With a wealth of experience in financial and operational analysis, monitoring, and benchmarking within the ski industry, Yulia Frolova is the founder and CEO of SunTax Consulting based in the U.S. Additionally, she served as the Chief Financial Controller at Rosa Khutor, Russia’s largest ski resort. Joining the key investor, Interros, before the 2013 Winter Olympics, Frolova played a vital role in shaping the company’s strategic, operational, and financial goals. Her responsibilities included assessing financial risks, enhancing internal control systems, and strengthening corporate governance.
Born in neighboring Moldova, Yulia has been frequently visiting Romania’s Carpathian Mountains since her childhood and, thus, had the opportunity to watch the Romanian ski industry’s growth and development over time. According to Yulia, Romania is currently home to more than 50 ski resorts, and its evolution of annual skier visits is truly remarkable: during the 2020/2021 ski season 1.7M skier days were officially recorded, showing 41% growth compared to pre-pandemic 2018/2019 visitation levels.
According to Business-review.eu, the Romanian tourism sector plays an important role in the country’s economy. It contributes approximately 3% to the total national GDP and provides employment for around 6.3% of the total workforce. But its potential extends far beyond these modest figures.
Today, with Yulia’s expert support, we are focusing on the constraints and opportunities for the Romanian ski market, discussing global industry best practices and the performance of the worldwide ski leaders – the USA and France.
Mrs. Frolova considers industry benchmarking to be the most effective way for identifying performance gaps within the local market and, more importantly, find solutions how to address them.
So, let’s start our ski industry benchmarking journey guided by Mrs. Frolova.
The U.S. ski industry is currently dominated by two major players which have been growing in size by new acquisitions over the years. The biggest one of them is Vail Resorts, Inc. (Vail) which currently comprises 42 ski resorts. The total skier visitation levels in North America have reached 80 million skier days per year, with Vail holding a share of close to 30% of them.
With 250 resorts spread over 6 massifs, France is the world’s second-largest ski destination, with about 55 million skier days sold during the 2021/2022 season. Unlike other European countries, the French ski industry is dominated by a single major market player – Compagnie des Alpes (CDA), which operates 12 ski areas and accounts for around 25% of the national skier visits.
Although both the U.S. and French industry leaders operate within similar business segments – Mountain and Lodging, they differ significantly in their approach to managing operational risks through diversification. Vail’s diversification strategy involves expanding internationally through the acquisitions of ski resorts in other countries such as Canada, Australia, and Switzerland. CDA, on the other hand, keeps all its mountain operations exclusively within France’s borders. At the same time, the company also manages another business segment, Leisure Parks, which contributes to nearly 50% of its total revenues. Unlike mountain resorts, CDA’s leisure parks are operated in five different countries, including France.
When directly comparing the mountain operations of both companies, it’s essential not to overlook the different approaches used in the USA and Europe to measure the skiable terrain. This consideration is particularly important to ensure the relevance and accuracy of the comparable data. Converting acres, traditionally used in the United States to measure skiable area, to kilometers, the standard unit for measuring the overall length of ski trails in France, is not feasible due to the considerable level of approximation involved.
Nevertheless, there are still numerous ratios at our disposal that can be used to compare the financial and operating results of the two companies. Fortunately, both companies’ financial statements and annual reports are publicly available they are listed on the stock exchange, as assured by Mrs. Frolova.
“I am a strong advocate of utilizing a top-down approach in industry benchmarking, where the most aggregated indicators, such as the overall business EBITDA, serve as a starting point. Remarkably, both companies demonstrated nearly identical results in this regard – 33% and 32% for Vail and CDA respectively. This suggests that they both have effectively tackled the seasonality challenge inherent to the industry in their own unique ways,” Mrs. Frolova added.
Another interesting coincidence is that national markets continue to be the predominant revenue-generating source for both Vail and CDA, with only 12% and 15% of their respective revenues attributed to international operations.
The revenue mix of the two companies is completely different. Vail maintains a heavy concentration on the Mountain segment, which represents 88% of its total revenue, while the remaining 12% is attributable to the Lodging segment. On the other hand, CDA splits its revenue almost equally between Mountain and Leisure Parks (including Lodging) segments, as previously mentioned.
The Mountain segment can be further divided into categories of services, including Lift tickets and other services such as Ski school, Dining, Retail, Rental, etc. Typically, lift ticket sales constitute a significant portion of the Mountain segment revenue, although the proportion may vary among different companies. In the case of Vail, approximately 60% of its total revenue is derived from ski resort operations through the sales of lift tickets. On the other hand, lift ticket sales account for 95% of CDA’s total revenue in the mountain segment.
Other services are normally associated with higher operating margins compared to Lift ticket sales, thereby contributing to overall marginality enhancement. At the same time, lift ticket sales constitute a much more predictable revenue stream, especially if the company chooses to prioritize revenue stability over higher margins by focusing on the annual passes sales as opposed to the window sales.
Vail stands out as a unique example of a company that implements both strategies at the same time, focusing on the development of highly profitable other services while simultaneously relying on annual passes sales. Over the past few years, its advance commitments sales account for over 60% of total lift ticket sales. This approach helps to reduce dependence on weather conditions and mitigate the impact of potential force majeure closures – two major risks for the ski business.
Unfortunately, there are no publicly traded ski resort operators in Romania that would openly disclose their financial information, resulting in a scarcity of national ski industry data. However, what can be confidently stated is that Romania holds great potential for ski industry development as it’s home to the second-largest mountain range in Europe with 14 peaks reaching over 2,000 meters. The winter season typically spans up to 120 days, which is comparable to the average season duration of Vail Resorts (136 days) and CDA (131 days).
Romania has approximately 700,000 national skiers, representing a 4% national participation rate (compared to 13% in France and 8% in the USA). The ongoing development of the Transalpina ski resort, featuring 80 km of ski trails, holds the potential to become the largest national ski resort once completed.
