Vail: Epic Pass Sales and Strategy

[Tony Crocker]

finance company

That's Apollo Global Management, a private equity company whose first claim to fame was the takeover of Executive Life's junk bond portfolio out of its 1990 bankruptcy. George Gillett, the Vail owner 1985-1992, had overleveraged his media properties (mainly TV stations) and sold Vail to Apollo as part of bankruptcy restructuring. Katz was already working for Apollo in 1992 and was on the Vail Resorts board starting 1996 before becoming CEO when Vail went public in 2006.

Here are some details of Vail's history through 2016.

 

[MarzNC]

That's Apollo Global Management, a private equity company whose first claim to fame was the takeover of Executive Life's junk bond portfolio out of its 1990 bankruptcy. George Gillett, the Vail owner 1985-1992, had overleveraged his media properties (mainly TV stations) and sold Vail to Apollo as part of bankruptcy restructuring. Katz was already working for Apollo in 1992 and was on the Vail Resorts board starting 1996 before becoming CEO when Vail went public in 2006.

Here are some details of Vail's history through 2016.

According to the article, VR went public in 1997. That's when the name was changed from Vail Associates (VA) to Vail Resorts (VR). Adam Aaron was CEO then, and continued on until 2006. Aaron is now CEO of AMC Entertainment. He is not a skier. Had been leading a shoe company before being hired to lead VA/VR as I remember.

" . . .
In 1997, Vail Associates, renamed Vail Resorts, went public while simultaneously acquiring the nearby Breckenridge and Keystone ski areas via a merger with Ralston (yes, the cereal and pet food company). The conglomerate then began systematically acquiring lodging properties—including Vail’s first hotel, the Lodge at Vail—as well as retail outlets and restaurants in a series of moves that made local independent business owners decidedly nervous.
. . ."

I started learning about the history of VA/VR reading Chris Diamond's book Ski Inc. a while ago. It was too bad Diamond died before he could get a third book done about the post-pandemic era we are in with Epic, Ikon, Mountain Collective, and Indy passes all doing well. Plus Mountain Capital Partners upgrading Nordic Valley and Brian Head in Utah, as Park City continues to fight with the town over lift upgrades.

 

[Tony Crocker]

According to the article, VR went public in 1997.

Missed that.

Chris Diamond's book Ski Inc.

I read that too, overall very worthwhile but it missed a few relevant details/stories. There were some misstatements about when areas joined Mountain Collective. I think it discussed POWDR Corp's rocky beginnings at Killington but not that those issues were presaged during POWDR's earlier takeover at Mt. Bachelor. Comments were tangential, related to Vail's Australian acquisitions, but he said Perisher was highest and largest Southern Hemisphere ski area.

He said Vail paid $174 million AUD for Falls Creek/Hotham in 2019, shocking in comparison to the $38 million USD Mammoth paid for Big Bear just 5 years earlier. These areas are quite comparable in both size and skier visits.

 

[MarzNC]

He said Vail paid $174 million AUD for Falls Creek/Hotham in 2019, shocking in comparison to the $38 million USD Mammoth paid for Big Bear just 5 years earlier. These areas are quite comparable in both size and skier visits.

While they are comparable for resort size and skier visits, the regional setting is completely different between Southern California and Australia from a cultural and general population standpoint. Just as what happens for skiing in California for mountains of similar size is quite different between New England, the Midwest, or the Southeast.

It's taken VR a while to figure out how to best deal with Perisher. Been reading about it on the Aussie ski forum starting a few years before the acquisition. At least one exec who was put in charge of the Australian resorts never visited before the responsibility was moved to someone else.

 

[Tony Crocker]

completely different between Southern California and Australia from a cultural and general population standpoint

It's not clear to me how those differences would make the Australian areas more valuable. Yes they have more of a captive audience (many L.A. skiers disdain the local areas completely), but OTOH the population of SoCal is similar to the population of the entire country of Australia, thus leading to the similar number of skier visits.

I listened to the podcast this week. Stuart applauded the new half window price ski-with-a-friend program. Katz said that the multiarea season pass is a mature product now (with explicit endorsement by Alterra/Ikon) so the industry has to pay more attention to rest of the ski market. The option for the skiing friend to apply the ticket cost to a next year Epic Pass is a carrot to recruit more Epic pass buyers, and Katz intends to promote that feature.

Stuart wondered whether the Epic Pass was too cheap, contributing to overcrowding. Katz said that the complex pro-rata credits from the COVID shutdown in 2020 gave Vail a lot of data to determine what the correct pricing should be to maximize overall revenue. Katz pushed back on crowding in general, saying it was limited to a handful of peak days, and pushed back, "Who should we be excluding from the mountain?"

Stuart mildly questioned there being so few Epic partner resorts vs. Ikon. Katz did not answer that question directly but pointed out that the ski-with-a-friend program was only possible within the context of Vail owning nearly all the Epic Pass areas.