The Snowballing Problems at Vail Resorts

Summary

The Snowballing Problems at Vail Resorts – A Comprehensive Summary

Podcast Information:

• Title: The Journal
• Host: Ryan Knutson and Kate Linebaugh, with contributions from Jessica Mendoza
• Produced by: The Wall Street Journal & Gimlet, in collaboration with Spotify
• Episode Title: The Snowballing Problems at Vail Resorts
• Release Date: February 5, 2025

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Introduction: Vail Resorts' Ascendancy in the Ski Industry

The episode opens with host Ryan Knutsen reconnecting with Alison Polly, a colleague who has been extensively covering the ski industry. Their conversation quickly centers on Vail Resorts, the premier name in American skiing. Initially a single resort near Vail, Colorado, Vail Resorts has expanded into a global powerhouse owning and operating 42 ski resorts worldwide.

Ryan Knutsen (00:40):
"Vail markets itself as the experience of a lifetime and it's a premium product."

Alison Polly (01:10):
"Vail markets itself as the experience of a lifetime and it's a premium product. It is a luxury experience where they have created these little mountain villages that are emblematic of what you might see in Switzerland."

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The Epic Pass Revolution: Transforming Skiing into a Subscription Model

In 2008, Vail Resorts introduced the Epic Pass, a groundbreaking season pass that bundled access to multiple resorts at a significantly reduced price. This move not only provided consumers with greater value but also stabilized Vail’s revenue streams, addressing the volatility faced by independent resorts.

Ryan Knutsen (04:15):
"Vail's entire business became about selling the Epic Pass."

Alison Polly (04:50):
"It took five Vail-owned resorts and a partnership with one other resort, put them all on one pass, and for the low price of $579, you could ski at any of these six resorts as much as you wanted for the entire season."

This strategy was lauded by Wall Street for its ability to ensure continuous growth and investment in resort upgrades, solidifying Vail’s dominance in the market.

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Peak Success and Initial Challenges: Scaling the Epic Pass

The Epic Pass proved to be an incredible deal for consumers, fostering a large and loyal customer base. Vail capitalized on this success by continuously expanding the pass’s offerings, acquiring smaller resorts, and incrementally increasing the pass price, which in turn boosted the perceived value of the Epic Pass over individual day passes.

Ryan Knutsen (05:46):
"So at the time that this came out, it was like an incredible deal for consumers."

By the 2021-2022 season, the pandemic had further propelled interest in outdoor activities like skiing, leading Vail to reduce the price of the Epic Pass to attract even more customers.

Alison Polly (08:26):
"Vail realized this and thought, okay, great, we are going to cut the price of the Epic Pass."

The price drop from $979 to $783 resulted in a surge of new pass holders, with over 2 million Epic Passes sold, marking the peak of Vail’s aggressive expansion strategy.

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Snowballing Issues: Overcrowding and Operational Strains

However, this meteoric rise brought unintended consequences. The influx of Epic Pass holders led to overcrowded slopes, strained parking facilities, and overwhelmed resort infrastructure. Vail attributed these challenges to a global labor shortage, which hindered the operation of all lifts and services.

Alison Polly (10:08):
"But in some ways, this backfired. All of a sudden, these mountains are becoming super crowded because there's no limit on the number of Epic passes that are sold."

The result was a significant backlash from customers, who felt the quality of their skiing experience had diminished despite the higher costs.

Ryan Knutsen (11:20):
"A lot of people pay a lot of money in order to come here, and those people are not getting the experience that they're paying for."

Social media became rife with complaints about long lift lines, insufficient services, and the overall degradation of the luxury experience Vail was known for.

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Labor Disputes and Further Reputational Damage

The situation escalated when, on December 27, ski patrollers at Park City, Utah—Vail’s largest resort—went on strike over wage disputes. The strike, lasting 12 days, led to significant operational disruptions and fueled customer frustration.

Alison Polly (12:24):
"The ski patrol are getting paid a starting wage of around $21 an hour in Park City... we can't even afford to have lunch on one hour salary here."

Vail eventually conceded to the demands, increasing wages and adding benefits, but the damage to its reputation was already done. The strike also highlighted ongoing labor issues at other resorts like Crested Butte and Breckenridge.

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Financial Decline and Shareholder Dissent

The combined effects of operational inefficiencies, labor disputes, and a tarnished reputation led to a decline in Epic Pass sales by 2% and a 50% drop in Vail’s stock since its peak in 2021. Minority shareholder Apex Partners publicly criticized Vail’s management for their short-sighted strategies and called for significant leadership changes.

Apex Partners (14:45):
"The core skiing community has labeled Vail the 'evil empire.' Management's incredibly short-sighted actions have led to lost opportunities and destroyed brand value."

They demanded the replacement of key executives and proposed an 80% cut in dividends, underscoring the severity of investor dissatisfaction.

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Vail’s Response and Future Strategies

In response to the backlash, Vail Resorts has apologized to customers and offered credits to those adversely affected by the strike. The company is also exploring new revenue streams, such as promoting ski lessons and gear rentals, expanding into the European market, and implementing cost-cutting measures, including a planned 14% reduction in its corporate workforce over the next two years.

Vail Spokesperson (15:18):
"We engage frequently with shareholders and value their feedback. We still believe in the Epic Pass model."

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Divergent Perspectives: Vail’s Mixed Legacy

The episode concludes by presenting diverse viewpoints on Vail Resorts’ impact:

• Proponents argue that the Epic Pass has democratized skiing for enthusiasts who now find it more affordable and accessible.

  Alison Polly (16:16):
  "People who have gotten into skiing or who are able to ski more because of the Epic Pass say they actually made skiing affordable for me."

• Critics contend that Vail’s strategies have inadvertently priced out casual skiers, inflated resort costs, and eroded the community-centric charm of local ski areas.

  Alison Polly (16:16):
  "Among a lot of other skiers, there has been this reputation that Vail has made skiing inaccessible by raising the price of the daily lift tickets."

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Conclusion: A Paradigm Shift in the Ski Industry

Vail Resorts’ journey exemplifies the complex interplay between aggressive business expansion and maintaining quality customer experiences. While the Epic Pass initially revolutionized the ski industry by offering unprecedented value and accessibility, the ensuing challenges of overcrowding, labor disputes, and shareholder dissatisfaction have exposed the vulnerabilities of such a model. As Vail navigates its current struggles, the industry watches closely to see if the company can recalibrate and restore its standing as a leader in the luxury ski market.

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Notable Quotes Recap:

• Alison Polly (08:26):
  "It soon became clear that being outside was great. A lot of people who had never skied before wanted to try it, right?"

• Ryan Knutsen (11:20):
  "A lot of people pay a lot of money in order to come here, and those people are not getting the experience that they're paying for."

• Apex Partners (14:45):
  "The core skiing community has labeled Vail the 'evil empire.'"

• Alison Polly (16:16):
  "Among a lot of other skiers, there has been this reputation that Vail has made skiing inaccessible by raising the price of the daily lift tickets."

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This detailed summary encapsulates the rise and challenges of Vail Resorts, providing listeners and readers with a thorough understanding of the issues discussed in the podcast episode, enriched with direct quotes and insightful analysis.

Transcript

[Ryan Knudsen]

The other day I caught up with my colleague Alison Polly. Lately she's been writing about the ski industry. Do you ski?

[Alison Polly]

I do ski.

[Ryan Knudsen]

Okay.

[Alison Polly]

I learned as an adult though, so I did not grow up skiing.

[Ryan Knudsen]

Uh huh. So you don't go out there and like shred the gnar?

[Alison Polly]

I don't. I don't. I try to embody that, though. Like I have an alter ego when I'm skiing called the Grade A Shredder. And that's me in that Persona.

[Ryan Knudsen]

Wow, this is definitely going to make it into the podcast.

[Alison Polly]

She's finally getting her public recognition.

[Ryan Knudsen]

Grade A Shredder, or Allison, as she's more commonly known, knows the biggest name in skiing is Vail Resorts. Vail started out as just one resort near its namesake in Colorado. But over the years, it's grown into a behemoth and now owns and operates 42 ski resorts around the world. And the company has completely revolutionized the business.

[Alison Polly]

Vail markets itself as the experience of a lifetime and it's a premium product. It is a luxury experience where they have created these little mountain villages that are emblematic of what you might see in Switzerland. The trails are immaculately groomed. You have high speed, speed chair lifts.

[Ryan Knudsen]

I mean, I feel like even just like in pop culture, almost just the name Vail, like I'm going to Vail is like, oh, that's a really high end, classy thing you're gonna go do.

[Alison Polly]

Exactly. It's fancy, it's desirable.

[Ryan Knudsen]

Vail has amassed a large customer base over the years, but as that customer base has grown, things have gotten a bit icy.

[Alison Polly]

And as it turns out, Vail has pioneered a business model that is now really a victim of its own success.

[Ryan Knudsen]

Welcome to the Journal, our show about money, business and power. I'm Ryan knudsen. It's Wednesday, February 5th. Coming up on the show, the problems snowballing at Vail Resorts.

[Unknown]

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Vail, the king of Colorado skiing, extends its reign as number one.

[Ryan Knudsen]

For decades, skiing in America was pretty straightforward. Ski slopes were largely independent operations. And the business model was pretty simple. You bought a day pass and you went up and down the hill.

[Alison Polly]

You would go up to the window at a ski resort, buy a lift ticket for the day. They would give you a tag. You would fasten it to your. The zipper of your jacket.

[Ryan Knudsen]

I remember kids in high school that skied like, they'd wear their winter coats and it have their, like, ski pass on it. Growing up in Oregon at Mount Hood.

[Alison Polly]

Yep. And they would have all those tags to show how many times they went. But it left the resorts themselves in a vulnerable position, because how many tickets they were able to sell depended on how good the snow was and how good the season was. So if they had a great year, they were able to invest in the resort and make some upgrades. If it was a bad snow year and they didn't sell a lot of tickets, that was tough. And that meant the next year was going to be difficult in terms of whatever snowmaking equipment or lift upgrades they were able to do.

[Ryan Knudsen]

For most independent ski resorts, which were privately held, this volatility was a headache. But for Vail, it was a big problem. Vail is the only ski resort company in the US that's publicly traded on the stock market. It listed in 1997, meaning the company's sales have to be publicly disclosed each quarter to investors. And investors don't like volatility. They just want to see growth all the time. So in 2008, Vail came up with a solution. The Epic Pass.

[Alison Polly]

So what it did was take five Vail owned resorts and a partnership with one other resort, put them all on one pass, and for the low price of $579, you could ski at any of these six resorts as much as you wanted for the entire season. Whereas before, if you were buying a season pass, it was for one resort, and it was a lot more expensive. It could cost over $1,000, even over $1,500, just for one resort. If you're somebody who's skiing 10, 15, 20 days a season, and your pass costs $580 total, then your cost per time skiing is going down. So really, if you think about it, you know, you're getting a lot out of the value of the pass.

[Ryan Knudsen]

So at the time that this came out, it was like an incredible deal.

[Alison Polly]

It was.

[Ryan Knudsen]

For consumers. Not only was the Epic Pass a good deal at the time, owning a pass meant that if snow conditions were bad at one resort, you could just take your skis or snowboard to one of Vail's other mountains. And over time, Vail kept making its Epic Pass even more epic.

[Alison Polly]

The main part of their strategy was buying up smaller ski Resorts and putting them on the Epic Pass and raising the price of the Epic Pass a little bit along the way. So Vail was really acquiring resorts across the country.

[Ryan Knudsen]

Vail's entire business became about selling the Epic Pass. And at the same time, it dramatically raised the price of a single day pass, which made the Epic Pass look like an even better deal in comparison.

[Alison Polly]

So to just walk up to the window and go ski, it has become exorbitantly expensive. Where today, in this ski season, 2024, 2025, it will regularly cost over $300 on a holiday weekend at Park City, at Vail, at the most popular resorts. Just for the day.

[Ryan Knudsen]

Just for a one day pass.

[Alison Polly]

For a one day pass for one.

[Ryan Knudsen]

Person, this is like, got to be one of the most expensive hobbies that exists.

[Alison Polly]

It is. And it's gotten more so over time.

[Ryan Knudsen]

And what did the introduction of the Epic Pass mean for Vail's business?

[Alison Polly]

Wall street loved this for Vail's business, and it was successful. It meant that tens of thousands of people are buying this Epic Pass before the season starts. So Vail is able to grow their revenue. They're able to have the money to buy more ski resorts, but also to improve the ones that they did buy. So a lot of these resorts were in rough shape before Vail came in. So Vail was able to come in and spend money to make those upgrades and make the resorts better.

[Ryan Knudsen]

The Epic Pass revolutionized the ski industry. And by the late 2000 and tens other ski companies introduced their own versions, in many cases by partnering with other ski resorts. Now two alternatives are the Icon Pass and the Indy Pass. But neither have been able to reach Vail's scale. And when the pandemic hit, tons of people caught the skiing bug. And Vail suddenly had a lot more potential customers.

[Alison Polly]

It soon became clear that being outside was great. A lot of people who had never skied before wanted to try it, right?

[Ryan Knudsen]

Here's the perfect thing I can do when I'm stuck at home. Just go outside and ski.

[Alison Polly]

Exactly. And all of a sudden, it became very desirable to ski. Vail realized this and thought, okay, great, we are going to cut the price of the Epic Pass. It was the first price drop that they had ever did. They wanted to incentiv a lot of new skiers. So this was before the 2021, 2022 season. They cut the price to get more people to commit to this season pass in advance.

[Ryan Knudsen]

The price of the Epic pass went from $979 down to $783 and it was a huge hit. A lot of people bought it. And what was the sort of peak of this business strategy?

[Alison Polly]

I think we're it. We have just passed the peak, I believe.

[Ryan Knudsen]

Is the downslope going to be a black diamond, a double black diamond, a blue maybe, or a green? Or is that bunny hill?

[Alison Polly]

I think there's some moguls. I'm not sure what grade it is yet, though. Remains to be seen. But there are some bumps, and we're going over those moguls right now.

[Ryan Knudsen]

Before we hit those moguls, we're going to take a quick break in the lodge. After Vail dropped the price of the epic Pass in 2021, the company saw an avalanche of new customers.

[Alison Polly]

But in some ways, this backfired. All of a sudden, these mountains are becoming super crowded because there's no limit on the number of Epic passes that are sold. So at this point, you have over 2 million people buying this pass. They don't need to make a reservation. They just show up, and that means there are tons of people trying to ski.

[Ryan Knudsen]

Vail said the crowding wasn't because more people bought the pass. It was due to a global labor shortage that prevented it from opening all the lifts across Vail's resorts. Regardless, many skiers and snowboarders were not happy.

[Alison Polly]

So on social media, there was a massive backlash. Let's cut the crap. Let's get straight into a haters guide to Vail. There were too many people on the mountain. It strained everything. It strained parking around the areas. There's nowhere to eat. And there were so many people skiing at Vail resorts that there became a phenomenon known as the Epic lift lines.

[Ryan Knudsen]

It just keeps going.

[Unknown]

It's not 9 o'clock yet, dude.

[Ryan Knudsen]

That is insane.

[Alison Polly]

It was also just not what they felt they had paid for. So, you know, you've seen the advertising of all these Vail resorts that, you know, there's one skier going down and all of a sudden, you know you're trying to navigate around 15 people just to take one turn. You're paying a lot of money to go to this place, and then you're having a bad time.

[Ryan Knudsen]

After bringing in all these new customers, Vail started raising the price of the Epic Pass again. This season, it reached the most expensive it's ever been at $1,107. Then at the end of last year, Vail's reputation took another blow. On December 27, during one of the busiest ski periods of the year, there was a strike at Park City, Utah. Vail's largest resort. Ski patrollers walked off the job in a dispute over wages.

[Unknown]

A fair contract? No.

[Alison Polly]

So the ski patrol are getting paid a starting wage of around $21 an hour in Park City. And there were signs that they had. They were holding out saying a burger at the dining hall cost $25. And they're saying, look, we can't even afford to have lunch on one hour salary here.

[Unknown]

None of us here are trying to be rich. We are merely trying to live a dignified life and be able to aff like groceries, child care.

[Ryan Knudsen]

During the strike, a significant percentage of runs had to be shut down, but customers said that it wasn't clearly communicated.

[Alison Polly]

Vail did insist that the mountain was open, that people could go ski there, and the lifts were running. Now when people got there, that was not the experience that they had. They were extremely frustrated.

[Unknown]

A lot of people pay a lot of money in order to come here, and those people are not getting the experience that they're paying for.

[Alison Polly]

I talked to multiple skiers who have spent thousands of dollars to take their family on this vacation and spent it waiting in line or even just gave up and said, you know what? We're going to do something else while we're here. We're not going to stand for over an hour trying to get on the mountain. This is just not worth it.

[Ryan Knudsen]

The strike ended after 12 days when Vail agreed to increase union member wages by an average of $4 an hour and added other benefits like parental leave. Vail apologized to its customers and offered credits to people whose skiing experience was negatively impacted. But Vail's labor struggles didn't end with Park City. There have also been issues of Vail's Crested Butte and Breckenridge locations. The company says it's working to resolve them now. For Vail, after years at the top of the mountain, things are sliding downhill. This season, for the first time ever, sales of the Epic pass fell by 2% and the company's stock has dropped by half since its peak at the end of 2021. And then last week, one of the company's minority shareholders publicly called for big changes late.

[Alison Polly]

Apex Partners Is what They're Called, published a letter to Vail's board of directors. And in the letter, the shareholder said that Vail's performance over the past five years has been, quote, unacceptable. It even goes on to say that, quote, the core skiing community has labeled Vail the evil empire, end quote. And in another part, it says that, quote, management's incredibly short sighted actions have led to lost opportunities and destroyed brand value.

[Ryan Knudsen]

The investor also called for Vail's CEO, c CFO and executive chairman to be replaced and its dividends to be cut by 80%. A Vail Resorts spokesperson said the company engages frequently with shareholders and values their feedback. The company attributed the decline in Epic Pass sales to a quote, post Covid normalization and to light snowfall in some areas. And they said the company still believes in the Epic Pass model. To turn things around, Vail has been exploring some new ideas. It's trying to get customers to spend more on ski lessons and gear rental, and it's looking to expand its footprint in Europe. It's also cutting costs and says it plans to shrink its corporate workforce by 14% over the next two years. So what's Vail's reputation now in the ski industry and amongst skiers?

[Alison Polly]

It's. It depends who you ask. People who have gotten into skiing or who are able to ski more because of the Epic Pass say they actually made skiing affordable for me. Now I ski all the time, and I actually learned how to ski because this pass gave me an incentive to keep getting back out there, even when it was hard. And now I love it and I take my family. But among a lot of other skiers, there has been this reputation that Vail has made skiing inaccessible by raising the price of the daily lift tickets. So it's harder to go out there and try it and see if you like it when it costs several hundred dollars to do so. Other people say they're driving up the cost of ski lessons, of eating at the lodge, and have changed the character of these local ski resorts. They acquire from being a place where it's the local hill, the mom and pop area where everyone knows each other, to something that's a lot more corporate.

[Ryan Knudsen]

All right. Gray Day Shredder?

[Alison Polly]

Yeah.

[Ryan Knudsen]

Thank you so much for your time.

[Alison Polly]

No, thank you. It's been great.

[Ryan Knudsen]

That's all for today. Wednesday, February 5th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Denny Jacob. Thanks for listening. See you tomorrow.