Steamboat Springs When airline bills begin coming in as soon as this week, managers of Steamboat’s ski season flight program expect to spend a record $3.5 million to meet revenue guarantees that brought direct flights into Yampa Valley Regional Airport last winter. The bill is just less than the maximum caps called for in contracts with the airlines.
But the amount of money the community puts at risk for the coming winter is expected to go higher still.
Steamboat Ski and Resort Corp. Airline Program Director Janet Fischer told the board of the Local Marketing District on Friday that she expects the revenue guarantees for the coming 2012-13 winter flight program to be up about 20 percent and approach revenue caps of $4.4 million. That doesn’t necessarily mean the final cost of the 2012-13 ski season would be any higher than last winter. But it would make the return of a snowier winter weather pattern and increased skier numbers all the more important.
“Based on our results this past winter, with (airline) capacity up 6 percent and travel down 5 percent, we’re really close to our full cap of $3.57 million and it will be the highest amount we’ve ever paid,” Fischer said. “The second highest was the season of 2009-10, which was about $2.6 million.”
Some of the increase in anticipated revenue guarantees for the coming season are attributable to the airlines’ perceived increase in risk based on last season’s air program performance.
A 5 percent decline in ski season passengers from the 82,514 who arrived in 2010-11 would equate to 4,125 passengers. Airline officials estimate they typically have spent $30 to subsidize each passenger, each of whom spends about $1,100 during a winter vacation here.
A mix of private and public tax revenues funds Steamboat’s ski season flight program. Steamboat voters agreed by a substantial majority in November 2011 to bolster the fund by imposing a 0.25 percent citywide sales tax that went into effect Jan. 1. The LMD board makes decisions about how to spend the money, including a guaranteed $1.1 million from Ski Corp.
Fischer said Friday that Ski Corp. is prepared to go as far as doubling its $1.1 million commitment for the 2012-13 season, if necessary. Any money beyond the original
$1.1 million would be provided by Ski Corp. “on the back end” — meaning after all other sources of revenue have been committed, she said.
As recently as the economic boom year of 2006-07, the airline program ended up paying airline costs of $1.49 million against minimum revenue guarantee caps of $2.75 million. And while the caps have gone up, air program officials will be looking for improved fiscal performance in the coming winter.
In recent years, the LMD has been dipping into reserves to close the gap between revenues and expenses. The new tax, which was approved for a five-year term, is being counted on to restore reserves by 2016.
The 0.25 percent sales tax is expected to generate about $1.3 million annually, and a pre-existing lodging tax dedicated to the airline program generates about $1.2 million annually.
However, the new tax will not be eligible to be applied to the airline program budget until the LMD begins planning for the 2013-14 ski season, board member Chuck Porter said Friday.
The budget for the 2012-13 airline program is due to be presented to the board at its August meeting. The Steamboat Springs City Council will take it under consideration in September.
Fischer said airline program performance last ski season was affected not only by the scarcity of snow on the slopes of Mount Werner but also dismal snow conditions across the country.
“Last winter was one of our lowest snow winters ever, which affected both demand at the resort and on the flights,” Fischer said. “But it was a very mild winter nationwide. The mindset of people who would normally be skiing just wasn’t there. It affected the whole country and changed demand. The National Ski Areas Association reported recently that nationally, skier visits were down 15.5 percent and Colorado was down 7 percent.”
City Finance Director Kim Weber told the LMD board that year-to-date accommodations tax collections are down 5.19 percent, and she expects the two points of original LMD tax to closely follow that number. But the actual number is somewhat obscured by the fact that the state collects taxes from local marketing districts quarterly, and some payers submit their money on a monthly basis, skewing the numbers until they are finalized.
“I’ll think we’re trending about 5 percent down, when we budgeted 3 percent down from what was received in 2011,” Weber said. “Fifty percent of your accommodations tax is collected in the first three months of the year. Our overall sales tax is down 1.26 percent, but lodging is looking good for the summer.”
The effect of last winter’s disappointing ski season on airline negotiations is that the airlines are in a position to say that the Steamboat flights are riskier in terms of their financial performance and ask for more revenue guarantees, Fischer said.
This past winter, expenses also were increased by jet fuel costs that bucked the typical trend and continued to rise throughout the winter, Fischer said.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com