For Vail Resorts, ‘Less bad is the new good’
September 28, 2009
BROOMFIELD – Vail Resorts is trying to do what every other company in America is trying to do – predict the unknown.
That’s what ski industry analysts say of the company’s earnings announcement that came Thursday along with vague ideas of what’s to come in 2010. The announcement showed a 52.4 percent decrease in net income from the year before, but analysts say it’s an unfair comparison.
Ralf Garrison, president of Advisory Group, a consulting company that focuses on the travel industry, said travel and resort companies like Vail Resorts are faced with the dilemma of comparing performances in fiscal year 2009 to the previous year, which was a record year. Vail Resorts CEO Rob Katz called the fiscal 2009 results “solid” during a conference call with media and investors Thursday.
“Less bad is the new good,” Garrison said. “While previous years might otherwise measure how good things are in performance, now we’re measuring how bad things aren’t.”
For Vail Resorts, things aren’t any worse than any other tourism-based businesses. Jerry Jones, a developer and ski resort consultant, said he thinks Vail Resorts is positioned as well as anyone, if not better, to get through the economic downturn.
“I don’t think there’s anybody in Colorado who will do as well as Vail Resorts because Vail Resorts has the best package by far,” Jones said. “Vail will succeed where others will not.”
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The package is changing, though. Vail Resorts has adjusted strategies in the areas where the company under-performed compared to previous years, Garrison said. The biggest thing the company is adjusting toward is the shift in destination skiers to local and regional skiers.
Skier visits were actually up at Vail in fiscal year 2009. The company was able to keep skiers coming to the resort, but the money those skiers are now spending is significantly less, Garrison said.
The company is anticipating and reacting to that fact by changing its marketing and sales strategies, Garrison said. The company is going from conventional print media that reaches an established national market, to a shorter term, largely electronic-driven messaging system, Garrison said.
“That should give them more flexibility to be nimble with the changing market so they can deliver the right message to the right market at the right time throughout the season,” Garrison said.
The move is the right move, Garrison thinks, referring to Charles Darwin’s theory that the most adaptive people are the ones who survive.
Jones said Vail Resorts is probably in a better position this year than it was last year, because of the experience in fiscal 2009 that has prepared the company.
“I think they’re doing a good job in controlling their costs,” Jones said. “Anticipation for a slower season should be able to allow (Vail Resorts) to be better off.”
In predicting the upcoming ski season, Jones and Garrison agree that it’s hard to do. The Epic Pass is definitely keeping skiers coming to Vail, but the question is will they spend more this year, Jones said.
“I think that it could be a little bit worse (this season),” Jones said. “I think there could be a slight decline in business for the coming year and the coming year will be somewhat similar to this last year.”
Garrison said the big shift in mountain resort company venturing into real estate development is likely going to shift backwards. While Vail Resorts is somewhere in the middle, Garrison said the company is lucky compared to other big ski companies that immersed themselves in real estate development.
“The companies who got over-leveraged who had more out there when the market shifted were not easily able to adjust,” Garrison said.
That message of the least bad equaling the new good is going to carry on in Vail, Garrison suspects. Where Vail Resorts stands out is in its ability to adjust and react, he said.
“Vail Resorts has interests in other resorts as well. The picture is different in each destination, but their diversity keeps their eggs from all being in one basket, which helps,” Garrison said. “Because they’re strong financially and well-operated, they ought to be in a good position to capitalize on the recovery when it comes.”