ANALYSIS OF IMPACT OF GRAVEN DECISION

Graven v. Vail Associates, Inc

Though Colorado ski areas received the Graven decision with foreboding, skiers may anticipate safer conditions. Moreover, it could be good for the industry. Annually, the National Ski Areas Association (NSAA) commissions an economic analysis of North American Ski Areas from the Business Research Division of the Graduate School of Business Administration at the University of Colorado, Boulder. The research is summarized in the recently published Economic Analysis of North American Ski Areas 1976-1993. There, liability insurance costs over 13 ski seasons is summarized. The report states: "[I]f one looks at liability insurance costs compared to either total revenue or gross operating revenues, the increase in insurance costs appears more reasonable. Liability insurance to total revenue increased from 3.1% to 4.3% and liability insurance to gross operating revenue increased from 2.5% to 3.2%." During 1990, when ski area operators lobbied the General Assembly for the inherent danger amendments the rate of increase in liability insurance rates was actually falling in comparison to the increase in their gross operating revenue. Furthermore, in a September 1988 article in Ski Area Management, the NSAA voiced complaints that increasing insurance costs were unrelated to increased claims, but instead resulted from predatory pricing strategies exercised by underwriters.

Since 1988 ski area operators have enjoyed progressively higher earnings and expansion, while enjoying wide availability of insurance at decreasing cost from numerous insurers who were competing for the ski areas' business in a highly competitive market. (See, Derouin, "Ski Area Insurance Programs" SKI AREA MANAGEMENT (Vol. 33, No. 5 September 1994) pp. 59 - 61.) The most recent NSAA Economic Analysis is for the 1993-1994 season. The facts indicate that ski areas, especially in Colorado, are extremely profitable. Operating profit for the reporting ski areas in the Central Rockies as a percentage of gross fixed assets was an impressive 17.4%. According to the author of the NSAA Economic Analysis, Professor Charles Goeldner, "In terms of dollars, the average ski resort in the Central Rockies is the most profitable of any region in the country." (Goeldner, "1993-1994 Economic Analysis" SKI AREA MANAGEMENT (Nov. 1995).) The economic analysis historically consolidates Colorado and New Mexico within the "Central Rockies" statistical group. Profitability of Colorado ski areas, on average, far exceeds the average profitability of the New Mexico areas. From this we can infer that the Colorado ski areas have profit margins even higher than the 17.4% GFA than the average generated with the inclusion of the New Mexico ski areas' financial statements in the 1993-1994 study. This comes as no surprise to the average skier who has seen ski tickets rise at twice the rate of the Consumer Price Index. ( The C.P.I. has averaged 2.5% since 1991. Lift tickets at Vail have increased from $38 in 1991 to $48 in 1995.)

These figures reflect that Colorado Ski Areas are a highly profitable big business. What the statistics do not accomplish is to dispel the persistent myth that the Colorado ski industry is operated by a friendly group of former athletes, soldiers, and local families, who deserve or are entitled to special treatment from the Colorado legislature. Colorado's largest ski areas are owned and controlled by interests outside of the state of Colorado. Aspen Ski Corporation, which last season controlled about 1.4 million skier days at its four ski areas is presently owned by the family of Chicago billionaire Lester Crown. ( " [Marvin} Davis to sell his half of Aspen Skiing Company ...for undisclosed price" ROCKY MTN. NEWS (3/25/93) p. 25) . Another billionaire, Kankori Kanko, of Kankori Kanko Co. Ltd., from Sapporo City, Japan, paid a record $110 million for Steamboat Ski Area which sold 1,013,606 skier days last season. Apex Oil Company, of St. Louis controls, Copper Mountain, Inc. which in 1994-1995 served 770,973 skier days. Of the top ten resorts, only Crested Butte (485,840 skier days) is still owned by a Colorado family - Bo Callaway. The owners of the ski areas are not a particularly needy lot. In balancing the interests of the industry versus the interests of skiers, the Colorado Supreme Court has taken a reasonable approach. Industry advocates argue that the associated employment of the ski industry is critical to the State. This is true. It is untrue, however, that the small businesses associated with skiing will be affected in any way by the Graven ruling. The recent downturn in employment at the areas, has been caused by the changing nature of the employment market ( Brooke, James "Foreigners Flock to Slopes to Work, Not Ski" NEW YORK TIMES (12/29/95) p. A8) - principally the decreasing number of people who are willing to take low paying jobs in a community with skyrocketing costs of living. The concerns of the ski areas are with a flat skier market, not profit margins, or the three cents on the ski area dollar which has been the historic cost of insurance.

The decision will not have a negative effect on the industry. Will it have a positive impact on the industry? Can Colorado ski areas position themselves competitively by advocating safe skiing? It would seem sensible. Skiers who wear helmets are being seen in greater numbers. Instructors are careful to explain skiers' responsibility to new skiers. For over five years, the Gilman corporation has made padding for manmade objects which is far more effective than the material in wide use in Colorado. Perhaps we will see more of it in the coming years. At some ski areas, small children are not permitted alone on ski lifts, recognizing that they do not have the skill, balance or judgment to safely ride a chair without a safety bar. The design, function, use, and installation of safety bars on chairs are undergoing improvements, in large part as a consequence of litigation on behalf of skiers injured in lift accidents.

Safety at ski areas is a serious matter for skiers, and skiers will want to ski where they believe ski area operators conduct themselves in a responsible manner. Ski safety can improve without diminishing the aesthetics and exhilaration of the mountain. As Justice Lohr wrote for the majority: "Skiing is a dangerous sport...[but] not all dangers that may be encountered on the ski slopes, however, are inherent and integral to the sport, and this determination cannot always be made as a matter of law." Justice Lohr should know, he was a Pitkin County (Aspen, Colorado) district court judge for 7 years (1972-1979) prior to appointment to the Colorado Supreme Court.

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