Adapting ski area operations to a warmer climate in the Swiss Alps through snowmaking investments and efficiency improvements

Economic consequences of climate change for the Swiss winter tourism have been assessed in two studies. Though estimates of the potential annual costs highly differ between them, they however agree on two points. On the one hand, winter tourism will be one of the most affected economic sectors. On the other hand, impacts of climate change on this sector will be very disruptive. In this context, adaptation strategies must play an important role in the Swiss winter tourism sector in order to alleviate these impacts. When thinking of technical adaptation measures, snowmaking facilities very often come to the fore. Hence, our first task in this thesis work was to picture the achieved level of investments towards this kind of facility. The umbrella organization of the cableway sector indicates that 42 km2 (19% of the total slopes' area) which represents roughly 1400 km of ski slopes could already be snowed artificially in 2005. In the three most important Swiss ski regions (Valais, Grisons and Bern), we found that the percentage of the total slopes' area that could be snowed in 2005 was lying in the same range (i.e. from 18% to 22%). With respect to the numerous investments that will probably be planned in the years to come, an important issue deals with the commitment of cantonal authorities in the adaptation process carried out by the ski area operation companies located on their territory. Are these commitments different from one canton to another and how could they evolve in the short and mid-term? What are the consequences of regional differences in the authorities' commitments for the companies' vulnerability towards climate change? Among the reviewed cantons, we found that Bern is clearly the canton where the investments are less dependent to the authorities' support. On the contrary, Fribourg, Vaud, Ticino and (to a lesser extent) Saint-Gall are the cantons in which ski area operation companies are most dependent on authorities' support for their snowmaking investments. Based on these results, it was however difficult to determine clear-cut consequences for the vulnerability of companies located in different regions. In addition, we found that companies with transport revenues ranging between 1 to 5 Mio CHF have constituted the core of the beneficiaries. While small companies are generally not eligible for large support towards snowmaking investments, the highest companies of the sector were only rarely recipient of authorities' support mainly because they did not need it to finance their investment. Despite the different forms and features of financial support provided in the different cantons, we have also derived a unique value for the financial support provided at the cantonal and federal levels towards snowmaking investments in Switzerland. This overall financial support (overall equivalent subsidy) has been estimated at 12.5 Mio CHF (state at the end of 2006). After having analyzed to which extent public authorities have already supported snowmaking investments and verified under which conditions these facilities will continue to be supported in the future, a crucial question was then to determine whether snowmaking investments could actually reduce the potential costs of climate change. This question arises since snowmaking facilities implies large investment and operating costs. In order to answer this question, several statistical models of the ski area operation companies' operating results have been assessed. While such models were only estimated with the data concerning the 2003/04 and 2004/05 winter seasons, estimation results derived from them nonetheless prepare the ground for assessing more precisely the impacts of snowmaking investments under climate change. First, our results show that the partial effect of snowmaking investments on EBITDA is positive but tends to decrease for higher level of investments. Secondly, we were also able to show to which extent additional snowmaking investments could have potentially improved the financial situation of Swiss ski area operation companies. Under the conditions of the winter season 2003/04, 69.5% of the Swiss companies operating more than 15 kilometers of ski slopes would have increased their net income with a one kilometer increase in snowmaking facilities. Because we have tried to explain or predict the companies' EBITDA, variables other than those related to snowmaking investments were added in our statistical models. This feature has allowed us discussing ongoing issues such as the impacts of horizontal reconfiguration, modernization of the transport facilities and increase in the ski resorts' lodging capacity on the ski area operation companies' profitability. Besides snowmaking facilities, we have also analyzed efficiency improvements of companies as another potential adaptation measure to climate change. For a sample of 20 valaisan companies, we have evaluated their performance using a DEA approach. However, few firms were rated as inefficient when making use of this approach. This result is mainly due to the limited number of companies included in our analysis. Indeed, gathering data was not an easy task for this research.