Bike Park Profitability

[axisofevelknievel]

While riding up the Fitz chair the other day, I had a sudden thought about the profitability of bike parks in general. It may have been partially caused by some recent threads here (including the massive Cypress pricing thread) that have touched on the financial success of various bike parks. I'm most familiar with the Whistler bike park (after all, I live here and I ride it frequently), but I've also ridden at a couple other bike parks across North America.

First of all, it's probably harder to determine whether a bike park at a ski area is profitable than it is to determine whether the ski area itself is profitable during the winter. Skiing is a ski area's bread n' butter. If skiing isn't profitable, it's doubtful that all other activities combined at that ski area can bring it out of the red (I can never remember the red/black, losing money/making money thing - it's like my version of Seinfeld's 'on the wagon/off the wagon'). You don't open a ski area for any reason other than skiing. Any other activity you can provide that can convince a potential customer to give you money is a bonus. If other activities such as biking are offered, they're piggy backing on skiing. The lifts were built for skiing and just happen to be available for the summer. After all, that lift is only going to be sitting there depreciating all summer long, so might as well fire it up and try to make use of it. The various facilities needed are already in place (including staff often), and you could argue that operating in the summer is indirectly subsidized by winter operations.

Additionally, there is very little money to be made in owning/operating ski resorts. Too much money is tied up in assets that aren't even used for the majority of the year, and that doesn't even take into account other risks such as weather. Real estate, on the other hand, is a different story. For example, Intrawest is more of a real estate company than they are a ski resort company. They just happen to buy and operate ski resorts so that there is a reason for people to buy the real estate that they've developed. That's not to say that ski resorts aren't profitable, it's just that they aren't the best investment to make. As true as that may be, how many that are on this have bought real estate in Whistler?

Enough about that.

I think it's safe to say that Whistler is best case scenario for a bike park. A huge range of trails, a big population base close by, extremely positive reputation. No place is 'cooler', whatever that may be. It all adds up maybe the most profitable bike park around. No other resort probably even comes close to getting the rider numbers that the WBP gets. But even still, it's a small percentage of what they get for skiing. All the factors that make Whistler a popular bike destination (terrain, population, reputation, etc) also make it a popular skiing destination. If the best bike park around can only get 5% (2 million skiers vs 100,000 bikers - numbers may not be 100% accurate) of it's winter business, how well can other, smaller resorts be expected to do?

In BC, all the other resorts that currently exist are basically far removed from the nearest major population centre (typically Vancouver). This is true of Mt Washington, Sun Peaks, Silverstar, & Kicking Horse. If you don't have alot of people living close by, who is going to give you $? International airports are also important, but less so than they are for skiing (less people fly for bike vacations, as they you bike anywhere unlike skiing), but again most of these places lose out.

As for the East Coast, there are many lift-accessed bike areas, but I'm not sure if it's much different there. Bromont seems to have something good going on - good biking experience, good reputation, and it's close to a big city. When I rode there a few years back they seemed to have a good-sized crowd, and that was mid-week early season. Otherwise, the resorts are typically found in the more remote parts of the east in places like Veront and West Virginia, and are often a long drive to the nearest cities.

Maybe this means that Cypress has the potential to be very successful. Or maybe they're drop the ball on this and then go after the lucretive wakeboarding market or something.

What is the point of all this? I'm not so sure anymore. It just seems like there has been a fair amount of talk in the other threads about whether certain resorts are making or losing money, so I thought I'd start this thread and let people talk about it here instead of in threads about Cypress pricing or Whistler trail conditions. So...let's hear your thoughts.

[JSinclair]

well you did mention one important thing.

The cost of assets and liability doesn't really change if you are or are not using the facilities during summer.

Operational cost would be the multiplier.

Why would you not use the facilities to generate revenue during the off season?

Yes the bike park has to be self sustaining, but given the fact that Intrawest is a public company, they are bulking the revenue into one lump sum for the investors.

really at the end of the day you get "This is what we made, and this is what we spent" you don;t generally get a huge breakdown of where the money was spent or made.

2 million skier visits a year x and average of lets say 50 bucks (Consdering there are seasonal passes and the day rate is 70 bucks) equals 100 million dollars. not bad revenue for one resort for one season (not including all other revenue generating assets and operations on the mountain -- F&B, Ski School, Privates, Shops etc.)

If you think the ski resorts are not profitable, I would suggest you have a better look.

in one year Intrawest has gone from 15 bucks a share to 24 bucks a share.

in the fiscal year 2004 intrawest had 1.5 BILLION in sales.

Revenue - Quarterly Results (in Millions)
---------FY (06/05)------ FY (06/04)---FY (06/03)
1st Qtr------204.5----------223.4--------112.4
2nd Qtr-----432.8----------398.1--------208.3
3rd Qtr------502.8----------437.6--------400.2
4th Qtr-------NA------------485.1--------363.4
Total--------1,139.6--------1,543.8------1,084.3

Notice the 3quarter results? (July, Aug, Sept) 2nd best quarter of the year...doesn;t exactly scream "We don't make money in the summer" does it ?

Jan, Feb, March (Ski season) does half of the revenue that Q2,Q3,Q4 does.

Just my 0.02

[Sharon]

The biggest difference between summer and winter users is that in the winter its all about the skiing. Intrawest also reaps more benefit since most people buy food on the mountain. I'm sure a lot book through the W/B website.

In the summer you can hike, golf, ride anywhere, sightsee etc. not only in Whistler but in the surrounding areas. Intrawest does not benefit as much from the summer visits.

If I recall some Tourism Whistler stats, in 2000 the average winter stay was 6 nights, summer was 3. No stats were given for mountain bikers, most summer visits was for golf and sight seeing.

The latest numbers I heard (Tourism Whistler) - Of the 127,000 summer visitors last year, 7% were mountain bikers. The bike park had ~72,000 visits last year.
The average stay is up from 3 nights/week in 2000 to 5.1 nights/week.

Since W/B is already a destination, with the international airport 2hours away it stands to be the most successful.

In the grand scheme of things, that is not a lot of riders... over 8000 came to whistler as a destination ( they stayed overnight ) to mountain bike, the rest were day visits.

In order for a ski area to have mountain biking as a successful component, they need other ammenities to entertain the visitors when they are not riding.

I think this is one of the reasons Sun Peaks isn't busier. The village needs more to offer to get people to come for its sake.

Its too bad Cypress, and Seymour for that matter, don't upgrade their lodges and restaurants like Grouse Mountain so that people will go up to eat and maybe go for a hike. Cypress has had ammenity upgrades as part of their master plan since it was bought in 2001.

Mountain biking has been a part of the Cypress Master Plan since 1998.

[axisofevelknievel]

Interesting points from both of you.

I didn't really want this to become solely about WB or Intrawest, I was thinking about resorts in general. Whistler Blackcomb is a bit of an anomaly for ski resorts in the fact that its snow season is so long and due to how many visits it generates. When I was saying that ski resorts aren't all that profitable, I was thinking about resorts in general, especially ones with longer off seasons and without the non-ski season revenue streams that Whistler has. What about other resorts that are more borderline?

As for bikers coming from further afield for vacations, it'll be interesting to see how much the destination bike market might grow. Biking isn't the cheapest sport to participate in (or at least in the form that most of us here do it in), and if you can afford a $3k bike, doesn't that imply that you're willing to spend money doing what you love? This would benefit not just Whistler but Vancouver and other biking destinations within the province.

[Dirk]

JSinclair: A question about the Whistler financials. What does the "06" in "FY(06/04)" stand for? Does that mean (perhaps?) that their fiscal year starts/ends in June? This might make sense for a "seasonal" company like Intrawest. You probably wouldn't want your fiscal year to be ending in December, theoretically right in the middle of your busy season. If this is the case, then things need to be interpreted differently:

Q1 - July to September (least profitable)
Q2 - October to December
Q3 - January to March (consistently most, or close to most, profitable)
Q4 - April to June

This would also explain why there are no 4th quarter number for F'05 (it hasn't finished yet). Anyhow, this interpretation might be wrong, but this is how I read it.

[phat-phur-knee]

I suggest you all check out a book called the Downhill Slide by Hal Clifford.

[gooch]

Intrawest does a hellova lot more than just run ski hills and such

[brahms]

"As true as that may be, how many that are on this have bought real estate in Whistler? "


that $2.00 pack of gum you bought in whistler village = Intrawest revenue of $0.60

or so I've heard...30% of every dollar spent in Whistler goes to Intrawest. $$$$$

[Dirk]

http://www.intrawest.com/about/overview/quickfacts.asp

Looking at this suggests that Intrawest makes an incredibly large chunk of it's money from ski resorts.

I think that the comment "30% of every dollar in Whistler goes to Intrawest" probably refers to their complete domination of Whistler rather than kickbacks on packs of gum. Buy it at the "right" store and I'm sure $1.50 goes into their pockets.

[bunny]

JSinclair: A question about the Whistler financials. What does the "06" in "FY(06/04)" stand for? Does that mean (perhaps?) that their fiscal year starts/ends in June? This might make sense for a "seasonal" company like Intrawest. You probably wouldn't want your fiscal year to be ending in December, theoretically right in the middle of your busy season. If this is the case, then things need to be interpreted differently:

Q1 - July to September (least profitable)
Q2 - October to December
Q3 - January to March (consistently most, or close to most, profitable)
Q4 - April to June

This would also explain why there are no 4th quarter number for F'05 (it hasn't finished yet). Anyhow, this interpretation might be wrong, but this is how I read it.

i didn't even bother to read most of that but the first thing i thought when he tried to say summer was the most profitable was that they have a different fiscal year than jan-dec.

really i'm not sure i care about any of this. sometimes less analyzing more enjoying might be a plan. there are awesome trails to ride on so many mountains so close to us all year. wooptydoo for all of us (well all of you). :P

[Dirk]

sometimes less analyzing more enjoying might be a plan. :P

Is analyzing independent of enjoying something? I don't think anybody here is complaining about anything. Merely discussing and speculating if bike parks make money. Seems like a reasonable train of discussion to me.

[JSinclair]

JSinclair: A question about the Whistler financials. What does the "06" in "FY(06/04)" stand for? Does that mean (perhaps?) that their fiscal year starts/ends in June? This might make sense for a "seasonal" company like Intrawest. You probably wouldn't want your fiscal year to be ending in December, theoretically right in the middle of your busy season. If this is the case, then things need to be interpreted differently:

Q1 - July to September (least profitable)
Q2 - October to December
Q3 - January to March (consistently most, or close to most, profitable)
Q4 - April to June

This would also explain why there are no 4th quarter number for F'05 (it hasn't finished yet). Anyhow, this interpretation might be wrong, but this is how I read it.

Dirk, My bad. You are correct. The fiscal year is indeed June 30.

What makes that interesting is that for 2004 the biggest Quarter for them was Q4 (April to June) Then. That seems odd no? 485 million in a Quarter with no skiing and little bike park ? Maybe they are booking sales late from the spring skiing ?

[axisofevelknievel]

that $2.00 pack of gum you bought in whistler village = Intrawest revenue of $0.60

or so I've heard...30% of every dollar spent in Whistler goes to Intrawest. $$$$$

Wow - someone who believes everything they hear.

As I wrote in the superlong Cypress pricing thread:

- Whistler Bike Park/ Whistler/ Intrawest. There continually seems to confusion about Whistler vs Whistler Blackcomb. The bike park is operated by Whistler Blackcomb. WB is mostly owned by Intrawest. Whistler (the town) isn't. People coming up to Whistler to ride the park is good for the economy of the entire town of Whistler, but other than lift ticket/passes/rentals, most of the money people spend while in Whistler is going to other businesses. Unless you're at the GLC or in EB/GBB, you're probably giving you're food/drink $ to someone else. Additionally, Intrawest operates very little accommodation. Just that because you're spending money on a burger or a beer and maybe a hotel bed, it doesn't mean that Intrawest is the one making the money... .

Enough about Whistler - anyone have any thoughts on any other bike parks? Or does the world of bike parks begin and end on Whistler mountain?

[whistler110]

I think Whistler is a good model to look at, but not because it is supposedly making money. The real story is it's ability to continually grow at a fast pace and adapt to the riders wants. There have been lift accessed bike areas since the early 90's but their growth was always limited. Personally I don't think Bike Parks will be big money makers until the number of people participating in the sport increases. Look at the number of Bikers vs. Skiers world wide or even in North America, the ski industry is flat(0 growth), and has been for quite some time but the number of people participating is huge.

Here are some points that I think helped Whistler become what it is.

Piggy backing the infastructure and knowledge of a strong ski area.

Strong riding culture and numbers within a day of the park, where else in the world has this many Freeriders or DHers within 2 hours traveling time.

Revenue was put back into the park in the form of trails.

Affordable equipement, thank god the industry saw the need for this equipement and over time has made it more affordable. I don't think you'd see 800 riders/day at Whistler if we were still riding the Hard Tails with V brakes like 6 years ago.

B-Line, what can I say, this started everything. B-Line was built as an option to get beginner riders into the park, but once it was built the advanced riders were ripping it at high speed so something had to be done. A survey was done with park users as well as watching the popularity of trails like Ripin-Rutebega. What everyone wanted was a faster B-Line with jumps, A-Line was born.

Just some points to think about with Whistler, I don't know about the other Bike Parks but would love hear more about other areas.

[1994canucks]

Insurance costs lots of $$$$$$$$$

[gooch]

What makes that interesting is that for 2004 the biggest Quarter for them was Q4 (April to June) Then. That seems odd no? 485 million in a Quarter with no skiing and little bike park ? Maybe they are booking sales late from the spring skiing ?

Or closing a real estate deal like the Four Seasons, or selling out a large asset of commercial property in Creekside.

[XXX_er]

I thot the money was in developing realestate around a ski hill not actualy running the ski hill AND its actualy better to sell as soon as you develop ...take the money and run?

[whistler110]

I can't remember all the names or details but Intrawest split into two over a year ago, they have the resort playground group that runs resorts and they have the real estate group that continues that aspect of the company. The resort group has been expanding and is focusing on running and growing the operations side of the business.

All the talk about the Bike Park being a loss leader is crap, it has to make money on it's own. Whistler Blackcomb believes in the bike park and so gives it the resources and support to operate and grow but if it was losing money I don't think it would continue to operate the way it is.

[Clownshoe]

A few points I'd like to add:

A chairlift has a certain lifetime of operating hours. If it runs only in the winter, it will last (roughly) twice as long as if it runs all year. So the argument that the chair is just sitting there in the summer time isn't really valid because it costs a lot more to run it in the summer than it does to just let it sit there.

Also, Intrawest owns most of CMH (a HUGE heli operation), a bunch of golf resorts, and real estate to go along with it's ski areas, which might account for why the majority of the profit is in a season other than winter...

[derwood]

Food for thought...

In 2002 their operating budget was approx 200,000 dollars

Visits were around 70,000

lift revenues alone would have been around 225,000.

These are rough numbers,but should show that the bike park is definetly generating a profit up there.

[gooch]

Food for thought...

In 2002 their operating budget was approx 200,000 dollars

Visits were around 70,000

lift revenues alone would have been around 225,000.

These are rough numbers,but should show that the bike park is definetly generating a profit up there.

Cost of running a chairlift or a gondy is more than that when you add depreciation and such

[Moocowsia]

How much exactly would one of those chiarlifts cost? I can't really see the base and top being more than $10 000 000 or so, and they must have a fairly long runtime before they wear out or become obsolete.

[Sharon]

Cost of running a chairlift or a gondy is more than that when you add depreciation and such

The gondola would be running regarless for sightseeing.

They run 3 lifts and the busses on blackcomb for glacier skiing. Are they making ANY money there?

[whistler110]

The gondola would be running regarless for sightseeing.

They run 3 lifts and the busses on blackcomb for glacier skiing. Are they making ANY money there?

Yes, they make the money off renting the lanes for the camps.

[HeadOverWheels]

I thought this thread would be some interesting info on how BIKE parks can be profitable but its more like all the different ways Intrawest makes money with Whistler/Blackcomb?

Hmmm, I guess the easiest way is to work out

how many people come per week/weekend
What do they pay to ride

how many people you need to run it
what's insurance gonna cut you back
all other expenses, marketing etc

Then you can get sponsors involved and even investors and start your own. All ski hills are open for suggestions. In Europe there's actually too many of them opening, and selling lift tickets to ride down basically under developed trails, plus not enough of them.

I don't think they make a huge profit from Biking but it's extra. Most have more hikers.

BUT I know a guy over here in Germany that runs a hill basically alone renting the lift service. He gets a portion of the ticket price plus makes all the money from rentals, repair and snack food. This he does from May to October from Friday to Sunday getting 20-50 people during the week and 100-170 on the weekends.

Full day - 32 bucks
Half day - 25 bucks

Park has 2 trails.

If done right a Bike Park alone can do ok. Biking is growing and the summer season is getting longer, the winter season shorter, hmmmm, what does the Future hold for parks.

Will there ever be a 50/50 split on skiing and biking?