Over the past few weeks a number of people have asked me what I think comes next for the ski sector. Whilst I no longer run a ski business, I have clients who are still very much involved in ski and I talk on an almost daily basis to operators, suppliers and people working in the sector.
There’s always a danger in hypothesising about the future, especially when so much uncertainty remains, but inevitably I have views on the subject!
The challenges for the ski sector in 2020 have been very well publicised.
The last ski season ended prematurely in mid-March 2020. Operators had the challenge of repatriating clients and staff as well as refunding money for holidays that were curtailed or never happened. Many firms saw clients happy to push holidays out to a future date or accept credit notes, but to certain extent this kicked the problem down the road rather than solving it.
Over the summer and autumn months it became clear that it would be increasingly difficult to operate anything approaching a normal season for winter 2021. In the background there was another massive challenge that had been brewing for some time. Brexit.
It has long been suspected that it would no longer be possible to use the EU Posted Workers Directive to employ staff once the UK left the EU. I was closely involved in the evolving approach to this issue up until Spring 2019. We now have a deal, but past employment models are no longer workable.
Dealing with Brexit and its implications for organisational structure, product offering and future viability is a project ski businesses have been grappling with for over four years. Finding workable solutions was taking up a lot of business leaders’ mental bandwidth before COVID got lumped on top. It wasn’t forgotten but it had to get pushed down the priority list.
Where are we now?
The position now is that a number of high-profile ski businesses have gone into administration, more have effectively been mothballed for this winter (as I have said elsewhere this should definitely not be viewed as a worst case scenario) and others are hoping for some trade this winter, but have significant challenges ahead.
Where firms do have bookings it is increasingly unclear whether they will be able to service them. If skiers cannot travel there will be another round of refunds to contend with. Feedback from operators suggests that generating sufficient demand is not an issue (at least in theory), however there are multiple barriers to being able to supply guests with any kind of holiday in the mountains this winter.
So where does this leave the ski industry going forward?
I would argue that for a number of years much of the ski sector has had an oversupply of both flights and accommodation. Accordingly there have been disappointingly low margins. For highly committed operators much of the season was sold at a loss.
The traditional catered chalet model that has driven much of the market has had a sell-by date lurking in the background for a while - at least for operators targeting any kind of volume. There are the employment issues already alluded to, but it's also an inherently risky setup. Fixed costs are high and businesses are at the mercy of myriad external factors (mountain weather, a fragmented supply chain, over dependence on seasonal staff, what day of the week Christmas falls on, the timing of Easter … the list goes on!).
I do however believe that people will still want to go skiing. For established snow sports enthusiasts the ski break is more of an addiction than a hobby. Looking beyond the hard core fans there is also reason for positivity. Lockdown has shown us that the things people value most are experiences and time spent outdoors. The mountains combine the two brilliantly.
Enjoying sociable activities with other like minded souls now seems like the ultimate luxury. Although it is very easy to argue that disposable income are likley to decrease in the coming years and months, my suspicion is that there will be plenty of people who now prioritise doing things over buying things. Government figures also show that savings rates have increased this year as incomes remained relatively stable (for many), but opportunities to spend decreased; this bodes well for future travel and leisure spending.
If we work from the assumption that there will still be demand, we need to consider the supply side. As a starting point it is important to recognise that there will not be a reduction in the number of beds available in the mountains. They remain in the same locations and are of the same quality. How these beds get distributed to the market is where we can expect to see a shift.
It’s worth noting at this point that I do envisage a reduction in the flight capacity going into hubs serving the Alps. This will partly be due to reduced schedules for low-cost airlines such as EasyJet, but I also see a reduction in the number of charter flights on offer. The number of operators using charters has been in steady decline for a while, accelerated by the demise of Monarch and then Thomas Cook.
Accommodation owners and operators, as well as destinations, will now be looking for new ways to connect with the skiing public and the UK market will inevitably be a focus. There are already some strong technology-driven property distribution platforms emerging in response to this need. The best also have a layer of property management, solving a further problem for owners and operators.
Some of these new platforms have quickly developed a strong foothold in the Alps; they built momentum over the course of summer 2020 and going in to Winter 20/21, largely by focusing on domestic markets. I have a client based in France who has done particularly well, both acquiring new properties to feature and attracting domestic clients wishing to stay in them. This trend has continued as the winter season started, despite the limits on services available in alpine destinations.
However, I don't see what are essentially online distribution platforms as being able to service the ski market as a whole. They have a role and many will do well, but there will still be space for firms who have a more service based approach. Many people new to snowsports need their hand holding a bit more, more experienced skiers can have quite specific needs and a chunk of the market is looking for more involved experiences.
This is where there's a real opportunity for operators (and agents) to hone their offering and create decent margins. What I think is probably unlikely is a single brand emerging who can do this at significant scale. I don’t see a new “Crystal Ski” appearing, or even Crystal itself going back to the “all ski bases covered” approach of the past. Times have changed.
Where scale can come in is when a number of brands servicing different niches get pulled together within one business. It is not hard to imagine a new ski group emerging that contains within it distinct brands servicing the likes of short breaks, high-end serviced chalets, the family market, corporate trips or ski touring. There are investors already assesing the potential of such a tie-up.
There would be back office economies that would help the businesses to profitably grow, alongside the potential for cross selling. A lot has been learnt from past mistakes made when pulling together niche acquisitions. The passionate brand advocates would now be given a stronger voice than the bean counters (at least in my world they would …).
The other opportunity is for ski brands to look for a new home as part of a wider group of companies servicing a variety of travel needs. There is a huge crossover between people that enjoy villa holidays, city breaks (remember them?), cycling holidays, tailor made trips and people who enjoy skiing.
Having a ski brand sitting as part of a wider offering makes a lot of sense. In fact I would go as far as to say that the single product ski business, which is what many ski industry players have essentially been in the past, will be an anomaly rather than the norm.
So what are the opportunities right now for anyone in the ski sector?
I think it's time to get out a blank sheet of paper and carefully consider how best to serve the changing needs of clients. Look at what as a business you can do really well and what your customers love. Once that is done start figuring out how to tie the two together. Take into account the fact that the world has changed; do you really still need to commit to staff, flight seats or properties, or are you able to have a more flexible operational model?
Above all don't rule out mergers, acquisitions or going into new markets. I think there could be a lot of interesting and innovative activity that includes ski brands as we get further into 2021. When people do start to travel again, which they will, travel businesses have a once in a generation opportunity to significantly shift their structure, offering and pricing.
With the right strategy many businesses will find themselves entering an exciting period of profitable growth.