{"id":13888,"date":"2016-11-04T17:54:15","date_gmt":"2016-11-04T21:54:15","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-death-of-the-ski-industry\/"},"modified":"2016-11-04T17:59:38","modified_gmt":"2016-11-04T21:59:38","slug":"the-death-of-the-ski-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-death-of-the-ski-industry\/","title":{"rendered":"The Death of the Ski Industry?"},"content":{"rendered":"

\"vail-2\"<\/a> The tourism industry is significantly impacted by climate change. Variability in weather patterns can lead to changes in the environment that directly impair the natural competitive advantages\u2014pristine beaches, gushing waterfalls, and heavy snowfall\u2014that make some locations such attractive tourist destinations. The impacts of climate change can be seen by analyzing the ski industry. In particular, Whistler Blackcomb Holdings Inc. (TSX: WB) (\u201cWhistler Blackcomb,” “Whistler,” “WB,\u201d or the \u201cCompany\u201d), a Canadian ski resort, employed a number of steps to bolster its business model in the face of climate change, such as utilizing artificial snow, reducing its operating footprint, and becoming a year-round resort. However, the Company\u2019s recently announced merger with Vail Resorts, Inc. (NYSE: MTN) (“Vail”), raises questions about the long-term viability of the business in the face of climate change threats. The success of the merger for WB will depend upon Vail\u2019s ability to add other ski resorts in defensive locations.<\/p>\n

Blackco\"vail-1\"<\/a>mb Takes a Stand Against Climate Change<\/strong><\/p>\n

WB is a year-round mountain resort that includes two adjacent and integrated mountains, Whistler Mountain and Blackcomb Mountain. WB is comprised of 200 marked runs, 8,000 plus acres of skiable terrain, 14 alpine bowls, and three glaciers.[i]<\/a> The Company\u2019s business model is directly at risk from the rising temperatures that result from global warming. For WB, unseasonably warm weather has two main effects: it may cause inadequate natural snowfall, leading to the use of artificial snow, which imposes additional costs on the business, or it could result in unsuitable skiing conditions, leading to a decrease in the number of days available during the season.[ii]<\/a><\/p>\n

To protect against inadequate snowfall, WB invested heavily in snow making equipment. The resort now has 697 acres of snowmaking capacity due to its $26 million investment in a state-of-the-art snowmaking system and terrain improvements ahead of the 2010 Olympic Winter Games.[iii]<\/a> In addition to investing in snowmaking equipment to protect against weather variability, the Company has attempted to diversify its revenue stream away from winter-related activities. Only 15% of WB\u2019s 2014 revenue was generated during the summer months. In 2015 the Company unveiled a plan to invest $345 million in the construction of a 163,000-sq.-ft indoor water park called \u201cWatershed,\u201d in addition to further investments in snowmaking equipment.[iv]<\/a> These investments may\u00a0allow the Company to be a year-round resort destination, further protecting its position in the face of variable weather patterns caused by climate change.<\/p>\n

Furthermore, in an effort to reduce its own contribution to global warming, WB adopted a zero waste, zero carbon, zero net emissions goal. To achieve its goal of generating a zero operating footprint the Company focuses on the 4 Rs regarding waste\u2014reduce, reuse, recycle, and repurpose. WB has reduced its waste by 70% since 2010. As the food and beverage department generates 72% of waste, the Company has identified further opportunities for reducing food related waste by improving sorting, which will result in 25% more diversion.[v]<\/a> Additionally, in 2010 WB began operations for a micro hydro renewable energy plant situated on the resort. The project allows WB to return to the energy grid an amount equal to the Company\u2019s annual demand.<\/p>\n

\"ski-1\"<\/strong><\/p>\n

Is it Enough?<\/strong><\/p>\n

However, serious questions remain about whether these adaptations will be enough to protect the Company in the face of the direct threats from climate change. Studies have shown that although investments in snowmaking equipment are widespread among operators, even when operators invest in snowmaking, resort visitors are still very sensitive low natural snowfall during the winter season. Furthermore, skiers in low elevation areas are even more sensitive to a lack of natural snowfall. According to Falk and Vanat, \u201csnowmaking investment has no impact on skier visits in low elevation ski areas.\u201d[vi]<\/a> Other studies have shown that ski operators will face higher energy costs due to rising electricity costs and decreasing long run ski visitor numbers due to lower overall snow depths.[vii]<\/a> This environment of lower profitability may cause many ski operators in lower elevations to face financial strain.<\/p>\n

Following the trends on industry consolidation, on October 17, 2016, Vail and Whistler Blackcomb announced the completion of the merger joining Whistler Blackcomb with Vail Resorts. The deal valued Whistler Blackcomb at $1.0 billion and shareholders received C$17.50 in cash and 0.097294 shares of Vail Resorts.[viii]<\/a> Vail and Whistler\u2019s ability to remain competitive will require the combined Company to expand the success of Whistler\u2019s zero operating footprint campaign to other ski resorts on the Vail platform, thereby reducing Vail\u2019s energy costs in a period of rising energy costs. Additionally, given skiers’ sensitivity to natural snowfall, Vail will need to continue to add additional ski resorts at higher elevations to remain competitive.<\/p>\n

Word Count: 796 Words<\/strong><\/p>\n

[i]<\/a> Whistler Blackcomb Holdings Inc. (TSX: WB), 2015 Annual Report. p. 2.<\/p>\n

[ii]<\/a> Whistler Blackcomb Holdings Inc. (TSX: WB), 2015 Annual Report. p. 17<\/p>\n

[iii]<\/a> Whistler Blackcomb Holdings Inc. (TSX: WB), 2015 Annual Report. p. 10<\/p>\n

[iv]<\/a> Macleans.ca. 2016.\u00a0How snowless ski resorts are adapting to climate change – Macleans.ca<\/em>. [ONLINE] Available at:\u00a0http:\/\/www.macleans.ca\/economy\/business\/how-snowless-ski-resorts-are-adapting-to-climate-change\/<\/a>. [Accessed 04 November 2016].<\/p>\n

[v]<\/a> Whistler Blackcomb. 2016. Environment | Whistler Blackcomb.<\/em> [ONLINE] Available at: https:\/\/www.whistlerblackcomb.com\/about-us\/environment. [Accessed 04 November 2016].<\/p>\n

[vi]<\/a> Martin, F, 2016. Gains from investments in snowmaking facilities. Ecological Economics, 130, 339-349.<\/p>\n

[vii]<\/a> Damm, A, 2014. Does artificial snow production pay under future climate conditions? \u2013 A case study for a vulnerable ski area in Austria. Tourism management, 43, 8-21.<\/p>\n

[viii]<\/a> Vail Resorts and Whistler Blackcomb Complete Strategic Combination. 2016. Vail Resorts and Whistler Blackcomb Complete Strategic Combination – Yahoo Finance.<\/em> [ONLINE] Available at: http:\/\/finance.yahoo.com\/news\/vail-resorts-whistler-blackcomb-complete-130000490.html. [Accessed 04 November 2016].<\/p>\n

Vail Resorts, Inc., WHISTLER BLACKCOMB TRANSACTION OVERVIEW. August 8, 2016<\/p>\n","protected":false},"excerpt":{"rendered":"

Analysis of the impact of climate change on the ski industry. <\/p>\n","protected":false},"author":1849,"featured_media":13889,"comment_status":"open","ping_status":"closed","template":"","categories":[1218,1226,1402,1279,306],"class_list":["post-13888","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-climate-change","category-global-warming","category-ski-resorts","category-skiing","category-tourism"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nThe Death of the Ski Industry? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-death-of-the-ski-industry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Death of the Ski Industry? 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