To understand the new economics of the ski and snowboard industry, start with the two behemoths. First, there's Vail Resorts, the king of U.S. skiing. To find the second, trace the Rocky Mountains north and hitch a left at the Canadian border.



There is only one ski resort in North America larger than Vail Mountain. Eighty miles north of Vancouver, tucked in the British Columbia Coastal Mountains, the Whistler/Blackcomb resort is the colossus of ski destinations. Across the two peaks -- Whistler and Blackcomb are separate mountains connected by a gondola -- the park has more skiable area, more average snowfall, more trails, more lifts, and a higher vertical drop than any other mountain on the continent.



What Vail and Whistler have discovered is that lift-tickets -- that is, passes to ride the chairs up the mountain -- will always provide the foundation of ski-nomics. But a resort that offers only skiing is a terribly risky business model -- like a snow farmer whose yearly harvest is only as good as the snow crop.



Instead, both Vail and Whistler have devised and refined a business that keeps income as constant as the weather is variable. It comes down to two smart hedging strategies. Strategy One: Own the skiers. Strategy Two: Own the mountain.Vail and Whistler hedge against bad snow by turning skiers into members. "Just under 40 percent of our lift tickets come from season passes sold before the ski season begins," Katz told me. For just under $700, skierscan buy the Vail Epic Pass, which offers total access to all six Vail Resort mountains."Some people think we're crazy," Katz said. "After all, one day's lift ticket is $100, and some of these people will ski 30 days, or 40 days." Why would Vail give its most die-hard skiers a 90% discount?Because, they own the mountain. Vail and Whistler make half their money from lodging, rentals, snow school, and food (see charts). Even when die-hard skiers and snowboarders get a free pass to the mountain, they're still sleeping in Vail's beds and eating Vail's food."Creating packages is fundamental to our business," said Kevin Smith, executive vice president and CFO of Whistler/Blackcomb. "Especially if families pre-commit to a package that includes lift tickets, lodging, and ski school, we lock up that business before the snow falls."Vail and Whistler are considerably more profitable than large ski resorts in Europe precisely because they've embraced mountain monopolies. In Europe, the mountain is like a strip mall, with restaurants, rental shops, and service centers mostly owned by different companies renting space. At Whistler and Vail, the mountain is more like a cruise or amusement park, where vertical integration meansintegration. From village to peak, Vail and Whistler own all the key businesses -- equipment rentals, food and beverage, and snow school.Maybe the best analogy to ski resorts is the casino. There's a core gambler like there's a core skier. Some people hate gambling, like some just want to keep their boots on. The job of the casino or ski resort to give these people a reason to come, anyway. The same way casino designers are meticulous about designing a floor plan that is more likely to get patrons gambling, mountain planning requires a specialized understanding of the the ski experience and how the guests will experience a terrain. It means moving traffic away from environmentally sensitive areas and toward lifts. It means clearing space for wide-open vistas and putting challenging runs near cruisers, so families with varying skill levels can follow their paths of choice and arrive at the same place for lunch."With the right design, skiers come down the mountain like water," Katz said.