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The Investment Competition among Swiss Ski Areas

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  • Pascal Troxler, Marcus Roller, Monika Bandi Tanner

Abstract

In recent years, ski area operators in Switzerland have faced a decreasing demand due to climate change, exchange rate pressure and demographical changes among other factors. At the same time, ski lift and snowmaking capabilities have increased – partly with financial aid from public funds. It is therefore crucial to find out how much ski area investments retain demand and affect the competition for the remaining guests. We link firm-level data from ski areas to natural snowpack data and use Two-Way Fixed Effect (TWFE) estimators to study (i) how ski areas lower their dependency on natural snow by investing in snowmaking facilities, (ii) the effect of ski lift investments on skiing demand and revenue and (iii) the impact of lift investments on the spatial competition between neighboring ski areas. We find that ski areas with above-median snowmaking capabilities lower their dependency on natural snow by two-thirds. Ski lift investments induce a one-time positive average effect of 4.1% on demand and 1.9% on revenue in the winter following the construction. Finally, we document negative effects of ski lift expansions of neighboring areas within a road distance of up to 50 kilometers on demand.

Suggested Citation

  • Pascal Troxler, Marcus Roller, Monika Bandi Tanner, 2023. "The Investment Competition among Swiss Ski Areas," Diskussionsschriften credresearchpaper45, Universitaet Bern, Departement Volkswirtschaft - CRED.
    • Handle: RePEc:rdv:wpaper:credresearchpaper45
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    File URL: https://repec.vwiit.ch/cred/CREDResearchPaper45.pdf
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    References listed on IDEAS

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    1. Kurt Schmidheiny & Sebastian Siegloch, 2023. "On event studies and distributed‐lags in two‐way fixed effects models: Identification, equivalence, and generalization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(5), pages 695-713, August.
    2. Richard G. Walsh & Nicole P. Miller & Lynde O. Gilliam, 1983. "Congestion and Willingness to Pay for Expansion of Skiing Capacity," Land Economics, University of Wisconsin Press, vol. 59(2), pages 195-210.
    3. Pascal Troxler, 2023. "The Impact of Weather Forecasts on Ski Demand," Diskussionsschriften credresearchpaper43, Universitaet Bern, Departement Volkswirtschaft - CRED.
    4. Kyle Butts, 2021. "Difference-in-Differences Estimation with Spatial Spillovers," Papers 2105.03737, arXiv.org, revised Jun 2023.
    5. Sebastian Siegloch & Nils Wehrhöfer & Tobias Etzel, 2022. "Spillover, Efficiency and Equity Effects of Regional Firm Subsidies," ECONtribute Discussion Papers Series 210, University of Bonn and University of Cologne, Germany.
    6. Christian Lohmann & Nils Crasselt, 2012. "Investments in Ski Areas: Effects of Compensation Payments in a Complementary Value Network," Tourism Economics, , vol. 18(2), pages 339-358, April.
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    More about this item

    Keywords

    : Ski area operators; investment competition; ski area expansion; ski lift replacement; snowmaking; spatial competition; tourism;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • Z32 - Other Special Topics - - Tourism Economics - - - Tourism and Development

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