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HarvardBusinessSchool

9-395-019
Rev. January

24, 1997

Steamboat Ski & Resort Corporation
As Charlie Mayfield, vice president of Marketing for Steamboat Ski & Resort Corporation (SSRC) in Steamboat Springs, Colorado, looked out of bis office and saw the lines at the ticket windows on a warm, sunny day in March 1993, he smiled to himself. SSRCwas having its best year ever and had maintained its position as one of the premier North American ski resorts. SSRCwas not, however, immune to the difficulties faced by the ski industry. First, Mayfield was concerned about the trend among customers of coming to Steamboat and other ski resorts and spending fewer of their vacation days skiing on the mountain, preferring instead to participate in other wintertime activities such as snowmobiling. Second, while skier days1 had continued to increase in Colorado over the last several years, the number of skier days in the entire United States had actually decreased. Furthermore, Steamboat's share of the Colorado skier market had steadily decreased since 1990. FinaIly, Mayfield was concerned about Steamboat's low percentage, relative to other resorts, of visitors who intended to make a repeat visit to the resort. In the 1991-92season, the percentage of Steamboat destination skiers intending to make a repeat visit to Steamboat declined to 55%; other resorts, such as the group of Disney Resorts, claimed as high as a 90% repeat visit rate. These trends, combined with Steamboat management's belief that the average length of a ski vacation at Steamboat had also declined, concerned Mayfield. He was worried about how Steamboat could continue to attract new customers and retain its current ones in what was an increasingly competitive environment.

Steamboat Ski & Resort Corporation
Steamboat Ski & Resort Corporation (SSRC) was one of North America's largest ski resorts, boasting 2,500 skiable acres, 106 trails, 20 lifts, and snowmaking on 385 acres of skiable terrain. 15% of the trails were for beginner skiers, 54% for intermediate skiers, and 31% for advanced skiers. Steamboat's 20 lifts, including one gondola, provided lift capacity of 29,941 skiers per hour. Known for the abundance and quality of its "champagne powder," Steamboat received an average of 27 feet

1 A skier day is a standard measure in the ski resort business; one skier day equals one ski customer skiing all or part of one day.
Don Bramley, Muy CalIalum, Hilary Nicholas, ]ordan Smyth, and Katie King, MBAs '93, prepared this case under the supervision of Professor ]effrey Rayport as the basis for c/ass discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright @ 1994 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materiaIs, call1-BOO-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.

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of snow each year. In addition to downhill skiing, the resort offered cross country skiing, onmountain dining, and a renowned ski school, induding The Billy Kidd Center for Performance Skiing. Steamboat had sent more skiers to the Olympics than any other community in the United States. Capital expenditures for 1992 included two high-speed detachabie quads, the latest in lift technology, at a cost of $6 million. As of March 1993, there were no specific plans for major capital expenditures in the coming year. Located in northwest Colorado, Steamboat was approximately three hours from Denver by car (157 miles). Major airlines served Steamboat's two airports with non-stop flights from airline hub cities nationwide. The local community was proud of its ranching heritage and the ownership of most homes in the town by year-round residents; in many other resort towns, such as Aspen and Vail, most dwellings were vacation homes. While the vast majority of visitors came to Steamboat during the ski season, people also traveled there during the summer to enjoy a variety of outdoor activities and festivals. SSRC's promotional materials emphasized the town's western heritage as well as the friendliness of the local inhabitants, the plentiful snowfall, and the family atmosphere. Innovative programs such as "Kids Ski Free," which offered free lift tickets to children (ages 12 and under) of adults staying in qualified lodging establishments and purchasing multi-day lift tickets, reinforced the resort's image as an outstanding value, particu1arly for families. Survey results and comments from competitors and others familiar with the industry confirmed Steamboat's attractiveness as a friendly, family-oriented, western town (see Exhibit 1). During the 1991-92ski season, skier days at SSRC totaled approximately one million, a 2% decrease from the previous year. Steamboat's percentage of the Colorado market decreased by 3% during this same period. Exhibit 2 summarizes Steamboat's historical Colorado market share. Management projected approximately 1.04 million skier days for Steamboat's 1992-93season. Resorts like Steamboat, which attracted visitors from outside the home state who were likely to stay two or more nights, were called in the industry "destination" resorts. Steamboat did attract many skiers from the "Front Range" market2, but to alesser degree than other resorts which were located doser to the Front Range communities. Approximately 33% of Steamboat's visitors were from Colorado (Front Range and other), 63% were from other states in the United States, and 4% were international. Exhibit 3 provides a description of skier demographics at Steamboat segmented by visitor type. Exhibit 4 shows the percentage of visitors intending to return to Steamboat in the future. Exhibits 5 and 6 show the historica I trend of nights spent and days skied in Steamboat per vacation. SSRC was owned by Kamori International Corporation (KIe), a Japanese company with additional ski and other resort properties in the United States, Japan, Europe and Australia. KIC had purchased the resort from its previous owner in 1989. Masanori Senno, assistant to the chairman, U.S. Operations, resided in Steamboat and acted as the liaison between SSRCmanagement and KIe. KIC allowed SSRC management to act independently in running the daily operations of the resort, though senior KIC managers were involved in all major decisions regarding policy and capital expenditure and conducted annual budget reviews. Senno had indicated to Steamboat management that KIC's primary goal was to be "number one" in the ski industry by offering exceptional customer service and quality. There seemed to be no

2 The "Front Range" market, as defined by Colorado ski resort operators, included residents of Denver and other communities on the eastern side of the Colorado Rockies who primarily took single day or weekend trips. 2

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finite direction beyond this broad-based goal. Steamboat's management team did not generally forecast financial and operating results more than two years into the future and capital planning and improvements were reviewed on an annual basis. In addition to financial reports, the resort's management relied upon the research of RRC Associates, a firm which conducted extensive market research for SSRC and other ski resort companies, to evaluate its performance in such areas as customer satisfaction and service. Exhibit 7 shows an organization chart for the resort, and Exhibits 8 and 9 provide financial information for the company. Airport and Relations with the Airllnes Skiers had the option of driving to Steamboat from Denver or flying into one of two airports-Steamboat Airport in Steamboat Springs or Yampa Valley Regional Airport in nearby Hayden. Steamboat Airport was just five minutes from town but was not equipped for jet traffic. Continental Express was the only commercial airline serving Steamboat Airport, with numerous daily commuter flights from Denver. Yampa Valley Regional Airport, which was able to handle large, commercial jets, was a 30-minute ride from Steamboat and was served by American, United, Northwest and Continental Airlines. In order to sustain airline service, Steamboat engaged in an airline revenue guarantee agreement which ensured the airlines a minimum revenue stream. Approximately 20% of Steamboat's visitors arrived on direct flights. Lodging at Steamboat According to SSRCmanagement, the current bed base in Steamboat of approximately 15,800 pillows3 was the largest single constraint on the number of visitors the resort was able to handle. The ski resort had demonstrated many times in its history that, even when the lodges were full to capacity, the mountain itself could still handle many more skiers. 80% of the lodging revenues were obtained during the winter months, and the lodging establishments were consistently booked to capacity during the peak periods of Christmas, Presidents' Day weekend in February, and spring break in March. Lodging accommodations in Steamboat varied widely in price from approximately $100 per night for a studio during periods of low demand to $800 per night for a four-bedroom condominium in peak season. The largest property management company was Steamboat Resorts, which was 13 years old and managed ten condominium projects and one lodge. Much of the lodging was relatively old, and the lack of a modem, fuII-service hotel was a weakness in Steamboat's ability to attractupscale and corporate customers. Vem Greco, president of SSRC,stated in his 1992 Annual Review: Lodging in Steamboat is priced commensurate to Vail and Aspen, but, from a quality perspective, [it] is notably inferior. . .. There can be no significant increase in skier days without a corresponding increase in quality lodging, and we may continue to see a decIine in the overall yield as the more upscale customer is unable to find adequate lodging alternatives. Steamboat Central Reservations Service The ten major lodging companies in Steamboat generally filled 80% of their inventory through their own reservations systems. The balance of the rooms were rented on a commission basis through Steamboat Central Reservations Service (SCRS). SCRSwas acquired from the Chamber

3 The number of pillows represents the number of people the town's rentaI units could accommodate if aDbeds (includingsofabeds)were fullyutiIized. 3

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of Commerce by SSRC in 1989. Upon purchase, SSRC made two changes. It added toIl-free, nationwide telephone lines and an Airline Reporting Corporation appointment to sell airline tickets and air-inclusive vacation packages. SCRS had the resources to handle all aspects of a trip to Steamboat, including sales of airline tickets, ground transfers, bookings of lodging reservations, sales of lift tickets, and bookings of other activities. Since the price of lodging combined with air tickets often outweighed all other vacation costs, it was the most common concern among price-sensitive consumers. Use of SCRS increased dramatically during the 1993 ski season. 20% of 1992-93visitors to Steamboat used SCRSto make travel plans, as opposed to 12% in each of the preceding five seasons. Of that number, 75% of the visitors contacted SCRSdirect1y through the toll-free number, while the remaining 25% of vacation plans were made by travel agents through SCRS. SCRS received approximately 81% of its business from out-of-state customers, 17% from Front Range skiers, and 2% from international skiers. In December and January of the 1992-93 ski season, SCRS received approximately 70,000calls per month and converted 50% of the caUs into reservations. An estimated 60,000calls received busy signals. The Chamber of Commerce and the Local Community Steamboat Ski & Resort Corporation, along with 750 other businesses in Steamboat Springs, was a member of the Steamboat Springs Chamber of Commerce. In addition to working with SSRC to coordinate winter promotion of Steamboat, the Chamber also orchestrated the "Steamboat in Summertime" campaign to attract summer visitors. Relations were generally favorable between SSRC and the community. The major strain on SSRC-community relations was the perceived threat of horizontal integration by SSRC. For example, the sale of SCRSto SSRChad been controversial among businesses in town. Many in the community feared loss of control resulting from the sale of the central reservations to the already dominant SSRC. Management was sensitive to the town residents' concerns about SSRC,which was by far the largest employer in the town. Management would need to consider the impact of any new pricing strategies on the community.

The Ski Industry
The ski industry consisted of a highly fragmented group of 546 ski areas in the United States. In the U.S. market, 27 were located in Colorado and produced nearly 20% of total skier days per season in aggregate. The larger resorts offered a greater variety of skiing terrain as weIl as accommodations and nonskiing activities. As these were the resorts providing the majority of the skier days, they established pricing and distribution expectations throughout the industry. The larger resorts were primarily located in New England, the Rocky Mountains, and the Pacific Coast. Of these regions Colorado had been successful in differentiating itself by offering the greatest consistency and quality of snowfaIl, as weIl as a selection of world class ski resorts. The Colorado region attracted a distinct cross section of both destination and Front Range skiers. The major destination resorts in North America included Colorado's Vail/Beaver Creek, Aspen/Snowmass, TeUuride, Crested Butte, Breckenridge, Keystone, Copper, and Steamboat, as weIl as Whistler/Blackcomb in British Columbia, Sun Valley in Idaho, Jackson Hole in Wyoming, Snowbird and Park City in Utah, and Squaw Valley in California. Of these resorts, Vail, Aspen, Steamboat, Crested Butte, and Telluride were considered the leading options among Colorado destination skiers. Breckenridge, Keystone, and Copper, while participating in the destination 4

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market, realized a more significant number of skier days from Front Range skiers. Some of these resorts offered skiers multiple mountains and a wide variety of skiing terrain. Exhibit 12 shows the total skier day trends for U.S. ski resorts. This trend had been influenced primarily by snow conditions and the economy in general. Resorts throughout the United States had invested a substantial amount during the last few years in new lift technology, new terrain, and on-mountain dining. In 1991, for instance, Vail invested more than $10 million in Two Elks, a restaurant for skiers in its China Bowl, a recent mountain expansion. Colorado resorts in the aggregate planned to spend an estimated $44.5 million on capital improvements during the 1992-93 season. Another significant trend experienced by U.S. resorts was a rise in the numbers of international skiers. Many of the large Colorado resorts had increased their marketing in Europe, Asia, and Latin America. International skiers had become more knowledgeable about Colorado and had the financial resources to spend one or two weeks a year at a premier U.S. ski resort. The opening of the new Denver International Airport at the end of 1993promised to increase such skiers' visits to Colorado.

Competition
While SSRC considered companies such as Walt Disney and Carnival Cruise Lines competitors for the same vacation dollars, management believed that Steamboat's primary competition was from other destination ski resorts, particularly those in Colorado. The following is an overview of those resorts with which SSRC competed directly. Exhibit 11 provides information on Steamboat's major Colorado competitors' lift ticket pricing and distribution strategies. Exhibit 10 shows historical skier days for selected Colorado resorts. Vail/Beaver Creek Vail/Beaver Creek ("Vail"),with 180 trails, seven bowls,4 and nearly two million skier days per year, was a world class ski resort offering two mountains and a wide variety of terrain for every skier's ability. Over the years, Vail had pursued aggressive marketing throughout the U.S. and in international markets. lts premier image had been enhanced by terrain and lift expansion, price leadership, exceptional focus on customer service and commitment to total quality management. While Beaver Creek, the sister resort to Vail, catered primarily to upscale and corporate customers, Vail provided a wider range of lodging alternatives and night life. Vail Village and Lion's Head, which together comprised the town of Vail, had been developed with great thoroughness. Upon arrival at the base of the mountain, skiers found themselves in what seemed to be an Austrian foot village, with expensive shops, upscale lodging and dining, trendy nightclubs, and spotless streets. The combined bed base of Vail and Beaver Creek was approximately 28,500piIIows. The single-day ticket price in 1992-93was $42. With its upscale image, Vail was a favorite vacation spot for corporate executives and their families. Après-ski cocktail parties and other social events were present in abundance.

4 A bowl is a wide-open area with no trees to mark the trails. 5

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Aspen/Snowmass The Aspen/Snowmass ("Aspen") complex offered a wide variety of skiing terrain on four mountains and over 270 trails. Aspen had evolved from a small, advanced skier's mountain to a world class, premium resort. Aspen had become intemationally known as the ski area of the stars, where celebrities vacationed in both winter and summer. The development of the town and related infrastructure was consistent with Aspen's upscale image, having extensive premium lodging and dining as well as shopping which paralleled Beverly Hills' Rodeo Drive in prestige. The bed base was approximately 18,SOO pillows. The single-day ticket price in 1992-93was $43. The development of the Bumt Mountain area in Snowmass, already underway at a cost of approximately $35 million, promised to greatly increase skiable terrain.

Crested Butte
Crested Butte had recently become a more prominent competitive force in the destination resort market. With 85 trails, Crested Butte had a variety of terrain and was appealing to all skier types. To develop its image, Crested Butte had focused on the family and college markets through extensive vacation packages and discounting. Since the Crested Butte resort also included a hotel and 300 condominium units, vacations were easier to package than at resorts where lodging was owned by third parties. Furthermore, Crested Butte's relationships with the airlines serving the area were also favorable and were expected to improve, largely because the resort's newly hired head of marketing had previously been with Northwest Airlines. In the meantime, Crested Butte had expanded its mountain with 300 acres of new terrain in the 1991-92season. At some points during the ski season Crested Butte, like Steamboat, experienced a bed base constraint when demand exceeded its 6,000pillows. The single-day ticket price for 1992-93was $39.

Telluride
Telluride, a much smaller resort than Vail, Aspen, Crested Butte, or Steamboat, had only 62 trails, but it had taken great strides in recent years to develop an upscale, family image. Located in southwest Colorado, the resort had been difficult to reach by air and had been known as a challenging, skier's mountain. In recent years, however, the town of Telluride and the Telluride Mountain Village had been extensively developed to support the increased demand for this friendly, alpine village. Substantial long-term development of the residential and commercial areas in the Mountain Village area was expected. The introduction of commuter service into the new local airport, as well as the development of beginner and intermediate terrain on the mountain, had influenced customers' perceptions of both the accessibility and the desirability of Telluride. Increased awareness of Telluride in the marketplace had placed a strain on the town's small bed base of approximately 4,000 pillows. The single-day ticket price for 1992-93was $39.

Ski The Summit
The Ski The Summit resorts, comprised of Arapahoe Basin, Breckenridge, Copper, and Keystone (all in Summit County), offered over 3SOski trails and catered to a mixture of destination and front range skiers. Since all of the resorts were within a two-hour drive of downtown Denver, they were prime areas for weekend and day skiers. To compete against other Front Range resorts, the Ski The Summit resorts discounted single-day prices heavily. Discounts included special skier cards and discounted lift ticket sales in supermarkets in Denver and throughout Summit County. The four resorts of Ski The Summit had interchangeable passes, so that skiers could ski different resorts on the same ticket. In addition, the resorts pursued extensive joint marketing throughout the United States and the world. In the previous year, Keystone had spent approximately $32 million to expand its Outback region (256 new acres of skiable terrain) and upgrade its existing areas with 6

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modem lifts and a gondola. The owners of Keystone and Arapahoe Basin had recently purchased Breckenridge. The bed base in Summit County was approximately 60,000 pillows. The single-day prices for the 1992-93season were $37 for Copper and $38 for Breckenridge and Keystone.

Lift Ticket Pricing and Distribution
Lift tickets are the number one product which all ski areas have in common and, as such, strong, steady management of this aspect of the business will tend to make an otherwise marginal area a star performer.5 SSRC, like others, set prices for each ski season in the spring of the preceding season. Although pricing structures usually included multi-day discounts, group rates, and other special prices, the price of a single-day lift ticket was the most widely recognized measure of a ski resort's relative cost. When making pricing decisions, ski resort managers had to consider carefully the implications for a resort's image and its strategy of the single-day ticket price. Retail pricing for the ski industry had historically been set by the leaders, Vail and Aspen; other resorts had maintained similar pricing strategies and closely tracked the movement of these two leaders. In an attempt to increase revenues by maximizing the number of days a visitor skied during a vacation, most ski resorts promoted the sale of multi-day tickets, which were typically nonrefundable. Customers viewed multi-day tickets as a convenience and, if offered at a significant discount from the single-day rate, a way to save money. Multi-day tickets, however, reduced customers' flexibility if they wished to participate in other, non-skiing activities for more than the allowable one "day off." Moreover, when the tickets were not fully used, skiers often attempted to avoid the loss by passing them on or selling unused portions. As aresuit, certain ski resorts, including Steamboat, had implemented control mechanisms such as photo passes (these were lift tickets with identification photos) to prevent unlawful transfer. Ski resorts, like the airline industry, were high fixed-cost businesses. Since a mountain operated on a full-time basis during the ski season, any increase in skier days offset fixed costs and led to a direct increase in operating profit. Hence, segmenting the market in order to provide discounted tickets to skiers who would not ordinarily ski at a particular resort was an important, yet complex, task for ski resort managements. Ski resorts continually grappled with the challenge of finding the price threshold for those consumers who otherwise would not ski in order to increase profitability while maintaining their image and position in the marketplace. Despite such efforts, ski industry managers did not seem to have solved the problem. The primary channel for distribution was through ticket windows located at the base of each mountain. Some resorts, particularly those catering to Front Range skiers, also offered tickets through grocery stores and other retail channels at discounted prices. Some resorts recently had attempted to increase distribution breadth through lodges and hotels. Others had begun to offer flexibie ticketing or point systems to provide skiers with the option of paying on a per-run basis. None of these altemate distribution channels, however, could be adapted cost-effectively to sales of the photo pass. Thus, resorts that used such channels could not at the same time benefit from the added security of the photo pass.

5 Economic Analysis of U.S. Ski Areas, 1991-92.

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The Steamboat Situation
Exhibit 13 shows initial price points of selected Colorado resorts. Exhibit 14 graphs Steamboat's multi-day pricing position relative to the competitive Colorado resorts. Exhibit 15 details the per day discount on a 6-day lift ticket for the Colorado resorts. While some ski resort managements believed that perceived value lay in the initial price point, others believed that perceived value was signaled by the multi-day discount. SSRCbelieved that, since most visitors to Steamboat were destination skiers, the additional incentive of substantial multi-day ticket discounts was unnecessary. Focus group results6 indicated that a more significant discount would encourage customers to purchase multi-day tickets; under the existing pricing structure, Steamboat customers bought the tickets more for convenience than for the minimal discount. During nonpeak periods, most resorts offered additional discounts on both single day and multi-day ticket prices. Steamboat had three seasons, one regular and two "value" seasons, with all prices reduced by $5 per day during the latter (see Exhibit 16 for the SSRC pricing strueture and break-down of lift-ticket sales by type). One exception to this practice was Aspen, which actually increased prices during the two-week Christmas season. Steamboat had been the innovator in several packaging programs that served as marketing tools to increase skier days and revenues. The most successful of these programs was "Kids Ski Free," introduced in 1983. This program enabled one adult who purchased a five-or-more-day lift ticket and stayed a minimum of five nights at any Steamboat Springs Chamber of Commerce member property to have one child under the age of 12 ski free. Since this program began, every major Colorado resort had established its own children's free skiing program. Steamboat had also implemented a plan called "Keep Skiing Steamboat," which allowed guests to bring their used six-day ticket back the following year to receive a free day with the purchase of a five-day ticket. But this program had been only marginally effective, due to lack of awareness among Steamboat skiers. Lift Ticket Distribution At Steamboat as at other resorts, the main channel for distribution of lift tickets were onmountain ticket windows, typically offering a range of single-day, half-day, and multi-day lift tickets. Windows sold all types of tickets with all types of payment. The only other channels for ticket distribution were central reservation systems (such as SCRS), travel agents, and tour operators. Because customers using such altemate channels frequently planned and purchased their entire trips at once, they provided attractive opportunities for increased sales of multi-day tickets.

Lift Ticket Pricing Altematives
As the March deadline for setting lift-ticket pricing for the 1993-1994 season was fast approaching, SSRC management was considering several alternatives for its pricing strategy. Mayfield believed that some radical changes in pricing strategy might benefit the resort by

6 Two focus group sessions were conducted by RRC Associates on Steamboat. Questions were developed by the HBS research team, which group to achieve maximum diversity among respondents. Each group who were singles, couples with children, and couples without children, Front Range skiers. 8

February 14 and 15, 1993, on site at also selected the 20 participants in each represented a mix of ages, with adults as weil as a balance of Destination and

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differentiating Steamboat from other Colorado ski areas, especially if such changes were responsive to consumer demands for better value. Mayfield was aware, however, that such an approach had its risks. He had little hard data on the cost of attracting and retaining a Steamboat customer. He was uncertain about the effect of any new pricing strategy on skier days. And, to complicate matters further, he also knew that SSRC management was considering an expansion of lift-ticket distribution into area lodges and grocery stores, which would raise two potential problems if it occurred. One was the reduced security on lift tickets that would result from the elimination of photo passes. The other was the negative impact of sales commissions required by such new channels on SSRC margins-unless Mayfield's new pricing strategy took those added costs into account. Over and above these concerns, Mayfield knew that there were no guarantees as to how KIC would respond to any departure from the status quo. Although KIC assured SSRCthat it was willing to consider changes that might improve Steamboat's reputation as a premier ski resort, KIC was often conservative in its decisions. Nonetheless, Mayfield was considering a number of options for SSRCs pricing strategy:

No Change
Maintaining the status quo involved raising prices by approximately $2 per day across allliftticket categories, as SSRC had done in past years. This option was probably "expected" by the marketplace-and represented minimal risk.

Increase Multi-Day Discount
An increase in the multi-day discount would bring Steamboat's pricing structure into line with that of its competitors. Steamboat's current price position on multi-day tickets delivered little in savings to the consumer. A six-day lift ticket, for example, brought a savings of only two dollars per day to a Steamboat skier. In effect, multi-day tickets were purchased solely for convenience purposes, since financial incentives were minima!. An increase in the multi-day discount would provide the customer with better value and might increase the number of multi-day tickets sold, thus boosting overall skier days for the mountain. Mayfield wondered whether the incremental revenues gained from these additional sales would offset the lost margin on the multi-day discounts.

Seasonal Variance
Mayfield was also intrigued by another prking approach. Steamboat already had three seasons with two separate prking structures. But he considered moving toward greater variance to attract customers at slow times and increase margins during peak periods. Such an approach called for SSRCto raise prices to $45 per day during peak periods such as Christmas and reduce them to $30 per day during slow periods such as November. This prking structure might balance demand in high and low periods, while addressing the bed base constraint during the peak times (see Exhibit 17 for historical skier days per month). To avoid any confusion, SSRCwould eliminate all discounts on multi-day tickets. As a result, pricing of single-day tickets would become a more meaningful indication of value to the customer. With no savings incentive to buy multi-day tickets, Mayfield expected a rise in single-day ticket sales, but he wondered whether this would have a negative impact on overall skier days and what it might do to SSRCs average contribution margin per skier day.

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Teen Programs Though most major ski resorts had followed Steamboat's lead in providing free skiing to children (see Exhibit 18 on Family Oriented Programs), no resorts offered discounted tickets for teenagers, ages 13 to 18. Mayfield saw this as an opportunity for SSRC. He recognized that Steamboat was in danger of losing families whose children skied free when the children became teens. SSRCneeded to provide some incentives for such families to continue coming to Steamboat rather than selecting a lower cost nonski alternative or another ski resort with more aggressive multiday discounting programs. While offering family discounts might result in a short-term decrease in overall margin, capturing the teenaged group while retaining current families would be critical in the long term to expanding Steamboat's customer base. Besides the possibly negative impact on margins of such programs, Mayfield was also concemed about added operating costs. Teens would no doubt require other activities such as snowboarding and evening social events.

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