Telluride Season Pass Rate Increase & Local Economy

While the Telluride Ski Resort season pass rate increase affects those of us who independently purchase a pass, I believe it also has a signicifcant impact on the local and regional economy.

If you’re gonna be a ski bum, you’ve got to have a pass. Receiving a season pass from an employer as part of a compensation package is a coveted benefit to those individuals who are seeking to “live the life” at a major ski resort. So, unless you get a pass from an employer, you’re forced to buy it outright ($1,198 early bird or a whopping $1,850 after Nov. 1, 2008).

Last I checked (I could be wrong here), the merchant program offered by Telski was something to the effect of $700 (which would probably be $850 this year) for a merchant pass; however, it requires a substantial contribution to the local “airline guarantee program”. I believe this contribution is somethere in the neighborhood of $500-$1000. There are price breaks for larger companies with more employees. I’ll eventually obtain the exact figures and terms for a more detailed analysis. Nonetheless, it’s safe to say most average sized merchants in town are forced to ante up at almost the full pass rate in order to obtain passess to hand out to their employees as a benefit.

On the other hand, Telski can virtually print out an unlimited number of passes to distribute to their employees as part of a compensation package. This fundamental dynamic provides Telski a significant competitive advantage over other merchants in so far as keeping overall expenses down. It follows that an increase in season pass rates translates into a greater advantage in so far as many local businesses being squeezed that much further to offer up a competitive compensation package. In an overall inflationary/recessionary environment, this advantage that Telski enjoys becomes even more pronounced.

So, what are local area businesses to do in order to hire and retain qualified employees? It seems their faced with one of two choices:

1.) Discontinue their involvment in the merchant pass program and let their employees purchase a pass independently. This option is somewhat risky in so far as possibly losing out on those employees who are using a pass as a “deal breaker” in terms of whether or not the job is worth taking. The employer can mitigate this by raising wages, but if the employee is smart they’ll do the number crunch as applied over time. Assuming an employee will net 80% of gross earnings, one would have to gross $2,220 in wages to pocket that $1,850 for the pass. Moreover, the employer may also be shelling out an additional 10-20% in taxes on the backend. So, while it’s true that many employers are willing to implement creative and innovative ways for their employees to get their hands on a pass, the numbers don’t readily add up in regard to increasing wages.

2.) The other option would be to simply ante up more cash for season passes in order to remain competitive in the local employment sector. What does this do? It decreases the bottom line for the employer and tightens the already shrinking margins. It may also increase the cost of goods and services to the end consumer; contributing to inflationary pressures. Given the already high cost of living in Telluride, where many locals work multiple jobs and barely get by, we’ll start to see even greater cost of living hardships. Many locals may find it difficult to continue to live in Town and move away.

The trickle down effect of Telski’s pass rate increase will probably be incremental, it nonetheless will have tremendous ripple effects over time. If wages don’t keep up with the cost of living, we may see more and more workers communiting from towns further away such as Montrose & Cortez. We may see more vehicles on the already deteriorating roads which lead into and out of Telluride. However, with the cost of gas on the rise, local area businesses will have a difficult time providing wages which mitigate travel expense. Still, Telski can print up passess as if they had a license to print money in the basement of their headquarers … so they may be more successful in luring regional workers who are interested in a pass.

Of course, all of the above scenarios assume the local economy will not implode, but I would argue there is a limit to how high Telski can raise the price of a season pass and not have virtually all of the dominoes knocked over. Crested Butte found itself in a quite a situation a few years back when something on the order of 18-21 businesses closed their doors over the course of a 12 month span. The underlying reasons may have been different, but the potential exists here in Telluride for a similar mass exodus of viable essential businesses.

It’s interesting to note the National Forest Service will require impact studies (mostly environmental) with respect approving development activities within NFS boundaries; however, it seems Telski (as a current leasee and existing operator) is immune from current economic impact evaluations in terms of how their operational price points affect the local and regional economy. Should the NFS have oversight powers in perpetuity? This is somewhat of an ideological question, but I think it deserves consideration.

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