Vail Resorts Could Be Doing More
Vail Resorts (“Vail” or “the Company”) is taking several steps to help mitigate the impact of climate change and operate in a sustainable manner, but as a leader in the snow sports industry, the Company should take a more active role in helping to prevent the root causes of climate change worldwide.
Context: Vail Resorts and Climate Change
Vail Resorts is the largest ski resort holding company in the U.S. with a $6.2 billion market cap and $1.6 billion of revenue.  The Company has resort locations across North America, including a high concentration of locations in Colorado and Lake Tahoe (see exhibit 1).
Exhibit 1: Vail Resorts Locations 
Rising global temperatures and more extreme weather patterns could significantly reduce snowfall amount and consistency, both of which would negatively impact Vail. As a ski resort holding company, Vail’s financial performance is highly dependent on weather conditions; more snow means a longer ski season and better skiing conditions, both of which increase the number of people who visit Vail’s resorts. A decrease in revenue resulting from a season with poor snowfall has a significant impact on profitability as ski resorts have a high fixed cost structure, and long-term reduced snowpack levels could eventually lead to financial insolvency for many ski resorts, including those in Vail’s portfolio. 
Vail is already feeling the effects of climate change. Most recently, the Company’s Lake Tahoe-based resorts suffered from extreme drought in the western U.S. states; the Sierra snowpack water content was far below normal from 2012-2015, and it fell to its lowest recorded level, 5% of average, in the 2015 season (see exhibit 2). 
Exhibit 2: Sierra Snowpack 
Vail’s Response to Climate Change
Vail Resorts has taken several operational steps that will help to directly mitigate the impact of climate change and seasonal variability, including:
- Continued investment in snowmaking: Vail continues to improve upon and invest in its significant snowmaking systems.  Snowmaking allows the Company to make up for lower precipitation and melt from unseasonably high temperatures, so the resorts can continue to function even if weather is not ideal.
- Geographic diversification via acquisition: In October 2016, Vail completed an acquisition of Whistler Blackcomb, a British Columbia-based ski resort, for $1.4 billion. One of the major drivers behind the acquisition was that Whistler Blackcomb enables Vail to further diversify its geographic footprint as Whistler’s weather patterns tend to differ from those in Vail’s other resorts.  This will enable Vail to reduce the impact of increasing variability in the future.
- Increasingly diversified operations: Vail offers non-winter sport activities in the off season, and the Company launched a new summer activities program, Epic Discovery, across some of its largest mountains in 2016. Analysts believe the new program has the potential to drive meaningful incremental sales in the off season. 
Outside of the operational steps summarized above, Vail has made a commitment to reduce its environmental impact via its sustainability program, EpicPromise. A reduction in energy consumption is a large part of EpicPromise. In 2008, Vail committed to reducing its energy consumption by 10% by 2012. The Company hit its 10% reduction goal in 2011 (a year early), and they set a new goal to reduce energy consumption another 10% by 2020. Examples of investments undertaken to improve energy efficiency include new snowmaking compressors, efficient snow guns, better lighting and heating, efficient boilers, and GPS tracking equipment for snowcats. 
In addition to its focus on energy savings, Vail aims to reduce waste and increase recycling (reuses more than 300 tons of material from Vail Mountain alone each year), and they also help create sustainable communities through monetary and time-based donations to local nonprofits (~$7 million dollars and 20,000 hours donated last year). 
Vail Could Do More
Although Vail’s operational strategy and commitment to sustainability are admirable, there is almost no mention of climate change in Vail’s website or public filings, and the Company does not appear to be actively involved in climate change advocacy groups. Furthermore, Vail PACs and multiple high-level executives at Vail recently donated thousands of dollars to politicians who deny climate change. 
Winter tourism will be hit especially hard by global warming in the coming years, and as the largest ski resort operator in the U.S., Vail has the responsibility to encourage greater regulation and stand up to politicians who deny climate change. There are many ways to accomplish this goal, but one potential first step would be to join Protect Our Winters, a leading climate advocacy group for the winter sports industry that already has dozens of high-profile resorts and ski companies as partners. 
Vail is doing great from an individual standpoint, but the Company could be doing so much more to help combat climate change. I hope they become more active in the climate change discussion going forward!
 Source: Market data as of 10/3/2016 and trailing twelve months revenue, Capital IQ, Inc., a division of Standard & Poors.
 Vail Resorts, Inc. July 31, 2016 10-K, https://www.sec.gov/Archives/edgar/data/812011/000081201116000115/mtn2016073110-kforq4.htm#s8D53DFFD5FE75DF9A6F1BE940AB98C87, accessed November 2016.
 Craig Miller, “Government Orders Water Cuts Amid Record Low Snowpack,” KQED, March 31, 2015, https://ww2.kqed.org/science/2015/03/31/record-low-sierra-snowpack-will-drive-home-drought-impacts/, accessed November 2016.
 Vail resorts 2015-2016 highlights, from Vail Resorts website, http://news.vailresorts.com/presskits/vail-resorts-2015-2016-highlights.htm, accessed November 2016.
 Thomson Reuters, Vail Resorts and Whistler Blackcomb Conference Call, August 8, 2016.
 “Vail Resorts, Inc. – Initiating Coverage with a Buy Rating; Time to Hit the Slopes,” Stern Agee research, April 7, 2016.
 Sustainability, from Vail Resorts website, http://www.vail.com/mountain/environment, accessed November 2016.
 Porter Fox, “Campaign Donations Link Ski Industry Leaders to Climate Change Deniers,” Powder Magazine, November 3, 2016, http://www.powder.com/stories/news/campaign-donations-link-ski-industry-leaders-climate-change-deniers/#qvZYGfSCcXFPDoki.97, accessed November 2016.
 Our Partners, Protect Our Winters website, http://protectourwinters.org/our-partners/, accessed November 2016.
Student comments on Vail Resorts Could Be Doing More
I fully agree with the author that Vail needs to take a more proactive stand in the fight against climate change. Even if the company does not see any interest in this course of actions, climate change consequences actually hurt Vail’s own business at the very first. My recommendations for companies like Vail is to work harder on making their business all-year-round. People nowadays are more educated to come back to nature during their leisure time and this opens a lot of opportunities for such businesses. Shutting down the resort for three quarter of the year in all way drives down the company’s potential revenue. Vail can actually leverage extra gains from business conducted in other seasons to invest into causes and actions that address climate problems and find a way to sustain its business.
I also agree with the author that a more proactive stance is needed to fight climate change. In order to maximize it’s own future sustainability, Vail should work to create a year-round business catering to a broader range of people. Moreover, Vail has the opportunity to interact multiple high impact members of the community who may hold significant power to continue the conversation about climate change. Thus, Vail should take a proactive stance in leveraging its unique position in society to start a conversation regarding climate change with current customers and family.
While I agree that as the owner of some of the world’s top resorts Vail could do more to promote sustainability, one question / issue I would like to bring up is funding. As an avid skier myself, I have seen the annual prices of tickets continue to increase, with Vail reaching $160 / ticket this year. This article (https://gearjunkie.com/vail-lift-tickets-price-increase) suggests that for a comparable resort (Aspen) prices have increased nearly 65% since 2005. Not to suggest that sustainability is necessarily making the pricing model unsustainable but it seems like so many costs have already been passed on to the consumer and people are getting priced out of the sport. So at some point, will people just stop going and how does Vail strike a balance between having the best practices while continuing to be “affordable”?
Thank you for your insightful post about Vail Resorts. I find it shocking to see that Vail is not making much of an initiative to combat climate change, especially when a large percentage of other ski resort companies are making these efforts. I found a few of such efforts to be particularly interesting. With regards to snow making, many resorts are using more efficient snow making guns and using recycled water to maintain a consistent water table. Additionally, some companies are cooling the water as it moves through the system so it is bigger and therefor more efficient. Furthermore, many companies are using solar panels or hydro-power to power their operations as opposed to taping into the grid. Such measures I find to be particularly innovative approaches to the structural issue that is operating a ski resort in a world of global warming.
This is a great topic to write about and it was a fun read, thank you. I spent time growing up in Colorado and I lived there for two years after college, during both of those times of my life I spent a lot of time in the mountains skiing at Vail, and I witnessed first hand Vail Resorts’ growth throughout Colorado and into California. I had no idea that Vail Resorts acquired Whistler Blackcomb last month. I thought you did a great job discussing the operational changes the company is currently making to mitigate seasonal variability. It is also incredibly frustrating to hear that Vail Resorts has donated to politicians that continue to deny climate change. Were you able to look at or analyze what Vail Resorts’ competitors are doing to mitigate the risk of their business in North American? I would also be very curious to learn more about how European companies are handling the situation, particularly because European countries were much more excepting and reactive to climate change years ahead of the US.
The impact of climate change on the skiing and winter tourism industry has always fascinated me. Climate change is essentially threatening their entire existence. Yet, when asked about it, the most immediate change agents (i.e. hoteliers in the winter regions, producers of skiing apparel and equipment, etc.) often seem only mildly concerned. Being an avid skier myself, I have noticed tremendous changes in weather patterns in my home region in Europe and have often wondered why the industry is not more actively lobbying governments to act on their behalf. Compared to this, regions threatened by the other weather extreme, i.e. flooding (such as the Maldives, for instance), have been way more visible in the dialogue on climate change. It remains to be seen how extreme weather patterns will ultimately need to be until the winter tourism industry will finally become more active and lobby for actionable change. I am happy to hear that Vail is starting to become a thought leader and change agent on climate change and hope that smaller companies in the field will be inspired by it and follow suit soon.
Just last year I was at a Vail resort and saw the impact of climate change on the resort first hand. I completely agree with the author’s point that the company could do more. Simply reducing the company’s consumption and emissions will not have a significant impact on climate change.
Operating ski resorts requires significant fixed costs, which leads to the higher lift-ticket prices referenced by asafina. Rather than simply continuing to increase prices, it would behoove Vail to make a broader push to combat climate change. I’m not sure Maniglass’s solution of year-round activities will help anyone other than Vail, not to mention that ski resorts have long tried (and largely failed) to offer year-round entertainment and activities. Unless the broad shifts in temperature and precipitation patterns that are being brought about by climate change are at least stopped, Vail and the rest of the recreational skiing market may be in grave danger.
I fully agree with your stance regarding Vail’s efforts (or lack thereof) to combat climate change. At best, climate change will create meaningful variability in future year’s free cash flow, seriously impacting the valuation of the company, and at worst, poses an existential threat to the company’s existence. As a result, it’s truly remarkable that Vail hasn’t done more to pound the drum of the future risks of climate change! And while I appreciate the company’s acquisition of Whistler to expand its portfolio of resorts with less immediate term impact from climate change, the reality is the company likely paid a full valuation for that business which should do little to ease investor’s concerns regarding the future prospects of the business.