Overview of U.S. Ski Industry

1. Overview of U.S. Ski Industry Michael Berry, President NSAA O.I.T.A.F. Seminar Oslo, Norway June 27th, 2008

2. Snowsport’s Model for Growth • NSAA developed The Model for Growth in 1999 as a method for critically analyzing the future of the snowsports industry. • The Model’s initial value was its ability to identify and quantify the impacts of various obstacles that needed to be overcome in order to grow the sport.

3. The Prediction • Based on estimates in 2000, we determined that if we didn’t act to grow the industry through trial and conversion, our projected visitation numbers might drop from the 1990s season average visitation number of 52 million, to as low as 47 million skier/boarder visits in the near future.

4. The Strategy • It was clear that the most effective strategy was to grow the sport through a combination of trial and conversion. • Resorts across the country devoted significant resources towards improving conversion rates, increasing trial, and at the same time, providing a quality experience for their core customer base. These efforts yielded significant results.

5. The Outcome? In 2000 the Model for Growth was presented to the industry at the NSAA National Convention and Trade Show. At that time the Model projected that with good weather and progress in trial and conversion goals, visitation in the 2007/08 season could be as high as 59.6 million visits. We were a little off.

6. Estimated Visits – 1980/81 to 2007/08 Continuing to Move the Bar Up Source: Preliminary results from the 2007/08 NSAA Kottke End of Season Report

7. Estimated Visits by Region 1998/99 to 2007/08 vs. 10-Season Average • Continuing strength in Rocky Mountain Region Source: Preliminary results from the 2007/08 NSAA Kottke End of Season Report

8. Percent of Visits Attributable to International Guests: 2004/05 - 2007/08 • International visitation is up significantly, particularly in the Rocky Mountain Region Source: 2007/08 NSAA Kottke End of Season Report

9. Net Promoter Score Ratings of Customer Experience Rate of Growth in EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) Revenue per Visit vs. Expenses per Visit Capital Expenditures as a Percent of Revenue Marketing Expenses as a Percent of Revenue Metrics NSAA Tracks

10. What Decisions are Based on These Metrics? • Capital improvement • Operations • Product development • Advertising • Strategic marketing • Pricing

11. Net Promoter Score How likely are you to recommend this resort to a friend or colleague? Extremely Likely Extremely Unlikely Neutral A company’s net promoter score is defined as the percentage of customers who are promoters of the company or brand, minus the percentage who are detractors. Reichheld (2003) has observed this measure to correlate with a company’s rate of growth.

12. 2007/08 Net Promoter Score Distribution for North American Businesses vs. U.S. Ski Resorts • High scores reflect recreational segment

13. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007/08 Net Promoter Score Distribution Excellent (77%+) NPS Good (64-76%) Mediocre (47-63%) Needs Improvement (<46%) Net Promoter Score Out of 76 US resorts surveyed in 2007/08, net promoter scores ranged from a high of 95% to a low of 15%. The average score was 62%, up from 60% last season and significantly higher than the 54% observed in Canada this season. Source: Preliminary results from the 2007/08 NSAA National Demographic Survey

14. Average Revenue per Visit: 2005/06 vs. 2006/07 Source: 2006/07 NSAA Economic Analysis of U.S. Ski Areas

15. Net Promoter Scores vs. Profitability Source: 2006/07 NSAA Economic Analysis of U.S. Ski Areas & National Demographic Survey

16. EBITDA Growth vs. Net Promoter Score in U.S.: Which zone is your industry in, which zone are you in? Going Down Zone Money & Growth Zone Down for the Count Zone Inefficiency Zone Source: 2006/07 NSAA Economic Analysis of U.S. Ski Areas & National Demographic Survey

17. Trends that will effect the future of snowsports.

18. What are the demographic and economic trends that will impact snowsports? • Likes marrying likes. Lawyers marrying lawyers, executives marrying executives, etc. Widens the income divide substantially, boosting the high-end and reducing social mobility. • Education level as a significant predictor of overall income and likelihood to adopt the sport. • Protracted early adulthood, a challenge for both the young and old. • Housing and transportation costs, combined with healthcare costs will eat up leisure dollars for the lower income brackets that built skiing and snowboarding. • Out-migration from northeast will continue to negatively impact the region. • Reaching out to emerging population centers in the southern and western U.S. will be a challenge.

19. What are the implications for U.S. Snowsports? • The holy trinity of trial, conversion, and retention, have never been more important. • Old and young baby boomers will increasingly demand different types of experiences than our younger customers. Delivering to all groups will be a challenge. • If we build the youth component we can weather the exit of the baby boomers, but 2020 represents a critical deadline. • Diversity is de facto. Diversity out-reach is important, but increasingly education level will be the primary determinant of who is and isn’t a good candidate for snowsports. • A crunch for leisure dollars with the arrival of “boomsday” could be significant. • Labor issues already effect the industry. This will likely get much worse before it gets better.

20. THANK YOU.