Adventureskope

The Price of Skiing

Everybody knows that the price of skiing is one of those commodities that goes up every year. Here in New Zealand we aren’t immune to this and it has become a fact of a skier’s life. Earlier this week NZSKI, the corporation which owns the two largest ski areas near my home in Queenstown, announced their prices for the upcoming ski season. While we all expected a moderate rise in price and were secretly hopeful for a plateau, I was shocked to see the price of a seasons’ pass jump by 11%. An early-bird season pass is a now a hefty $889 up $90 from last seasons’ price. Added to that there are now restrictions on who can qualify to buy this pass, with new arrivals to Queenstown excluded from the ‘deal’ forced to pay the $1300 full price. When news of this came to light I decided that I would voice my opinion and emailed the CEO of NZSKI James Coddington to register my disapproval. Here’s what I emailed to James:

Hi James,

My name is Scott Kennedy and I’m a long-time Queenstown resident. I’ve called our little slice of paradise home for the past decade after I moved here with my wife from my native home of Western Canada. What drew us to NZ was our love of skiing – we wanted to experience a southern hemisphere winter and like so many Queenstown locals we fell in love with the place and never left. I’m writing you today to express my concern on the prices of season passes for 2011. To be honest I was shocked to read today that the season pass price had increased by a whopping $90 for the early bird price.

What I’m, let’s be honest, offended by is the perceived ‘value added’ aspect of your marketing plan. You have attempted to woo locals by restricting this early bird price only to us, yet you have increased it by 11.5%. You have increased the scarcity yet also counter intuitively increased the price – that’s not how ‘value added’ works. By excluding non-locals you have greatly impacted the ability for seasonal workers to buy passes prior to arrival in Queenstown and have had a potentially negative impact on the upcoming winter job market. Without seasonal workers to make hotel beds, wash restaurant dishes and pour après ski pints of beer Queenstown doesn’t function as a winter resort town. It is my fear that NZSKI has gone one step too far and has created a climate where to the outsider it looks like Queenstown is collectively trying to screw the little guy.

What’s more, beyond the perceived exclusivity of our ‘locals deal’ is the price itself. While I understand the economic pressure of running a ski field – I worked at them for years, I strongly feel that NZSKI has lost touch with the economic reality of their customers and lost perspective on their place in the worldwide ski market. Why is it that a NZSKI ski pass is so significantly more expensive than elsewhere in the world? I’m sure you are going to respond that your prices aren’t in fact higher than other international ski destinations – and that is true, but if you are going to pass Coronet Peak off as an international ski resort in the same league as Whistler, Aspin, Le Grave, Chamonix and so on then you are kidding yourself and insulting us. While you are not overcharged by international standards, you are grossly overcharging for what you are selling. You’ve continued to set your prices not based upon value, but on what the market will bear – just.

And the truth is, you know all this. You can read it between the lines of your press release that you published on your website today. You try and win the reader over by using empowering phrases like “their ski field” and are quick to point out that the price increase has gone towards your “world class facilities”. It smacks of desperation and I for one am not buying it. Your explanation or the pass. Why not be transparent – tell us what our extra ninety bucks a season is buying us. Tell us why prices have had to increase, use real numbers, treat us like adults.

Just a month ago you said and I quote, “It’s very much about the locals. We are getting back to the roots of why season passes are designed.” Coddington won’t reveal prices just yet but says “I think you’ll be pleasantly surprised”. So how is this getting back to the roots of season passes? And where is the pleasant in the surprise?

I look forward to your explanation – as a long term purchaser of NZSKI season passes and a Queenstown local I think I’m deserving of at least that.

Best regards,

Scott Kennedy

And James responded with this:

Hi Scott,

Thank you for your email detailing your concerns with our pricing of our season passes. You raise many issues in your email and I would like to meet with you to discuss these if you would find this helpful?

We have done our best to upfront and honest on all aspects of how we price the season passes, this was explained in our one page article in the Mountain Scene last week. As I am sure you will understand there are many aspects that go into the pricing of a season pass, and why the Queenstown Pass had the largest rise out of all other passes. They include usage of the pass, operational costs, investment in to the specific mountains and the length of the season.

My comment that “people will be pleasantly surprised” is that we have not increased our premier product – the NZSki Pass which is $999 for 3 mountains (same price as last year), or the Transport Pass or the First Tracks Pass. With the increase of GST, this is an actual price reduction to NZSki.

Again Scott, I would be very happy to meet with you to discus the issues you raise in your email, as I along with all NZSki staff value our locals and want to ensure that they are getting the very best deal we can offer.

Best regards,

James Coddington

CEO

NZSki Limited

I took James up on his offer to sit down and discuss it yesterday afternoon and we had a very interesting chat. Firstly I approached this meeting as a concerned Queenstown local – I wasn’t wearing my journalist hat during the chat. I didn’t record the conversation or take notes; we just sat down and talked for about 45minutes. It’s not my intention to use this meeting as research for an article, but as so many of my friends and colleagues here in Queenstown are eager to hear what James had to say I’ve decided to overview the meeting here in my blog.

My impression of Mr. Coddington, having never met him in person prior to yesterday, is that he has a high level of integrity and genuine drive to do the best that he can at his job. For starters, he didn’t have to meet with me – he’s a busy guy and in this week, of all weeks, he’s been inundated with PR fires to put out.

Prior to the meeting several friends put forward questions that they wanted me to address with Mr. Coddington. As a means of conveying our conversation, here are the relevant questions and James’ answers. Remember I wasn’t taking notes, so these aren’t quotes, but what his ‘answer’ was to the questions.

Q: Why did the prices rise so dramatically this year?

A: There has been a steady increase in our fixed operating costs – the rise in GST, ACC levies, wage increases, fuel increases, expansion and developments on the resort.

Q: You indicated that we would be pleasantly surprised at the price of season passes, yet there was an 11% increase, what is pleasant about that?

A: I was referring to our premier product of our full NZSKI pass (Coronet Peak, Remarkables, Mt. Hutt) which hasn’t increased this season. And besides there was the idea of scrapping season passes altogether this season and that idea was seriously considered. I was referring to the fact that customers would be pleasantly surprised that we actually had season passes period this season.

Q: Do you really think that most Queenstowners who struggle to make ends meet in a very expensive town will travel up to MT. Hutt (6hrs away) to ski? In my experience even though you refer to this as you’re premier product it isn’t the most popular or most relevant option here in Queenstown.

A: You’d be surprised and many of the Mt. Hutt skiers come down to Queenstown to ski.

Q: in the last 10 years the price of season passes have increased 260% at the same time as average wages in Queenstown have only grown by 70%, while housing rental prices have risen by an equal rate of 67%. We are in the middle of a recession, we’ve just weathered the global financial crisis, jobs are down in Queenstown, tourism numbers are down yet NZSKI is expanding every season and we as the pass buyers are paying for it at a time when we can afford it the least. Why not plateau development until a time when we can all afford it?

A: We’ve always wanted to improve and build our product. If we stayed the same we’d get left behind by our competitors. Our customers, both locals and visitors, demand snow making, grooming and good facilities, we are committed to providing that. On the last day of the season last year we were making snow – that’s how much we care about our customers.

Q: Why not have a Coronet Peak Pass?

A: Essentially that is what the Queenstown pass is – if we offered a Coronet Peak pass it would be $889 – we are giving you a Remarkables pass for free with this pass.

Q: How can you justify this when I could buy a Cardrona season pass for $550? That’s a huge price gap.

A: We’ve invested a huge amount in the resort; we have more snowmaking and are open for 3 weeks longer.

Q: You mentioned previously that the average season pass user skis 18 days a season – why should those extra three weeks matter when we are only skiing 18 days a season?

A: we want to give our customers the option to ski whenever they like for the whole season.

Q: how are season pass prices determined?

A: We have fixed costs for the season – we know right now within a few percent exactly what the season will cost us. We have labour costs, power costs, fuel costs and so on. We know how many overseas visitors we can expect from overseas and we determine the price of passes by combining these numbers and balancing the equation.

Q: What percentage of your income comes from overseas guests as opposed to locals?

A: 90% of our income comes from overseas visitors – that’s why we have limited early bird prices to locals only – we wanted to give locals a special price that visitors couldn’t take advantage of.

Q: if we are are only 10% or less of the market then what does it matter what price you charge locals? Why not charge us less and win some local fans?

A: We need that 10% if we charged $20 less per day the ski hill wouldn’t be able to operate.

Q: How can a ski field like Whistler / Blackcomb and NZSki charge comparable day rates for the ski field when you are selling vastly different products.

A: we both have fixed costs, but in Whistler they have much more terrain to spread users out and spread the costs out. Here at Coronet Peak we are at capacity, we have to cover our costs based upon the number of users we have now.

Q: Why not grow user numbers to spread out the costs?

A: We are at capacity we can’t handle any more guests during the busy periods.

Q: So if overseas guests are accounting for 90% of business and are filling the field to capacity, where do locals fit in?

A: Locals are an essential part of NZSKI – they make the brand Queenstown what it is, without locals the town couldn’t function.

Q: What if you make inroads to show locals that you are making an effort in the community and to the local environment. What about matching environmental donations from users and giving back to the community.

A: We already do that; we donate to all sorts of causes both for the community and the environment.

Q: I’m very interested in these things, connected to the local community and up to speed on what’s happening in these circles, and I’ve heard nothing of this previously, how is the average user supposed to hear about these things?

A: I take on board that we need to communicate that better.

Q: What about making a true locals pass that rewards users who have been loyal to the NZSKI brand? What about a mid-week pass that is only valid Monday – Friday and not during school holidays? You could sell true local passes at a decreased price and as locals we could colour in the gaps when your core (overseas) guests aren’t filling up the resort?

A: These are all good ideas that I’ll definitely put down to discuss for next season.

My overall impression was that NZSKI is caught between a rock and a hard place – They’ve made massive capital investments in infrastructure and a high level of service, yet at the same time they have reached skier capacity. They rightly see overseas guests as the target market to cover these costs and are passing much of the costs onto them. This leaves two problems for a local user – number one, NZSKI is catering to a non-local market and we are very much of an afterthought – our 10% input into the revenue stream doesn’t garner enough weight to have any pull within the organization. The second issue is that the status quo is to treat all their customers the same and while the majority of users are from overseas, at a higher income bracket and beneficiaries of a favourable exchange rate the locals are left out of the loop. Essentially Coronet Peak is a foreign holiday resort on NZ soil – it is aimed at wealthy Australians and unfortunately Queenstown locals don’t figure much into their plans. As much as they say they need us on side at the end of the day, if they lose 50% of local business that’s only a 5% drop in revenue – well within acceptable limits.

Mr. Coddington said that he was open to more local input and his door is always open to the local community. If you have concerns, more questions or comments – feel free to pass them onto me so I can meet with him again or email him directly: james@nzski.com If you want him to respond to you I’d suggest being articulate, constructive and professional. Prices are set in stone for this year, but as long term locals there does appear to be a least a glimmer of hope of possible influence in the future….