Which type of market does this business or industry compete in? List the characteristics of the market type from the text and explain how your example fits them and where it does not.
The example i chose for this module is the ski industry. I chose this because i work at Sunlight and we have an interesting position within the market because of the size and rustic, non-corporate atmosphere of this resort. The ski industry competes within the tourism market which highly depends on income and spending patterns throughout society, oh and weather is a huge factor as well. I would say that the characteristics of this market are that there is some competition but i would say that it has monopolistic competition because this market has many firms with similar products but they are not identical. (i.e. different resorts throughout the state). The type of product is unique to each mountain, and there is slight control in prices throughout this industry because there are large barriers to enter the market.
Describe how your example firm prices it’s product(s). Does it’s behavior fit what would be expected based on your answer to question 1? If not, why not?
Ski resorts cannot survive on lift tickets alone, it must expand its revenue to other products as well. But instead of making the resort like a strip mall with different restaurants and shops, ski resorts must keep revenues within the company making it more like an amusement park where the different restaurants and hotels are connected to one firm. From one article i read, “No Business Like Snow Business,” the author explained that ski resorts only make around 50% of their profits from lift ticket sales. The other 50% comes from food, ski school, rentals, lodging and retail. This factor takes risks like weather and income differentiation away from the industry allowing it to rely on more than one source of income. Based on the answer form question #1, since there a lot of barriers to enter this market, most ski resorts are allowed to become stable with consistent growth because it is not likely to be disrupted by new competition. Thus, as long as people keep coming, resorts are able to keep raising prices with inflation with no problems in elasticity.
Sometimes markets change over time. Do you expect that to happen in this industry? Why or why not? What changes are most likely?
I think that climate change is a huge factor in determining future changes within the ski industry. From a NY Times article from 2012 i read, that year was the fourth-warmest winter on record since 1896. This trend is forcing resorts to open later and close earlier. If lifts are not running, that takes a huge tole on alternate sources of income for the firm as well, like restaurants and lodging. One example from the article explains just how much revenue is effected with weather changes. “Between 2000 and 2010, the report said, the $10.7 billion ski and snowboarding industry, with centers in 38 states and employing 187,000 people directly or indirectly, lost $1.07 billion in revenue when comparing each state’s best snowfall years with its worst snowfall years.” I expect this trend to become more drastic as we move into the future. I think the most likely changes will come through summer activities like mountain biking and summer festivals. Since the resorts only receive 50% of their income through ticket sales they could really benefit in keeping that other 50% through lodging, food and retail at a maximum throughout the summer months.
Provide at least 2 outside sources for information on this business or industry in formal citation format (MLA or APA).