Pando

Liftopia introduces dynamic pricing, wants to price ski lift tickets more like airplane seats

By Michael Carney , written on October 1, 2014

From The News Desk

The ski and snowboard industry is about to see its biggest shakeup since the invention of artificial snow.

Today, the vast majority of lift tickets are purchased “at the window” on the day of usage. This is bad for resorts, because there is no predictability and no ability to separate sales from the vagaries of weather. For consumers, it means that all tickets cost the same, regardless of demand.

Thanks to Liftopia, the industry is about to go the way of airlines and hotels by offering dynamic pricing and variable commitment levels on advanced ticket purchasers. Today, the company announced three new ticketing tiers will be supported by hundreds of resorts across North America. According to a company statement on the new pricing model:

  • “Value” lift tickets are date-specific, non-refundable and non-changeable, offering the deepest discounts with savings up to 85 percent off walk-up window rates when purchased in advance. These are ideal for consumers who know the exact dates they will be skiing or riding.
  • “Value Plus” lift tickets offer added flexibility, allowing a one-time date change during the season.
  • “Flexible” lift tickets offer the ultimate flexibility with unlimited date changes during the season.
“Part of the reason we’ve been able to grow is by helping resorts understand that a lift ticket isn’t just a ticket for Jan 13th, it’s a ticket for Jan 13th purchased on Nov 1st,” says Liftopia co-founder and CEO Evan Reece. “And those are two different things with two different values to both the consumer and the resort.”

But more important than the new tiered pricing is the data and analytics engine that will power this pricing program across the Liftopia’s several hundred North American resort partners. While the number of lift tickets available on a single day is less rigid than say, seats in an airplane or rooms in a hotel, Liftopia will use similar demand-based models to regulate pricing. Predictably, the further in advance consumers buy their tickets, the deeper the discounts.

“The reason we’re still around, is that we have moved beyond an ecommerce platform,” Reece says. “We have built a platform that enables resorts to adopt our pricing model and use us to drive advanced purchases. And now that we have hundreds of resorts on the platform, we can benchmark them against one another to see what works. We can say, ‘The lift to book ratio on this date in these circumstances is X,’ we should either raise or lower the price down the street accordingly.”

This advanced purchase phenomenon has the potential to dramatically change the way the winter resort industry operates. Currently, the resorts rely on the off season bulk sale of annual passes, at deep discounts, to fund their early season operations. Liftopia’s advanced and dynamic pricing could mean that resort revenue could become slightly more evenly distributed throughout the year. Also, with the increasing unpredictability of weather, resorts would have a new way of generating revenue in advance of these potentially slow periods on the calendar. For example, the week between Christmas and New Years may be considered a peak season, but if it’s raining or the season has seen limited snowfall, a resort that waits to sell tickets at the window during these weeks could be left with disappointing sales during one of the most important periods of the year.

It may seem like consumers get screwed by purchasing early, particularly in bad weather situations. But, given the commitment segmentation – a concept which is also borrowed from the airline industry – those consumers who want the flexibility to change travel dates or the peace of mind to be able to chase good snow conditions can get it, at a price, although one that's still less than traditional "window" pricing.

“We can create a huge amount of value for the consumer, by helping save money on their favorite resorts and discover new resorts not on their radar,” Reece says. “We want to convince the world that skiing is not as expensive as people think.”

The team behind Liftopia is no stranger to data-driven pricing, as they came out of Hotwire, a discount travel marketplace acquired by IAC in 2003. But it was only after nine years in operation selling fixed-price, discounted lift tickets that the company had enough data to derive an intelligent, dynamic pricing model. It also needed to win the trust of its resort partners, most of which are extremely old school and averse to technological change.

The Winter Sports industry is not the first beyond travel to adopt dynamic, demand-based pricing. Golf tee times have been priced dynamically via GolfNow.com (acquired by Comcast in 2008), while live entertainment, sports, and other verticals have tested similar concepts. It seems inevitable that this is the way most experiential purchases are priced in the future.

“The average resort will see between 15,000 to 60,000 price movements in a given year,” Reece says.

There are two ways that resorts can opt into Liftopia’s dynamic pricing program. The first is to give the company permission to apply the model to all tickets sold through its website. The second is for resorts to adopt Cloud Store, the company’s white-label eCommerce solution that can power sales on a resort’s own website.

Liftopia is headquartered in San Francisco and has a 48 person team today, up from 35 a year ago. The nine-year-old company has raised $7.3 million to date across multiple rounds of financing, with backers including First Round Capital*, Industry Ventures, RTP Ventures, Lowercase Capital, SK Ventures, Erik Blachford, Sam Shank, Spencer Rascoff, Mark Benioff, Jeremy Stoppelman, and Dave Morin. While still focused on growth, the company has approached profitability on numerous occasions, according to Reece, and could likely flip that switch at will should market conditions make it a necessity.

There are 471 winter resorts in the United States and another 200 in Canada. This season, lift tickets for 250 of these resorts will be available on Liftopia.com, with another 110 adopting Cloud Store and implement dynamic pricing on their own websites. It’s an impressive footprint that covers many of the nation’s most popular destinations, but there are some glaring omissions as well. For example, the ever-expanding Vail Resorts portfolio has not adopted Liftopia yet, which means if you want to ski at Vail, Beaver Creek, Breckenridge, Keystone, Heavenly, Kirkwood, Northstar, or Park City you’re paying full price.

But given the way purchasing behavior is shifting across categories, with consumers doing more and more research in search of the best value, and the challenges that the resort industry is facing amid increasingly unpredictable weather conditions, it seems like Vail will be forced to budge eventually. Adopting Liftopia’s platform also gives resort operators a degree of visibility into data on the sales of competitors, and allows them to automatically reflect these market conditions in their pricing.

“We just haven’t proven to them that we’re worth more than we cost,” Reece says. “This is a passion-driven industry, and many resort owners are jaded and reluctant to try new products because have been burned by so many people promising them the next great thing who are just hoping to support their lifestyles. But we’ve been in the industry for a while and we can offer the data to prove that our model works.”

Like most new technologies, Liftopia isn’t competing against other similar solutions, but against the inertia of the status quo. Tickets have been bought and sold at resort windows under fixed pricing models for decades. And discount programs powered by Costco and local ski shops have left a bad taste in the industry’s mouth, as most sales are made within days of actual usage, meaning they simply rob value from the resorts’ bottom lines.

Consumers are used to dynamic pricing and variable commitment levels across many industries. No one would ever walk up to an airline counter and expect to get a decent price on a last minute ticket. Liftopia today dragged the Winter Resort industry squarely into the 1990s. But given where the industry started, this is major progress. Here’s to a season full of fresh powder and intelligently priced tickets.

(*Disclosure: First Round Capital is an investor in Pando.)