Price differentiation in the alpine skiing industry—The challenges of demand shifting and capacity constraints under pandemics

The implementation of variable pricing at ski resorts can shift demand from peak periods to off-peak periods if at least some skiers have the flexibility and willingness to do so. This is often referred to as diversion, or demand shifting, and can directly affect the profit-maximizing prices ski resorts should set for their tickets. In this paper, we first model how diversion is related to various levels of the intra-weekly price differences at a ski resort. Then we use this model to recalculate the optimal variable prices a ski resort should set when accounting for the demand shifting and capacity constraints. The results show that the optimal prices the ski resort should set are influenced by both diversion and capacity constraints. The latter aspect is particularly relevant in the ongoing global pandemic. Ski resort managers can make direct use of our modelling framework and results when implementing new pricing strategies. Management implications •Variable pricing at ski resorts can shift demand from peak periods to off-peak periods.•The demand shifting will directly affect the optimal prices managers of ski resorts should set for the tickets.•Managers can use the proposed framework to model diversion as a function of intra-weekly price differences and use these results in a subsequent optimization model.•Our framework and results are also useful when implementing new pricing strategies during periods of strong capacity constraints (such as the ongoing pandemic).