Hemispheres Magazine

CASE STUDY: Grand Targhee takes a different trail—and turns powder into gold

At first glance, Grand Targhee Ski & Summer Resort should have less chance of survival than a ball of its signature talcum-powder snow on a hot summer’s day. 

The crucial element for a successful destination ski resort, according to conventional wisdom, is land—and lots of it.  The skiers and snowboarders demand a return on their hefty investment in a round-trip airline ticket, accommodations and skyrocketing lift fees in the form of an enormous and varied terrain crisscrossed by numerous high-speed lifts. Off the mountain, it’s no longer enough to throw up a couple of pseudo-chalets housing a lodge, a rental shop and a cafeteria specializing in refried grease.  Today, visitors expect a base village crammed with spiffy shops, luxury hotels and high-octane restaurants, a destination in itself.

Based on those parameters, Targhee wouldn’t seem to have what it takes.  Located on the western side of Wyoming’s Grand Tetons about 30 miles from tony Jackson Hole, Targhee grabs the edge on acreage—3,000 acres compared to Jackson Hole’s 2,500—but accesses it with just four lifts and a snowcat, compared to eight lifts, a gondola and a tram.  Compared to Jackson Hole’s crowded base village that recently slotted in a Four Seasons hotel—not to mention the town of Jackson an easy 12 miles away—visitors who white-knuckle their way up the long and highly hair-pinned approach road to Targhee find barely a handful of low-slung lodges, shops and restaurants grouped around a plaza that can be thoroughly explored in 15 minutes.

Land usage in the base area is key to a destination ski area’s bottom line.  “For all the major ski operations—Vail, Intrawest (which owns Whistler/Blackcomb in British Columbia, Mount Tremblant in Quebec, California’s Mammoth and Colorado’s Copper Mountain, among others), American Ski Company—real estate has become a huge part of their business plan,” says Mary McKhann, editor of “The Snow Industry Letter,” a trade publication covering the ski and snowboard industry.  That real estate generates hefty rents from shops and restaurants and sizable amounts of income from the sale of high-priced single-family homes, townhouse condominiums and interval ownership (the latest high-falutin’ euphemism for time shares).  “Just making it on lift tickets alone, without having the real estate and a village, is extremely difficult,” says McKhann. 

Targhee is hobbled right where it hurts the most:  Its 3,000 acres are located in the Targhee National Forest and are subject to strict regulations regarding the usage of public land.  It took six years to get permission to build a new lift on Peaked Mountain; further expansion of either the mountain or the base area is unlikely in the near future. 

Yet 80 percent of the skiers who have tasted Targhee’s powder come back for seconds. While that figure might not seem notable compared to an average return rate of 77% for destination skiers at 79 major areas nationwide, many of those areas are within just an hour or two of a major urban center, like Denver or Boston.  Targhee’s nearest city is Idaho Falls.  

And business has never been better, despite the double whammy of a disappointing snowfall in 2000, followed by the economic and travel downturns in the wake of 9/11. “Financially, we’re probably twice as well off as we were five years ago,” says general manager Larry Williamson.  “And that despite the fact that propane has doubled in price.”

What is Targhee’s secret?

Because Targhee literally could not expand into new territory, it was forced to take another look at what it already had.  In doing so, it discovered that it was sitting on a mother lode of resources just waiting to be re-discovered. 

The light went on for Larry Williamson seven summers ago. At the time, the Targhee’s horseback riding concession was run by an outside outfitter, which organized everything according to a strict schedule:  one-hour rides left at 9 o’clock, 10:30 o’clock and 1 o’clock, two-hour rides went out at 10 and 1:30. “We just couldn’t get them to accept the idea that if it’s 10 o’clock and you’ve got guests waiting and two wranglers and 15 horses sitting down there, why wait half an hour to go on a ride,” Williamson recalls. 

Targhee took over the riding program and Williamson quickly realized that guests didn’t want riding lessons per se; they wanted to enjoy being on a horse. The program was changed to accommodate their wishes.  The result:  “We went from $8,000 to over $15,000 in one three-month season with no change in marketing, except that when you come in, we’ll put you on a horse as soon as possible.”  Today, the horse concession is pushing $28,000 in revenues.

The next task was to figure out how to satisfy the customer when the snow fell. As a former ski instructor, Williamson knew that the ski school experience could make or break a guest’s visit.  A 1979 University of Idaho survey had found that virtually 100% of the people who had taken lessons at Targhee’s ski school planned on returning, while less than half who had not taken lessons were willing to come back.  “The obvious answer was that if you’re in ski school, you develop a friend and become part of Targhee,” says Williamson. 

But there was a less obvious and even more compelling aspect to the lessons.  Many ski schools judge their success on how much the student improves.  One problem with that method is that students improve to a point where they don’t feel they need to take any more lessons.  Another is that success is defined by the instructor’s parameters, rather than the guest’s.  

Williamson came up with a different definition for success.  “It really wasn’t about how much the guest improved,” Williamson concluded. “It was more about how much fun the guest had. People don’t like to pay for classes on vacation unless it’s something fun.  Fun became my focus for the industry.”

A key element in Williamson’s formula for fun is Mark Hanson, the snowsports school director.  Hanson had run the children’s program at Targhee for five years before becoming overall director in 1998.  He knew the secret of a successful program:  “If little kids don’t have fun, mom’s not going to get them back again.  And if they have fun, mom isn’t going to be able to keep them from not coming back.”

In transferring the successful elements of the kids’ program to the adult lessons, Hanson had to take into account the fact that some 80% of Targhee’s adult clientele are either Level II or Level III skiers, compared to 60% at most other resorts.  Advanced skiers are not nearly so inclined to take a lesson as beginners.  “We teach on a percentage basis way less lessons than Vail, so it became a particular challenge to get those advanced skiers into lessons,” says Williamson.  “Powder is part of the answer.  Customized options are another.  Finding out what people want to accomplish. Rather than worrying about what they do with their feet or their body, you get them doing things where they develop confidence and are comfortable.”

Hanson examined Targhee’s liabilities and realized that they could be key differentiators and even opportunities. This year, Targhee expects to welcome 135,000 skiers and snowboards, up 10,000 from 2001-2002.  That’s about a tenth of those who thronged the slopes at Steamboat Springs, a Colorado resort of comparable acreage (and 25 lifts). But rather than sulk about empty slopes, Hanson says, “The lack of exorbitant volume becomes an advantage.  We can be more personal with folks.  We can say, ‘It’s just you and me now, so let’s go play and do what you want.’”

Thanks to the small volume, Targhee’s snowsports school can afford to be more flexible.  At Big Sky, Montana, for example, four hours to the north, semi-private intermediate lessons go out in the afternoon only; if the snow has turned to slush by two o’clock, that’s tough luck.  With so few crowds at Targhee, if you want a semi-private lesson, sign up for a group lesson.  Most days of the week, you end up with personalized attention, no matter what time of day it is. 

But it’s the private lessons that best demonstrate Hanson’s determination to bend over backwards to achieve customer satisfaction.  “You can go on a private lesson any time or any day,” claims public relations director Susie Barnett Bushong.  “If you decide you don’t want to learn a technical skill, that you just want the instructor to show you secret powder stashes, that’s fine.  If you want Debbie to take you on a snowshoe tour because you like her, that’s fine.  If Dad and the kid want to take a snowboard lesson together and are at different levels, we’ll figure out how to accommodate that.  There’s no social studies at two and math at three—it’s what you want to do today.  And if you aren’t happy with your lesson, you can come back the next day and get a free one.”

As the program changed from the standpoint of value and product, the pay strategy changed too.  Instead of being paid merely for the cost of their labor—a cost which Williamson knows full well is significantly higher in nearby Jackson Hole—Targhee instructors have a hefty incentive to ensure customer satisfaction through repeat business.  “You make way more for returning mountain tours or returning private lessons than from one that’s just assigned to you,” Williamson says, adding with a grin, “hit ‘em where it counts.”

Although an expected amenity, a ski school is often something of a loss leader.  While at the larger areas, the expense involved in building it up and staffing it can be amortized by other revenues, Targhee is too small to afford that kind of luxury.  Hence the push to sell private and semi-private lessons.  “Financially, they’re a win for us as a resort because they generate more revenue, they’re a win for the instructors because they can make more money, and they’re a win for the guest because they’re getting what they want,” says Hanson. 

Hanson spends a lot of time ensuring he’s got the right staff.  “We can afford for our new hires to be relatively inexperienced at snow-sliding teaching, but they have to be rich with working with people,” he says.  Again, Targhee’s size is an advantage.  “We might hire 10 or 12 people each year, whereas some resorts hire 200 every season,” he says.  “That smaller need allows me to be pretty choosy.”

It also enables him to keep a close eye on his instructors.  Hanson monitors requests for private and semi-private lessons and checks responses to guest surveys.  The staff is divided into small units, with no supervisor in charge of more than 15 instructors.  And Hanson puts his feet where his mouth is.  “I try not to do any formal spying, but I spend a lot of time on the hill myself,” he allows.  “I can say, ‘Hey, I noticed you were doing this.  Why?’”

Hanson’s attentions have paid off.  Grand Targhee’s ski school brings in only 4.5% of revenue, compared to a national average of 7.5%.  But in terms of EBIDTA (earnings before interest, depreciation, tax and amortization), in the school contributes a whopping 30.1%, while the national average is a little over half that amount.

Targhee also bucks the industry trend by fervently pursuing the local market.  “All the research will tell you that the destination guest spends more money but to be successful, we can’t afford to concentrate on that one aspect of our market,” says Hanson.   To broaden its share of the regional market, Targhee has adopted an all-encompassing approach, sponsoring ski programs in elementary, middle and high schools, partnering with ski clubs in nearby Idaho Falls and at the University of Idaho at the other end of the state, and organizing programs aimed at niche audiences as narrow as women from southeastern Idaho. Not surprisingly, discounted lessons and instructional weekends are a big part of the perks of membership.  “We get a lot of the same people who come to every instructional they can and they generate more business for us by telling their friends,” says Hanson.

Targhee’s drive for customer satisfaction and repeat business pervades every corner of its business, from the parking lot attendants to the ski patrol.  Each department is graded on its performance, with guest satisfaction accounting for a large portion of the rating.  Five years ago, the ski patrol had a 44% performance rating.  Then they started to have lunch with guests, give demonstrations with their avalanche dog and generally make themselves more visible. Last year, their score hit 88%. “When they figured out how to utilize that avalanche dog, it made a huge difference,” recalls Williamson.

Similarly, the parking lot attendants had barely eked out a 40% rating.  They decided that guests wanted to see them—and see them working efficiently—so they donned bright orange vests, worked out a series of hand signals, were more friendly and boosted their rating to up in the 90s.  Says Williamson, “The whites of the teeth are the number one factor.” 

Williamson knows that Targhee will never be able to compete directly with Vail or Jackson Hole.  It will never have the number of chairlifts or the swanky base village that can be subsidized by real estate sales and rentals.  “What we offer people is an experience, rather than a sensation,” he says. “We try to focus not on competing with other resorts but on those features that make Targhee unique.”  By mining those profit centers that existed right under their nose, Williamson’s team has figured out a way to turn Targhee’s famous effervescent powder into cold, hard cash.

Catherine Fredman is the co-author with Michael Dell of Direct from Dell:  Strategies that revolutionized an industry, and frequently writes about business strategy.