Market know-how: Minus $6M Celsius

December came, but with only a couple of weeks before the New Year, there was no snow. On December 1, it rained and temperatures climbed as high as 5 degrees Celsius. Ski resort managers reluctantly admit that attendance rates have fallen by 50% as compared to previous winters and that the 2006/2007 season opened a fortnight later than in previous years. They also admit that ski lift prices have nevertheless gone up this year. Nowadays, each countryside resort vies for the title of the only venue where snow conditions remained satisfactory even in warmer days.

Visitors

Despite the lack of snow local ski resorts say they have not witnessed an exodus of skiers from the Moscow countryside to other parts of the country. Dmitry Shishkov, director for alpine skiing at Marina Club fitness center and member of the union of ski instructors, says that winter sports fans stayed in Moscow and mastered their skills using ski slope simulators while waiting for snowfalls. Professional athletes and amateur skiers who could afford a vacation at big-time ski resorts did so, as everyone understands that countryside ski runs can serve merely as a training ground, or even just a place where novices arrive on weekends yearning for a new experience - this group of clients is quite numerous here.“For ski instructors those resorts are a source of income,” Shishkov adds.

Instructors say that some skiers had even booked two vacations elsewhere during this season, because of poor ski conditions in Moscow. But even the favorite resorts of the Moscow skiers, Courchevel in the French Alps and Krasnaya Polyana in Sochi, suffered from weather surprises, which received wide media coverage. The former venue has survived the boycott by residents a Rublyovka [Moscow’s posh countryside area along Rublyovskoye Shosse]. Skiers who opted for Sochi had their plans disrupted by the strike launched by ski lift operators. On the whole, Europe suffered from the lack of snow no less than Russia.

Places of Abode

Moscow Region’s ski resorts are located chiefly northwards from the capital, along Dmitrovskoye Shosse [highway]. Owners and operators describe their projects as sports and leisure year-round resorts. “As practice shows investors take interest in such projects as long as those are touted as multifunctional all-year-round parks," says Maxim Otchertsov, general director of the League of Cultural and Sports Workers and general manager at Sorochany.

But positioning alone is not enough. In the opinion of their customers those parks have two functions so far – they provide slopes for skiing and snowboarding and cater to companies who organize corporate events for their staff in the countryside. Visitors without skis or snowboards are rare in sports parks along Dmitrovskoye Shosse. Winter resorts provide no other popular leisure facilities. In addition to ski runs, they feature but a couple of cafes, small saunas, a skating rink and a bobsleigh run. For example, none of the aforementioned venues provides a movie theater; Volen is the only resort where a swimming pool has been built. The pool measures 360sqm and is open only in summer months. In summer those parks are reminiscent rather of countryside hotels.

Nature Attacks

This year, the season at alpine ski parks in Moscow countryside kicked off later than usual. “Usually we open our slopes in early November," says Andrei Pankratov, commercial director at Leonid Tyagachyov Club. “But in November all we had to offer was our indoor slope for affluent audience. Before January, only two-thirds of our slopes were open, as compared to the same period last year. Attendance was 60% lower during the Christmas break." Pankratov says that the club’s main slopes and snowboard park remained closed until early February.

Yakhroma reports that this year there has been no snow for eight weeks. “If weather conditions had been normal by this day we would have been open for 2.5 months already,” says Natalia Silinskaya, commercial director at Yakhroma. At the same time, she insists that their financial results are no worse than reported in the same period of last year as Yakhroma stakes chiefly on corporate clients. Orders for corporate events are placed several months in advance. New Year parties also help, as customers book rooms in Yakhroma hotels as early as in summer and autumn. Many sports parks serve as venues for corporate events.

This season in Yakhroma began only on November 12, while the 2005/2006 season kicked off as early as November 5. One-day tourists, says Silinskaya, accounted for 10% of last season’s attendance. Weekend attendance in normal winters stands at 2,000 to 3,000 per day, of which 200 to 300 spend the night at a hotel. “We do not conceal the fact that we have suffered losses because of the weather,” she admits. “But we have been spared also thanks to the demand for our hotel rooms, which is always high. We have built a new 4-star hotel providing 37 rooms. In November we look forward towards winter, offering rooms for holiday breaks and corporate events. We also hosted a large number of entertainment shows trying to distract people from poor weather. For examples, we held discos.”

Patrons usually buy ski passes (multiple ski lift tickets for 10 ascents and over) in advance for the entire season. Yakhroma's management has decided to reimburse their clients for unused tickets by making them valid for two months of the next season. Corporate clients who booked ski holidays in December were offered a rebooking for January and February. The park has lost several clients who had abandoned their plans to hold ski gear advertising campaigns at Yakhroma ahead of the season. Several ski sports festivals were cancelled. Yakhroma even fears that some 10% of their patrons will not pre-book hotel rooms for the next season.

Silinskaya is convinced that many other countryside resorts have suffered the same problems. Resorts, which live by slopes alone must have been hardest hit, their losses being estimated at up to 90%.

While skiing is one of the key sources of revenues for sports park it is not the only one, winter resort developers believe. Properly operated, cafes and restaurants alone may bring up to 25% of revenues to the resorts, and approximately just as much may be earned from hotels. But those facilities fail to bring returns unless they are operated alongside well-equipped ski slopes.

Analysts put the cost of maintenance of a countryside ski resort, such as Yakhroma, Volen or Sorochany (also known as Shukolovo) at $250,000 per month on average, in winter months. Revenues must exceed spending three to four times. This year, ski resorts’ revenues could be 30% lower as slopes were open for skiers for less than two weeks before February. Losses are estimated at $1.5 to $6 million.

Ski resorts, such as Sorochany, usually make up to $12 million per season on average, Maxim Otchertsov has reported. And this, from skiing alone. There are different approaches towards calculation. For example, by the number of ascents or the quantity of sold ski lift passes. “This winter has indeed given jitters to resort owners and managers,” Otchertsov admits. “Considering that in normal seasons when slopes are opened for skiing in late November we earn approximately $2.5 to 3 million per month, it is easy to figure out what losses we have suffered this year."

It might seem that as soon as temperatures fell the situation would improve. Besides, there are snow cannons used to make artificial snow. But it transpires that building an artificial slope is not that easy. To begin with, resort operators failed to raise hills between thaws, besides most snow guns generate snow only in freezing temperatures; humidity levels also count. To build a decent ski run at least four snow guns should be switched on for 3 to 4 days without interruptions. Even a relatively inexpensive snow generating system, says Andrei Pankratov, could cost 15 to 20 million rubles.

Resort owners believe that this year they are unlikely to make up for the loss in revenue. Even if snowfalls and freezing temperatures continue till late April.

It is no secret that annual revenues from travel industry in Switzerland are estimated at $10 billion, generated largely by mountain resorts. But European scientists already voice concerns about the impending disaster brought about by global warming. As a result of climate change and human impact on the Alpine ecosystem, along with the development of leisure facilities, melting of main glaciers has already begun. As Vedomosti already reported, the rapid development in the sector has affected the magnificent landscapes and the ecosystem of the region. With the glaciers melting as a result of global warming, scientists expect as many as 50% of the current ski resorts to close down by 2050. The first to go bankrupt in these circumstances will be the resorts operating below 1,600 meters. .

Skiing in the Rain

“They were skiing in the rain,” a fellow journalist recounted after visiting a number of ski resorts in Moscow countryside in late November.Skiers patronizing Moscow resorts described a dismal picture they had seen in Yakhroma, Volen and Sorochany and spoke of “woeful landscapes", “green grass”, “walking through puddles" and “dining in an empty restaurant…” Web cams installed on slopes showed deserted runs covered with artificial snow against the background of late autumn colors.

More or less decent ski runs reportedly were available in Stepanovo and at Leonid Tyagachyov Club. But then, slopes covered with artificial snow, which is rather stiff, are dangerous for beginners, especially in warm weather when it is covered with icy crust. The inexperienced often suffer injuries.

One of the recent novelties is the artificial ski surface spread on slopes for skiing in any weather. May 2006 saw the first snowboarding competition in Zelenograd held on artificial surface. Meanwhile, in Africa local residents and travelers enjoy sand skiing and snowboarding in the dunes.

Snow Investments

Northern countryside was chosen for development of alpine ski resorts owing to the landscape of the area. The Klin-Dmitrov Range is known for its hills. Building slopes on the flatlands would be much more expensive, Dmitry Shishkov explains, so why not use the hills created by the nature itself.

Konkor Group, founder and owner Yakhroma, says it has spent $100 million on the development of the resort. Construction of Sorochany was launched in 2000. The company MGK Itera had put up $30 million for the project. The amount is not final as the resort owners continue to pursue new projects on their territory. For comparison: the new leisure complex Karusel in Krasnaya Polyana, covering a total area of 1,920 ha and providing 70 kilometers of ski runs, is estimated to be worth approximately 350 million euros.

Leonid Tyagachyov Club does not divulge the cost of the project. But with the President of Russia on the list of its founders, the club is a non-profit partnership, Andrei Pankratov emphasizes. The sale of ski passes and catering and accommodation facilities at the Club provide cash for maintenance of training venue, he explains. The club features a children’s sports school that hardly brings any profit to the club owners. The key source of incomes are membership fees. Corporate clients account for 30% of proceeds.

Maintenance of ski slopes require huge spending, Andrei Pankratov admits. In addition to the cost of snow making equipment, estimated at 15 to 20 million rubles, it is necessary to spent at least 15 million rubles on lighting systems. Installation of chair lifts requires $2 million on average. Then, there are salaries to the staff and all sorts of utility payments. All those costs deducted, the owner is left with an amount that they spend on further development of the resort. “I am envious of Austrians who are entitled to interest-free loans for construction of alpine ski centers. In that country alpine tourism and winter sports are supported by the government. But come to think of it, Russia, too, has mountainous districts with good prospects," Pankratov says.

Did Prices Grow?

Against all odds, prices at ski resorts did grow this year, visitors complain. For example, Sorochany is said to have charged skiers 650 rubles for one hour of skiing on January 7 to 8 (Orthodox Christmas). These days, the company's official website reports that a one-hour ski pass on weekdays costs 180 to 300 rubles and 750 rubles on weekends and holidays.

To at least partially make up for their losses resort operators push up ski lift prices. But Natalia Silinskaya, for one, opposes the measure. “It would be more appropriate to improve the quality of service by training hotel staff to a higher standard and host sports festivals in order to attract visitors, than to burden them with our problems,” she says.

But Sorochany is set to make up for the loss, not only by pushing up prices but also by improving the quality of service. Maxim Otchertsov has reported that in warm weather days the Sorochany team succeeded in preserving snow on their slopes and even hosted a seminar attended by Australia’s coach Dalibor Dvorsky.

Pankratov says his resort charges 8 rubles per one lift on weekdays and 16 rubles on weekends.

Last year, the price of a ski pass for 10 lift rides at Volen stood at 150 rubles on weekdays and 400 rubles on weekends. Now Volen charges 450 rubles for the same ticket on weekends, a spokesman for the resort has reported. Volen's spokesman Alexander Belikov does not rule out that in the near future the park will host a number of events and plans to reduce prices for all services with a view to boost attendance.

“An increase in prices is natural in view of inflation, growing incomes, energy and utility charges,” Maxim Otchertsov says.

Countryside sports parks, beyond doubt, seek to resemble European resorts. But if they are to achieve that they still need to work hard, not only on improvement of their hotel, restaurant and leisure facilities, but also on the quality of ski runs. Resort operators do not deny that. .

Leonid Tyagachyov Club’s executives admit that this winter they have learned their lesson well and are now set to put in additional ski making equipment and raise three more slopes.

Dmitry Shishkov agrees that ski resort operators should pay more attention to the quality of ski runs, especially, the slopes for beginners. Leonid Tyagachyov Club, he says, is perhaps the only resort providing well-equipped skiing facilities for beginners. Besides, few parks pay due attention to safety on ski slopes. Ski resorts need skilled staff to operate snow generating equipment as, for example, improper installation of a snow cannon may result in poor quality of a ski run.

From Elitism to Mass Audience

Can a ski resort function at the same time as an amusement park? In other words, can it combine sports and leisure? One of the examples is Chamonix. Or Les Deux Alpes, often referred as Alpine Las Vegas.

But those resorts are in the Alps. If one thinks of a mixed-use sports and leisure park in Moscow countryside, the question arises as to whether the project will ever pay back. Will investors ever secure a payback on a project featuring ski slopes and snowboarding parks, water parks with swimming pools, gyms and other sports and amusement facilities, such as cycle lanes, ice and roller skating rinks, movie theaters, discos, restaurants, bars and hotel? With all those facilities in place owners will secure extra income and safeguard themselves against warm winters. Then, guests will visit the park not only for the sake of skiing.

Volen formerly ran a casino on the site. But that was about a decade ago, under previous shareholders, Alexander Belikov explains. Few can name the true reason why the establishment had been closed down.

A water park would require enormous spending from countryside resort operators. Perhaps, such projects would be worth as much as the cost of resorts themselves. Built in 2002 Transvaal water amusement park had cost its developers $30 million. A water park in City was estimated to be worth at least $230 million back in 2004 when the plan to build the facility was announced. Natalia Silinskaya says that Konkor plans to build a water park at the resort in a distant future. But for the time being the resort owners have confined themselves to building a water sports complex featuring several types of saunas and a swimming pool, next to the fourth slope. It has to be noted that swimming pools and saunas are common at ski resorts across the globe.

The owners of Sorochany plan an open-air skating rink, a children's amusement park and a dancing hall on their grounds. Leonid Tyagachyov Club plans a water feature and stalls.

Igora Resort in Leningrad Region opened only 12 months and still has not been put fully in operation. The company that runs the resort has now launched construction f a swimming pool and spa facilities, hoping to boost attendance, Igora has reported.