While some people at Harvard Business School in Boston still experience extremely cold weather and wish for global warming on some days in the winter, people on the West Coast are suffering from an opposing problem. At first, when you think of climate change you think of rising temperature and sunburns in the costal and urban areas. But climate change is also impacting winter tourism in the mountains – in particular, the skiing industry.
Vail Ski Resort (Vail) is the largest ski resort in the US with operations in 9 states, the largest being in Colorado. Recent climate change debatably resulted in less snowfall over a shorter duration of the year. As a result, some ski resorts went almost out of operations due to a rise in snowline, and some have shorter seasons every year. Due to its high altitude in Colorado, Vail suffers mostly from the latter1). As a result, Vail reported a 28% decline in ski visits during the 2014-2015 season2). However, the typical ski resort needs 100-105 days of skiing to secure the average industry profit margin of 6.5-7 percent2). Fewer visits therefore put pressure on Vail’s profitability and, to illustrate the impact, Vail recorded a $2 million loss in the second quarter of 2008 compared to 20071).
To remedy for shorter seasons, the major initiative that Vail is undertaking is investing in improvements in snowmaking technologies. In fact, 88 percent of resorts belonging to the National Ski Areas Association were doing so3). Vail can currently cover 450 acres with fake snow2) and this enables them to open only a subset of their slopes. Snowmaking can therefore deteriorate the experience of customers expecting to ski freely on all slopes. For this reason, Vail shifted part of its business towards R&D aiming to increase efficiency of snowmaking. Snowmaking also provoked a rise in another operation: adjusting snow uniformly on the slopes using snow-trucks. This operation is not new to the skiing industry but was just amplified with the surge of snowmaking to make sure that slopes have enough snow for safe operations.
On another front, Vail realized that its business in one season is not sustainable, especially if that season is getting shorter with time. Vail decided to venture in other activities that do not depend on whether to ensure consistent operations all year long: concerts / conferences, yoga, water parks, spas, zip-lines, golf, etc.3) In February 2016, Vail announced a new summer program called “Epic Discovery” claiming to be the “first-of-its-kind comprehensive on-mountain summer adventure featuring components such as zip lines, canopy tours, alpine coasters, wildlife trail exploration, and interactive learn-through-play activities”2). Summer activities introduced a new business to Vail along with all its operations complexity.
Climate change also impacted other operations at Vail. First, foreign and native pests and diseases, as well as forest fires, will all thrive under a warmer climate. Warmer temperatures and longer seasons have encouraged population growth and range expansion from species such as the mountain pine beetle. Ski resorts have to manage the cleaning up of infested trees on ski resorts and neighboring areas. As an illustration, Vail had to cut down 2,000 tees at a cost of $200,000 in 20081). Another change inside the Vail corporation hits Marketing and Sales departments. Due to shorter seasons, Marketing and Sales teams have to shift focus towards season pass tickets. As a matter of fact, season pass revenues increased by 22% in the 2015 fiscal year4).
To sum up, Vail Ski Resort handled climate change effects by trying to preserve the winter experience through snowmaking and innovating new ways to drive revenue in the off-season. However, snowmaking will impact the bottom line of Vail and is by itself a carbon-intensive activity – making it a non-sustainable practice. In my opinion, although climate change is not yet proven to be caused by humans, Vail and other ski resorts are all directly incentivized to help reduce greenhouse gas (GHG) emission in the world, by supporting organizations addressing this topic. Mountain Pack, for instance, is a NGO focused on reducing the detrimental effects of climate change on American West mountains5). Moreover, on the long-run, Vail should shift its mindset from being a ski resort to being a recreational center that also offers skiing activities in the winter. By considering outdoor activities to be their core business, Vail can build a community around the resort where families and friends can go spend weekends irrespective of the time in the year. The two big challenges are: 1) to attract a similar number of customers all year long and 2) to maintain margins similar to those of skiing. (767 words)
1) Center for Integrative Environmental Research (CIER) – Economic Impacts of Climate Change on Colorado. Retrieved on November 3, 2016, from http://cier.umd.edu/climateadaptation/Colorado%20Economic%20Impacts%20of%20Climate%20Change.pdf
2) University of Colorado – Examining the Economic Impacts of Climate Change on Colorado Ski Communities through 2050. Retrieved on November 3, 2016, from http://scholar.colorado.edu/cgi/viewcontent.cgi?article=2351&context=honr_theses
3) The New York Times – Rising Temperatures Threaten Fundamental Change for Ski Slopes. Retrieved on November 3, 2016, from http://www.nytimes.com/2012/12/13/us/climate-change-threatens-ski-industrys-livelihood.html
4) The Denver Post – Stanford looks at impact of warming weather on Vail Resorts valuation. Retrieved on November 3, 2016, from http://blogs.denverpost.com/thebalancesheet/2015/10/14/stanford-looks-at-impact-of-warming-weather-on-vail-resorts-valuation/13830/
5) Mountain Pack website: http://www.themountainpact.org/about/