When Vail Resorts bought Whistler Blackcomb in 2016, nothing seemed to go right. But the U.S. behemoth avoided a wipeout, with help from a little something called the Epic Pass
Introducing then–Whistler Blackcomb chief operating officer Pete Sonntag at last February’s The View From Here business and investment forum, emcee Maureen (Mo) Douglas was ready with a zinger. “Since Pete’s been here in Canada, he’s learned the versatile use of the term ‘sorry,’” Douglas told the Whistler crowd.
Sorry for the lousy snow conditions in November. Sorry for the delays in opening the alpine on stormy days. Sorry for those lift ticket snafus back in 2017.
But U.S. parent Vail Resorts Management Co. wasn’t worried. In Whistler and elsewhere, its Epic strategy, which locks in pre-season ticket sales across its extensive network of ski resorts throughout North America, provides a reliable hedge against the whims of Mother Nature. And compared to its rivals, the company’s skill at gathering and deploying customer data makes it look like the Amazon or Facebook of the ski world.
Until Vail’s surprise acquisition of Whistler Blackcomb in 2016, most Canadian skiers probably thought an “epic” day on the slopes consisted of knee-deep powder, bluebird skies, short lines and cold beer. Ski Canada editor Iain MacMillan was introduced to Vail’s new spin on this much-overused adjective eight years earlier. In 2008, he attended a press junket where CEO Rob Katz officially launched its new Epic Pass.
“Most of the writers were making lazy puns about what ‘epic’ might mean,” MacMillan says. “But I asked Katz when they were going to buy Whistler Blackcomb.” It was treated as a joke at the time, yet MacMillan recalls a sidelong glance from Katz that said, Anything is possible.
One thing was for sure: skiers were going to be able to take advantage of some Epic savings. Here was the largest publicly traded ski company in North America, at the height of a recession, announcing that it was dropping the price of a season’s pass to its premium destination resorts (Beaver Creek, Breckenridge and Vail) from US$1,849 to US$579 for the 2009-10 season. Also, the pass would be interchangeable, meaning that a lawyer from Miami might fly directly into Eagle-Vail airport two or three times a season and choose from three distinctive mega-resorts with more than 185 trails each. If you lived in, say, the Bay Area, you even got a pass to Heavenly near Lake Tahoe as well.
But there was a catch. To lock in the US$579 rate, you had to purchase the pass by mid-May—six months in advance of the ski season. In a Vail Resorts podcast series called Epic by Nature, Katz recalls how the Epic Pass announcement burdened the Breckenridge, Colorado–headquartered company’s IT system and front-line staff at its resorts. “Everyone thought it was a typo,” he says. “They wanted to purchase it before someone found out the mistake.”
Vail paid a handsome premium for Whistler Blackcomb in a friendly takeover that saw the latter’s stock jump from $25.14 to $36.63. (Long-term employees who held options when the stock had been offered at $12 five years earlier were overjoyed.) It also came bearing gifts. Reprising its strategy from eight years earlier, the company announced that Whistlerites would save money: 2017 Epic Passes—again, good at all ski areas in the Vail universe—would sell for $1,117, down from $1,439 for the early bird season’s pass the previous year.
Vail Resorts' Pete Sonntag spent an eventful two years as COO of Whistler Blackcomb
Brownlie out, Sonntag in
Like Disneyland, Vail Resorts makes money the old-fashioned way, by offering what Sonntag calls “an extraordinary guest experience.” Where it differs, and the key to its success, is in executing a decade-old business strategy that has brought tech-like disruption to the ski industry: prizing detailed marketing analytics to forge a direct, long-standing relationship with the customer.
Within a year of the acquisition, Sonntag replaced long-time Whistler Blackcomb CEO David Brownlie, whose stewardship had some stormy moments, notably the 2008-09 recession, local business owners grumbling about lost revenue during the 2010 Winter Games and construction of the dazzling—though expensive—Peak 2 Peak Gondola. More significant, Brownlie helped engineer Whistler’s initial public offering on the Toronto Stock Exchange when hospitality business stocks were widely out of favour and struck deals with local First Nations to ensure secure access to and tenure of its lands.
Sonntag’s stint as COO of Whistler Blackcomb only lasted two years, but there must have been times when it seemed like two decades. (This past August, he was kicked upstairs—and down to Colorado—to assume a regional leadership role.)
Like many senior Vail executives, he combines academic achievement—a degree in economics followed by an MBA—with a lifelong passion for skiing. Sonntag has the cheerful demeanour and wholesome good looks of an elite ski school director, a job he held at tony Beaver Creek Resort, Vail Ski Resort’s younger, more attractive sibling just down Interstate 70 from the company’s original property. When Vail acquired Heavenly in California in 2002, he headed west and eventually was promoted to COO.
“Coming to Whistler was the opportunity of a lifetime,” Sonntag says. “I was familiar with Canada—my kids have attended hockey school in the Okanagan—but I also knew we would be undertaking our biggest resort integration by far.”
Would he be up for the challenge?
“There’s a fear that when Vail Resorts comes to town that somehow the local brand will get lost,” says Chris Diamond, a Colorado-based former ski industry executive–turned-consultant and author of the recent book Ski Inc. 2020. Indeed, while the Epic Pass rewarded skiers and riders willing to make a commitment, the slightly discounted one- and three-day Edge cards were eliminated. (The popular 7-Eleven tickets had been discontinued by the previous ownership.) A walk-up day pass was now $130. For Lower Mainland families crushed by mortgage debt and high gas prices, it was all a bit much.
Also, the integration of Whistler Blackcomb’s ticketing system with Vail’s proprietary software created bothersome delays. When massive amounts of snow plastered the Coast Range in mid-November 2017, thousands of Epic Pass and Edge cards still hadn’t been sent out.
The genius of the Epic Pass soon revealed itself, though. The state of Colorado, Vail’s home base, was suffering one of the worst snow droughts in history. Suddenly, Whistler Blackcomb’s slopes were being filled by the very best kind of customers: high-value high rollers who were cancelling their Colorado plans to find exceptional snow conditions—not to mention a favourable exchange rate—north of the border.
Delighted with its vast new playground, Vail committed $66 million—its largest infrastructure investment ever—to replace three aging lifts on Blackcomb Mountain with a high-speed eight-passenger gondola and an express quad chair. Over on Whistler, the Emerald Express quad was upgraded to a six-seater to alleviate crowding at the confluence of several popular trails.
But last winter, with brand-new lifts to move ever-growing numbers of skiers around its mountains and a much-improved ticketing system (Vail listened and brought back the one- and three-day Edge cards), the weather failed to cooperate. There was so little snow—even with extensive snowmaking—for the resort’s traditional U.S. Thanksgiving opening that Whistler management asked its employees to stop skiing until conditions brightened.
Ski resort ownership has always been a financially risky business. Just ask Hugh Smythe, former CEO of Intrawest Resorts Holdings, Whistler Blackcomb’s previous owner. “Skiing is weatherproof and skiing is recession-proof,” he said in the mid-1980s. “But it is not weather- and recession-proof at the same time.” Vail Resorts boss Katz has referred to ski resort owners as “snow farmers.”
Skyrocketing energy costs, inflationary wage demands and record-level interest rates had all but the best-capitalized resorts on the ropes during the ’80s. Properties from California to Quebec were bought and sold and traded—including Blackcomb Mountain, the struggling sister resort across the Fitzsimmons Creek Valley from more-established Whistler.
Smythe convinced Vancouver business park developer Joe Houssian to put in a lowball offer of $3.7 million to Blackcomb’s then-owners, Aspen Skiing Corp. Land above Whistler Village, known as the Benchlands, was transformed into an enclave of posh residences and prestigious (Fairmont, Four Seasons) hotels. For Intrawest, Houssian’s company, the new business model would be creating four-season destination resorts: planned pedestrian villages offering luxury hotels, art galleries, restaurants, boutiques and, most important, a vibe. An endless supply of year-round activities would stimulate demand for “warm beds”—condos whose owners would rent out their units when they weren’t in use.
Intrawest acquired 10 resorts in all, expanding into Quebec (Mont Tremblant), Vermont (Stratton Mountain), Ontario (Blue Mountain), Colorado (Copper Mountain) and California (Mammoth Mountain). In 2006, after a strategic review, the publicly traded company was sold to New York–based Fortress Investment Group for US$2.8 billion.
Down in Colorado, Vail Resorts was doing some market research. What might happen, Katz and his team wondered, if we could trigger revenue early in the season by offering season’s passes at a huge discount at the tail end of the previous year, through to, say, Labour Day? Also, what if the Epic Pass were marketed not just to impecunious locals, but to keen, not to mention affluent, skiers living in Chicago, Miami, New York and Los Angeles? What if we could diversify away from Colorado and into other states, if not countries? The Epic Pass strategy was born.
In 2014, Vail bought the legally troubled Park City Mountain Resort in Utah. It already held an operational agreement for the nearby Canyons Resort—and immediately built a gondola connecting the two, giving them a combined 7,000-plus skiable acres and 300 runs. Then came the surprise Whistler Blackcomb acquisition, the “jewel in the crown,” as Katz calls it. An epic resort to match Vail’s epic ambition.
Recently, Vail’s strategy has been to buy ski areas near major urban centres in the U.S. Northeast and Midwest. In mid-September, the company sealed a deal that would add another 17 resorts to its Epic Pass program for the 2021 season, including five hills in Pennsylvania, four in Ohio and Hunter Mountain—the largest day-trip skiing destination close to New York City. Now an Epic Pass purchased by a Minneapolis resident could be used for weekend skiing at nearby Afton Alps and vacation destinations like Vail, Breckenridge, Park City and Whistler Blackcomb.
And while it’s perhaps doubtful that a Whistler hardcore would ever ski in the Midwest, their Epic Pass is now good for a limited number of days each season at dozens of major resorts worldwide, such as Sun Valley and Telluride in the U.S., France’s Les 3 Vallées, Italy’s Dolomiti Superski and Hakuba Valley in Japan.
“The reality is that the Epic Pass is now the brand,” says former resort executive Diamond. “You seldom see individual resorts aggressively promoted,” he notes of Vail. “That said, they are very sophisticated, and if a particular resort or product is seeing low levels of awareness, you can be sure they will invest appropriately. They were the first resort group to fully exploit data as a business tool. They know all of their customers and continuously feed them product offerings, discounts and pricing plans—whatever it takes to prime the pump.”
The Epic Pass does have its critics. Gregg Blanchard, a Vermont-based digital marketing expert who specializes in winter recreation, agrees that it gives great value to people who ski often. But “when Vail introduced its first Epic Pass, a day ticket was $125, and now it’s $210,” he notes.
It’s also well known that skiing has a growth and a retention problem. The number of skiers who stick around after taking basic lessons hovers at a dismal 5 percent or so, according to the U.S.-based National Ski Areas Association, and the sport has failed to make significant inroads into Hispanic, Asian and black communities.
While keen skiers have been handsomely rewarded by Vail’s Epic Pass strategy, so have investors. Vail, Breckenridge and Beaver Creek had 40,000 season’s pass holders—most living in the Vail Valley and nearby Denver—when the company introduced the program. In 2019-20, Vail expects to sell more than a million Epic passes to skiers from all over the world.
Had you done the smart thing and purchased a mittful of Vail Resorts stock for just north of US$20 in 2008, you would have seen your investment grow to almost US$300 by August 2018—a shocking 15-fold increase in share price, excluding dividend—that not only outperformed the Nasdaq Stock Market but also many tech stocks during the decade after the Great Recession. (Since then, Vail has melted a bit, but at US$236.04 as of October 25, it was still rated a strong buy by eight analysts, including the Motley Fool Internet stock pundits.) Back in June, Katz exercised a US$39 option on 142,000 shares and promptly sold 75,000 at US$235 apiece. He isn’t going anywhere, however; at press time, he still held 285,000 shares.
There’s more to being a good community partner than offering a great deal for your most loyal customers. Soon after Vail’s B.C. acquisition, Katz and his wife, Elena, personally donated more than US$2 million through their Katz Amsterdam Charitable Trust to support mental health services at the company’s resorts, including some $300,000 to Whistler Blackcomb. Vail prides itself on a strong leadership culture that could provide opportunities for young Canadians wishing to expand their careers in the U.S. The company also remains committed to offsetting its carbon emissions completely—an effort it calls the Epic Promise—by 2030.
Seeking to smooth relations with more-occasional skiers, Vail has introduced the somewhat-complex Epic for Everyone program for the 2020 season. Skiers can save money and time by purchasing single-day tickets online that offer direct-to-lift access (no ticket window lineups!). In return, Vail gets your e-mail address and demographic information. Up in Whistler, many locals are pleased that the company won’t push ahead with the Renaissance project, a plan to replace valuable parking space with a giant artificial surfing and aquatic park.
Recently departed COO Sonntag is pretty happy with the way it’s all turned out. “I knew I would need to kind of be up for some unexpected challenges,” he says. “I think we were very public in acknowledging our mistakes, and looking back on last year, we largely corrected them. On a personal level, it was amazing to be in a place that’s so beautiful, pursuing what I love to do. I probably thought I’d be up here a bit longer.”
Pay now, ski later
What will you spend to hit the slopes at Whistler Blackcomb this winter?
Figuring out how much a day of skiing will cost is like trying to predict mountain weather—it’s ever-changing. But there are a few basic rules.
The earlier you buy (some of the best deals for the upcoming season are in March and April), the better, and tickets are always cheaper online (though you’ll probably be asked if you want to receive online promotions).
Also, lift tickets are always discounted—sometimes even given away in early and late season—as part of an accommodation package. American e-tailer Liftopia includes all the B.C. resorts in its offerings.
As of late October, here’s what skiers and riders were paying to enjoy Whistler–and how it stacked up against B.C. and U.S. rivals:
$156 Pre-purchase online price (by November 15) for a one-day pass to Whistler Blackcomb during the Christmas holidays. Not included: $7.80 in tax and a steep $5.15 mailing fee.
$915 Early bird price (now expired) for the Epic Local pass, which offers unlimited access to several Vail Resorts hills in the U.S. but just 10 days of non-holiday skiing at Whistler Blackcomb.
$519 Price of an Unlimited 5-Day Edge Card, minus GST and mailing costs.
$234 Day pass (peak season) at Aspen Skiing Co.’s four Colorado mountains.
$129 Day pass (peak season) at Big White Ski Resort, Kelowna.
$115 Day pass (winter season) at Sun Peaks Resort near Kamloops.
$89 Day pass (includes night skiing) at Cypress Mountain, West Vancouver.
$72 Day pass (includes night skiing) at Grouse Mountain, North Vancouver.
$69 Day pass (includes night skiing) at Mount Seymour, North Vancouver.
All prices in Canadian dollars
**An earlier version of this story mistakenly listed the price of the Epic Local pass as $699, when in fact it was US$699. BCBusiness regrets the error.**