Vail Resorts was struggling, now it is in a perfect storm.

[ski diva]

An interesting article in the Snow Industry Newsletter about the difficulties facing Vail Resorts. Not a good situation, by any means.

 

[ilovepugs]

Very interesting. Thanks for posting. No doubt part of why they’ve taken so long to figure out next steps.

 

[ski diva]

To be honest, I can't say I'm surprised (and I know pretty much zero about financial stuff). But Vail has been spending money like a drunken sailor for the past few years. Something was bound to happen.

Check out this excerpt from a blog post of mine regarding whether or not consolidations are good or bad for the ski industry. It's from August 16, 2016, nearly four years ago:

"Like a lot of people, I’m not convinced that the Vail-ification of the ski world is a good thing. I’m always a little nervous when one company gets too big in any particular industry, and I’m afraid this is what we’re seeing here. Sure, Vail is doing well now. But as a publicly traded company — and a big one, at that — Vail is certainly captive to the crazy gyrations of the stock market. A bad stock year can cause problems not just at the Mother Ship, but at all its resorts, across the board. What’s more, Vail has a responsibility to its shareholders to continually improve its bottom line. And this doesn’t always engender practices that are to the customers’ liking."

 

[ilovepugs]

Speaking as an armchair pundit, I thought that their fundamental thesis of buying lots of areas to hedge against environmental shocks was sound. What was not sound, however, was raising day ticket prices to the point of totally shutting out new skiers or skiers who aren't passbuyers, or not having newcomers' products at price points that would actually make it attractive for middle-class people in their 20s to 40s to grow into the sport and become customers for the next 30-40 years.

I only got into snowboarding because of the attractive first timers' product that Sugarbush offered - 3 lessons/rentals and a free seasons pass if you complete all 3, for about $300 at the time. Meanwhile, my friend tried skiing for the first time at Stowe and it cost her $250 just for the first lesson and rentals. How anyone with a "normal" budget (and not to be rude but I would hazard that my friend's pre-COVID household income was comfortably north of $500k, maybe even in the 7 figures) would be tempted to try the sport at Stowe or anywhere with a similar price point is baffling to me.

 

[ski diva]

I only got into snowboarding because of the attractive first timers' product that Sugarbush offered - 3 lessons/rentals and a free seasons pass if you complete all 3, for about $300 at the time. Meanwhile, my friend tried skiing for the first time at Stowe and it cost her $250 just for the first lesson and rentals. How anyone with a "normal" budget (and not to be rude but I would hazard that my friend's pre-COVID household income was comfortably north of $500k, maybe even in the 7 figures) would be tempted to try the sport at Stowe or anywhere with a similar price point is baffling to me.

I agree with this a thousand percent. The industry talks all the time about "growing the sport," yet how is this possible when it's so god-awful expensive?

 

[MissySki]

I agree with this a thousand percent. The industry talks all the time about "growing the sport," yet how is this possible when it's so god-awful expensive?

I've never looked into it, but maybe others have. How much profit do ski areas actually make? Is there a lot, or are the prices charged necessary to keep things functioning? I'm not sure how difficult of a data point this is to assess either, given how dramatically different each resort is. For example, in the northeast we have the necessity to invest heavily in snowmaking and grooming infrastructure and activities etc. Each resort has different overhead costs, but I'd be curious to know where they stand on profit. There is also a large capital requirement to keep reinvesting.

Are they greedy, or is it just the price of doing business? I have no opinion on this at the moment, because I haven't ever looking into any data.

 

[ilovepugs]

Not to mention that if Vail Resorts - as in, the corporate overlord, not the individuals who are actually part of our communities in Stowe, Ludlow etc - did things to promote the brand perception that it actually cares about the skiers and riders as individuals, it would have a better chance of retaining customers during this tough spot. As it is, in my opinion, I don’t think it’s generally perceived that way, and I think it’ll be a tougher sell to get customers to buy in and support the company - unlike the smaller local hills that try hard to build rapport with their customers.

 

[ilovepugs]

I've never looked into it, but maybe others have. How much profit do ski areas actually make? Is there a lot, or are the prices charged necessary to keep things functioning? I'm not sure how difficult of a data point this is to assess either, given how dramatically different each resort is. For example, in the northeast we have the necessity to invest heavily in snowmaking and grooming infrastructure and activities etc. Each resort has different overhead costs, but I'd be curious to know where they stand on profit. There is also a large capital requirement to keep reinvesting.

Are they greedy, or is it just the price of doing business? I have no opinion on this at the moment, because I haven't ever looking into any data.

The profit margins aren’t huge by any means and high window rates are a fact of life. But, to my knowledge, Vail is unique in how much it restricts discounts available to non-passholders. It’s either feast or famine - either you’re part of a large group visit or you buy a pass in advance of the season, or you pay $160 for a lift ticket to Stowe. Seems like other resorts have a lot more of a product mix that make it more accessible to people who aren’t hardcore committed.

And, of course, as a publicly traded company, they’ve paid out plenty of attractive dividends. When executive compensation is tied to public share prices, you can either drive up your share price by growing long term value or by growing your balance sheet in an unsustainable manner and paying out dividends. I know which one is easier for most executives...

 

[ilovepugs]

And to be clear, I don’t think it’s a matter of greed. I just think that market incentives aren’t aligned with true long term growth in value for the ski industry and it takes shareholders, whether public or private, to have a lot of faith in a management team that doesn’t show instant results.

 

[vickie]

If it isn't greed, what is it? I read how much cheaper it is to ski in Europe -- the skiing, lodging, food, instruction. I read how ski instructors elsewhere make a living wage. How do other locations -- other companies -- manage to do that and we can't or don't?

I have never looked into the financial details. I would have to really get into the weeds before I'd feel I got any answers -- i.e., if there's a huge price tag on "Operations", I'd want to know what line items comprise that ... what costs are hidden there. And I'd want a side-by-side comparison with successful companies.

I read the article yesterday and kept thinking that skiing really is a dying industry -- price out the middle class, plus rely on an older generation? That plan gives it 10 to 20 years of a slow death.

 

[elemmac]

What was not sound, however, was raising day ticket prices to the point of totally shutting out new skiers or skiers who aren't passbuyers, or not having newcomers' products at price points that would actually make it attractive for middle-class people in their 20s to 40s to grow into the sport and become customers for the next 30-40 years.

Vail and the Epic Pass were the first to throw caution to the wind and re-write how ski business is done. For anyone that skied prior to the 2000's knows how you could go to a mountain for a day, walk up to the ticket counter and pay a respectable rate. These same people understand how expensive season passes were, and how it often wouldn't "pay for itself" until you hit maybe 20 days. Now, you can break even in only 5 days, in some cases.

Vail re-wrote this business model, chopped season pass prices in the effort to keep the loyalty of the skiers that will keep coming back, and keep them from spending money at other mountains. But this price slash had to come at someone's expense...the day ticket holders. Personally, I think this model has worked in their favor. It creates a fixed revenue that they can rely on, rather than a day by day, weather oriented model. People now choose where they're going to spend their money for the season, it's not a weekend to weekend decision....personally I think this is a very sound business decision.

If it isn't greed, what is it? I read how much cheaper it is to ski in Europe -- the skiing, lodging, food, instruction. I read how ski instructors elsewhere make a living wage. How do other locations -- other companies -- manage to do that and we can't or don't?

I have limited European skiing experience, but at the two places I've been, yes, it's cheaper to buy day tickets. But, after a quick search of a couple of the larger resorts, season passes are on par with what they were before the US adopted, what I'll call, the "Vail Model"....Chamonix at $1400USD, St. Anton at $1000 and Mortiz at nearly $2000.

Plus, I'll add that lots of places in Europe don't have a "base", it's a town. So they don't own, nor maintain, lodges, base villages, restaurants, hotels, parking lots, etc.

 

[gingerjess]

Speaking as an armchair pundit, I thought that their fundamental thesis of buying lots of areas to hedge against environmental shocks was sound. What was not sound, however, was raising day ticket prices to the point of totally shutting out new skiers or skiers who aren't passbuyers, or not having newcomers' products at price points that would actually make it attractive for middle-class people in their 20s to 40s to grow into the sport and become customers for the next 30-40 years.

Yes, totally agreed—the arrangement allows resorts with great conditions to subsidize resorts that maybe are underperforming in a given year. But this also makes it hard to get started; I think I ended up shelling out ~$350-$400 for a weekend of rentals, a half-day first-time lesson, and two days of lift tickets (included for one day with the lesson). I'm in a position where I can do that after hearing so much from my friends about how great skiing is (and absorb the cost of a pass well enough to benefit from amortizing it over a bunch of visits), but that's prohibitive for a lot of people.

Not to mention that if Vail Resorts - as in, the corporate overlord, not the individuals who are actually part of our communities in Stowe, Ludlow etc - did things to promote the brand perception that it actually cares about the skiers and riders as individuals, it would have a better chance of retaining customers during this tough spot.

Again, agreed. This is what we'll see play out over the next week once Vail actually releases a plan. If it's a good one, I actually think people will forgive them for taking so long in comparison to Alterra. I know I have lots of other things on my mind right now.

And, of course, as a publicly traded company, they’ve paid out plenty of attractive dividends.

I swear I didn't set out to quote and agree with just you three times over, @ilovepugs.

 

[Ski Sine Fine]

I’d like to think Vail buying Peak Resorts is more of a plus now. If skiers shy away from destination resorts and ski local hills next season, I think most of the mountains in the Peak Resorts portfolio fit that bill.

 

[marzNC]

The profit margins aren’t huge by any means and high window rates are a fact of life. But, to my knowledge, Vail is unique in how much it restricts discounts available to non-passholders. It’s either feast or famine - either you’re part of a large group visit or you buy a pass in advance of the season, or you pay $160 for a lift ticket to Stowe. Seems like other resorts have a lot more of a product mix that make it more accessible to people who aren’t hardcore committed.

In recent years, Vail Resorts has also been dealing with ski areas/resorts that are completely different from a destination resort. What happens in terms of profit margins at the three "urban" ski areas/resorts in that VR owns in the midwest and the smaller hills they picked up by taking over Peak Resorts is probably very different from W-B or the CO/UT/CA resorts.

When the MCP was first created, what the independent resorts that were partners for the MCP had in common was that most didn't have multiple ways for people to get discounted day tickets. Liftopia existed but GetSkiTickets didn't yet.

The first time I went to Aspen was just a short trip because it was part of the MCP. Otherwise the cost of day tickets were higher than I wanted to pay to see if traveling to Aspen was worth the effort. Don't remember finding much in terms of discounted lift tickets besides a resort multi-day ticket for Big Sky back in 2012, 2013.

 

[marzNC]

If it isn't greed, what is it? I read how much cheaper it is to ski in Europe -- the skiing, lodging, food, instruction. I read how ski instructors elsewhere make a living wage. How do other locations -- other companies -- manage to do that and we can't or don't?

From what I've read, the situation in Europe is very different than in the U.S, at least in the Alps. Factors include health care, the size of the mountains, the history of the sport, how off-piste terrain is used, what the expectations are for how ski patrol is paid if someone needs help, where people usually stay and for how long, the fact that multiple ski schools can operate at the same resort, local culture, level of support from governments, and others.

Even in the U.S. regional differences can be significant. A day ticket at Massanutten on weekends is $70. That's for 70 acres and runs that are 2-5 min after a 7-min lift ride. The cost per min of skiing is much higher than in New England at a resort with 300+ acres and high speed detachable lifts. But the slopes are still busy on weekends at Massanutten.

 

[marzNC]

The books written by Chris Diamond about the ski industry are a good place to start for a better understanding of the business side of snowsports in N. America. The first, Ski Inc., came out in 2017. The next one, Ski Inc. 2020, was published in late 2019. Diamond had to scramble to rewrite several sections during the summer after Vail announced that Peak Resorts was being incorporated into the Epic Pass. I imagine he may well be starting to think about what to say in the next book. Maybe "Ski Inc., after a pandemic"?

Nov 2019, Colorado Sun
“The industry as we have known it no longer exists”: A former Colorado ski area executive peels back the curtain
Chris Diamond’s new book, “Ski Inc. 2020,” is a study of the ever-shifting ski resort industry
https://coloradosun.com/2019/11/07/chris-diamond-ski-industry-2020/

 

[ilovepugs]

I’d like to think Vail buying Peak Resorts is more of a plus now. If skiers shy away from destination resorts and ski local hills next season, I think most of the mountains in the Peak Resorts portfolio fit that bill.

If that guess is true, that might actually be a plus for me in terms of picking up a local pass at Stowe, if our household economy allows.

I’m not complaining, per se, about the network effect that Vail’s buying spree has had on crowd size, but it has gotten steadily more crowded on weekends (and I am most definitely a weekend warrior most of the time even if I’m quasi-local) since 2017 and it would be nice to enjoy the resort with less crowd pressure for a season.

 

[ilovepugs]

Vail re-wrote this business model, chopped season pass prices in the effort to keep the loyalty of the skiers that will keep coming back, and keep them from spending money at other mountains. But this price slash had to come at someone's expense...the day ticket holders. Personally, I think this model has worked in their favor. It creates a fixed revenue that they can rely on, rather than a day by day, weather oriented model. People now choose where they're going to spend their money for the season, it's not a weekend to weekend decision....personally I think this is a very sound business decision.

I agree and understand that the lower pass price (although my first Epic Pass purchase in 2017 was definitely $800-900 or so... not much cheaper than St Anton) has to be off-set somewhere.

My issue is that this strategy wasn’t and isn’t accompanied by an offering by Vail of an easy on-ramp to the sport. $250 for a first timer’s lesson is just outrageous and with the consolidation of the industry, it’s hard to imagine growing the sport at that price point.

I lived in Maryland last season and had a night skiing pass to the former Snow Time resorts. It started at under $200 for unlimited skiing for the season; you could pay ~$60 extra for unlimited lessons all season and another ~$50 for unlimited rentals, and was available to both kids and adults. It was an incredible deal by any measure and incredibly popular. Off-pass beginner lessons and rentals were still under $100, I believe.

Small wonder that of the out of state friends that have come to visit in Vermont and weren’t already skiers, only the 1%ers have come skiing with us.

 

[marzNC]

I lived in Maryland last season and had a night skiing pass to the former Snow Time resorts. It started at under $200 for unlimited skiing for the season; you could pay ~$60 extra for unlimited lessons all season and another ~$50 for unlimited rentals, and was available to both kids and adults. It was an incredible deal by any measure and incredibly popular. Off-pass beginner lessons and rentals were still under $100, I believe.

Keep in mind that the Snowtime business model probably wasn't sustainable. At least not in a way that could have led to a sale to someone who was willing to just stick with the trio. It was essentially a family business, but didn't have anyone in the next generation who was interested in continuing on. Hence the sale to Peak Resorts, and soon after the incorporation into Vail Resorts.

I'm reading the updated version of Southern Snow, which is about skiing in MD, WV, VA, NC, and TN. Fascinating stories of how skiing made it as an important industry in a region that had very few locals who knew anything about the sport. Needless to say, a very different history than in New England or the Rockies. Worth it almost just for the story of how Snowshoe got started and almost went under more than once before Intrawest turned it into the only destination resort in the southeast. The successful ski resorts in the region did some things in common to survive warm winters and recessions. For example, they welcomed snowboarders early on, and most planned on being 4-season resorts with golf courses and other summer time activities from the beginning. They also recognized the importance of ski schools for beginners of all ages.

 

[KWlovessnow]

The books written by Chris Diamond about the ski industry are a good place to start for a better understanding of the business side of snowsports in N. America. The first, Ski Inc., came out in 2017. The next one, Ski Inc. 2020, was published in late 2019. Diamond had to scramble to rewrite several sections during the summer after Vail announced that Peak Resorts was being incorporated into the Epic Pass. I imagine he may well be starting to think about what to say in the next book. Maybe "Ski Inc., after a pandemic"?

Nov 2019, Colorado Sun
“The industry as we have known it no longer exists”: A former Colorado ski area executive peels back the curtain
Chris Diamond’s new book, “Ski Inc. 2020,” is a study of the ever-shifting ski resort industry
https://coloradosun.com/2019/11/07/chris-diamond-ski-industry-2020/

Blister podcast just interviewed Chris Diamond a week ago. Interesting listen. I haven't read the book yet, but I want to.