Steamboat Springs Steamboat Ski and Resort Corp. Airline Program Director Janet Fischer told a group here Friday that within two winters, the resort community could face a funding shortfall as it tries to maintain current levels of ski-season jet service.
"Our cost rose substantially this winter, and we are forecasting our funding will be short of supporting current levels in 2011," Fischer said. "Next winter (2009-10) will deplete a lot of our reserves."
The impact could be felt in the winter of 2010-11, she said.
Fischer was speaking before an audience of 45 people at the Steamboat Smokehouse during the first of a bi-monthly series of short speeches and networking gatherings called Good Morning Steamboat. It is sponsored by the Steamboat Springs Chamber Resort Association.
Yampa Valley Regional Airport and the Steamboat resort community will see 162,500 arriving airline seats this ski season. They are provided by six airlines flying direct from nine cities with connections from 200 more cities.
In order to secure the flights, the business community has put together a funding package that backs up minimum revenue guarantees for the airlines. Ski Corp. bears about 56 percent of the cost, another 37 percent is supplied by the Local Marketing District, or LMD, and 7 percent comes from businesses that contribute to the Chamber's Fly Steamboat program.
The voter-approved LMD was formed in 2005 to collect a 2 percent lodging tax in Steamboat Springs. The revenues are used to support commercial air service in the Yampa Valley.
Fischer confirmed that the various players in the ski-season jet program owed the airlines $2 million at the conclusion of the 2007-08 ski season.
Chamber Executive Vice President Sandy Evans Hall told the Good Morning Steamboat audience that by the end of next ski season, she expects that 50 to 75 percent of a $1 million reserve fund built up with LMD monies will have been expended to provide the same level of service as this winter. Depleting the reserves means the same amount of money won't be available the following winter, she said.
Fischer said the Yampa Valley should feel fortunate it isn't among 30 small markets that lost commercial airline service altogether last year.
It's too early, Fischer said, to tell how the different contracts with each airline would perform this ski season. She told her audience that performance isn't measured by the number of passengers who fly to Steamboat, but by the revenues generated.
Balancing passenger demand with yield can be a tricky process, she said. Steamboat is protected by a ceiling on the maximum amount it must pay to subsidize each flight. Higher fares lead to higher yields, but Fischer actively consults with executives from the airlines when they see that passenger demand isn't at desirable levels. Decreasing fares to increase demand can impact the contract performance of each airline route in the Steamboat ski season jet program, costing the local program money.
In the end, the purpose of the program is to transport passengers, Fischer said, and at some point it becomes necessary to give on yield in order to ensure there is demand in the market.
"That's kind of what's going on this year," she said.
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