What’s up with Vail Resorts’ stock? After a slow and steady decline for the last year, the price last week in a few hours of frenzied trading soared to $145 from $129.
It was the company’s best day on Wall Street in several years, with 2.6 million shares trading hands, about triple the average daily volume. And it was an odd bump, 10 days after the company reported lackluster results from the dismal winter and warned investors that pass sales were slowing.
The 11% price surge followed reporting by financial journalists at Semafor, citing unnamed sources, that the company has enlisted bankers who specialize in takeover defense. Another Semafor article published June 18, the same day as the sudden stock-price increase, said Oasis Capital Management, an activist investment group out of Asia that has a nearly 8% ownership stake in Vail Resorts, making it one of the company’s top institutional investors, was weighing a proxy fight to push out existing management.
The sudden jolt to Vail Resorts’ stock price and the activist investor report follows The Colorado Sun’s chat with Matthew Prince, the Park City billionaire pushing Vail Resorts to sell him Park City Mountain Resort, the company’s flagship Utah resort and the largest ski area in the country.
Prince said he was willing to invest $500 million in the ski area if Vail Resorts sold. And if the company didn’t pursue his proposal, Prince told The Sun last month, hostile-takeover investors were gathering with a plan to force changes at the company. And those changes could include selling ski areas in the company’s portfolio.
“It’s inevitable that Vail management who have proven to be such incompetent capital allocators will change,” Prince wrote on X on June 18 in response to the Semafor articles.
Vail boss says there is financial safety in numbers
Vail Resorts CEO Rob Katz said his company’s strategy is focused on selling season passes and the guest experience, not shedding resorts for quick cash. But if a takeover ousts current management, could that trigger ski area sales? And what does a ski resort marketplace look like without Vail Resorts looming as a buyer?
Katz this week dropped an illuminating episode of his Epic by Nature podcast, detailed why the network of 42 ski areas assembled over the last 15 years is key to the resiliency and sustainability of not just the company, but the resort industry.
“It is from the resorts banding together that they get the power to both withstand some of the ups and downs that we are dealing with and really innovate and put money behind the future,” Katz said in the podcast.
Citing “rather loud voices,” calling for him to sell ski areas, Katz said the company’s network of integrated, owned ski areas “is at the heart of our business model” and “what made the Epic Pass possible.”
In the last 15 years, Vail Resorts has grown from five ski areas to 42. In that period the company went from selling a couple hundred thousand season passes to more than 2.5 million advanced-purchase passes and tickets, generating more than a billion dollars in revenue in the summer months before the snow flies.
Those sales don’t happen without a stable of resorts that lure skiers by the millions, Katz said.
He spoke at length on the podcast on how Vail Resorts’ advanced-purchase sales strategy and its unified network of ski areas is good for skiing. First, he said, the united culture across 42 ski areas has enabled “rapid progression” of careers, with a deep pool of ladder-climbing workers spread across four countries. Second, he said, guests love Vail Resorts’ ski areas. He said internal surveys indicate the company’s investments in worker pay, technology and on-mountain improvements are buoying the company even when the snow isn’t great.
It can be hard to innovate and invest around surging visitation and guest stoke as an independent resort, Katz said.
“We think some of these solutions can only be delivered if you have a network of resorts and the support that goes with them,” he said.
Pass programs are nearing maturity
Katz said owned and operated resorts have benefits not found in the partnership model deployed by Vail Resorts’ competitor Alterra Mountain Co., which offers Ikon Pass access at more than 70 resorts but only owns 17 ski areas.
A partner model can make it challenging to adjust season-pass prices and benefits, Katz said, pointing to his company’s recent lowering of Epic Pass prices for young adults.
And a partner arrangement makes it difficult to adjust lift ticket prices in response to demand, a fluid pricing scenario Vail Resorts deployed last winter with lower-priced access in slower stretches of the season.
“We need to admit this and the industry needs to admit this: Passes are reaching a maturity point,” Katz said, noting how pass sales are slowing after more than a dozen years of explosive annual growth and the frequency of pass use has declined in the past two years.
Katz compared the passion of wealthy folks who want to buy a ski resort to those who seek to buy professional sports teams.
“Some of that emotion and energy is good,” he said. “But it does not necessarily mean it’s the right thing for us to do.”
Vail Resorts actually leases Park City Mountain Resort from a former mining enterprise that owns the land. It is a 300-year lease, but the company does not have the right to sell the ski area, he said.
“It’s always been a silly conversation on every front,” he said of the call to sell Park City Mountain Resort.
Going down a path of selling ski areas “really puts the company in serious limbo,” Katz said.
“I get that it’s the kind of idea that might make for a good soundbite, but it’s not one that remotely works in the real world,” he said. “For us, internally, it’s a distraction.”