Snow Business: How Vail Resorts Makes Money Off-Season
There may be no business like snow business, but what do ski operators like Vail Resorts (NYSE: MTN) do when the weather begins to change and their luxury resorts no longer resemble winter wonderlands?
This was a question asked by many members of the public in July after Vail announced that it had acquired rival Peak Resorts for $264 million, adding 17 new locations to its industry-leading network of sites. The timing of the news led many to wonder how exactly a company could justify such a hefty sum for a purchase that would only really bring in revenue during the cold season.
The question is certainly a fair one. For most public companies, meteorology and climate simply don’t factor at all into the running of the business. Short of an apocalyptic deluge, Facebook (NASDAQ: FB) and Alphabet (NASDAQ: GOOG) will continue to operate whatever the weather.
This is not the case with Vail Resorts. Even during the winter season, the business can be drastically affected by weather variability. Just as vacationers will avoid Cancun or Hawaii if they find out rain is on the cards, skiers are not likely to make the trip out to one of Vail’s luxury mountain resorts if the slopes are insufficiently snowy.
Of course, by the time summer comes around, the chances of snowfall drop to about zero, and an entirely new approach is necessary.
With this in mind, Vail’s management has been pushing in recent years to transform its resorts into four-season attractions. Back in 2016, the company invested $25 million into turning many of its locations into year-round adventure zones, with ziplines, hiking trails, and mountain coasters established in order to appeal to families, couples, and nature-lovers. The diversified offering is paying off. Indeed, the company is quickly seeing its summer business catch up with its winter high-season and even posted a 9.5% year-on-year jump in retail revenue across its locations in its most recent earnings report.
A move like this hadn’t always been possible, or even legal. Until 2011, Vail and its competitors in the industry were not allowed to conduct off-season activities on lands protected by the U.S. National Forest System, which included many of its star resorts. This changed with a landmark bill authorizing year-round enterprise on the territories, paving the way for the company’s expansion into new activities.
Another factor that contributes to Vail’s summertime success is the sheer beauty of its land, which only really becomes apparent after the snow has melted. In the hotter months, the company’s flagship resort in Vail, Colorado makes use of the lush greenery, good weather, and stunning views by offering guests boutique adventures, such as its popular ‘scenic gondola rides.’ On top of that, its annual Fourth of July celebration, with its parades and firework displays, has become a must-see spectacle for tourists far beyond Colorado’s state borders.
Amazingly, July 4th in Vail has become the biggest day of the year for the resort. As many as 40,000 visitors descend upon its picturesque streets annually to celebrate Independence Day, about 15,000 more than regularly attend its major winter event — the U.S. Open Snowboarding Championships.
While Vail Resorts will always be synonymous with skiing, the success of its forays into off-season activities shows that good management can overcome just about anything — sometimes even the sky itself.
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