Vail Buys Stowe

"Vail Resorts to buy Vermont's Stowe ski area for $50 million": http://dpo.st/2lasAhA

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": http://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.


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