{"id":12837,"date":"2016-11-04T17:01:13","date_gmt":"2016-11-04T21:01:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/when-your-product-is-dependent-on-snow-how-do-you-react-to-climate-change-a-look-at-vail-resorts\/"},"modified":"2016-11-04T17:01:13","modified_gmt":"2016-11-04T21:01:13","slug":"when-your-product-is-dependent-on-snow-how-do-you-react-to-climate-change-a-look-at-vail-resorts","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-your-product-is-dependent-on-snow-how-do-you-react-to-climate-change-a-look-at-vail-resorts\/","title":{"rendered":"When your product is dependent on snow, how do you react to climate change? A look at Vail Resorts."},"content":{"rendered":"

\"lake-tahoe-skiing\"<\/a><\/p>\n

Vail Resorts Inc. is the largest publically owned (NYSE:MTN) ski resort operator in North America. They have 13 premier resorts across Colorado, California, Utah, Minnesota, Michigan, Wisconsin, Australia, and most recently Canada. Additionally, the company has a portfolio of luxury hotels and operates a real estate development arm [1].<\/p>\n

Vail Resorts\u2019 business is dependent on the weather in the areas it is located, and therefore climate change is important for the organization to consider. Climate change is proven to have caused increased temperatures around the globe, but is also directly linked to fluctuating rates of rainfall, runoff and evaporation [2]. In particular, global warming has recently caused shifting rainfall patterns around the world and is expected to continue to do so \u2013 which is incredibly relevant for Vail Resorts [3].<\/p>\n

The impacts of global warming and these decreased precipitation levels are already affecting ski resorts. In two of Vail Resorts key regions: Vail and Tahoe City \u2013 annual snowfall in the last 20 years has been trending downward (seen in Table 1 and Table 2) [4].<\/p>\n

\"tahoe-city-snowfall\"<\/a>\u00a0 \u00a0\"vail-snowfall\"<\/a><\/p>\n

Table 1: Annual Tahoe City, CA Snowfall \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0Table 2: Annual Vail, CO Snowfall<\/p>\n

Source: Donna Bebb, \u201cClimate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc,\u201d Steyer-Taylor Center for Energy Policy and Finance. http:\/\/media.law.stanford.edu\/organizations\/programs-and-centers\/steyer-taylor\/Vail_Final.pdf<\/a>, accessed November 2016.<\/p>\n

 <\/p>\n

In the last few years, this has become more relevant: California\u2019s resorts have suffered through three years of severe drought from 2012-2014, resulting in annual snowfall less than 60% of average [5]. These changes in snowfall have a direct impact to Vail Resorts\u2019 bottom line. Due to the drought, Vail Resorts experienced at 27.7% decline in their Tahoe resorts skier visitation in their second quarter (Jan. 31) of 2014 as compared to 2013 [6]. Although Vail Resorts does not break out revenue for each resort, they did have to revise their guidance for revenue for 2014 and decreased the guidance from $280-295M [7] to $255-265M [8] directly due to adverse weather in Tahoe.<\/p>\n

And we can expect these impacts to continue. A research study in Aspen, another key ski area in Colorado, found that with high climate change scenarios, skiing will likely not be possible in Aspen in 2100, while low scenarios hold that skiing may be preserved only in high elevations. It is expected that the ski season will be shortened and snow depths will be reduced by 2100 [9].<\/p>\n

Vail Resorts has already begun to take measures to address climate change and protect their core winter business. First, anticipating lower snowfall levels, Vail has begun to further invest in snow-making equipment in order to entice skier visits [10]. Unfortunately, these snow making machines will require a growing amount of energy use as global temperature increases, which makes this solution unviable in the long term.<\/p>\n

Additionally, in order to support and maintain their winter revenue, Vail Resorts has geographically diversified their portfolio of resorts \u2013 so that poor weather will not impact all of their resorts at the same time. For example, Vail recently acquired Whistler-Blackcomb, a large ski resort in British Columbia, Canada which is in a different mountain range and weather region than Vail\u2019s other key resorts [11].<\/p>\n

Vail resorts has also expanded its off-season mountain activities to explore other revenue opportunities. This past summer they launched \u201cEpic Discovery\u201d at Vail and Heavenly, which is an adventure center (e.g., zipline, water park) on the mountain [12]. Despite this effort to expand services, winter quarters still generate 100% of profit [13].<\/p>\n

Finally, Vail Mountain Resorts has also focused on energy efficiency and renewable energy. They reduced 10% of their energy use, and also have invested in a few small renewable energy projects in Colorado with solar panels [14].<\/p>\n

Although Vail is actively taking steps to mitigate against climate change \u2013 more can be done. First, they need to re-brand and refocus as an outdoors resort not as a ski resort. Vail will be unable to maintain their core winter revenue in the future and needs to shift and prioritize to year-round mountain activities as soon as possible. They should offer year-round activities such as guide-led hiking and backpacking adventures, outdoor movies, campfires, and kids camps. It is critical that they make this key business move now and build other revenue lines, versus later when their business is in decline.<\/p>\n

To follow their rebranding as a full outdoors experience, Vail Resorts needs to focus deeply on being environmentally sustainable and being a leader as a fully sustainable resort. This would include being fully supported by renewable energy sources, focusing on water conservation, reuse and educate their visitors on these elements of environmental sustainability. \u00a0(765)<\/p>\n

 <\/p>\n

Endnotes:<\/p>\n

[1] Vail Resorts Inc, \u201cCompany Profile,\u201d http:\/\/www.vailresorts.com\/Corp\/info\/company-profile.aspx<\/a><\/p>\n

[2] John Carey, \u201cGlobal Warming and the Science of Extreme Weather,\u201d Scientific American,<\/em> June 29, 2011, https:\/\/www.scientificamerican.com\/article\/global-warming-and-the-science-of-extreme-weather\/<\/p>\n

[3] Kate Marvel and Celine Bonfils, \u201cIdentifying External Influences on Global Precipitation,\u201d Proceeding of the National Academy of Science of the United States of America<\/em>, October 18, 2013, http:\/\/www.pnas.org\/content\/110\/48\/19301.full<\/a><\/p>\n

[4] Donna Bebb, \u201cClimate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc,\u201d Steyer-Taylor Center for Energy Policy and Finance. http:\/\/media.law.stanford.edu\/organizations\/programs-and-centers\/steyer-taylor\/Vail_Final.pdf<\/a>, accessed November 2016.<\/p>\n

[5] Ibid.<\/p>\n

[6] Vail Resorts Inc, \u201cVail Resorts Reports Fiscal 2014 Second Quarter Results and Increases Quarterly Dividend 100%,\u201d <\/em>http:\/\/investors.vailresorts.com\/releasedetail.cfm?ReleaseID=832299<\/a><\/p>\n

[7] Vail Resorts Inc, 2014 First Quarter Results, http:\/\/files.shareholder.com\/downloads\/MTN\/3138243372x0x712501\/1DEA0C71-44D1-4C86-9977-48282A53B6A4\/MTN_News_2013_12_9_General_Releases.pdf<\/a>, accessed November 2016.<\/p>\n

[8] Vail Resorts Inc, 2014 Second Quarter Results, http:\/\/investors.vailresorts.com\/releasedetail.cfm?ReleaseID=832299, accessed November 2016.<\/p>\n

[9] Aspen Global Change Institute, \u201cClimate Change and Aspen: An Assessment of Impacts and Potential Responses.\u201d http:\/\/aspenpitkin.com\/Portals\/0\/docs\/City\/GreenInitiatives\/Canary\/2006_CCA.pdf<\/a>, accessed November 2016.<\/p>\n

[10] Donna Bebb, \u201cClimate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc,\u201d Steyer-Taylor Center for Energy Policy and Finance. http:\/\/media.law.stanford.edu\/organizations\/programs-and-centers\/steyer-taylor\/Vail_Final.pdf<\/a>, accessed November 2016.<\/p>\n

[11] Allen Best, \u201cClimate Change a Factor in Vail Resorts Swallowing Whistler,\u201d Mountain Town News, August 12, 2016, http:\/\/mountaintownnews.net\/2016\/08\/12\/climate-change-a-component-of-vail-resorts-swallowing-whistler\/<\/a>, accessed November 2016.<\/p>\n

[12] Heavenly Resort, \u201cEpic Discovery\u201d, http:\/\/www.skiheavenly.com\/info\/epic-discovery.aspx#\/TheAdventurePass<\/a>, accessed November 2016.<\/p>\n

[13] Donna Bebb, \u201cClimate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc,\u201d Steyer-Taylor Center for Energy Policy and Finance. http:\/\/media.law.stanford.edu\/organizations\/programs-and-centers\/steyer-taylor\/Vail_Final.pdf<\/a>, accessed November 2016.<\/p>\n

[14] Vail Resorts, \u201cRenewable Energy\u201d, http:\/\/www.vailresorts.com\/Corp\/info\/powered-by-wind.aspx<\/a>, accessed November 2016.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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