Vail CEO Katz: The ‘fat years’ are over
April 1, 2009
KEYSTONE ” After enjoying several “fat years” between 2003 and 2007, it’s time for the ski industry to give something back to consumers, Vail Resorts chief executive officer Rob Katz said Wednesday during a panel discussion at the Mountain Travel Symposium.
Headlining a session called The State of Destination Mountain Travel 2010, Katz said Vail Resorts will focus on building and maintaining customer loyalty for the coming season. Offering value for money will be a key part of the resort company’s tactical approach to making the best of things during economically trying times.
Along with Mike Shannon, founder of KSL partners, a leading private equity firm dedicated to investments in travel and leisure businesses, Katz spoke to several hundred travel professionals about the current economic climate and what to expect going forward.
“Somebody asked me to please say something optimistic today,” Katz said at the start of his presentation. “The only thing I can say that’s optimistic is that this season is almost over,” he said, only partly in jest.
“We’ve seen such huge declines, especially during some of the key weeks,” Katz said, explaining some of the hits that have resulted in the company’s stock price dropping along with the rest of the market this year.
When the company implemented cost-cutting measures this season, including salary roll-backs, Katz led the way by announcing he would not pay himself for a year. Top executives took the biggest hit, but even line employees saw their pay reduced.
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Although skier visits haven’t dropped as much as feared, the big challenges for Vail Resorts have included a dramatic decline ski school participation and high-end retail spending, he said. And that may not change anytime soon, as consumers appear to have fundamentally adjusted their behavior in response to the economic free-fall.
Katz referred to consumers who are going to Prada in New York and asking to have their purchases wrapped in plain brown paper bags, using the story to illustrate what he called “a moral re-adjustment.” It may be quite a while before consumers return to the free-spending ways that preceded the recession, he said.
“People are afraid … the shift in attitude and purchasing behavior extends to even the wealthiest consumers,” said Shannon, trying to explain how the economy will affect resorts next season. “Consumers are looking for meaningful experiences and they know the difference. Travelers are going back to familiar places they know and enjoy, the “safe bet” places,” Shannon said.
“Tried and true travel is really growing. We have consumers who know what skiing is. This is a good time to keep the skiers we already have,” said Katz, echoing Shannon’s remarks. “What I’m doing for next year is saying to myself, what are the things we know we do well, what are the cores strengths we can rely on,” Katz said.
On the positive side, Katz said the ski industry ” and Vail Resorts in particular ” already has a loyal customer base that will help resorts ride out the tough times.
“There are a lot of reasons to think things will be better,” he said, looking toward next winter. “Things will be better in September. People will have settled into the new reality … Billions and billions are going into the system, and that will have an impact,” he said, anticipating that the economy could stabilize, albeit at a “lower level,” if some of the economic uncertainty starts to wane. Even if things aren’t getting noticeably better, consumers would be re-assured if they see that the situation isn’t getting worse, Katz said.
Active family travel, with authentic, close-to-nature experieces, is a segment of the industry that has shown growth, and that bodes well for the long-term future of the ski industry, Katz said.
The panel ended with a handful of questions from the audience. Several people wanted to know what, other than an end to rising unemployment, would help consumers regain confidence.
“When people start to see that home values have stopped declining and when they see their bosses stop firing people around them,” Shannon said.
“If 30 days go by and you don’t read about a major lay-off, that’s a sign, and that’s not the case right now,” Katz concluded.
Bob Berwyn can be reached at (970) 331-5996, or at email@example.com.