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Ski industry: small hill, small profits?

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Wednesday, February 01, 2006

IN THE UNPREDICTABLE SKIING BUSINESS, are profi ts more unlikely the smaller your hill?

In interviews with four owners and managers of small areas (with 60,000 average annual skier visits or less), only Chuck Shepard of Hoodoo ski area would share numbers regarding his fi nancial health (see However, each was clear that while they can make a profi t in a good year, the value of their areas is often measured in terms other than net revenue.

That philosophy, along with other business holdings, has to carry them through bad seasons like last year, when snow was uneven and skier visits were way down. “You carry that loss forward,” says John Murray, who owns Spout Springs, 45 miles north of La Grande, which opened on New Year’s weekend as this season’s snow picked up again. “We clear a profi t, but not every year. When you do make money, you’re not cutting a fat hog, but it’s a living for the four months you’re open.”

Murray didn’t open Spout Springs last winter because of poor snow. But he had the revenue from a mixed-use offi ce and residential building in Walla Walla, Wash., and a moorage he runs in Portland to fall back on. That’s common among small-hill owners. Tim Wiper of Willamette Pass, southeast of Eugene, runs a cemetery and funeral home business his grandfather started in Eugene in 1929. Shepard is one of the biggest landlords in the Willamette Valley. And the three couples from Salem and Vancouver, Wash., who own Ski Anthony Lakes, near Baker City, have diverse interests and aren’t trying to squeeze a profi t out of the hill. “They see it as a long- term investment,” says Ski Anthony Lakes general manager Rick Pignone. “We feel like Eastern Oregon is going to grow eventually and we’re just pleased to break even now.” ski areas 3.jpg

Some of these small-hill owners are diversifying their nonwinter off erings to loosen their reliance on snow. Wiper spent $3.5 million on a new year-round chairlift/gondola that opened in 2002. He also hosts weddings and meetings at his lodge throughout the year. Shepard continues to invest in warm weather campsites throughout the Cascades.

Keeping the hills running each season tests even the wiliest businessperson. There are the fi xed costs: Insurance runs about $100,000 per year at Hoodoo, according to Shepard. The minimum wage rise of 25 cents per hour on Jan. 1 also deeply aff ected ski areas, which tend to pay workers right at the legal limit while throwing in free skiing as a perk.

Expanding and updating hills has also become costlier due to land use regulations. Since nearly all of Oregon’s ski areas are on U.S. Forest Service land, owners have in recent years had to put all expansion plans through a lengthy and costly National Environmental Protection Act (NEPA) process. Ski operators estimate the costs of NEPA compliance is anywhere from a few hundred thousand dollars up to a $1 million, or about the market value of a small ski area.

Geography challenges small areas as well. Almost all of them are at lower elevations than their big cousins such as Timberline and Mt. Bachelor (see map). The snow down lower is less reliable, and, especially on the western front of the Cascades, it’s likely to be wetter. Warner Canyon, in Lake County, and Spout Springs are also quite far from major metropolitan areas.

There’s been a lot of concern in the industry that global warming will make winter shorter and warmer. Most resorts now have placards and signs urging customers to “Keep winter cool” by cutting fossil fuel consumption. In the short term, however, ski execs watch the vagaries of the jet stream, which needs to dip south in the winter to give the Pacifi c Northwest snowstorms. Last season, there wasn’t a signifi cant storm until late March.

Despite costs and operational headaches, there’s an importance to small ski areas beyond the bottom line that keeps owners coming back year after year. These areas act as the training grounds for learning skiers and may in some cases be the fi rst place where people feel the sensation of skimming down a snowy hill.

“You’re introducing people to a life sport; how many other businesses can say that?” says Wiper, who’s owned Willamette Pass for 25 years. “You put up with some of the downturns for the love of the sport.”

Spout Springs’ Nordic trails, once used by the U.S. Olympic Team in the 1950s, are now the practice facility for Whitman College in Walla Walla, which consistently has one of the top Nordic teams in the country. In the Baker City area, locals have grown so wedded to the usual fluffy, dry powder at Ski Anthony Lakes that when wet snow arrived last year they stayed away. “They’re kind of powder snobs,” Pignone says, laughing. He says locals make up about 65% of his skier visits in most years.

Operators have been noticing that tourists from far away locales are increasingly drawn to the charm of the small hills. Ski travelogues in in recent years have extolled the virtues of Oregon’s small mountains. “People like to jump around and try diff erent places,” Murray says. Noting how tough improvements are with the cost of the land use process, he says with a little irony, “We’ll always be charming.”

— Oakley Brooks

A tale of two hills

Mt. Bachelor Summit elevation : 9,065 feet Runs: 70 Average annual skier visits : 514,286 Peak employment : 860 Months of operation : late November- May Weekend day pass: $49 Annual revenue: more than $20 million Spout Springs Summit elevation: 5,660 feet Runs: 12 Average annual skier visits: 4,386 Peak employment : 12-14 Months of operation:  variable (opened New Year’s Day in ’06) Weekend day pass: $28 Annual revenue: undisclosed; bought for less than $1 million in 1999

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