Bundling versus Unbundling

I ran into a terrific example of the concept of economic bundling last week.

Every year I go on a ski trip, arranged by a ski club. When I started going on club trips (a long, loong time ago), the process was remarkably simple. You wrote the club a big check, and you were told when to show up at the airport. Once there, the trip leader handed you an airline ticket. You deposited a massive amount of gear at the gate (skiers travel with more equipment than your average Himalayan expedition), and got on the plane.

When the plane landed, you got on a bus that took you to the resort. After check in, you got your lift ticket for the week. Invariably, several dinners were included in the price of the trip, so you would get together with other members of the club and swap lies about how adventurous you had been.

The dominant feature of the pricing was that it was all inclusive. That is, you paid one fee, and everything was included. Put another way, all of the various services had been put together in one bundle by the club.

This year's trip provides quite a contrast with those earlier experiences.

First, I had to make my own airline reservation, separate from the payment for the club trip. I also had to pay an additional fee to cover the bus transfer from the airport to the resort. Several years ago, the lift ticket had been broken off from the rest of the trip package. You select the number of days you want to ski, and pay for those apart from the main trip fee.

When I bought my airline tickets, I thought I had a pretty good deal. That illusion stood until I got to the airport with all my luggage, and had to pay baggage fees, which were equal to 30% of the original ticket cost. Since the airlines no longer serve food on the flights, we bought something at the airport to eat on the plane. The trip price also included only one final dinner at the end of the week. There were other group activities planned, but they were pay as you go.
All of the discrete pieces of the original trip package had been separated, or unbundled, from each other.

The advantage of unbundled prices is the additional freedom and flexibility it offers the individual. When prices are bundled, you pay for everything, whether you use it or not. You don't like airline food? Tough, you still have to pay for it. Renting your equipment to ski? You don't get to use all of the baggage allowance built in to the ticket price. You like to rent a car and drive yourself to the resort? The other people who are riding the bus appreciate your subsidizing their ride. So unbundled prices give you a chance to save some money.

Bundling prices offer a couple of advantages, however. First of all, it is less complex, both for the buyer and the seller, and complexity costs money. If you use bundled prices, you only have to pay one time, and there is only one revenue collection point for the seller. In the context of my ski vacation example, bundling has another, even larger benefit. By grouping together a number of individuals, the club was able to get discounts by buying in bulk. A batch of wholesale purchases bundled together are going to be cheaper than the same set of purchases made at the retail level.

For my trip this year, I had more options, but the sum of my individual choices cost me more than what the old group price would have been. For once, I can actually put a price on freedom.

A Modest Proposal

I am on my annual pilgrimage to ski country this week. I’ve noticed that the tilt towards the green side has become more pronounced over the last few years. It started with the invitation to reuse your towels, so that housekeeping didn’t have to expend so much fresh water on laundry. Now it has expanded to include the use of compact fluorescent bulbs throughout the condo unit we are staying in this week.

The management has posted a little notice in the room, stressing how energy conserving they are, doing their part to fight global warming. It put me in mind of an article I read in a skiing magazine a couple of months ago. The article profiled an activist in the ski town of Crested Butte. This woman was committed to fighting global warming, specifically to preserve heavy snowfalls in the Rockies. More snow, better skiing.

After thinking about this for a while, it gave me an idea of how we could really fight global warming to preserve snow: ban skiing.

Well, not really. My idea is not to ban skiing. Just to ban the sport as currently practiced. The modern ski vacation has got to be one of the most carbon intensive activities on the face of the planet.

To get to the resorts, we fly in from all over the country, if not the world (how much carbon do you emit to get to Colorado from Australia, I wonder). Once we’re here, we stay in luxury condos, housing that stands empty for eight months out of the year. That can’t be environmentally benign. In the last ten years, I have yet to stay in a unit that doesn’t have a gas fireplace. They’re not efficient heating units, but the flames are pretty, as we watch irreplaceable natural gas get converted into carbon dioxide and water vapor.

Then there is the sport of skiing itself. First off, to create the ski runs, they mow down swathes of National Forest. Last I checked, trees were carbon absorbers, but hey, we’re out to have some fun. Then, they install big diesel powered ski lifts. They haul us up the hill, solely so that we can slide down, back to where we started from. A less practical activity can scarcely be imagined.

Trying to offset all of these carbon emissions with compact fluorescents is like trying to bail out the Titanic. With a teaspoon.

No, if we were really serious about slowing down greenhouse gas emissions to preserve snow, we would close down the ski areas. Of course, that wouldn’t leave many people to care about whether there was fresh powder snow on the mountains or not.

I guess it would be a case of having to destroy the village in order to save it.

How is a Ski Vacation Like Valhalla?

In the old Viking religion, the highest honor was to die in battle. For those warriors "fortunate" enough to meet their end this way, they were rewarded by getting to spend the afterlife in Valhalla, which was the residence of Odin, chief of the Norse gods.

In Valhalla, every morning the warriors would wake up, don their armor and weapons, and march out into the snow covered fields surrounding Odin's hall. Then they would do battle against each other all day long. At the end of the day, Odin would come forth and miraculously heal all of the wounds suffered during the day of combat. Then all of the warriors would march back into Valhalla, and spend the evening drinking and feasting before falling asleep. The next morning they would awaken to begin the process over again.

The modern ski vacation is something like that. In the morning you get up and put on your gear for the day. Then you go out, get on the ski lift, and spend the day doing battle against the slopes of the mountain in the cold and the snow. At the end of the day, through the power of modern analgesics, you are healed of your aches and pains. Then you go out for dinner at a three star restaurant. And the next morning you do it all over again.