The big idea
The idea came during a trip to the Alps. After moving my skis for the tenth time just to get to the ski lodge, I thought ‘Why can’t I just leave my skis here and pick them up the next time I come?’ This idea was the start of a profitable franchising deal called Skis4Life.
The business concept
Comfinion found a ski rental company that was interested in subtracting a huge capital investment (the cost of their ski inventory) from its books by renting out skis owned by individual skiers. And we identified a group of skiers who would be interested in earning back their ski equipment investment by renting out their skis when they are not being used. The skiers save a lot of money on their skis. And the ski rental company reduces their capital investment.
How it works
Self-owned skis: high-cost, low-use investment
When going on a ski holiday, a tourist can either buy or rent their ski equipment. If he buys his own skis, he has the comfort of always skiing with his own gear. But this is an expensive proposition. Apart from the major up-front investment, he also has to pay for maintenance and insurance, storage, a ski box and additional fuel/travel costs. Those costs are spread over a relatively short period of time. Many skiers replace their equipment every five to six years. As time goes by they become more experienced and will naturally upgrade to more sophisticated materials. Unfortunately at this point the residual value of their old skies is close to zero. This is a shame since most skiers will have used their skis for only one or two weeks a year, even though the technical life of their skis can last up to ten times longer.
Rented skis: Flexibility, but at a high price
Renting skis every season does offer more flexibility, but it can be rather costly. And when your skiing holiday is over the rental fee you have paid is gone for good. The up-side is that you do not have to pay an initial large investment amount or related costs. The down-side is that if a skier rents skis for 2 weeks every year, the average costs can amount to Euro 200.00 per year. that adds up to EURO 1,000.00 over 5 years, making it an expensive propositions. compared to buying your own skis.
Ski rental firms: high capital investment, unpredictable market factors
Ski rental firms face an even more complex dilemma. On the one hand, this business requires a sizeable investment in rental equipment. On the other hand, its revenues have an extremely strong seasonal character that can be heavily influenced by the most unpredictable of all external factors: the weather. This combination of predominantly fixed costs and volatile revenues translates into a high-risk profile and thus relatively high financing costs.
At the same time, the competition between ski resorts has become much fiercer over time. A lot of resorts have invested considerably in all sorts of facilities to attract more skiers. And as with any investment, the goal is to make a solid return. But with a lot of resorts doing the same thing, skiers can choose from a wide range of alternatives. To attract the attention of skiers, the marketing and advertising costs of ski resorts have sky-rocketed in the past decade. And while these efforts may attract some skiers to a specific resort, it is no guarantee that these guests will be coming back the next year as well.
Skis4Life offers three major advantages for skiers, rental companies and ski resorts:
Skiers can save money
For those buying their own skis, Skis4Life offers skiers the opportunity to earn back their investment. They sign up for a three-year membership in Skis4Life. This membership allows the skiers to leave their ski gear with a rental firm in the ski resort they visit. When the member is not using their equipment, it can be rented out to other skiers. The revenues are split between the owner of the skis and the rental firm. The rental firm is responsible for maintenance, insurance and storage and for providing the rental infrastructure. Depending on the weather, the Skis4Life member can earn back their full equipment investment within the contract period.
During the life of the contract, a member’s share of the rental revenues is deposited in a segregated account at a trusted third party (bank or other financial institution). Once a year, each member will receive an overview with an exact specification of accumulated rental revenues, the credit one has collected, etc. After three years, this amount is released to the member and they can reinvest their money in new skies or simply take the cash and go. That means that during the membership period the member will have used their ski gear for free!
Rental firms can lower their risk profiles whilst raising ROI
For the rental firm, its biggest gain lies in the fact that this concept will significantly reduce the amount of capital invested. Along with that, the annual depreciation charges go down as does the risk of under utilization losses. On top of that, the firm’s return on investment will go up.
True client retention
Ski resorts will benefit from the fact that the Skis4Life members will have a strong incentive to come back to the same resort for at least the period of their membership. After all, their skis are already there. That means that Skis4Life offers a client retention element as well. With this in mind and based on the fact that retaining an existing client is always cheaper than attracting a new one, Skis4Life offers ski resorts a more efficient alternative than traditional advertising and promotion. This could yield significant savings for ski resorts. Part of these savings will be channeled back to the Skis4Life members by means of special membership awards (e.g., discounts on ski-lift passes, restaurants, hotels, etc.), reducing their holiday costs even more.
By combining and leveraging on existing assets, Skis4Life is a concept that benefits all parties involved. More information on Skis4Life and the resorts where this program is available can be found on the Skis4Life website (www.skis4life.com)