Is Mammoth/Yosemite Airport ready to “Play Big” too?
In Town political circles, one of the current debates is whether to classify commercial air subsidies as a General Fund expense or a marketing expense.
In other words, is air service more a driver of tourism, or is it more of a service for those that live here?
The answer, Kent Myers would argue, is both.
Myers, of Avon, Colo., could well be considered the Godfather of resort air service, responsible for creating hugely successful commercial air service programs in Steamboat Springs, Colo. and Vail, Colo.
Myers, whose company Airplanners currently serves as the air service consultant to Mammoth Yosemite Airport, gave The Sheet an insider’s look at the air travel game via telephone this week.
It might be most helpful to begin with a story that will help illustrate how the industry works.
As Myers says, airlines are unique because they’ve got assets they can move around in an effort to maximize revenue. “A plane sitting at LaGuardia Airport in New York City on a Saturday isn’t worth much. But a plane sitting there on a Friday is worth a lot of money.”
Which makes sense. For the most part, people have reached their destinations by the weekend, so there’s not a great demand for Saturday travel.
While Myers was a Senior Executive Vice-President at Vail Resorts in the ‘90s, he convinced American Airlines to put that underperforming asset sitting on the ground at LaGuardia on a Saturday to work. American launched a nonstop route from LaGuardia to Vail that operated only on Saturdays.
The route, says Myers, has always made money. And it has since spawned daily nonstop service to Vail from Newark International Airport and JFK.
“Vail dominates the New York market,” Myers said. “And these aren’t small planes.”
Now, Vail appears to be repeating this model in Miami, which also connects it to the South American market.
Overall, Eagle County Airport now accommodates nonstop air service to 11 major cities on five airlines and fills 300,000 seats every winter, representing 50 percent of all winter guests visiting Vail/Beaver Creek.
No one is suggesting Mammoth emulate Vail and try to fill 300,000 seats, and as Myers cautioned, the air service game is fraught with risk. But he sees a lot of upside for Mammoth … as well as a few barriers that will ultimately need addressing.
Mammoth’s visitation demographics. Our customer base is so heavily Southern Californian that it makes any new market look like a stash of fresh powder. Virtually every person getting on a plane to Mammoth in a new market is a new customer.
“Rusty [MMSA CEO Gregory] and Howard [Marketing Director Pickett] look at Northern California as a gold mine,” said Myers, who predicted the San Jose route would break even [no longer require an airline subsidy] by its “third or fourth year.”
But here’s the issue. Mammoth Airport’s lone current commercial carrier, Horizon Airlines (a subsidiary of Alaska Airlines), is what Myers would describe as a regional carrier having a north-south orientation. Yes, you can reach that 20 percent of the U.S. population that lives along the west coast from California to Washington, but “you’re not penetrating the other 80 percent,” Myers said.
“If you polled people in the Denver airport and asked them to name the top 10 most popular ski areas in the United States in terms of skier days, Mammoth wouldn’t even show up (even though we routinely rank in the top three).”
So how do you reach the other 80 percent? Access to a hub airport, i.e. San Francisco. Which is why Mammoth’s been working so hard to secure a United flight to SFO for this winter. Because suddenly, you’re connected east-west as well. And it opens up possibilities.
For example, with the impending United-Continental merger, Myers could envision a once/week Saturday nonstop flight to Houston (a Continental hub) as a good gamble. You try to get them to come visit for a week, but if they can’t stay that long, they always have an easy, alternate route home through San Francisco.
The next most logical hub airport to look at after San Francisco? Phoenix, which is a US Airways hub.
What about Las Vegas? “I think Vegas is a home run,” said Myers, “but we’re not ready to take it on.” The issue with Vegas is that it’s not a hub, so it gets complicated, both scheduling connecting service and finding a plane that can make a side trip before completing its roundtrip back from where it originated.
Once you go further afield, said Myers, marketing muscle is required. Which is why it’s important to build slowly. “This is an expensive proposition. You can go out too quick, take on too many seats.”
How do others do it?
To extend air service through this summer, Mammoth’s Council committed to a $325,000 summer air service guarantee this year, although some Council members groused at their last meeting that it was their recollection that if the Town built the airport, the Mountain had committed to subsidizing air service.
MMSA has also tossed $325,000 towards the guarantee while Mono County is in for about $45,000.
Mammoth Mountain CEO Rusty Gregory would agree that this assessment is largely correct, but that a word was omitted. Winter service.
An examination of other resorts shows that a commitment to summer and year-round service requires more than one entity bear the financial burden. As Myers says, “It’s important that everyone have a little skin in the game.” A dedicated funding source, at least for resorts with smaller programs, appears mandatory. Montrose/Telluride and Steamboat are both structured similarly. They have summer, fall and winter service. The ski resorts pay about a third of the air subsidy. A dedicated sales tax on lodging and/or food makes up another chunk. Public/private partnerships fill in the rest.
Telluride’s air service guarantee program has been in place since 1985.
Telluride is served by American Eagle, American Airlines, Continental, Delta, Great Lakes, United Express, and US Airways Express. These services connect to Dallas, Chicago, Houston, Newark, Salt Lake City, Atlanta, Denver, Phoenix and Los Angeles.
“We’ve done very well with our average load factor,” said Scott Stewart of the Telluride/Montrose Regional Air Association. The load factor is the percentage of seats that need to be filled on each flight in order to fulfill the airline contract. However, more important than the load factor is the “actual goal,” or the particular amount of revenue each flight needs to produce. If a flight falls short of producing that amount of revenue, then the Town must make up the difference to a capped sum.
According to Stewart, “we’ve done pretty well with a return on our investment.” Telluride has felt the effects of the recession, “but the trend is up again.”
The Telluride/Montrose Regional Air Association uses the lodging and restaurant revenue numbers to get an idea of the kind of economic impact the airline program has on the Town. In addition, the Association conducts surveys at airports to determine how much and where visitors spend their money; how many people fly in as guests, and how many are returning locals; and to be sure that “we are bringing in flights people want to use.”
The results of these surveys have been positive overall, Stewart said. And while he admits that the summer air service program is, “on a per passenger basis, less beneficial than the winter,” he also points out that summer passengers spend about 30-40 pecent more time in the region, which translates into greater economic expenditures.
Jackson Hole enjoys a successful summer air service program as well. The air service guarantee for both winter and summer has existed on some level since 1985. It began as an initiative led by the Jackson Hole Resort, with American Airlines providing the first services from Dallas, Fort Worth and Chicago. Now Jackson Hole is served by American, Delta, Frontier, United and Northwest, with service to additional cities Los Angeles, Salt Lake City, Minneapolis, Denver and Atlanta. These air services are supported by the Town and County governments, the State government, and over 200 local businesses.
This year, though it might sound surprising, summer service has been going strong. Explained Kari Cooper of Jackson Hole Resort, “It helps that we have two national parks nearby: Grand Teton, and Yellowstone. So the demand for this area during summer months actually exceeds winter.” In the winter, Jackson Hole strives for a 70 percent load factor — the Town needs a 75-76 percent load factor to “enjoy a break-even scenario.”
Cooper believes the success of the Jackson Hole airline service program owes mostly to the Mayor and Town Council of the Town of Jackson. “They have stepped up to the plate even in difficult times,” she said. “We are very fortunate with our leadership. They are a well-informed, well-educated group of elected officials.”