Ski Resort Real Estate Markets: Why Not to Invest

Abstract

This paper examines the behavior of ski resort property in a major New
England market over the last 25 years. A property price series is constructed for
the Loon Mountain resort, which is believed to be quite typical of New England
Ski areas. This series reveals that nominal prices are no higher today than they
were in 1980, and consequently real prices have eroded by close to 40%. The price
series also exhibits considerable variation across time. We explore the causes
of this fluctuation with a time series VAR model of the resort and learn three
things. First, natural snowfall is crucial to the annual business (skier visits)
in the broader New England area. Second, regional annual business is central to
the price appreciation at particular resorts. And finally, resort supply responds
so elastically to any movement in prices or business that it effectively curtails
any long term property appreciation. Impulse responses with the model reveal that
a wide range of (positive) demand shocks all fail to generate any long term
(real) price appreciation because new development responds so elastically. This
behavior is likely to be quite typical of many ski resorts.