Climate Change: Is it All Downhill for Vail Resorts?
As climate change brings variable snowfall, how will Vail Resorts respond?
Effect of climate change on the snow sports industry
As the snow sports industry continues to struggle through inconsistent winters, resorts are consistently looking for ways to mitigate the effects of climate change. Vail Resorts, the largest publicly owned ski resort operator in North America [1], has been plagued by significantly lower snowfall, specifically in their Tahoe region. Vail Resorts’ California properties have been suffering, receiving only 60% of the average annual snowfall over the 2012-2014 seasons [1]. The 2013-2014 season was remarkably low with the resorts averaging only 29% of the usual snowfall, and the future isn’t looking much better [1]. According to researchers from Stanford, similar atmospheric conditions to those experienced in the most recent time period are at least three times as likely, due to the human emissions of greenhouse gases [1]. The company generates the vast majority of its profit during the winter months and will have to find a way to adapt to remain highly profitable.
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How has Vail Resorts responded?
Vail Resorts, while typically not overly outspoken in regards to climate change, has implemented a number of initiatives related to sustainability in recent history. In 2008, Vail set a target of reducing energy usage by as much as 10% in 2012 and were able to reach that goal in the 2011 season [3]. They re-upped on this strategy, committing to an additional 10% reduction by 2020 [3]. In the past 5 years, the Vail resort individually has spent more than 3 million dollars on a variety of sustainability initiatives:
More efficient grooming technology – The company invested in GPS grooming technology in order to maximize the efficiency of the snow cats and decrease idle time and fuel consumption. Snow depth sensors have also been implemented to help the resort minimize excess snowmaking [3].
New snowmaking compressors – In 2013, a number of old compressors were replaced with a single, higher efficiency compressor, saving the resort 1.2 million kilowatt hours per year [3].
New technology/solar energy – Additionally, the resort is experimenting with more efficient ways to power and operate the on-mountain facilities, installing new compressors and solar panels on mountain buildings [3].
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Outside of sustainability, the organization has decided to expand its resort portfolio to diversify the risk associated with changing snow patterns. With the weather variability in the Sierra Nevadas over the recent years, Vail Resorts looked to expand its footprint by acquiring Whistler Blackcomb [4]. The president of the National Ski Area Association, Michael Berry, stated that in the West, there are three areas of weather: the Rocky Mountains, the Sierra Nevadas, and the Pacific Northwest/Southwest Canada. Berry continued to say, “The scenario that all three would suffer the same consequence in one season is not particularly likely, and if it did happen, the ski business would be a footnote in the grander issue” [4]. The bigger concern is that the diversification, while potentially good for business, fails to address the root cause of the climate change issue.
In continuing with this trend, Whistler has recently announced a plan to spend $345 million to diversify the attractions it offers [4]. The resort is looking to expand its mountain biking options, add new lifts, and build a year round waterpark near the base of the mountain [4].
Additionally, the industry as a whole has increased snow production dramatically. Vail Resorts specifically have invested heavily in snowmaking equipment to protect itself from the reduced snowfall [1]. However, this increase in snowmaking adds a significant energy load and water usage to the company, counteracting some of their previous efforts. Again, this is a short term fix, and with snowmaking already accounting for greater than 50% of energy costs [1], this is not a sustainable solution.
Going Forward
Vail Resorts has taken a number of steps in the right direction by beginning to place an emphasis on energy reduction and various sustainability issues. The company must continue to look for innovative ways to reduce their energy and diesel usage. They may explore a more efficient chairlift design, more strategic snowmaking, or even attempt to further improve the grooming efficiency of their snowcats.
Vail may also follow Whistler’s lead at their other mountains and attempt to expand the attractions to all 4 seasons. Potential growth into mountain biking, hiking, or other base area attractions could lead to increased revenue in the off season.
Finally, they may choose to increase snow production as a short term fix, yet this is will counteract a number of their energy reduction efforts and could ultimately be detrimental in the fight against climate change.
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Sources
[1] – Bebb, Donna. Climate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc. Stanford Steyer-Taylor Center for Energy Policy and Finance. Retrieved November 3, 2016.
[2] – Bagley, K. (2015, December 24). As Climate Change Imperils Winter, the Ski Industry Frets. Retrieved November 03, 2016, from https://insideclimatenews.org/news/23122015/climate-change-global-warming-imperils-winter-ski-industry-frets-el-nino
[3] – Sustainability. Retrieved November 03, 2016, from http://www.vail.com/mountain/environment.aspx
[4] – Best, A. (2016, August 12). Climate Change a Factor in Vail Resorts Swallowing Whistler. Retrieved November 3, 2016, from http://mountaintownnews.net/2016/08/12/climate-change-a-component-of-vail-resorts-swallowing-whistler/
[5] – Heavenly Mountain Snowmaking & Grooming. (n.d.). Retrieved November 3, 2016, from http://www.skiheavenly.com/the-mountain/snow-report/snowmaking-and-grooming.aspx#/Grooming
[6] – Mountain Trail Maps. Retrieved November 03, 2016, from http://www.vail.com/mountain/explore-mountain/mountain-trail-map.aspx
I think one of the biggest challenges here is that, adapt as they can, there’s no way that Vail’s sustainability or diversification efforts can affect how much snow falls from the sky. Reducing energy consumption as a resort is admirable, but has no way to directly impact the climate-related challenges they are facing. Current and future sustainability efforts won’t be able to undo the damage done or reverse the climbing winter temperatures. As you point out, efforts to manufacture higher levels of artificial snow are likely to counter many of the gains made in reducing energy consumption in other areas, resulting in very little net change as a total resort. Even if they were to develop carbon neutral artificial snowmaking technology, it might be a relatively short- to medium-term solution to the lack of snow issue; if temperatures continue to rise, maintaining consistent levels of artificial snow may turn out to be a challenge in and of itself.
I agree with Grace, Vail Resorts can make all the steps in the world to help combat climate change, but they cannot fix this problem alone. Our Earth is warming and thus there will be less snow. These acquisitions into new ski areas will only be successful if we can stop climate change. I think Vail Resorts have made great strides in helping to combat climate change, but there is a bigger issue at play. The warming weather means shorter ski seasons and less revenues for ski resorts. These resorts need to find alternative ways to make money.
Vail Resorts should shift its business model and marketing from winter resort destination to year-round vacation locations. Expanding into new markets like mountain biking, rafting and hiking (http://www.latimes.com/nation/la-na-sej-mountain-climate-change-20150728-story.html). Just like a change in technology can cause an industry to pivot its target markets and goals, this change in the environment is going to force ski resorts to change their business model and strategy.
Great article! Vail’s acquisition of Whistler poses the question of to what extent is this a pure downside protection diversification strategy versus a product diversification?
> To expand on the former, as is quoted, it is unlikely that snow will be lacking in all three mountainous areas of North America at once, hence at least one region should product revenues and subsidize the other two)
> To expand on the latter, could it be there is capture upside from bad-year in one or two of the regions? For example, if the Rockies do poorly, will customers switch to the Sierra Nevadas? While geographic distance and buying behavior (i.e. early booking) suggest it is not easy to change plans at the last minute, it is worth noting that Whistler Blackcomb posted record earnings despite lowest snowfall in 36 years this past season. (see http://www.seattletimes.com/business/climate-change-currency-swings-spur-vails-decision-to-buy-whistler/)
I remember my first visit to one of Vail Resort’s mountains and its scale blew my mind. It makes me wonder if Vail has ever considered reducing the size of its resorts so that they can focus on maintenance and snowmaking to a smaller number of trails? In class, we discuss how large number of SKUs can be a bottleneck to the operation. Also, I would be interested in learning more about water usage. When they think about new snowmaking compressor, are they trying to reduce water consumption? Is there any adverse environmental effect of fake snow on mountains?