During the 2019-2020 ski season, a season pass for Ski Santa Fe cost $800 and gave the holder unlimited access from the start of the season on Thanksgiving Day to the end of the season, which was cut off early due to the COVID-19 pandemic in mid-March.

For the 2020-2021 season, which was scheduled to begin on Thanksgiving Day and end on April 4th, 2021, subject to snow conditions, in order to reduce and control the number of people on the mountain, Ski Santa Fe implemented a different kind of pass. The initial cost was $250, and that gave the holder first rights to reserve a spot, but not a guarantee since the total capacity was drastically reduced in order to facilitate social-distancing. If a spot was available, the holder could pay $30 for the first ten visits and $10 after that for each visit.

Other resorts, like nearby Taos, simply raised prices. In fact, during holiday weekends and the last two weeks of March, as well as the last three days it was scheduled to be open, it raised prices from $85 per day to $128, and capacity was controlled using a first-come, first-served system.

Some people, especially locals, responded to Ski Santa Fe’s COVID-19 plan with outrage, feeling that it would be far more expensive than the old $800 pass.

The actual 2020-2021 season didn’t start until mid-December and since it was a dry year with far less snow than usual, ended on April 4th, as predicted.

Assume your buddy, Alex, is complaining to you about this situation, and along with the increased costs of riding the lift, he brings up the cost of equipment that he buys each year (goggles, poles, coats, etc. as needed), and the fact that he already pays about $16 at the lodge for lunch that he could get down in town for half that, and the cost of gas (it’s 15 miles from his house to the slopes and his Subaru gets 30 miles to the gallon).

In addition, Alex came down with a respiratory infection in late December 2019 that kept him off the slopes in January of 2020. He hopes to make up for that lost time during the 2020-2021 season by skiing three times per week instead of his usual two.

Instructions:

Using proper managerial accounting terminology, but explaining it to the average person (e.g. Alex), discuss whether he is paying more or less under the new system. Make sure you use terms like fixed costs, variable costs, marginal cost, average cost, discretionary and non-discretionary, avoidable, sunk, relevant, irrelevant, and other terms that apply to your analysis.

Alex thinks Ski Santa Fe and places like Taos are raking in money, and can’t understand how just riding the lift could cost so much, especially in a normal year when thousands of people a day are paying over $80 each. How do you think Ski Santa Fe sets its prices in a normal year?