The Vail Effect

 

Vail

Park City at dusk

 

The Vail Effect

 

From Phew to Uh-Oh!

 

On September 11, 2014, the owners of Park City Mountain Resort (PCMR) and Talisker Corporation (Talisker) settled their high-profile lawsuit involving PCMR’s lease of its upper terrain, resulting in Vail Resorts (Vail) running both PCMR and Canyons Resort (Canyons).  After news of the settlement, Park City Mayor Jack Thomas described the reaction as Park City breathing a “collective sigh of relief.”

 

Park City had been perched on the edge of its figurative seat.  The town’s economy depends on the resorts.  For almost three years, people assumed the parties would work it out and that PCMR would open, whether it was run by Powdr or Vail.  Then, Powdr began talking about dismantling lifts and running half of a resort, with a Woodward facility at the base.  And the summer dragged on with no agreement, in spite of the court’s promise to evict PCMR if no agreement was reached.  People began to think that PCMR might not open come winter.

 

“There was a lot of anxiety on the part of businesses,” Bill Malone, CEO of Park City’s Chamber of Commerce explained.  “A lot of work was done by us to figure out what could happen, to develop game plans, for if PCMR went dark for the season.”  It was no longer about loyalties or taking sides.  It was about “doing what was right for the town,” said Hans Fuegi, long-time local and owner of The Grub Steak.  “The biggest priority was to have a three-resort season.”  Efforts to encourage a settlement were party-neutral and “pushed both sides equally,” according to Park City Mayor Jack Thomas, who credited the reasoning of the parties and the court with ultimately “guarantee[ing] that a season would happen this year.”

 

Settlement guaranteed that Park City’s three ski resorts would be open for the 2014-15 ski season.  Vail immediately added PCMR to its Epic season pass and announced Summer 2015 plans to connect PCMR and Canyons.  Overnight, media reports went from skeptical over whether Park City would even have a season to excitement over what would become the largest ski complex in the United States.  While the town may have been “anxious about the potential doom and gloom [before the settlement],” said Malone, “the amount of good news trumped it by three times.”

 

This news had an immediate impact on lodging.  “All of a sudden the phones started ringing again,” said Malone.  The settlement came early enough not to have “too much of a negative impact” on holiday bookings, assured Malone, who reported that Park City is “on par with last year” which was the town’s “third best winter ever” in terms of heads in beds.

 

Resort employees were happy to learn that their jobs for the 2014-15 ski season were guaranteed by the settlement.  Courtney Stangeland, a long-time resident of Park City and seven-year veteran volunteer host at PMCR, said that employees were relieved once they “knew the resort would run and that they would have a job.”  She added that employees “admired John [Cumming] for doing that…for making that a condition of the settlement.”

 

Organizations based at PCMR, such as the Park City Ski Team (PCST) and the National Ability Center’s (NAC) assisted skiing program, also learned that their programs would go ahead as usual this year.  PCST Director Jesse Hunt said that Vail is “going to take their time and evaluate before making a lot of decisions and that status quo for this season is proof of that.”  Fuegi, who also serves on the NAC Board, confirmed that the NAC will operate as usual this season and that they have every reason to think that Vail will be generous going forward.

 

But, not everyone was excited.  In the days following the settlement, Park Record guest editorials and columns called Vail everything from the Trojan Horse to steamrolling barbarians to ravaging, Abbey-esque, earth-moving machines.  These pieces complained that Vail would subject Park City to the corporate machine, driven by the dollar and bound to increase pollution, traffic, and prices.  More recently, during the annual McPolin Farm fundraiser, three local women made a scarecrow named “Queen Vail…always gets what she wants,” complete with money signs for eyes.

 

Queen Vail- "Always gets what she wants."

Queen Vail- “Always gets what she wants.”

These reactions seem extreme, especially since PCMR was hardly your average Mom-and-Pop operation.  Purchased by Ian Cumming, long-time director and chairman of the billion-dollar Leucadia National Corp., it was run by Powdr, which, with its eight ski resorts in five states, was recognized as one of the largest ski resort operators in North America, alongside Vail.  The difference is that the Cummings’, and the Badamis’ before them, were local.  As Fuegi explained, “People just don’t want to let go of the idea that PCMR was locally-owned.”

 

PCMR was locally-owned and a known quantity.  Relieved at first that PCMR would open, the community is now understandably anxious about change.  So, what can Park City—and the Utah ski industry in general—really expect from Vail?

 

More skiers…

 

The Epic season pass is a game-changer, for locals and tourists alike.  Blaise Carrig, President of the Vail’s Mountain Division and PCMR’s interim CEO, explained that resorts have traditionally sold one mountain, locally, and at a pretty high price.  Epic turns that model on its head, by selling multiple resorts, at a price point that expands the market beyond the resort communities.  And they sell a lot of them, estimating the sale of about 400,000 season pass products in 80 countries last season.  According to Nathan Rafferty, President and CEO of Ski Utah, “the only thing that drives business more than snow is the price of that Epic pass.”

 

An Epic season pass is priced below standard single-resort season passes.  For example, an adult Epic pass for the 2014-15 ski season will cost you $769, while an equivalent adult season pass costs $2049 at Sun Valley, $1985 at Deer Valley, and $1699 at Aspen.  So, Epic would be a good deal even if you were only skiing one resort, in one town, as many Park City locals did last year when Vail only owned Canyons.  Add to that the fact that Epic season pass holders have access to not one, but twelve Vail-owned resorts, two of which are now located in Park City.  Now, the Park City local is getting two-for-one.  This is a great value, even if the local is unlikely to travel to other, out-of-state, Vail-owned properties.

 

Reducing the cost also means that the season pass becomes an economical choice for destination skiers.  So, if you live in Los Angeles and take one ski vacation a year, skiing 7 days on average, individual lift tickets can cost you $700 or more.  An Epic pass priced at $769 may save tourists money if they plan to ski more than 7 days or if they plan to vacation in more than one place.  It also gives locals and tourists alike the option of going where the good snow is in any particular year.  According to Malone, “when the Lake Tahoe area had no snow [last season], we saw more people coming to ski here from that part of the country.”

 

Besides locals and destination tourists, the Epic season pass may appeal to other Utah residents who have felt priced out of the ski market.  Calder anticipated that Park City would see a significant increase in Salt Lake City residents taking advantage of the Epic pass.  A friend who lives in Heber City bought a student Epic pass at $399 for his son, even though he has only skied once before, reasoning that he “couldn’t afford not to buy it.”

Beaver Creek, Colorado

 

While the Epic season pass is a bargain for most, seniors and children who are five and six now have to pay.  This seems fair for the younger set—they’ll benefit from lower prices going forward.  But, after paying higher prices for a lifetime, seniors who were looking forward to golden years of free skiing will certainly feel robbed.

 

More terrain…

 

Shortly after the settlement, Robert Katz, Chairman and CEO of Vail, announced to analysts that Vail hopes to connect PCMR and Canyons, and create the largest mountain resort in the United States with over 7,000 skiable acres.  Exact plans for the inter-resort connection have not yet been announced.  Katz indicated that the connection would require at least one lift and other infrastructure.  Carrig confirmed that one lift would be proposed.  He explained that there was already a plan in place for lift access to gated homes in The Colony at White Pine Canyon (The Colony) and that he expects Vail to take the plans for that lift, “already programmed, not yet built, and extend it to come into PCMR.”

 

Because the alignment is still unknown, it is also unclear whether the lift will simply move people from one resort to another or will give lift access to new terrain.  When asked about possible impacts to Monitor Bowls, Rafferty explained that the proposed connection area is below that and that primary access to the bowls will still be through PCMR, by hiking up Pinecone Ridge from Jupiter.  Matt Mullin, a realtor with the LANGE Group, was more skeptical.  He thinks that, because lift alignment is over fee simple land, Vail will propose a top station with lift-accessed skiing.  A backcountry skier himself, Mullin mourned the idea that “earn your turn days in Pinecone Ridge may be over.”

Blaise Carrig of Vail Resorts

Blaise Carrig of Vail Resorts

 

If a PCMR-Canyons connection is approved, it would also take ONE Wasatch, Ski Utah’s plan to connect the resorts in Park City, Big and Little Cottonwood Canyons, one step closer to reality.  The connection is one of three needed for the ambitious interconnect.  As Rafferty reasoned, “Vail has already announced 1/3 of the connection.  People will come and ski between the two resorts and will want to come back and ski between three or more.”  Three could be achieved if PCMR and Deer Valley drop a rope.  With Vail now owning PCMR and the land over which a PCMR-Brighton connection would be built, that connection also seems more likely.

 

More investment…

 

In the next four to six weeks, Vail plans to file its applications with Park City and Summit County to build the interconnect during the summer of 2015.  But, according to Carrig, Vail intends to propose not just one lift, but “a much larger, comprehensive improvement plan, which covers both Canyons and PCMR, all in one summer.  All on-mountain improvements, totally focused on making the ski experience the best we can.”  While Vail is also interested in improving the base facilities at PCMR, Carrig explained that the its initial focus will be on the mountain, “to create the value, polish the ski experience.”

 

Breckenridge, Colorado

This facelift is consistent with what Vail has done in Breckenridge and Lake Tahoe, where it has purchased a total of five resorts in the last eighteen years.  B. Gorman, CEO of the Lake Tahoe South Shore Chamber of Commerce, said that Vail “invests capital like no one else does.  They are constantly upgrading their product, with exceptional marketing, so that the entire community benefits.”  By all accounts, this investment has been driven by Vail’s commitment to the customer experience.  Kim Dykstra, Director of Communications for the Town of Breckenridge, explained that Vail’s investments are guided by what they can do to “make the guest experience better.”  Gorman agreed, adding that Vail will “do everything they can to help the community do the same.”

 

Nor has Vail shown a pattern of investing in resorts early, only to use them later as cash cows for other pursuits.  Carol Chaplin, Executive Director of the Lake Tahoe Visitors Authority, explained that no improvements are made in Lake Tahoe without a lot of work and money, due to governmental and environmental restraints.  Nevertheless, Vail “spent money when other companies weren’t.  From the get go, they showed the commitment to the area that they could have kept or invested in another Vail resort.”  Vail continued to invest in Lake Tahoe, most recently launching a summer recreation program for which significant environmental improvements were required before even breaking ground.  According to Chaplin, Lake Tahoe stands to gain 200-400 jobs when the program is built out, adding, “A small business operator wouldn’t be able to afford that kind of investment. . . . To add that many year-round jobs, for economic impact, that’s a good story.”

 

In fact, Vail was likely drawn to Park City because of the extent of available investment opportunities.  As Mayor Thomas observed, unlike the Town of Vail, there’s a lot more room around Park City and in Summit and Wasatch Counties to expand.  By one estimate, Mayflower and the PCMR and Canyons parking lots alone have 10 million square feet of development already approved.  This opportunity is especially attractive when coupled with Park City’s close proximity to Salt Lake International Airport, due to be fully upgraded by 2022.  “They valued that,” said Thomas, “and I would suspect it’s part of why they’re here.”

 

While Vail intends to invest in Park City, however, Carrig was careful to say that Vail is not interested in changing its character.  Vail plans to market the two resorts as one, with Park City in the overriding name, but hopes to maintain Canyons’ distinct personality by “fitting its name into the larger name, such as ‘Canyons in Park City.’”  Regarding the character of Park City as a town, Carrig said, “The essence of our business is the essence of the towns in which we have resorts.  Park City as it is is a big part of the brand, its appeal in the marketplace.  Vail just wants to make sure that the quality of that experience stays strong.”  Folks in Breckenridge and Lake Tahoe likewise bristle against any suggestion that their towns somehow lost character after Vail arrived on the scene.  “Breck” remains “quirky” and Kirkwood “a renegade.”  As Chaplin explained it, “I see Vail as people.  I don’t see them like that Transformer guy pounding his fist.”

 

More competition…

 

Ever since Talisker leased Canyons to Vail in May 2013, Utah’s once-stable ski industry has been changing almost daily.  Ski Utah unveiled ONE Wasatch.  The Cumming family bought Snowbird.  Vail bought PCMR and announced the combined resort.  Then, Deer Valley purchased Solitude.  Whether Vail played into the decision-making of the Cummings and Deer Valley is unclear.  But it seems like too much of a coincidence to have played no part, whether emotional or strategic.  And it is unclear whether this Utah ski resort shake-up is even over.

 

The Utah ski business is feeling the pressure to compete, as evidenced by the fact that the Epic season pass has driven down other area prices.  During the 2013-14 Season, Alta, Snowbird, PCMR and Deer Valley offered a ‘Best of Wasatch’ benefit to their season pass holders, which included 3 lift tickets at each of the other 3 resorts, at an added value of about $900.  Participating resorts are still working on what that benefit will look like this season, but if it is anything like last year, it will make more skiing affordable for more people.

 

Of course, if Vail is selling a season pass for $700, instead of $1700, “they need to make their money somewhere,” observed Alan Powell, co-owner of Peak Transportation.  Over the years, Vail has expanded beyond skiing and invested in ancillary services such as lodging, dining, retail, and transportation.  Powell called it “Vail’s ‘take over all’ model” and made clear that they are “paying close attention to how it will affect us going forward.”  He is not alone.  When asked about this concern, Carrig said Vail is “not about taking over the town, taking over the business,” adding that Vail makes its money “on the ski side.”  However, this is debatable.

 

In its Report for Fiscal Year 2014, Vail reported $1.25 billion in revenue, 76.8% of which was classified as “mountain.”  A closer look at the mountain revenue shows that only 57.8% of that number—or about 44.4% of its total revenue—is attributable to lift sales and ski school.  The remaining 42.2% of mountain revenue is attributable to dining, retail/rentals, and “other.”  Retail/rentals revenue of over $210 million accounts for about 16.8% of total revenue.  On- and off-mountain dining, lodging, and transportation revenue account for 10.67%, 8.6%, and 1.75% of total revenue, respectively.  So, while Vail certainly makes money on its ski slopes, it makes just as much or more because of them.

 

This being said, there are relatively few reports of Vail knocking on Park City doors and trying to purchase ongoing concerns.  As one business owner put it, “Vail is drinking from a fire hose” right now.  They will start by investing on the mountain, then move to the base, and out from there.  In the meantime, local businesses stand to make more money because of increased visitation and will have an opportunity to improve, expand, and/or position themselves to sell.

 

Heavenly Valley, California

“Change is good, it creates opportunities.  You either adapt or get run over,” said Alan Finnegan, President of All Seasons Resort Lodging.  He revisited what services his company provides in comparison to Vail and other local companies.  He found room for improvement, but the study also “validated a lot of what we already do, benefits our owners already have over other property management businesses.”  Finnegan and others understand that Vail is looking for additional revenue centers and wants to control “the guest experience to their standard,” but believe that Vail will be very strategic and won’t try to fill a gap that is already filled with high-quality service.  Of course, the converse is also true: some small businesses, due to either inability or unwillingness, will not make the cut in the long run.

 

More traffic…

 

The Epic pass, the interconnect, improvements, and investment in ancillary businesses are all intended to boost traffic and revenue.  Rafferty, Utah ski industry’s own marketing guru, called Vail “a massive marketing machine,” so they have the means to get the word out.  This combination, Rafferty thinks, puts Ski Utah’s goal of five million skier visits per year (Utah had 4.2 million visits last year) easily within reach.  Which means that Park City is about to get a whole lot busier.

 

Rafferty assures that there’s “room for it.”  Room on the slopes, on pillows and barstools, maybe, but on the roads?  The first (and sometimes only) concern Park City residents have when asked about Vail’s plans is traffic.  To this, Rafferty quips that “the only thing worse than too much traffic is no traffic.”  While this may be true, it does nothing to alleviate a problem that Park City is way behind on.

 

Mayor Thomas acknowledged that Vail’s plans “accelerate the need for better transportation in Summit County.”  It is one of the issues the Park City/Summit County joint committee will consider and is already being considered by the Mountain Accord.  As a member of the Summit County traffic committee and a Mountain Accord participant, Vail wants to be “a player in addressing transit issues and parking” and has ideas to bring to the table, claimed Carrig.  As a start, regular public transit from the airport to Park City would alleviate traffic on I-80 and around town, since visitors rarely need cars once they get to Park City.  Vail also has a “future, future plan for structured parking,” but that will not help in the short term.  One thing is for sure: if traffic in Park City increases as anticipated, it will give those entities a real, rather than hypothetical, problem to study.

More expensive…

 

Not surprisingly, the real estate market in Park City saw an immediate increase in interest.  Calder cited instances where people came into their office “specifically because Vail made the purchase, because they want to get in before things get crazy.”  Early interest seems concentrated in the base areas and Old Town.  According to Mullin, interest is particularly keen in The Colony, where, on the day the settlement was announced, the developer immediately raised prices on remaining lots by $500,000 and someone reportedly put offers out on every non-developer lot.  Mullin added that The Colony is a “good reference because it is where the [interconnect] will go through.  Owners will go from having marginal ski access now to having ski in/ski out properties in the largest ski area in North America.”

 

These anecdotes aside, there has been “no definitive impact yet” in terms of a jump in pricing or units being quickly absorbed, said Calder.  But, interest has been spiked and, with way more people moving in than moving out, prices are bound to creep up.  This is a concern for the many people who keep our resort town running.  Becca Gerber, who grew up in Park City and works for a local business, began looking to buy an affordable house and found her options few and far between.  Her friends, who have lived and worked here for years, are starting families and increasingly moving out of town.  For locals who want to stay in Park City and can’t, and for those who own property and simply want to cash out, Calder predicted that more will move to communities like Heber City and Midway.  Park City will ultimately become home to more wealthy, second-home owners than full-time residents.  So, whether or not Vail is attempting to change the town’s character, its very presence here may change the people—and people’s minds about whether to raise their kids here.

 

More community support…

 

Just four months after arriving in Park City, Vail gave $500,000 in cash and in-kind donations to 10 identified non-profits that benefit children and the environment.  Two months later and again this past August, Vail opened up two additional grant cycles.  In 2013-14 alone, Vail partnered with 26 Park City non-profits and schools.  Vail employees also put in innumerable volunteer hours, breaking down the Running with Ed course and cutting the WILD trail for the Mountain Trails Foundation, among other back-breaking things.

 

Skeptics said that Vail did this to curry favor during the litigation or to buy support.  But, according to Jennifer Billow, Events, Marketing and Communications Manager for the Park City Education Foundation, Vail “does this everywhere, yearly, in all of their towns.”  She added that Vail understands non-profits “can’t rely on something for one year…things need to be ongoing.”  Dr. John Warner, Mayor of the Town of Breckenridge, confirmed that Vail has given consistently and at a high level to benefit environmental causes including trails and wetland restoration.  Skeptics to the contrary, Dr. Warner claimed that Vail doesn’t “do a great job at ‘tooting their own horn’ about their many on mountain accomplishments and improvements.”

 

Robin Marrouche, Executive Director of the Kimball Art Center, added that Vail seems “to understand implicitly that it is not only the right thing to do but also good business to strengthen the communities in which they operate in order to thrive and serve the tourism base that they are catering to.  They walk the walk on that score and over time the positive effects will be far reaching and are a welcome addition to our community.”

 

Vail’s Epic Promise program (previously known as ECHO) is run locally at each resort.  Teams of Vail staff, from lifties to managers, review the grant proposals and decide whom to support, explained Carrig.  This allows not only the company to feel invested in the community in which it operates, but, as Marrouche added, it also ties “their giving back to their own employees by involving them in volunteerism.”

 

This is not to say that the ski areas were unsupportive in the pre-Vail days.  Billow praised Deer Valley as “a very generous benefactor.”  And Hunt emphasized that PCMR had financially supported and “carried the lion’s share of youth programming,” allowing local teams to develop a legacy of World Cup and Olympic athletes.  Vail may just take it one step further, by giving bigger and longer-term.

 

More give and take…

 

Park City and the Utah ski industry can expect many changes as Vail gets settled in.  Skiing will be cheaper and bigger, more tourists will visit, the quality of service may improve, and charities will get long-term support.  On the other hand, more terrain may be cut, competition will be tighter, traffic will be heavier, and the cost of living will increase.  These issues will necessitate strategic, long-term planning.  Mayor Thomas recognized that Park City will “need to be organized and prepared to help in this planning process.”

 

On the day the settlement was announced, Mayor Thomas, members of City Council and Leadership Park City happened to be in Vail on a City Tour.  Gerber, a graduating member of Leadership’s 2014 Class, remarked on how surreal it was to find out that Vail would be taking over PCMR at the same time as they were being shown “the best of Vail,” including their commitment to mass transit, affordable housing, and community service.  Having been at this for a while, Vail has learned a thing or two about running successful resorts and, more recently, about working as a community partner.

 

When Vail first purchased Breckenridge and Keystone in 1996, Breckenridge residents were also concerned about change.  That being Vail’s first major expansion, there were “bumps in the road, feelings being hurt here and there,” Dykstra explained.  This was especially true as Vail’s “development plans became known, [and] concern for community character, capacity issues, and effects on the retail sector became much more prevalent,” said Mayor Warner.  However, over the years, and through much give and take, Dykstra reported that Vail and the Town developed a real partnership, with both sides now “striving to do what’s best for our guests and best for our community.”  This has enabled the Town to make progress on issues that Park City will also face, like transportation, using a community-driven process.

 

Vail seems to have taken what it learned in Breckenridge and applied it in Lake Tahoe.  Chaplin reported that Vail has been a good partner and powerful ally, because “they know mountain towns and that there’s challenges to living there and working there.”  Chaplin credited Carrig as being instrumental in building that partnership and felt confident that Bill Rock, who was recently handpicked by Carrig out of Lake Tahoe to be the new CEO of PCMR and Canyons, will be “cut from the same cloth.”  In fact, Vail described Rock as “instrumental in our integration of Northstar in 2010, including overseeing a $30 million capital program and building cultural and community engagement and alignment.”  Mayor Warner encouraged Park City “to nurture relationships” with Rock, which will allow both sides to offer “suggestions, praise, and criticisms” when needed.

 

More to come…

 

All of this is, of course, speculative.  Park City won’t know for sure how things will go until they go.  In the meantime, the community can’t just hope for the good old days to come back.  Locals are understandably nostalgic about Park City’s past and resistant to change.  But, things have been changing around here for a long time and they will continue to do so.  Vail may be the next chapter, but it won’t be the last.  How Park City handles change—rather than who precipitates it—will prove what kind of community it is.  As Finnegan said, “Folks will always be unhappy with the unknown.  But, things usually work out better than I expect and I choose to believe that it will this time too.”  Park City can be optimistic too, so long as it plans ahead, recognizes the challenges, works hard, and doesn’t forget its roots.

One Response to “The Vail Effect”

  1. Thanks for writing this Maggie! It’s the best complete story of the situation that I’ve read.

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