Vail: A Ski Resort Giant
Vail changed the business model for the ski industry, but can it continue to thrive?
Skiing is a multibillion dollar business.
And the giant in the space is Vail Resorts (MTN), owner of 37 resorts, mostly in the U.S.
Today, Vail owns the four most-visited mountain resorts in the U.S., as well as many other mega resorts and regional resorts all across the country.
The company also owns the most-visited resort in Canada; three large resorts in Australia; and one resort in Switzerland.
Over the past two decades, Vail has grown by gobbling up its competition and investing in ancillary businesses like ski lodges and ski schools.
But the company made what was arguably its biggest move when it introduced its Epic Pass in 2008, which granted skiers unlimited access to all of the company’s resorts for a one-time fee.
The Epic Pass changed the business model for the ski industry, turning an unpredictable, weather-dependent revenue stream into something much more predictable.
Skiers got cheaper prices and more options when it came to where to ski, while Vail got a steady stream of revenue each year before the ski season started. This allowed the company to invest consistently in improving its resorts and buying up more of them, staying ahead of the competition.
Currently, Vail has multiple versions of the Epic pass that fit different budgets, and the sale of those passes accounts for 62% of the company’s lift ticket revenue. In turn, lift ticket revenue accounts for around half of the company’s total revenues. The rest comes from ski lessons, food, rentals, lodging, etc.
The company’s strategy has paid off. Vail is the leading ski resort operator in North America and its resorts accounted for 20% of ski visits last season.
But Vail’s success has attracted competition, mostly notably from Alterra Mountain Company, a privately owned firm that’s copying Vail’s playbook.
Formed through a series of acquisitions in recent years, Alterra unveiled its own season pass in 2018 called the Ikon Pass. The Ikon Pass currently offers access to over 50 resorts, 16 of which are owned by Alterra itself.
With so many skiers using these passes, even independent ski resorts are clamoring to partner with either Vail or Alterra so that their properties are included in the bundles.
As you can tell, Vail and Alterra are bitter rivals, but even as they go head-to-head, both companies are thriving in an industry where new significant competition is unlikely to emerge.
In fact, no new destination ski resorts have been built in North America in over 40 years. There’s three reasons for that: there’s limited private land to build them on; it’s difficult to get government approval to build them on public lands; and they’re extremely expensive to build.
That gives the existing big players like Vail and Alterra a strong competitive advantage.
On the other hand, there are concerns that new generations, like Gen Z, aren’t as interested in skiing as previous generations like Baby Boomers or even Millennials. That could be a problem for resort operators, especially since the ski industry isn’t a growth industry.
The number of visits to ski resorts today is the same as it was a decade ago and only about 10% higher than it was two decades ago.
Most of the growth in industry profits have come from higher ticket prices and operational efficiencies.
There’s also some worry that the consolidation phase of the ski industry is coming to an end. With all of the low hanging fruit already eaten up, growing through acquisitions, particularly in North America, might not be so easy going forward.
That’s why Vail has said that it’s interested in expanding its international presence, especially in Europe and Japan. Europe is the largest ski market in the world, with nearly three times the number of visits to ski resorts as North America.
It’ll be interesting to see if Gen Z eventually starts to take up skiing in greater numbers and whether Vail is successful in its international expansion.