Rocky Mountain Adventures, Inc.

Overview of the Outdoor Recreation Industry

The outdoor recreation industry included the manufacture of equipment and the provision of services for such activities as mountain biking, mountain and rock climbing, camping, fishing, hunting, hiking, backpacking, kayaking, canoeing, rafting, skiing, and golf. Some of these activities required highly specialized equipment and the use of a guide or instructor, while others required virtually no specialized equipment or unique skills. In 1995, almost 67 percent of Americans walked for recreation, 44 percent enjoyed swimming, and 27 percent found bird-watching a pleasurable recreation. Participation rates for outdoor activities declined as the need for specialized equipment and skills increased. About 25 percent of Americans camped and hiked, 14 percent played golf, about 8 percent went downhill skiing, 8 percent participated in river rafting or floating, 4.5 percent enjoyed mountain climbing, 3 percent went fly-fishing, and 0.7 percent kayaked on U.S. lakes, streams, and rivers.

Participation rates varied greatly by income level and age. Only about one-third of low-income families or individuals participated in outdoor activities, and even fewer participated in outdoor recreation that required travel or expensive equipment. Even though middle-income and high-income households accounted for most outdoor recreation that required travel or specialized equipment, members of high-income households were about twice as likely to engage in more costly outdoor recreation than middle-income individuals. Exhibit 3 presents U.S. participation rates for selected outdoor activities in 1987 and 1993-97, and Exhibit 4 presents U.S. participation rates based on income level.

Growth or decline in various outdoor activities was explained to some degree by the composition of the U.S. population. The 81 million baby boomers (those born between 1945 and 1964) were the most important consumer group to the outdoor recreation industry because of their discretionary purchasing power, lifestyles that favored recreational activities, and a growing amount of leisure time as they approached retirement. As a generation, baby boomers had adopted a "back-to-nature" philosophy, but it was expected that as baby boomers aged, their spending on outdoor activities would become secondary to that for their children's college education and their own retirement and future medical expenses. The demographic composition of the United States would continue to shift, as there were 5 million fewer adults under the age of 35 in 1997 than in 1988. In addition, the number of people aged 30 to 44 was expected to decline by 7 million and the number of people aged 45 to 70 was expected to increase by more than 20 million between 1998 and 2008.

The projected decline in the number of adults aged 30 to 44 was based on the current size of Generation X (Americans born between 1965 and 1979), which was approximately 44 million. Like baby boomers, Generation Xers enjoyed outdoor recreation, but since their generation was about one-half the size of the generation before them, it was expected that boomers would continue to dominate U.S. spending patterns for years to come. Like the original boomers, the 62 million echo boomers or Generation Y (Americans born between 1980 and 1995) were destined to become a dominating consumer group with a projected annual buying power of more than $100 billion. Manufacturers such as Frito-Lay and Nike were already taking actions to build loyalty to their brands among the echo boomers, who would represent 30 million teenage consumers by 2006.

Exhibit 5 presents the U.S. participation rates for selected outdoor recreation activities by age. Most Americans tended to participate less in outdoor activities as they became older—especially strenuous activities like downhill skiing, water skiing, basketball, and mountain or rock climbing. Walking, hiking, swimming, golf, softball, and camping were the most common outdoor activities for those aged 40 and over. Even though print and broadcast media provided vast coverage of strenuous outdoor activities like rock climbing, kayaking, whitewater rafting, and snowboarding, these activities were performed by relatively few people, regardless of age. Less than 10 percent of those aged 16 to 24 actually participated in kayaking and rock climbing, and fewer than 150,000 people annually engaged in other high-risk outdoor activities like skydiving.

The typical adventure outdoor recreation enthusiast was a 25-34-year-old unmarried male earning between $40,000 and $60,000 per year. However, much of the growth in outdoor recreation participation rates was accounted for by young women. Women's participation in a variety of outdoor activities had grown substantially in the 1990s. Between 1991 and 1996, women's participation in hiking had increased by 10 percent, in canoeing by 17 percent, in backpacking by 21 percent, and in whitewater rafting and kayaking by 116 percent. Overall women's participation in outdoor and physical fitness activities grew by 11.8 percent between 1987 and 1996, while men's participation grew by 2.9 percent over the same time period. Exhibit 6 presents 1995 participation rates for selected outdoor activities by gender.

The Market for Outdoor Recreation Equipment

Almost all outdoor recreation required some type of equipment. Camping required equipment ranging from tents to canteens; snowboarding and downhill skiing required special apparel and ski equipment; water sports like rafting, canoeing, and kayaking required a boat, life vests, and paddles; and rock climbing required ropes, lanyards, harnesses, and specialized footwear. Specialized footwear was even available for serious walkers. In 1997, the total U.S. sporting goods industry (apparel, footwear, and sports equipment) grew by 5.2 percent to reach $44.1 billion at the wholesale level. The wholesale value of specialized outdoor equipment was $1.6 billion in 1997. Sporting goods manufacturers' associations expected the entire sporting goods industry to grow by 5.3 percent in 1998. Rapid growth for the specialized outdoor segment in future years was thought to be linked to manufacturers' abilities to develop technologically advanced products and to further appeal to women and Generation Xers.

Outdoor recreational equipment was sold through specialty outdoor retailers, specialty bicycle shops, specialty ski shops, general sporting goods stores, and discount retailers. Combined, these retailers sold approximately $5 billion in specialized outdoor equipment, apparel, and footwear. The top 10 products sold by outdoor retailers in 1996 and 1997 are presented in Exhibit 7. Outdoor equipment and gear accounted for 34 percent of the industry's 1997 retail sales, while apparel accounted for 33 percent, accessories accounted for 20 percent, and footwear accounted for 13 percent.

About 70 percent of outdoor specialty retailers operated stand-alone, single-store operations with annual retail sales of $1 million or less, and about one-half of all specialty outdoor retailers had annual sales volumes of $500,000 or less. Outdoor specialty store annual sales averaged $250 per square foot in 1997, compared to an average sales per square foot of $169 for the entire retailing industry. Small specialty stores were able to achieve high sales volumes relative to store size because of their pricing practices and relatively small locations (66 percent of stand-alone outdoor retail stores were less than 3,000 square feet). The small specialty stores were usually able to charge premium prices for much of the merchandise stocked in their stores since many items were either highly differentiated brands or hard-to-locate products.

Single-store retailers were becoming increasingly concerned about the growing presence of specialty discounters, full-line discounters, and mail-order catalogs that chose to focus on the growing market for outdoor apparel, footwear, and equipment. These national catalog discounters and larger multistore "big box" retailers were putting pressure on specialty retailers' margins by offering consumers discount pricing on many of the brands and categories of merchandise traditionally offered only by smaller specialty shops.

Outdoor Outfitters and Guides

The services of professional outfitters and guides were available to about 13 million adventure travelers during 1997. When selecting an outfitter for a guided trip, most outdoor recreation customers considered the organization's safety record, attention to customer service, quality of gear, reputation for quality outdoor experiences, and ability to keep trips on schedule. Exhibit 8 presents a list of services typically offered by outfitters and the percentage of business accounted for by each service. Outfitters and guides had provided equipment, provisions, and expertise to outdoor adventurers throughout the western United States from the time the pioneers migrated from the East during the 1800s. Modern outfitters focused on guiding adventure travel for those who did not have the skills or equipment to safely outfit and lead their own outdoor excursions.

Outfitters usually found private landowners unwilling to allow public excursions on their property and were required to have Bureau of Land Management (BLM) or USDA Forest Service permits to operate in the wilderness regions owned by the U.S. government. These permits had become increasingly scarce since wilderness purists had begun lobbying the government to make fewer permits available and a number of new entrants to the outfitting industry had emerged during the 1990s. Some colleges and universities had begun to offer outfitting services to their students and faculty and, in some cases, to the general public. Also, outdoor retailers like L. L. Bean offered fly-fishing, rafting, kayaking, and cycling instruction and outfitting services to selected catalog customers. In addition, some large hotel chains and travel agencies offered outdoor recreation packages that included outfitting services to guests and customers. The new entrants' attraction to the industry stemmed from the industry's growth during the 1990s and the growing number of corporations that scheduled adventure travel retreats to build cooperative cultures and to boost the morale of employees who worked 60- to 80-hour weeks.

The Impact of Governmental Policies and Practices on Outfitters

Many outfitters were finding that recent changes in government policies made it increasingly difficult to offer quality outfitting services to its customers while consistently earning profits. Government regulation tended to vary considerably among the various regional offices of the Forest Service and the BLM. Outfitter associations testified at a congressional committee hearing in April 1997 that many individual government resource managers let their ideological beliefs affect how they interpreted and enforced the Wilderness Act of 1964—a situation that had an uneven impact on the balance between preserving the primeval character of wilderness areas and permitting people to enjoy the recreational attractions of such areas.

Outfitters found that while many wilderness resource managers had not changed their approach to outfitter regulation in recent years, other resource managers interpreted the act to require rigorous preservation of the wilderness. Outfitter associations charged that these managers who either felt pressure from or shared beliefs with wilderness purists enforced the act in a manner that allowed fewer recreational permits for outfitters and required outfitters to reduce party size. Outfitters found that new restrictions on the number of guided trips and on the size of guided parties severely limited the viability of offering outfitting services. Outfitters expressed confusion over enforcement of the act to Congress since, in many cases, self-guided users were offered unlimited access to wilderness areas without permits and with no restrictions.

Outfitters had also begun to see their profit margins erode as a result of increases in launch fees, concessions fees, and entrance fees charged by the BLM, the Forest Service, and various state parks agencies. For example, outfitters operating in the Canyonlands National Park were required to pay for a computer system used by the park service to manage self-guided users in addition to negotiated contractual fees paid to the government. Outfitters were also concerned about midseason fee increases that were implemented after their rate schedules had been published and customer reservations had been accepted. The BLM and Forest Service contract award process was also very costly to outfitters. Contract proposals typically took hundreds of hours and approximately $20,000 in professional fees to develop. Successful bidders were typically awarded a contract with a duration of five to seven years. Many outfitters claimed that more time was needed to recapture the cost of preparing the proposal. Outfitters also suggested that it was difficult to develop a long-term business plan and sustain profitability given the short-term nature of agency contracts. During 1998, members of the U.S. Senate sponsored the Craig-Wyden Outfitters Policy Act (senate bill s.1489), which intended to ensure more consistent wilderness resource management, provide longer-term contracts to outfitters, eliminate unnecessary and duplicative paperwork, evaluate government user fees, revise the process of awarding contracts, and eliminate the need for government approval of outfitter rates and charges where competition existed. The bill was strongly opposed by wilderness groups and private boaters, but outfitter associations were hopeful that the bill would become law during 1999.

Outdoor Recreation in Colorado

Colorado offered outdoor recreational opportunities that appealed to a wide variety of tastes and interests. Downhill ski resorts such as Aspen, Vail, Steamboat, and Breckenridge were among the many in the state that were known worldwide. Colorado also boasted 54 of the 68 U.S. mountain peaks measuring over 14,000 feet. Each year hundreds of thousands of tourists visited the Mesa Verde cliff dwellings and the 700-foot-high sand drifts of the Great Sand Dunes National Monument Park. Many others camped and visited the vast plains of eastern Colorado to get a feel for the Old West. Regardless of geographic region, the state offered a scenic backdrop to almost any outdoor recreational activity. Almost unlimited hiking trails and camping sites existed within the state, and numerous mountains, foothills, and rocks were readily available throughout the western section of the state for climbers of varying skill levels. Colorado's lakes, rivers, and streams were easily accessible to rafters, kayakers, and fishers. Big-game hunters from around the United States and other countries came to Colorado to hunt bighorn sheep, elk, and deer.

Colorado's diversity and quality of outdoor recreational activities made it a popular destination for travelers of all types. In 1997 the expenditures of Colorado's 25.1 million adult overnight business and pleasure travelers totaled $7.1 billion, while expenditures in mountain resorts accounted for about 37 percent of total overnight travel spending. Most spending in mountain resorts was made by an estimated 2.5 million tourists on sightseeing trips; 2.1 million downhill ski vacationers; and 1.9 million overnight participants in outdoor recreation like camping, rafting, and fishing.

Outdoor Recreation Activities Near Fort Collins, Colorado

Fort Collins is located in the northeastern section of Colorado about 60 miles north of Denver where the plains meet the Front Range of the Colorado Rocky Mountains. Fort Collins's climate made outdoor recreation possible throughout the year, although water-related activities were practical only during the very late spring and summer since conditions became unbearable in the colder months. Fort Collins averaged 300 days of sunshine annually, with annual rainfall accumulation of only about 8 inches.

The most popular locations in the area for outdoor recreation were the foothill mountains just a few miles west of the city, the Rocky Mountain National Park 35 miles southwest of the city, and the Poudre River Canyon located 10 miles northwest of Fort Collins. Two foothill mountain parks, Horsetooth Mountain Park and Lory State Park, comprised nearly 5,000 acres and were easily accessible to Fort Collins locals and visitors for hiking, mountain biking, horseback riding, and wildlife viewing. Water sports and recreation were available near the parks at the Horsetooth Reservoir—the largest lake in northern Colorado.

The Rocky Mountain National Park covers 410 square miles and includes 18 peaks over 13,000 feet that form the Continental Divide. Many of the park's 3 million-plus annual visitors also enjoyed recreation provided by the park's 150 lakes and traveled the Trail Ridge Road—the nation's highest paved highway, which begins in the town of Estes Park and meanders along the ridges of the Rocky Mountain range. The Poudre River Canyon runs east from the Continental Divide to the foothills and into the plains of eastern Colorado. During the spring and early summer snowmelt the river includes stretches of easy Class I conditions to very challenging Class V expert conditions for whitewater rafters and kayakers. As summers progressed and the river began to recede, the Poudre took on its role as one of the most highly rated trout streams in Colorado. Exhibit 9 provides a map of Colorado and a more detailed map of the Fort Collins area.