As economy rebounds, so do Vail Resorts’ prices
As the economy slowly shows signs of improvement, Vail Resorts is showing signs of confidence.
Chief Executive Officer Rob Katz told investors earlier this month that Vail Resorts sees itself as “turning more and more to a traditional approach to our long-term pricing strategy.”
What it means is that the days of heavily discounted deals, such as a $579 Epic Pass, are likely going to become a thing of the past. The company never reveals when or for how much it plans to increase or decrease prices, but Katz didn’t leave much up to the imagination in terms of what the company’s strategy looks like moving forward.
“Our operating model is absolutely to have world-class resorts and guest experience, and to charge for that experience,” Katz said.
Single-day lift tickets at Vail are $108 this season. Last season, they were $99. The resort does most of its lift ticket sales in advance, however.
“This winter, a single-day lift ticket purchased in advance only costs $1 more than it did last year over the holiday period,” Vail Mountain spokeswoman Liz Biebl said. “While we did raise the single-day walk-up window lift ticket price this year, the best value on lift tickets is still through online advance purchase, at least seven days in advance, where you can save between 14-17 percent off of the window rate this season.”
When the Epic Pass was introduced in 2008 it was $579 – a major deal and a shift in the resort’s pricing strategies compared to 2007, when an unlimited, unrestricted season pass was $1,849.
In the 2009-10 and 2010-11, the Epic Pass was initially offered for $599, but earlier this month Vail Resorts announced the 2011-12 Epic Pass would start out at $649.
Jerry Jones, a local veteran ski industry analyst, said the increases show confidence in not only the economy, but in the company’s market share.
“The multiple ski area pass – they have something that nobody else can really compete with,” Jones said.
Vail Resorts’ acquisition of Northstar-at-Tahoe last fall is giving the company a competitive market share in the Lake Tahoe region, as well.
The Epic Pass is now valid at five Colorado resorts and three Lake Tahoe resorts.
“They really are in a very unique position,” Jones said. “Their ability to package the multiple ski areas, no one can compete with that. They definitely couldn’t compete with it at a price level that Vail has been selling the product for.”
Vail Resorts has also seen its guests begin to spend more in the current fiscal year compared to the last two years, and as the company continues to invest in its resorts – with more than $100 million slated for this year alone -the company will be able to continuously charge guests for those upgrades.
“There are no new ski resorts being created, which makes the experience we offer unique,” Katz said.
Ralf Garrison, co-owner of the Mountain Travel Research Program, which studies travel industry data for mountain resorts, said consumers have been treated with lower prices and higher value across the United States travel industry.
“That said, such great deals can’t be expected to continue on forever,” Garrison said. “As market conditions improve and demand increases, that creates pricing power.”
Lodging occupancies, however, have started to go back up, which shows an increase in the quantity of demand, but not necessarily the quality of demand – lodging rate increases haven’t been sustainable, Garrison said.
“While resorts haven’t had to increase their bargains, they haven’t been able to decrease them in any meaningful way,” Garrison said.
There are signs the market is shifting to a more balanced market – where buyers and sellers are on a more equal playing field – from the buyer’s-only market it has been in for the last couple of years.
“We expect this time of the recovery cycle to be about when we’d see these things start to happen,” Garrison said. “It follows conventional economics of supply and demand – for demand to be coming back and discounts to be waning and prices to come back up.”
And while the overall market is something Vail Resorts obviously pays attention to, the company plans its strategy and approach with the long-term in mind because markets move up and down all the time, Katz said.
Garrison sees a positive sign for next season already in that the Mountain Travel Symposium, an annual mountain travel forum and trade show in Beaver Creek in early April, is sold out this year. The event did not sell out last year.
“That’s one anecdotal sign in the marketplace showing some enthusiasm about next year,” Garrison said.
Interpreting economic signs, however, has proven that it’s not an exact science. That’s why everyone in the industry, from analysts to company executives, still remain cautious about what the future has in store.
“As we mentioned in our earnings call, we are definitely seeing signs of improvement in the economy, though there are still a number of challenges ahead,” Vail Resorts spokeswoman Kelly Ladyga said.
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