Letter to the CEO of Vail Resorts

Dear Rob:

With Vail’s opening day just two weeks ago and barely a dusting of snow on the resort’s signature mountain, Vail Resorts is once again facing the cold reality of climate change. Over the past decade since you have assumed the CEO position at Vail Resorts, you have experienced acutely the impact of climate change, notably warmer weather and fluctuations in precipitation. I know that you understand the significance of climate change as you have previously stated that you are “in the category of someone who is very worried about climate change”[1]. The actions that you have undertaken as CEO are consistent with those beliefs. However, more must be done – and must be done now – if Vail intends to remain one of the world’s premier resort companies.

Across the United States, winter temperatures have increased 0.2 degrees Fahrenheit per decade since 1895 but this rate has climbed to almost 0.6 degrees per decade since 1970 – with the warming trends experienced more acutely in the Northern part of the country[2]. This trend of warmer weather translates into shorter ski seasons, fewer visitors to the resorts and thus less revenue for the ski industry. In 2012, the Natural Resources Defense Council found that the downhill ski industry lost $1.07bn in revenue between the high and low snow fall years over the previous decade[3].

Vail Resorts is a leader in sustainability. You have shown that you are focused not only on reducing your impact on the environment but also accommodating the inevitable changing climate.

Your commitment to aggressive energy reduction shown through the “Target 10” program and then “The Next Ten” program – both aimed to reduce energy usage by 10% from previous levels – is industry leading[4]. These reduction efforts not only lower the company’s greenhouse gas contributions, helping to reduce the rate of global warming overall, but also signal to your customers about the character of the company.

In terms of accommodation of climate change, your acquisition of Whistler Blackcomb in August offers geographic diversification to your existing portfolio of mountains concentrated in Colorado, Northern California and the Midwest. In addition to providing diversification from those weather patterns in those regions, the resort’s status as a top #3 resort in North America is consistent with your portfolio of premier mountain resorts[5]. Furthermore, Whistler attracts a different client base, predominantly drawing skiers from the Vancouver, Seattle and international markets, mitigating any risk of cannibalization of your existing clientele[6].

Your intention to convert “regional, weather sensitive” guests to season passes is a strong decision, providing upfront revenue and mitigating the risk that potentially poor conditions over the course of a winter season do not generate as many day trips[7]. In addition, your commitment to building a network of customer engagement at your resorts will provide a superior customer experience and allow you to capture more share of your customer’s wallet – even when ski conditions are weak[8].

Unfortunately, patterns of warmer and more extreme weather are predicted to continue – and even worsen[9]. If Vail Resorts wants to continue to remain the industry leader in premier resorts, the company must further the diversification of resort locations and development of non-snow dependent offerings.

While the addition of Whistler is progress, Vail Resorts should consider acquiring some of ski mountains in Vermont. For example, you shared in your 2015 investor presentation that Tahoe received “record low snowfall that resulted in poor conditions and disengaged market” in the winter of ’15. While Tahoe was suffering from a drought and difficult snow conditions, resorts in Vermont benefitted from an abnormally snowy winter. In 2015, the Northstar Mountain in Tahoe only had 33 days of snow while Stowe in Vermont had 57 days of snow[10]. Patterns of severe weather fluctuations are expected to continue. Therefore, acquisitions of ski resorts across the country will help mitigate some of the risks of intense weather variations in specific regions.

Furthermore, Vail Resorts should strongly consider adding more activities and programs throughout the year. Given that the winter ski season may be shortened due to global warming, Vail should increase the quality of non-winter activities. For example, Vail could add fly fishing programs and acquire local golf courses to attract more visitors in the summer months. During the fall and spring shoulder seasons, Vail Resorts could offer more retreats, concerts and festivals. And, even in the winter months, the Company should consider increasing the number of non-snow related attractions.

Vail Resorts has taken strong initial steps to both adapt to and mitigate against climate change. However, as the effects of global warming continue to grow, additional steps must be taken to ensure the long-term viability of the company.

Sincerely,

Mary

Words (773)

[1] Robert Katz, “Skiing won’t be the greatest loss after climate change”, Denver Post, December 21, 2012, http://www.denverpost.com/2012/12/21/skiing-wont-be-greatest-loss-after-climate-change/, accessed November 4, 2016

[2] Jens Hesselbjerg Christiansen, Bruce Hewitson, “Regional Climate Projections”, Intergovernment Panel on Climate Change,  https://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-chapter11.pdf, accessed November 3, 2016

[3]Elizabeth Burakowski, Matt Magnusson, “Climate Impacts on the Winter Tourism Industry in the United States”, Natural Resource Defense Council, December 2012, https://www.nrdc.org/sites/default/files/climate-impacts-winter-tourism-report.pdf, accessed November 3, 2016

[4] http://www.vail.com/mountain/environment.aspx#/EnergySavingsTab

[5] Christopher Steiner, “The Top 10 Ski Resorts in North America for 2016”, Forbes, November 17, 2015, http://www.forbes.com/sites/christophersteiner/2015/11/17/the-top-10-ski-resorts-in-north-america-for-2016/2/#1159123075a6, accessed November 4, 2016

[6] Jesse Paul, “Vail Resorts to buy Whistler Blackcomb in $1billion deal”, Denver Post, August 8, 2016,  http://www.denverpost.com/2016/08/08/vail-resorts-acquires-whistler-blackcomb/, accessed November 4, 2016

[7] Vail Resorts’ 2016 Investors’ Conference Presentation, March 15, 2016, http://files.shareholder.com/downloads/MTN/3155233169x0x881212/9EAD6DC8-6738-45E0-8567-B306538E30E1/2016_Investor_Presentation_vFINAL.pdf

[8] Vail Resorts’ 2016 Investors’ Conference Presentation, March 15, 2016, http://files.shareholder.com/downloads/MTN/3155233169x0x881212/9EAD6DC8-6738-45E0-8567-B306538E30E1/2016_Investor_Presentation_vFINAL.pdf

[9] Greg Shirah, “National Climate Assessment: 21st Century Temperature Scenarios”, March 7, 2013, http://svs.gsfc.nasa.gov/cgi-bin/details.cgi?aid=4029, accessed November 4, 2016

[10] http://www.onthesnow.com/vermont/stowe-mountain-resort/historical-snowfall.html?&y=2015, accessed November 4, 2016

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4 thoughts on “Letter to the CEO of Vail Resorts

  1. Mary – I really enjoyed your critical look at not only Vail’s mitigation strategies against climate change but also the company’s adaptive business strategies, such as portfolio diversification and product offerings. My question is: how does Vail manage its carbon footprint while attempting to expand its operations? Should the resort put profitability (adaptive strategies) above sustainability (mitigation) or is this there a middle ground between the two? I actually think that if Vail continues to diversity its portfolio into New England, as you suggest, they have the potential to continue their push to decrease the overall carbon footprint of ski resorts. In 2010, the National Ski Areas Association (NSAA) surveyed national ski areas, which highlighted that only 10% of respondents had completed a study of their own carbon footprint although 80% wanted to address climate change [1]. This gap between the 10% and 80% provides an opportunity for Vail to acquire the resorts that have yet to identify their carbon footprint and implement the company’s own sustainability efforts and best practices across the country.

    [1] The National Ski Areas Association, “Sustainable Slopes Annual Report 2016” (PDF file), downloaded from NSAA website, https://www.nsaa.org/media/249756/2015Sustainable_SlopesARFinal_Version_docx091015.pdf, accessed, November 3, 2016.

  2. Mary – I really enjoyed this blog post. As someone who went to college in Vermont, it is interesting to think of the parallels between the struggles facing Vail Resorts and successful Vermont ski destinations. I had no idea that Vail Resorts had acquired Whistler Blackcomb, but the geographic diversity makes sense. Vail Resorts is fortunate to have the power / financials they do because I do not believe any of the Vermont ski destinations would be able to pursue similar strategies. I actually think that this diversification may be the only real way to hedge against disaster.

  3. I agree that Vail’s programs in place to reduce energy use by 10% are noble, but it is clear from what you outlined that climate change will do substantial damage to Vail’s winter business model no matter what they do as a company to combat it. For that reason, I disagree that they should continue to diversify into winter resorts because this is only a temporary solution to volatility in snow patterns, when overall, all of these resorts will slowly lose snowfall and see damage to their ski business. Therefore I agree with your last points around creating other winter activities and building up the resorts value during the summer months.

  4. Enjoyed reading your letter to the CEO. It hits on the threat of climate change and addresses several possible solutions for Vail. There diversifying in other mountain resorts has helped them avoid region-specific dry spells in the winter season. I like the idea of Vail doubling down on their marketing for summer season activities, thus attracting different customer types who enjoy fishing, camping, water skiing.
    I would also propose Vail take a page out of Club Med’s book. Vail could start to invest in summer beachfront properties in Florida, Caribbean, Hawaii and Mexico. This will allow Vail to increase revenue in the summer season. Vail could offer an “all-season” annual pass to customers much like their winter “ski season” pass. The “all-season” pass could cover entry and discounts to various resorts, beaches and mountains throughout the year. A partnership with a popular travel credit card such as the Chase Sapphire Reserve may help hype up the “all-season” pass too. Would you think this direction is not aligned with Vail’s core values and customer base?
    https://www.clubmed.us/d

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