The Snowballing Problems at Vail Resorts

The other day, I caught up with my colleague, Allison Pohle.

Lately, she's been writing about the ski industry.

Do you ski?

I do ski.

Okay.

I learned as an adult, though, so I did not grow up skiing.

Uh-huh.

So you don't go out there and, like, shred the gnar?

I don't.

I don't. I try to embody that, though.
Like, I have an alter ego when I'm skiing called the grade A shredder. And that's me in that persona.
Wow. This is definitely going to make it into the podcast.
She's finally getting her public recognition. Grade A shredredder, or Allison as she's more commonly known, knows the biggest name in skiing is Vail Resorts.
Vail started out as just one resort near its namesake in Colorado. But over the years, it's grown into a behemoth and now owns and operates 42 ski resorts around the world.
And the company has completely revolutionized the business. Vail markets itself as the experience of a lifetime.
And it's a premium product. It is a luxury experience where they have created these little mountain villages that are emblematic of what you might see in Switzerland.

The trails are immaculately groomed.

You have high-speed chairlifts.

I mean, I feel like even just like in pop culture,

almost just the name Vale, like I'm going to Vale,

is like, oh, that's a really high-end, classy thing you're going to go do.

Exactly. It's fancy.
It's desirable.

Vail has amassed a large customer base over the years.

But as that customer base has grown, things have gotten a bit icy.

And as it turns out, Vail has pioneered a business model that is now really a victim of its own success.

Welcome to The Journal, our show about money, business, and power.

I'm Ryan Knudsen.

It's Wednesday, February 5th.

Coming up on the show, the problems snowballing at Vail Resorts. If this were a Reese's TV ad, you'd be staring at a Reese's peanut butter cup.
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Vail, the king of Colorado skiing, extends its America was pretty straightforward. Ski slopes were largely independent operations.
In the business model, it was pretty simple. You bought a day pass, and you went up and down the hill.
You would go up to the window at a ski resort, buy a lift ticket for the day. They would give you a tag.
You would fasten it to the zipper of your jacket. I remember kids in high school that skied.
They'd wear their winter coats and it'd have their ski pass on it growing up in Oregon at Mount Hood. Yep.
And they would have all those tags to show how many times they went. But it left the resorts themselves in a vulnerable position because how many tickets they were able to sell depended on how good the snow was and how good the season was.
So if they had a great year, they were able to invest in the resort and make some upgrades. If it was a bad snow year and they didn't sell a lot of tickets, that was tough.

And that meant the next year

was going to be difficult

in terms of whatever snowmaking equipment

or lift upgrades they were able to do.

For most independent ski resorts,

which were privately held,

this volatility was a headache.

But for Vail, it was a big problem.

Vail is the only ski resort company in the U.S. that's publicly traded on the stock market.
It listed in 1997. Meaning the company's sales have to be publicly disclosed each quarter to investors.
And investors don't like volatility. They just want to see growth all the time.
So in 2008, Vale came up with a solution, the Epic Pass. So what it did was take five Vail-owned resorts and a partnership with one other resort, put them all on one pass, and for the low price of $579, you could ski at any of these six resorts as much as you wanted for the entire season.
Whereas before, if you were buying a season pass, it was for one resort and it was a lot more expensive. It could cost over $1,000, even over $1,500 just for one resort.

If you're somebody who's skiing 10, 15, 20 days a season,

and your pass costs $580 total,

then your cost per time skiing is going down.

So really, if you think about it,

you're getting a lot out of the value of the pass.

So at the time that this came out, it was like an incredible deal. It was.
For consumers, not only was the Epic Pass a good deal at the time, owning a pass meant that if snow conditions were bad at one resort, you could just take your skis or snowboard to one of Vail's other mountains. And over time, Vail kept making its Epic Pass even more epic.
The main part of their strategy was buying up smaller ski resorts and putting them on the Epic Pass and raising the price of the Epic Pass a little bit along the way. So Vail was really acquiring resorts across the country.
Vail's entire business became about selling the Epic Pass. And at the same time, it dramatically raised the price of a single day pass, which made the Epic Pass look like an even better deal in comparison.
So, to just walk up to the window and go ski, it has become exorbitantly expensive, where today in this ski season, 2024, 2025, it will regularly cost over $300 on a holiday weekend at Park City, at Vail, at the most popular resorts, just for the day. Just for a one-day pass.
For a one-day pass for one person. This is, like, gotta be one of the most expensive hobbies that exists.

It is, and it's gotten more so over time.

And what did the introduction of the Epic Pass mean for Vail's business?

Wall Street loved this for Vail's business, and it was successful. It meant that tens of thousands of people are buying this Epic Pass before the season starts.
So Vail is able to grow their revenue. They're able to have the money to buy more ski resorts, but also to improve the ones that they did buy.
So a lot of these resorts were in rough shape before Vail came in. So Vail was able to come in and spend money to make those upgrades and make the resorts better.
The Epic Pass revolutionized the ski industry. And by the late 2010s, other ski companies introduced their own versions, in many cases by partnering with other ski resorts.
Now, two alternatives are the Icon Pass and the Indy Pass, but neither have been able to reach Vail's scale. And when the pandemic hit, tons of people caught the skiing bug.
And Vail suddenly had a lot more potential customers. It soon became clear that being outside was great.
A lot of people who had never skied before wanted to try it. Right, here's the perfect thing I can do when I'm stuck at home.
Just go outside and ski. Exactly.
And all of a sudden it became very desirable to ski. Vail realized this and thought, okay, great.
We are going to cut the price of the Epic Pass. It was the first price drop that they had ever did.
They wanted to incentivize a lot of new skiers. So this was before the 2021-2022 season.
They cut the price to get more people to commit to this season pass in advance. The price of the Epic Pass went from $979 down to $783.
And it was a huge hit.

A lot of people bought it.

And what was the sort of peak of this business strategy?

Uh, I think we're just past the peak, I believe.

Is the downslope going to be a black diamond, a double black diamond, a blue? Uh, I think we're just past the peak, I believe. Now we're on.

Is the downslope going to be a black diamond, a double black diamond, a blue, maybe?

Or a green?

Or is that a bunny hill?

I think there's some moguls.

I'm not sure what grade it is yet, though.

Remains to be seen, but there are some bumps.

And we're going over those moguls right now.

Before we hit those moguls,

we're going to take a quick break in the lodge.

After Vale dropped the price of the Epic Pass in 2021,

the company saw an avalanche of new customers. But in some ways, this backfired.
All of a sudden, these mountains are becoming super crowded because there's no limit on the number of Epic Passes that are sold. So at this point, you have over 2 million people buying this pass.
They don't need to make a reservation. They just show up.

And that means there are tons of people trying to ski.

Vail said the crowding wasn't because more people bought the pass.

It was due to a global labor shortage

that prevented it from opening all the lifts across Vail's resorts.

Regardless, many skiers and snowboarders were not happy. So, on social media, there was a massive backlash.
Let's cut the crap. Let's get straight into A Hater's Guide to Vail.
There were too many people on the mountain. It strained everything.
It strained parking around the area. There's nowhere to eat.
And there were so many people skiing at Vail Resorts that there became a phenomenon known as the epic lift lines. It just keeps going.
It's not 9 o'clock yet. Dude, that is insane.
It was also just not what they felt they had paid for. So, you know, you've seen the advertising of all these Vail resorts that, you know, there's one skier going down, and all of a sudden, you know, you're trying to navigate around 15 people just to take one turn.
You're paying a lot of money to go to this

place, and then you're having a bad time.

After bringing

in all these new customers,

Vail started raising the price of the Epic Pass

again. This season,

it reached the most expensive it's ever

been, at $1,107.

Then, at the end of last year, Vail's reputation took another blow. On December 27th, during one of the busiest ski periods of the year, there was a strike at Park City, Utah, Vail's largest resort.
Ski patrollers walked off the job in a dispute over wages. A big contract! Do we want a starting wage of around $21 an hour in Park City.
And there were signs that they had, they were holding out saying a burger at the dining hall costs $25. And they're saying, look, we can't even afford to have lunch on one hour salary here.
None of us here are trying to be rich. We are merely trying to live a dignified life and be able to afford things like groceries, childcare.
During the strike, a significant percentage of runs had to be shut down. But customers said that it wasn't clearly communicated.
Vail did insist that the mountain was open, that people could go ski there, and the lifts were running. Now, when people got there, that was not the experience that they had.
They were extremely frustrated. A lot of people pay a lot of money in order to come here, and those people are not getting the experience that they're paying for.
I talked to multiple skiers who have spent thousands of dollars to take their family on this vacation and spent it waiting in line, or even just gave up and said, you know what, we're going to do something else while we're here. We're not going to stand for over an hour trying to get on the mountain.
This is just not worth it. The strike ended after 12 days, when Vail agreed to increase union member wages by an average of $4 an hour and added other benefits, like parental leave.
Vail apologized to its customers and offered credits to people whose skiing experience was negatively impacted. But Vail's labor struggles didn't end with Park City.
There have also been issues at Vail's Crested Butte and Breckenridge locations. The company says it's working to resolve them.
Now, for Vail, after years at the top of the mountain, things are sliding downhill. This season, for the first time ever, sales of the Epic Pass fell by 2%.
And the company's stock has dropped by half since its peak at the end of 2021. And then, last week, one of the company's minority shareholders publicly called for big changes.
Late Apex Partners, is what they're called, published a letter to Vale's board of directors. And in the letter, the shareholders said that Vale's performance over the past five years has been, quote, unacceptable.
It even goes on to say that, quote, the core skiing community has labeled Vale the evil empire, end quote. And in another part, it says that, quote, management's incredibly short-sighted actions have led to lost opportunities and destroyed brand value.
The investor also called for Vail's CEO, CFO, and executive chairman to be replaced and its dividends to be cut by 80%. A Vale Resort spokesperson said the company engages frequently with shareholders and values their feedback.
The company attributed the decline in Epic Pass sales to a, quote, post-COVID normalization and to light snowfall in some areas. And they said the company still believes in the Epic Pass model.
To turn things around, Veil has been exploring some new ideas. It's trying to get customers to spend more on ski lessons and gear rental, and it's looking to expand its footprint in Europe.
It's also cutting costs, and says it plans to shrink its corporate workforce by 14% over the next two years. So what's Vail's reputation now in the ski industry and amongst skiers? It's, it depends who you ask.
People who have gotten into skiing or who are able to ski more because of the Epic Pass say they actually made skiing affordable for me. Now I ski all the time and I actually learned how to ski because this pass gave me an incentive to keep getting back out there, even when it was hard.
And now I love it and I take my family. But among a lot of other skiers, there has been this reputation that Vail has made skiing inaccessible by raising the price of the daily lift tickets.
So it's harder to go out there and try it and see if you like it when it costs several hundred dollars to do so. Other people say they're driving up the cost of ski lessons, of eating at the lodge, and have changed the character of these local ski resorts they acquire from being a place

where it's the local hill, the mom and pop area, where everyone knows each other, to something

that's a lot more corporate. All right, grade A shredder.
Yeah. Thank you so much for your time.

No, thank you. It's been great.

That's all for today.

Wednesday, February 5th.

The Journal is a co-production of Spotify and The Wall Street Journal.

Additional reporting in this episode by Denny Jacob.

Thanks for listening. See you tomorrow.