The ski industry is ever evolving. Sometimes for better, sometimes for worse – this can usually depend on what side you’re looking at it from. There’s been a lot of talk lately (in the last 6-12 months especially) of the current trend of resort mergers and acquisitions within the industry. Howard Katkov, CEO of RED, recently came across an opinion piece on The LefsetzLetter, a music analysis blog written by Bob Lefsetz – well known within the music industry. Howard received this piece from a handful of close friends, and while he tends to disregard many opinionated views like this, he felt the need to voice his own perspective on the matter in regards to Bob’s strong outside-the-industry opinion on Vail’s strategy and position in the industry, how the ski experience is evolving for guests, and what the future holds for those who are passionate about this sport and lifestyle. Needless to say, they didn’t quite see eye to eye.

We’ve copied the opinion piece below for your reading pleasure, following by Howard’s written response.

Howard’s response is a bit long…but would you expect anything less from someone passionate about the experience, culture, and history that RED represents for so many other independent resorts?

Have your own thoughts? Fire away in the comments section.

“Vail Resorts to buy Vermont’s Stowe ski area for $50 million” (Via The LefsetzLetter) This is a story of disruption. Ideas are everything, but execution is key. Rob Katz, Chairman and CEO of Vail Resorts, retweeted Guy Kawasaki’s link to a story about this just a day before the deal closed: “Sorry But Successful People Don’t Care About Your Brilliant Idea”: bit.ly/2m9xmAe Ideas are a dime a dozen, but what are you doing about them? Rob Katz worked for Apollo, in New York City, and then the twin towers fell and his wife said no mas, so they moved to Boulder, Colorado, where he sat on the board of Vail Resorts, an Apollo asset, which they picked up in the bankruptcy of its previous owner. Then they gave Rob the executive reins. Skiing is a moribund sport. Burgeoning in the heyday of the baby boomers, skier days have remained essentially constant for years. Now it’s about market share. But those running the resorts are old school, they’re too deep in their vertical, they’ve got no vision. Sound like the record business? And the old paradigm had hit a wall. The old paradigm was make it on real estate, like the record industry made it on CDs. But the real estate market crashed back in ’08 and hasn’t fully recovered. There’s little new construction in resorts. So Rob Katz came up with a new plan. He was gonna make it on lift tickets. And the key was volume. Now mountains cannot be standardized, but services can. What Vail does is buy your resort, throw a ton of money at infrastructure and upgrade the experience. To the point where others can’t compete. Because once you’ve ridden modern high speed lifts, slow ones are anathema. But the linchpin of Vail’s success has been the lowering of lift ticket prices. Used to be a season pass was nearly 2k. Now you can buy unlimited skiing at all Vail’s properties for under a grand. The Epic Pass started less than a decade ago at under $500. Now it’s in the $800 ballpark. Because when you provide something people need, they’ll endure price hikes. This is what those in recorded music can’t understand. That prices go up after people are hooked, and you make it up on volume. Vail Resorts sold 650,000 passes this year. Eclipsing the number of all its competitors COMBINED! So, after lowering the price for a season’s pass, Katz went on a buying spree. Not only legendary resorts like Park City, but molehills in the midwest. And the biggest ski resort in Australia. Because… If you can ski on the same pass for free out west, that’s an incentive to buy one! That’s right, Your Afton Alps or Perisher pass, thousands of miles from Tahoe, Colorado or Utah, works at Vail’s resorts in those other locations. It’s a no-brainer. And break even is less than five visits. So, if you’re gonna make a trip to Vail or Breckenridge or Whistler, all Vail resorts, you might as well buy a season’s pass, you’ll save money, and if you want to take another trip during the season, where are you gonna go? Because lift tickets are expensive. Over a hundred bucks at any resort of size. But they’re highest at Vail Resorts. $189 a day during peak season at Vail itself. Because Katz wants to incentivize you to buy the season’s pass, he wants to lock you in. And of course there are other revenue streams. There’s food, and retail. But the essence is lift tickets. Which get you to the mountain and get you to pay more for the extras, like ski school. Furthermore, you lock your money in before the season begins, so if it’s a bad one…you take the risk and Vail Resorts survives. Because the ski industry is littered with bankruptcies, weather can be fickle. Now this sell low and make it up on volume theory was hiding in plain sight. It’s just that Rob Katz had education and experience where his competitors did not. They were operators. They couldn’t see beyond their noses. So what we’ve learned here is outsiders can triumph, because their perspective is different. This is what happened in the music business. If you’re criticizing Daniel Ek, you’re missing the point. He had a vision and executed it. That’s what disruption is all about, that’s what making money is all about. The usual suspects are usually too inured to the old ways. And the other resorts hate Vail. And the denizens of the other resorts hate Vail too. But Epic Pass buyers, season pass holders, LOVE Vail. And no one is stepping up to compete. No one is rolling up ski areas and creating a competing offer. And now it’s like the web, where one company gets 70% of the market and dominates, like Google, like Amazon. So as you sit there at home know that you too can compete. But it takes brains. And the power of analysis. This is what education is supposed to teach. You can look up the facts, but how do you put them together? Most people don’t know. They read the book, but they don’t analyze the concepts. And everybody will say you’re doing it wrong, that you’ll fail. But you soldier on despite the naysayers. And of course there’s risk, but you’ve learned from experience not to do it the wrong way. There was a previous roll-up in skiing, at the end of the last century, but Les Otten’s American Skiing Company died as a result of too much debt and too much reliance on real estate, which Katz has avoided. So even if you don’t ski, this is the future. Of not only online, but brick and mortar too. Don’t forget, McDonald’s eviscerated the local burger shop and Wal-Mart wiped out downtowns and… You may lament those interlopers. But they’ve been eclipsed by Shake Shack/Five Guys, i.e. upscale burgers, and Amazon. Because the wheel keeps turning, you’re never safe resting on your laurels. And I’m not sure what the future of skiing holds in an era of climate change. But I do know smart people are going to continue to revolutionize industries while those presently in charge claim sour grapes. Don’t be one of those complaining. Be one of those disrupting.

Response from Howard Katkov, CEO

Hi Bob,

After reading your article I had received from a friend, normally –or let’s say never–do I respond to articles like that. But I felt I had to stand up and say something after reading about what felt like a huge oversight to many independent ski resorts.

I’d like to put your story about Vail being a “disrupter” in context to the overall industry. There are approximately 750 ski resorts representing nearly 80,000,000 skier visits in North America. Last count, Vail Resorts owns 12 resorts (in North America) if you include Stowe, with approximately 10,000,000 annual visits. That leaves roughly 738 remaining resorts serving 70,000,000 skiers and boarders.

You praise Vail Resorts for “disrupting the ski industry” as if they figured out the magic formula for enhancing the ski experience.

I respectfully disagree. I have provided a link for your reading and listening pleasure. It’s a campaign that we at RED call “Fight the Man, Own the Mountain.” that you can view here: https://www.startengine.com/startup/red-mountain-resort. It is the first equity crowdfunding campaign for a ski resort in North America pursuant to Regulations A offerings (JOBS Act Title lV, known as Regulation A+) and Canadian securities law.

We launched this campaign on August 22nd, 2016 and as of this writing, we now have over 3,000 reservations totally nearly $11,000,000 – and it’s still growing. Our goal was to hit $10,000,000. This campaign coincidentally was launched two weeks after Vail Resorts bought Whistler and sums up how we feel about the state of the ski industry and also represents a voice for independent ski resorts. As you can see from the results thus far, a lot of people are identifying with what this campaign represents. I would love it if you took the time to read the text and watch the videos. One of the things you will see is that the investment dollars go towards the enhancement and preservation of one of the most iconic ski resorts in North America.

In your article, you virtually passed a death sentence on the ski industry or as you stated, “Skiing is a moribund sport” only to be rescued by the likes of Vail Resorts. Really Bob.

There is no doubt that the ski industry can be challenging in terms of unpredictable weather and the constant need for capital investment. And yes, I know that in the last twenty years the US has closed approximately 140 ski resorts. However, in North America, 80,000,000+ visits continue to happen year over year, notwithstanding the exit of the Baby Boomers and the unpredictability of weather. The gap is being filled by the subsequent generation that love the sport for its adventure and ability to tell stories. By example, RED Mountain, the third oldest ski resort in North America, and the first in western Canada, has seen record breaking revenues and visits in the last two years. That is out of the last 68 years of continuous operation. I believe that our financial performance is not unique in the world of independent ski resorts. If you study our “Fight the Man, Own the Mountain.” campaign, you will understand why our growth and others like RED, who offer that authentic and unique experience, supported by a great value proposition, are growing, notwithstanding the Mega Resorts. With our crowdfunding campaign, we feel that we are disruptors in the world of skiing right now.

You suggested that “Old School Resorts” and their operators have “no vision”. Bob, to suggest such a blanket statement that all others in the ski industry are clueless is not supported by the facts. I wonder if you have never experienced a real ski culture/resort supported by their community – or you simply prefer the cookie cutter formulaic resorts that resemble shopping malls.

A few other clarifications to set the record straight. Vail Resorts did not invent the idea of focusing on skier visits as a result of the 2008 real estate collapse. By example, in 2015, RED Mountain opened up Grey Mountain, a 1000-acre expansion. This was one of the largest expansions in nearly 40 years by an existing ski resort in North America. We did this to increase our skier experience and also increase visitation. It worked. Many other independent resorts have done the same since the 2008 recession.

You also suggested that, “Now mountains cannot be standardized, but services can. What Vail does is buy your resort, throw a ton of money at infrastructure and upgrade the experience. To the point where others can’t compete. Because once you’ve ridden modern high speed lifts, slow ones are anathema.”

I couldn’t disagree more with this statement. I’d love to refer you to our new REDictionary campaign – while light-hearted, it shines a serious light on what a great ski experience really is in comparison to the Vail model you trumpet as the “disruptor” of a dying industry. These made-up words and definitions were defined by using the RED experience as the example, but represent many other wonderful independent ski resorts throughout North America.

I’ll reference just one of our words below based on your above quote, and you can see the rest here: www.redresort.com/redictionary

Thigh Speed Quad: A chairlift that actually allows you enough time heading uphill to get some feeling back in your quadriceps, check your texts, snap a selfie, eat some food, un-fog your goggles, and tell iffy jokes to strangers. A chairlift that moves at the speed of powder. With 3,000 vertical feet on offer your legs will thank you for the break. And you just know all that pow won’t be tracked out by 10am because, like, how could it be?

Bob, when you go to a resort like RED Mountain (and there are many) it’s not always about modern high-speed this and wonderful gentrified that. Skiing is also about slowing down, enjoying the alpine and maybe meeting some new people.

I have no comment on your explanation of the Epic Pass, but Vail Resorts is not alone, including the Mountain Collective, The Max Pass, Rocky Mountain Super Pass, Powder Alliance, The Peak Pass and the Lake Louise Plus Card in which RED participates. You might want to do the math on those visitations. It might surprise you.

You boldly state that “the other resorts hate Vail.” I don’t hate Vail, and if it wasn’t for Vail, I wouldn’t have discovered RED Mountain. I am certain that many people love the Vail experience and that’s absolutely fine. But Bob, as expressed in my response, there are roughly 740 other ski resorts in North America serving 70,000,000 people. These resorts are extremely important to the protection and preservation of a ski culture that has its roots founded in the late 1800’s. It is that authentic ski experience and ski culture that is resonating with the younger generations right now. Which is more important than ever.

Bob, be my guest at RED. I think it’d be good for ya.

Cheers,

Howard

CEO, RED Mountain Resort