By the numbers: Vail Resorts supplies what the market demands |

By the numbers: Vail Resorts supplies what the market demands

This is the last in a five-part series on how the presence of ski giant Vail Resorts affects life in Summit County.

SUMMIT COUNTY – It’s cold, it’s snowing, and they’re standing at 9,600 feet.

It was 65 degrees in Austin yesterday, and they wore shorts.

Tired and aching from the altitude and two or three I-just-started-my-vacation beers the night before, Dad gazes out the hotel window at 8 a.m. and tunes out the kids’ noise. He crunches some numbers.

The plane was $750, airport shuttle, $416. The hotel should end up at $1,340 – assuming the 10-year-old decides not to drop the television remote in the toilet this time.

Lift tickets will dent the back-pocket leather $694. Three days of lessons for the kids and two for Dad and Mom should scratch another $840 deeper. And, five-day gear rental will be $440 once they make it down to the shop.

Rounding off, he figures the $125 per-day food budget could dip into the $500 discretionary fund for a few nice dinners. T-shirts and hot chocolate couldn’t be that much, right? But he knows the temptations the outlet stores hold.

Quietly, the number $5,855 emerges amid the pounding blood in his temples, and he sighs – $209.11 per person, per day for a week.

Right then his wife calls, the haze lifts, the kids scream, and he realizes there are less than two hours to get the kids fed, geared up and on the hill in time to meet the instructor.

He reminds himself again that this is fun.


It’s long been known that skiing is not cheap. From $65 one-day peak-season lift tickets at Breckenridge and Keystone to variable airfares to $7 hamburgers in the mountain cafeteria, it adds up. Even for locals, who almost never pay sticker price, to ride the lifts, there is expensive equipment, the high cost of living and the hassle of free parking lots located on the far side of nowhere.

But last season, a rough period marked by recession and the precipitous post-9-11 travel decline, U.S. ski areas still posted 54.4 million visits. Including numbers from the newly acquired Heavenly at Lake Tahoe, Vail Resorts ski areas captured more than 10 percent of those visits, including more than 42 percent of the 11.1 million visits in Colorado.

Skiers keep coming, and economies such as that of Summit County bank heavily on it each season. Though national skiing numbers have grown an anemic 4 percent over the past 20 years, the industry still commands a great deal of attention and revenue. And VR stands near the top of the pile.

VR posted a profit of nearly $7.6 million for the fiscal year 2002, generating more than $615 million in revenue. This came from three segments: mountain, lodging and real estate, which accounted for 66 percent, 24 percent and 10 percent of the total, respectively.

The numbers show that the majority of VR’s business is overwhelmingly focused on resort operations, a fact company officials are quick to point out when countering allegations that the ski industry has become real estate-driven.

“There’s no doubt that we mainly still are a mountain resort and ski business,” said Rick Smith, VR vice president of human resources.

Reinforcing this claim, VR’s 2002 annual 10-K filing with the Securities and Exchange Commission reported that the company’s mountain segment, its largest, derived the majority of its revenue “primarily through the sale of lift tickets and passes.”

According to CEO and Chairman of the Board Adam Aron, lift tickets made up 30 percent of VR’s total non-real estate revenue for the fiscal year 2002, more than $117 million.

When broken down by the percentages Aron proffered, for every dollar the company brought in that year, roughly 27 cents came from lift tickets, 18 cents from retail, 13.5 cents from lodging and hospitality, 13.5 cents from dining, 10 cents from real estate, 9 cents from ski school and 9 cents from “other.”

Thus, while skiing remains the primary company focus, it is the accompanying amenities that provide the majority of VR’s revenue. Still, the bulk of those amenities are directly related to on-mountain operations in the form of food and beverage, ski school and equipment rentals and sales.

“We are a ski resort company first, we’re a hotel company second and we’re a real estate company third,” Aron said during an interview in the cluttered office he maintains on the first floor of VR’s corporate headquarters in Avon.

When asked why the company’s critics maintain that skiing has ceased to be its central focus, Aron pointed to the nature of development itself and misrepresentation in the press.

“For us, real estate is a piece of the equation, and it’s an important piece,” Aron said. “But it’s way overblown.”

“Maybe because the real estate changes the landscape and people can see that – but primarily because people (in the media) have been talking to the wrong people,” Aron said. “There is a fascination with real estate development being at the center of the ski industry, and that’s not true for Vail Resorts. If you look at the cash that we generated from operations last year (total company EBITDA, or revenue less expenses), for every $1 of cash we generated from real estate, we generated $7 from either ski resort operations or lodging operations.”

Aron added that as the company evolves, these ratios are not likely to change dramatically.

“The real estate activity that we’re engaged in will drive the growth of our ski resort and lodging businesses,” he maintained. “The relative balance of our ski, lodging and real estate businesses is going to stay about where it is now”

Annual financial reports show that from 1997 to 1999, real estate actually decreased as a proportion of revenue from 20 to 9 percent. This reflects the company’s acquisition of – and establishment of operations at – Keystone and Breckenridge, a move that raised revenue on the resort side. Since then, however, these percentages have leveled off, showing a net increase in the real estate division of only one percent. This supports Aron’s claim that these

segments have more or less stabilized and counterassertions that the company has disproportionately expanded its real estate sector.

Such numbers are important for those skiers who wonder where their lift ticket dollars go and if that money, in part, ends up funding real estate development.

A quick look at company expenditures seems to indicate that is not directly the case. In 2002, each individual business segment, including real estate, posted a profit, indicating they all are, theoretically, self-


Furthermore, Aron stated that more than $265 million of the $480 million in debt the company has incurred during his tenure, in addition to “every penny” of VR profits, has gone directly into the four Colorado resorts, primarily in the form of new on-mountain infrastructure such as high-speed lifts. Of the remaining nearly $215 million, $100 million went to purchase and improve Heavenly, with the balance distributed among the recently acquired RockResorts, the Grand Teton Lodging Co., the Snake River Lodge and Spa, and the Lodge at Rancho Mirage.

The latter holdings reflect the substantial portion of VR’s lodging business that lies in six states outside Colorado. The $265 million, Aron claims, indicates that instead of skiing funding real estate, it’s “just the opposite.”

While such a stance fails to acknowledge the corresponding spike in real estate values on-mountain improvements precipitate, it does reflect the theory that while more improvements entice more consumers of real estate, these same consumers patronize the mountain more. In the end, company officials argue, more real estate only increases skier visits, and that’s where the real money lies.

As VR Senior Vice President and Chief Operating Officer of Breckenridge and Keystone Roger McCarthy notes, the goal is to create “warm beds.” Warm beds spend money, while cold beds lie fallow.

Still, such skier concerns point to the more basic fact that visitors are generally most interested in what they personally will shell out during a trip to the hill.

Since 1997, when VR assumed control of Keystone and Breckenridge operations, the single-day, peak-season lift ticket sticker price at the resorts – the typical number cited in discussions of the rising cost of skiing – has risen by $23, at an average annual rate of 7.63 percent.

By comparison, the average inflation rate from 1997 to 2002, as measured by the Consumer Price Index for all consumer goods, was 2.23 percent.

Company officials, however, were eager to note that very few customers actually pay full price.

“You would have to walk by 20 different deals before you get to the ticket window,” said Kelly Ladyga, VR’s corporate communications director.

Ladyga pointed to the copious discount programs the company has initiated in the past few years, including the company’s PEAKS and Kids Fly, Ride, Stay, Rent and Ski Free programs; the Perfect 10 Ticket, which offers 10 lift tickets for $329; and discounted season passes such as the Colorado and Buddy passes.

Still, the company’s overall effective ticket price (ETP), which is defined as total lift ticket revenue divided by the total number of skier visits and provides a fairer indicator of actual cost to the average skier, was up $7.19 for the same period, with an average annual increase of 4.38 percent.

Company documents attribute the 7 percent rise in ETP from fiscal 2001 to fiscal 2002 to “increased pricing, particularly within peak periods.”

In a Dec. 11, conference call announcing VR’s first quarter earnings, Aron stated the company had been “bold” in taking early-season pricing more to “mid-season levels” earlier in the year.

“Our early-season realized lift ticket price is up a whopping 33 percent year over year,” he said.

In a subsequent interview, Aron said increases in skiing costs were natural and only part of a delicate balance the company maintains.

“For our company to be successful, we are going to need to be able to walk a tightrope where we can serve two masters who have very different orientations to price,” he said. “We are going to need to cater to the price-insensitive market, who is happy to pay $71 lift ticket prices (the price of a peak-season ticket at Vail) and we’re also going to have to cater to the price-sensitive market who can’t afford $71 lift ticket prices. And if you look at our company over the past five years, we have walked that tightrope quite successfully.”

“If you look at the price of skiing for a local, on your season passes, you’re paying less now to ski than you ever did before,” he continued. “I don’t think people necessarily should be afraid of what our lift ticket price is if they’re not paying it. They should only be interested in the lift ticket price that they’re paying. And it’s our job to make sure that we match the lift ticket program to the audience so that we can keep skiing affordable for you.”

Aron said that in comparison to other entertainment opportunities such as spectator sports, skiing was competitively priced.

“When you look at what other things cost in America, to have a five-hour experience on a mountain like ours,” he said, “skiing is priced the way other experiences in the United States are.

“In a sense, we can’t price ourselves out of the market because basic supply and demand and the laws of gravity suggest that if the price seems high, but people are willing to pay it, then we’re priced right,” he maintained. “And if the price is too high, we won’t be able to successfully get that price, and we will be forced as a company to figure out how to charge a lower price successfully.

“There will always be downward pressure on price and upward pressure on value, and that’s the consumer’s best defense to make sure that the consumer can afford what we offer,” he said.

As for who that consumer is, Aron said, only 10 percent of VR’s overall revenue comes from local skiers, whom he defined as “living within a couple of miles” of a resort. Front Range and other Colorado skiers make up an additional 20 percent, while the bulk of revenue is generated by out-of-state U.S. skiers, who constitute 60 percent and are more likely to stay at resort hotels and book package trips. International visitors account for the final 10 percent.

Thus, while locals may feel the most immediate impacts of the company’s presence, reaping the benefits and suffering the drawbacks, the majority of skiing’s financial burdens fall on tourists who keep the company afloat and profitable.

Most of these contributions come as part of a single package: lift tickets, lessons, lodging and gear – all part of the typical ski vacation experience.

Nevertheless, the residual effects are equally important as this one core industry feeds a much larger economy. From real estate development to the local retail shops and restaurants, an entire way of life depends on snow and people sliding down it.

Summit County lives that way of life, and for the time being at least, VR dominates the local scene.

Aidan Leonard is a free-lancer for the Summit Daily News. He can be reached at, subject: Aidan Leonard.

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