“For the first time in 30 years, a lack of snow has not allowed us to open the back bowls in Vail as of January 2012, and, for the first time since the late 1800s, it did not snow at all in Tahoe in December.”
Vail Resorts CEO, Rob Katz. (Colorado Independent)
Vail Resorts (MTN) has felt the burn of climate change. Unpredictable weather patterns have significantly affected the ski industry in the United States. Hotter temperatures led to shorter ski seasons while draught conditions compounded the problem. (Nature). Vail witnessed the severity of the issue during a prolonged period of poor conditions in their Tahoe resort (2012-2015) and observed historic low snowfall across all properties during 2011-2012. (10-k).
Unfavorable weather conditions have a direct impact on Vail’s ability to attract visitors who drive revenue. Vail recognized this risk, noting “unseasonably warm weather may result in inadequate natural snowfall and reduce skiable terrain,” which impacts “the level of sales of season passes.” (10-k). Further, “skier perceptions of early season snow conditions” influence “the momentum and success of the overall ski season.” (10-k).
Climate change directly affects Vail’s bottom line by reducing visitation and increasing costs, e.g., the cost of snowmaking. However, increased salience of climate change in the political arena also has indirect effects on Vail. Vail is subject to extensive federal, state, local and foreign environmental laws dictating everything from natural resource use to sustainable tourist practices. In the U.S., improvement projects must be reviewed by NEPA and CEQA after a mandatory environmental impact study is completed. (10-k). The resort relies on the National Forest Service to continue to grant permits for use of its land. Vail is subject to complex water rights laws and regulations which dictate the feasibility of turning to snowmaking in lean snowfall years. Increased Congressional focus on issues of climate change may alter this fragile ecosystem, making it more difficult or costly for Vail to operate.
Vail’s strategic response has been to diversify geographically. In 2016, Vail Resorts acquired Canadian ski resort Whistler Blackcomb for roughly $1.06 billion. Climate change similarly motivated Whistler to come to the table. David Brownlie, CEO of Whistler, discussed the motivation for the sale, “Our board of directors has also been monitoring the unique challenges facing the broader ski industry due to the unpredictability of year-to-year regional weather patterns,” concluding, “partnering with the geographically diversified Vail Resorts” would secure the long-term future of its resorts. (WSJ).
This selected transaction communicates the vast impact climate change has already had on the fabric of an entire industry. Individual ski resorts are no longer well positioned to weather the changing weather – climate change has forced the ski industry to consolidate.
Geographic diversification mitigates the effect of weather variability on Vail’s operation, but Vail recognizes this is only a near-term solution. Vail is also an industry leader in environmental stewardship. Vail’s EpicPromise program focuses on resource conservation, forest health, energy reduction, and recycling. This initiative has helped reduce energy consumption by 10% and reuse of 45% of total waste in recent years. (10-K). But is this enough?
Vail needs to double down on its diversification efforts. Already present in the United States, Canada and Australia, Vail needs to pursue strategic acquisitions in Europe and Japan. Only a global presence will temper the effect of weather variation on Vail’s bottom line.
Vail needs to develop offerings for all four seasons. Vail’s resorts are unparalleled in beauty year-round. However, Vail is currently branded as a ski resort company. If the company marketed itself, and developed more attractive off-season offerings, it would no longer be slave to winter snowfall.
Vail needs to take an active role advocating for legal and regulatory stability in Congress. Federal law and regulatory agencies have the potential to make life difficult for Vail – by passing cumbersome laws or by increasing fees Vail is required to pay for permits or environmental impact studies.
Climate change has forced a shake-up in the ski industry. The industry is hit particularly hard by climate change, however, it is also in a position to make significant change. The hospitality industry at large is responsible for heavy water and energy usage as well as significant waste production. Ski resorts like Vail occupy a rare space – they are disproportionately affected by climate change and disproportionately capable of making a difference.
MTN 2016 10-K
Wall Street Journal
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