I’ve had some great feedback on the perspectives interviews I’ve been posting recently. This week, I’ve got a biggie. Some distribution channels might not only be outdated, but actually detrimental to the resorts that are using them. As I’ve studied the topic, I wanted to get a fresh take from a non-resort source. Evan Reece, the co-founder of Liftopia, was the guy I turned to. There was a lot of ground to cover, so I’ll hit the first part in this post and finish the rest up tomorrow.
SlopeFillers: Evan, how have things changed to impact the effectiveness of existing distribution?
Evan: One of our core goals is to help resorts understand distribution in general, so that they can make the best distribution decisions and execute on the channels that truly benefit them. In the long term, we are most interested in helping to grow resorts’ businesses because increasing the market size grows our business as well.
To understand distribution it makes sense to look at the business climate as a whole, and how external factors have changed and impacted existing execution. Some more background: Every day businesses become victims or beneficiaries of core changes in the markets in which they operate. This occurs at all levels of the business, whether it be in operations, marketing, customer service, or distribution. As an example, a new automated snow making technology may make a manual system from 1995 look outdated, but that does not mean that the purchase in 1995 was a poor decision for an operator given the landscape of options at that time. However, just because it was a good decision in 1995 does not mean a resort should keep investing in it given more effective options now.
With distribution specifically, there have been many changes in the market that have shifted what each channel does, and how products are sold in each channel. Looking at the broad landscape of options at this point, the number one question a resort really needs to ask about every distribution decision is:
Does this distribution partner make money for me, or make money off of me?
To effectively answer the above question, a resort needs to ask:
How does this distribution partner make money?
These basic questions are the first steps to take in understanding whether a distribution partner’s interests are aligned with a resort’s. If the interests are not aligned, the partner by definition may be working towards a goal that is contrary to the resorts wishes.
SlopeFillers: So, relating to the snow making systems analogy, what is one equivalent distribution channel for ski resorts that was once a solid idea but now might need some updating?
Evan: One of the most affected pieces of distribution in the past 10-15 years has been the standard consignment ticket. This type of ticket can be sold through a ski shop, through Costco, through a grocery store, an outdoors store, or even convenience stores.
When these types of initiatives first came about, they were used to target very specific geographic areas and a very specific type of customer. As an example, when ski shops were the only place to buy ski equipment (before e-commerce enabled retailers to sell online), they were a great place for resorts to get in front of skiers and riders who would be influenced by shop employees or did not have access to resort information online as they do now.
Now that anyone can do a search online for lift ticket deals and ski information, a shop that previously only serviced locals now can be accessed by destination travelers who find out about the deal through our friend Google. The shop deal in this case has now become a loss leader for the shop to drive retail sales and now the shops use the tickets to drive traffic into their stores as opposed to the resort gaining access to the shops’ customers . This shift is especially dangerous, as shops compete with resorts for rental and retail revenue. The shop uses the ticket deal to capture rental and retail revenue that could otherwise be capture by the resort.
A thing to note here is that Costco, 7-11 or ski shops are not experts at selling tickets, it is that the changes in information availability mean that now shops make money off of resorts as opposed to the other way around. Even worse, unfenced deals are often resold on Ebay, Craigslist, in parking lots, or even by hotels in market that can resell tickets without directly paying the resort.
Since all of these outlets make money selling other things, it is always in the best interest of a consignment proprietor to push prices down, as it will help place customers in front of their core revenue generators. This means that interests are not aligned with the long term goals of the resorts, and therefore resorts have not seen corresponding increases in revenue/skier visits through these channels despite the volume of consignment tickets going up substantially.
Again, it is not that these outlets were not good opportunities when they were initially envisioned, it is that free information sharing online and lack of appropriate restrictions has made consignment sellers shift from making money for resorts to making money off of resorts.
In addition to standard consignment tickets, there are other legacy discount providers that simply use discounts to sell other things. These programs vary, but the most well known are gas station deals (used to sell gasoline to folks already en route to the mountains) and membership programs (which end up being a direct competitor to season passes because they target heavy users who can calculate the total cost of skiing X days versus buying a season pass from the resort directly).
SlopeFillers: So, lets say I am a resort who, like my three closest competitors, sells tickets at a local shop. Is it better to pull out completely and risk giving that share of ticket sales to my competitors? Do I rework the relationship? What’s a possible solution?
Evan: While those of us living in pricing theory land would point to removing any inefficient distribution channel from the marketplace, we also know that competitive necessity may mean a resort cannot feel comfortable removing itself outright from a legacy outlet.
In this case specifically, the best option is one that should be applied to any distribution decision – having the “right” price point for the channel. By adjusting to the right price point resorts can maintain a presence in an outlet while ensuring the customer is paying an appropriate price relative to a ticket’s level of restrictions.
Using several Colorado resorts as examples, many are still for sale in ski shops and supermarkets, but are now at more appropriate (higher) price points because tickets may be bought same day, may be used on any day of the season, and are sometimes resold to ehem, “friends” in the parking lot.
No matter what happens, resorts should remember that they will never be commodities so they should not price themselves as such. By fearing a competitor may outpace them in an outlet like a ski shop, resorts can make pricing decisions that simply turn their resort into a commodity next to others. All the money, time, and love resorts have put into their brands means that they do not need to price tickets like they are Doritos vs. Pringles.
Published May 10th, 2011 by Gregg Blanchard.