Vail Resorts Inc. is a hotel and resort company that operates some of the best ski resorts in North America. They are known for operating first-class, premier ski resorts in the country for many years. They are classified in the Resort and Casino industry, segmented into the ski destination resorts. They currently hold six major resorts in the western United States. Among them are Vail, Beaver Creek, Breckenridge, and Keystone which are located in the Rocky Mountains of Colorado. Heavenly resort is located in Northern California with all five resorts being among the top 20 ski destinations in North America according to Ski Magazine in 2006. Grand Teton Lodge Company is located in Wyoming by Lake Tahoe and provides a summer destination for travelers. Their facilities include everything from skiing to lodging, shopping to dining, and allow the clientele everything they need to have the best vacation possible.
Vail Resorts has found a way to increase its profits over the past couple of years despite a decline in the ski resort segment. Vail Resorts has been using a vertical integration approach to keep their competitive advantage over the competitors. With a development company in place, Vail resorts opt to find new alternatives to improve their industry and continue to grow in a declining segment of North America.
1. The company's revenues are dependent on uncontrollable environmental conditions.
2. Almost 70% of revenues are generated during the five-month ski season.
* Geographic Location: Four of the six resorts are conveniently located in Colorado, two of which are located on the largest mountain in North America. Colorado is the premier ski destination in the United States because it has many large mountains and optimal snowfall. Each resort is easily accessible from air and ground travel.
* Innovation of Technology: Vail is upgrading to state-of-the-art equipment in all of their resorts. This gives the customer the assurance that their needs are of most importance to the organization.
* Management: The management staff at Vail resorts includes experienced managers that are extremely knowledgeable in their respective departments. The company employs managers that know how to run a business from the marketing of the company to the maintenance of the resort.
* Size: Resort customers have trouble accessing all of the amenities offered by the various resorts because the resorts are so large.
* Crowds: The resort gets overwhelmed with skiers during prime season which causes long lift lines and crowded ski runs.
* Uncertainty: The Chief Executive Officer is stepping down at the end of the '05-'06 ski season, which could cause a downfall in the company.
* Eco-terrorism: Vail Resorts was hit hard by this threat in 1998 when eco-terrorist group Earth Liberation Front (ELF) protested new developments into untouched wilderness. The group set fire to gasoline-soaked wood and ended up burning 5 buildings of a new resort to the ground. (Maher, 1999).
* Domestic Terrorism: With attacks on the U.S. like the one on New York in 2001, the travel industry saw a decline of 4% from the previous year (TIA, 2004). Such attacks like this in the future could lead to a decline in the leisure industry.
* Aging Population: The median age of the world population is increasing. In the United States alone, there is expected to be an increase from 12.4% to 19.6% of seniors above the age of 65. This will have an effect on segments of the resort and casino industry like the ski segment that depends on able-bodied skiers purchasing lift tickets for 67% of its revenues (sec.gov, 2006). The ski segment and other extreme sporting companies may see a decline in profits due to this demographic trend from now through 2030.
* Strength of Competitors: Vail Resorts offers some of the same services provided by its direct competitors. These companies Quarterly Revenue Growths far surpass Vail's, who has been in the negative. Although Vial has enjoyed top market share for about 10 years running, it must realize that the competition is gaining financial strength and cannot be overlooked (Yahoo!Finance, 2006).
* Strength of the U.S. Dollar: Canadians often travel to the states to spend discretionary income when the strength of the U.S. Dollar exceeds that of the Canadian. Currently, the Canadian dollar is weaker that the U.S. which means Canadians must pay more if they cross the boarder to ski. Therefore, U.S. ski companies and resorts are currently losing most of their international business due to a stronger dollar (Yahoo!Finance, 2006).
* Global Warming/Poor Snowfall: A significant issue that severely bruised profits for Vail Resorts in 2003 and 2004 was inadequate snowfall and above-freezing temperatures during the ski season. This is a constant threat for the industry, as the natural environment is beyond their control and the industry depends on it. According to the COO of Aspen Ski Co., global warming is the greatest threat currently facing that company (NPR News, 2006). It faces the industry as a whole.
Vail Resorts falls under the "Destination" segment of the Resort and Casino industry, which lies within the Vacation and Leisure sector. Companies in this industry are defined as "companies that develop, own, manage, and/or operate tourist resorts and market membership vacation packages" (Hoovers Inc., 2006). Vail competes with a wide range of companies for market share, including amusement parks, gaming companies, cruise companies, and sporting events.
The Resort and Casino Industry is coming to the end of the shakeout stage and entering maturity. Demand is now saturated, as the rate of growth has slowed. There has been intense rivalry between key competitors, and they are now beginning to focus mainly on minimizing costs and building brand loyalty. This change is due to a strong desire to become more efficient, as well as to remain competitive in the industry (Kanther, 2006).
The industry is moderately fragmented but heading towards consolidation through massive horizontal integration in the destination segment. During the 2004/2005 ski season in the U.S., there were 492 ski areas in operation, compared with 727 in operation 20 years ago (NSAA, 2006). However, there are still too many companies in operation to consider the industry, or even the segment, an oligopoly. Still, four or five major companies dominate the ski destination industry.
Vail's leading competitors, according to Hill and Jones, p. C17, 2004, include Intrawest, owning 4 resorts and controlling interest in Copper Mountain; American Ski Co., owning 2 resorts, the three Aspen mountains and Snowmass; Aspen Ski and Golf, owning one resort in Aspen, Colorado; the City of Denver, owning Winter Park Resort; and Telluride Gold and Ski.
The industry is characterized by heavy competition, which is currently dominated by the Las Vegas resorts and casinos. Based on industry price performance, Vail Resorts has four main competitors. Vail ranks third in the world in this category. Ahead of Vail stand Ctrip.com International, Ltd. from China, who provides travel related services and internet-related advertising, and Diamondhead Casino Corporation, which owns and operates a casino resort in Diamondhead, Mississippi. Behind Vail Resorts lands Riviera Holdings Corporation which owns and operates the Riviera Hotel & Casino in Las Vegas, Nevada and the Riviera Black Hawk Casino in Black Hawk, Colorado, and Nevada Gold & Casinos, Inc. which develops, owns, and operates gaming facilities, lodging, and entertainment facilities in five states (Hemscott Americas, 2006).
Vail Resorts currently enjoys 43% of the total market share in the ski segment, which is more than any of its immediate competitors (according to each resort's annual skier days, calculated as one skier purchasing a lift ticket for one day) (Hill and Jones, p. C20, 2004). During the '04/'05 ski season, VR had approximately 5.9 million skiers. The company commanded about 10.4% of the U.S. skier visits, as well as 7.9% of the total North American visits.
Two recent events in the industry are particularly worth noting. Among them is the development of a new ski village at Wolf Creek, CO. Equipped to house 10,000 people year-round, it is said it will be the "largest ski resort village in Colorado" (Pasquariello, 2005). If marketed correctly, this new development may threaten to take some of Vail Resort's hard-earned business. Also, the popular ski resort Mt. Tremblant, one of Intrawest's finest, was forced to close over the busiest times of the year; Christmas. Almost 1,500 of the union workers went on strike, accusing the resort of "negotiating in bad faith" after they demanded a 15% raise over the next three years (Pasquariello, 2005). This had a threatening effect on the ski community, as well as the surrounding communities that supplied these workers.
Many factors have contributed to shaping the industry, including environmental, competitive, technological, economic, sociological, and demographic. In keeping with responsible stewardship of the environment, ski resorts in 19 states have addressed the threat of global warming through a "Keep Winter Cool" program by taking proactive measures to reduce the amount of CO2, the leading cause of global warming, they emit into the environment. Measures include reducing their consumption of electrical energy, purchasing or generating renewable energy, and reducing transportation demands. Also, in 2000, more than 72% of the U.S. ski industry (including Vail Resorts) adopted the "Environmental Charter" which is a list of best environmental practices for resorts dealing with energy conservation, water conservation, fish and wildlife habitat protection, air quality, and waste reduction. As a result, resorts are conserving approximately 335 million gallons of water for snowmaking per year, 42 million gallons of water for consumptive uses, 39 million kilowatt-hours per year of electric energy, 8,190 tons per year of solid waste from landfills, and 46 million vehicle miles traveled (Link, 2004).
In the competitive environment, the Rocky Mountain region set an all-time high record of skier visits in the 2004/2005 ski season with a total preliminary estimate of 19.33 million visits, which is up 2.4% from last year (Menozzi, 2005). Also, on May 21, 2005, The NSAA announced its 12 winners of the National Marketing Award based on 3 categories: Best Overall Marketing Campaign (Aspen/Snowmass, Stowe Mountain Resort, Schweitzer Mountain Resort, and Moonlight Basin); Best Program to Increase Trial by New Participants (Intrawest/Winter Park, Stevens Pass, Mount Sunapee Resort, and Tenney Mountain); and Best Program to Increase Overall Frequency of Existing Participants (Aspen/Snowmass, Sierra-at-Tahoe, Loveland Ski Area, and Moonlight Basin) (Hone, 2005).
Due to technological advances in virtual reality, resorts can now simulate the experiences common to the activities it provides such as skiing and snowboarding (Coy and Haralson). Economic conditions also posed an opportunity last ski season. Because the U.S. Dollar was down compared to the Canadian Dollar, resorts benefited from an influx of international visitors (Menozzi, 2005). In the United States, total national ski pass sales have grown 29% over the past four seasons, which means that more people than ever are skiing. Conversely, an emphasis on putting away more in savings each year will reduce the amount of vacation time spent by the average family unit, which may have a negative effect on total revenues (Orman, 2006). In the sociological realm, an increase in helmet usage indicates heightened safety awareness, which is possibly a result of an aging visitor base (Hawks, 2005). Finally, one of the greatest factors influencing and possibly threatening the industry currently has to do with age (Hawks, 2005). There has been stabilization and possible decline in visitors ages 7-18, growth in visitors ages 18-34, and a significant rise in visitors ages 45 and over.
This increase in age of ski resort visitors reflects the most glaring trend facing the industry; that of steady growth in visitors ages 45 and over. Other trends include the consolidation of resorts, the recent merging of lodging and entertainment concepts, and the use of resorts as mixed-use developments. Industry experts predict that in the next 5-15 years, there will be an increase of Americans traveling abroad decreasing revenue for domestic ski companies. Also, local resorts will see an increase in profits, and national, fly-to resorts a decline, due to dump in airline travel. Resorts will begin to adopt the characteristics of theme parks, integrating a regional sense of culture and geography, and will focus more on interaction and participation of guests. In addition, more resorts will integrate full/part-time lodging, offering a complete community setting, and will create virtual reality by using more simulators. Finally, more seasonal resorts will begin to operate year-round. Vail Resorts has already been on the cutting edge of many of these trends and predictions (Coy and Haralson, 2005).
Vail Resorts has one dramatic distinctive competency, which is the ability to provide exceptional service to customers seeking a mountain getaway. This competency is built upon Vail's reputation as operating quality ski resorts, as well as its reputation for great customer service. Many of Vail's visitors are repeat customers who have experienced first-hand the quality and convenience of the resorts' vast array of amenities.
While this competency is effective today, is must be sharpened and refined in the years ahead in order for the company to compete in the changing face of the Resort and Casino industry. Two other large and well-known ski companies, American Ski Co. and Intrawest Corp., have successfully implemented similar strategies. Although Vail has outdone its competitors in the past, it is now in danger of being passed by, particularly by Intrawest Corp, who now exceeds Vail in terms of net revenues and customer service review. Vail Resorts may need to develop new distinctive competencies, or perhaps refine its current strategy.
Vail's mission statement is clearly stated on its website:
"Our mission is to create exceptional experiences at our extraordinary resorts, all the while balancing the wants and needs of four key constituencies: our communities, employees, guests, and shareholders."
As stated above, Vail Resorts seeks to cater to the desires and needs of what it considers its four main stakeholders. By listing "communities" first, the company implies that it considers the communities in which the resorts are located in or near its most important constituent. The reason for this is unclear, but perhaps it has to do with maintaining good favor with the State of Colorado, since the land provided by the state is crucial to the company's operation. Secondly, the mission statement mentions catering to the wants and needs of its employees, which indicates an appreciation for the lifeblood of the company; its workforce. The company seeks to provide its customers with safe working conditions and a friendly environment. Finally, the customers and shareholders are introduced.
Since these two groups are the primary reasons the company exists, it would seems natural to list them first. While the communities and employees are critical to the success of the company, they are not the driving force behind the operations. A possibly more functional order may be to list first the customers, since they are who the company ultimately seeks to please, and then the shareholders, because they bear the financial burden and therefore carry significant interest in the success of the company. The employees and communities would then follow. In terms of broadness and appropriateness of content, the statement is functional. It allows the company to expand its operations to other countries, or perhaps other industries, without having to adopt a new mission.
Ultimately, the goal of the company is to meet the demands of the customer. However, the attainment of three main goals motivate the operation of Vail Resorts; the sale of real estate, the provision of accommodations for visitors, and the provision of a wide variety of mountain activities. These three goals are referred to as the company's consumer objectives, and the attainment of each affect the consumer's ultimate experience. Vail Resorts continues to seek new and creative ways to enrich the experience of their customers by providing a wide range of services such as restaurants and shops. It is the focus on these goals that ensures the profitability and maintains the company's competitive. By achieving these goals, the company also creates brand loyalty and thereby increases yearly revenues.
Vail is currently meeting their objectives to increase profitability. The net income for 2005 was just over $23 million, as reported by Denver business journal in March of 2005. This is an improvement from 2003 and 2004, during which the Company reported a net loss of $8.5 and $5.5 million, respectively. This is due to more ski-appropriate weather conditions, as well as the company's efforts to improve customer responsiveness. Analysts were surprised by this positive turn around contributed this to the increased ski school attendance. This example shows how Vail is working towards their objectives.
Vail was founded by two men in 1962 named Earl Eaton and Pete Seibert. In January of 1961, Vail got the final approval to begin construction on the ski area. Construction began a year later in 1962, and by the end of the same year Vail Mountain opened with two chairlifts, one gondola, and a lift ticket with a price tag of $5.00. The opening season had a grand total of 55,000 skiers (Vail Resorts).
Construction continued and now-famous landmarks were constructed. Finally in 1966, the town of Vail was established. By 1985, George Gillett purchased Vail Associates and high speed quad chairlifts were established to help the skiers get to higher elevations on the mountain. In 1992 Apollo Partners purchased Vail Associates, which in turn became Vail Resorts Inc., which was followed by the acquisition of ski resorts Keystone and Breckenridge. The acquisition of these ski resorts was a major change that helped Vail succeed in the long run by appealing to a broader market. Both Keystone and Breckenridge have lower prices than Vail Mountain, and attract more single- and college-aged customers (Vail Resorts).
The company then added the Real Estate segment which comprised 6 percent of the company's total revenues in 2004. Mountain revenues account for 69 percent, and revenues from lodging activities account for the remaining 25 percent. Having these additional revenues allowed Vail to establish itself and provide a greater level of customization to its guests. Owning a house on the mountain allowed skiers to visit more frequently during the winter season, as well as have a getaway during the summer season (Vail Resorts).
Vail owns four different ski resorts in Colorado, a resort in Lake Tahoe California, as well as a summer resort in Grand Teton. Along with these six resorts, Vail owns Rock Resorts which is a management company that "manages 10 luxury resort hotels across the United States" (Vail Resorts).
Vail Resorts offers a complete package to the vacationer of all ages. These activities can range from indoor to outdoor activities that can accompany the visitor during all months of the year for any occasion. All of the products that Vail offers will be complete with upscale, top quality amenities.
The majority of Vail Resort's visitors are there for the challenging ski terrain and the top quality service. Vail offers some of the most challenging ski terrain Colorado has and offers instructional courses for beginning to expert skiers. Select resorts have begun offering instructional ski lessons for select individuals. Classes such as: over the age of 50 only, female only, and kids Ski Zone packages have been implemented to provide the skier a more comfortable learning experience. They have recently started to offer amenities that fit the eye of the snowboarders dream. Many of the resort now offer snowboarder parks that include rails, pipes, jumps, terrain parks, and much more. For the person that prefers not to ski for the day, other activities are offered that allow them to enjoy the great outdoors without hitting the slopes. Activities such as ice skating, tubing, ski biking, snowshoeing, snowmobile tours, hiking trails, golf courses, hot-air balloon rides, and even a kid's snowmobile racetrack has been added to the list for the visitor's pleasure. (Snow, 2005)
Many indoor activities are offered at Vail Resorts as well. The most enjoyable indoor attraction is the many shopping areas the various resorts have to offer. There is a variety of shops where you can find gifts, souvenirs, jewelry, art, clothing, and much more. Other activities Vail Resorts offer will include museums, comedy shows, health spas, amphitheaters, arcades, indoor ice skating, bowling, and a variety of night clubs and bars. (Snow, 2005)
Vail Resorts targets the consumer that trends more towards the upper class in society. These customers are willing and able to pay the top price in the industry to get quality goods and service. Vail, in return, offers only the best equipment and service one can expect. The prices of the various services offered will vary in price according to the time of year and season. Other factors that determine the price include the length of stay and the number of individuals in the group.
Lift passes, which must be purchased to ski at any of Vail's resorts, will vary in price according to the time of the ski season. Using Vail as an example, you will pay $59 for a one day lift ticket (not including ski rentals) from November 18-22. Starting on December 9 through April 15, you will expect the price to increase to $81. These rates vary according to the different resorts that Vail Resorts offers and to the time of the season you wish to visit. Equipment rentals can be pricy as well, but Vail Resorts only offer top quality ski equipment to enhance your skiing experience. You will only find professional brands such as Burton, Salomon, and Head when purchasing ski rental equipment. Daily rentals for this equipment will start at $30 for adults. Discounts will be given if you purchase lift tickets for a number of days at one time. For example, you can purchase a four day lift ticket for about $212 during the first weeks which will save you $24 if you purchase an a day-to-day basis. Vail resorts also offers a season pass which will allow the person who visits the resort often access to all of Vail Resorts slopes. This pass for the 2005-2006 seasons can be purchased for around $1699. (Snow, 2005)
Vail Resorts offers some of the finest dining experience money can buy. They also offer a wide variety of restaurants that will fit the budget of many. There restaurants range from family-based to luxurious dining. They range in prices and one can find a menu that starts at just $8. You can also find restaurants that offer a four-course dining experience with excellent service that will range in the hundreds of dollars. Vail has over one hundred restaurants and bars that will surely quench your hunger.
As with the restaurants and ski prices, you will find the lodging to be high as well. These prices are set to appeal to the upper class society as well. With one night stays ranging from upwards of $150, packages can be purchased for several nights that are much more reasonable. These packages include such entertaining options like unlimited skiing, golfing, and other activities that make staying in their lodges worth while. Vail Resorts also offer other packages which include airfare, lodging, ski lift tickets, and equipment rentals. Whatever your desire is on your vacation, there will be a package that will fit your need. (Snow, 2005)
Vail Resorts is located in Colorado on top the spectacular Rocky Mountains. This is the prime location of the United States because is has optimal snowfall during the winter months. All the resorts are located about an hour away from the larger cities which allows for extreme relaxation and peace, but not too far to travel to get away for a day or so.
Heavenly, located in Northern California by Lake Tahoe, also offers first class skiing experience. Heavenly consumes more "northern California visits than any other ski resort in the country" (Vail Resorts, 2002).
Vail Resorts has limited there promotional strategy to that of word of mouth. They rely on their current customers to have such a great experience that they return years and years to come. They also expect that the customers will relay by word of mouth how great their experience is. Other strategies have recently been used like hosting the X-games qualifier, which brought many professional skiers and snowboarders to the resort. This brought in large crowds and television exposure which will help sales in the future. Magazines often rate ski resorts as to the quality and the experience gained from the resort, which will be distributed to people giving them a reassurance about the resort. In addition to these ski events, Vail also sponsored several LPGA golf tournaments which gave exposure to the resort. For the researcher, Vail has a very detailed website which will give you any information needed before coming to the resort.
Through Vail Resorts production analysis, is has achieved some of the highest rankings in the industry. Vail Resorts acquired five resorts and which are some of the best resorts in North America. Ski Magazine rates resorts in according to what the readers experience the most pleasure at. It has rated Vail Resorts to destination, Vail, number one thirteen times in the past seventeen years. Although it dropped to number two in 2006 behind Deer Valley, it is still one of the top resorts of all times in North America. Both Beaver Creek and Breckenridge were ranked in the top ten in this most resent poll. Vail Resorts other two destination, Keystone and Heavenly consistently have been among the top twenty resorts by this magazine. With their state-of-the-art facilities, excellent customer service, and these reviews, Vail Resorts is able to offer a premier resort to the skiers dream. (Ski Magazine, 2006)
The efficiency and effectiveness of Vail Resorts production, has customers returning to their resorts every year. Behind all of this strategy is Vail Resorts Development Company, which is responsible for the planning, marketing, design, and construction of both the infrastructure and vertical development. They emphasize on the creation of lodging, employee housing, new architectural themes, leasing of new restaurants, retail operations, skier service space, marketing and managing of residential real estate, and the marketing and selling of its real estate developments. (Development, 2006) The company researches the needs and wants of the customer to allow them to have the best experience possible. They have been able to figure out these desires of the customer and implement them by adding longer slopes, terrain parks, more restaurants, ski schools, and so on to provide the best environment for the visitor.
Vail Resorts is constantly updating to state-of-the-art equipment to give the visitor the best experience possible. Vail has a capacity of over 53,000 while the rest of the resorts have a capacity of around 30,000. These are some of the largest numbers as far as capacity goes in the industry. (Vail Resorts, 2002)
With this production strategy being implemented everyday, it is no wonder Vail Resorts exceeds in every aspect of the industry. They offer the best skiing, equipment, lodging, and restaurants money can buy. With the use of the Development Company, Vail Resorts will continue to stay atop the industry for many years to come.
Vail Resorts is divided up into three main revenue-generating segments; Mountain (67%), Lodging (24%), and Real Estate (9%). Total profitability has jumped after a two-year rut in the red in '03 and '04 due to heavy investment activities, and is finally back in the black. Although in fiscal year 2005 profitability looks boarder-line healthy, but there is still much room for improvement. With an ROIC of only about 2.16%, while it is better than for the two previous years, the company is not currently creating much value(U.S. SEC). However, net profits have been down due to the massive investments the company has been making over the past five to ten years. This is expected to improve as profits from these investments are realized. In the resort and casino industry, according to Yahoo!Finance, Vail Resorts maintains current market capitalization of $1.2 billion, which is in a healthy top 28% for the industry. Vail's Long Term Debt to Equity Ratio is currently just below the industry average which is good, but the company should not acquire any new long-term debt until it pays off some if it's current notes in order to keep that number down. Finally, with a current ROE of 4.13%, Vail Resorts is performing excellently in comparison to the industry average of -69.7. Overall, Again, the company expects to reap the returns of recent investments in the near future (U.S. SEC).
Although relatively strong now in comparison to previous years, Vail's cash flow is inconsistent. It relies, as do the company's profits, on natural environmental conditions. If cash flow is steady over the next few years, the company has two options. It may pay off some of its debt ahead of schedule. It may also finance many of its own investments, which may include expanding operations, without acquiring more long-term debt to pay for it. The decision depends on how management wants to strengthen the bottom line, either by boosting the debt-to-assets ratio, or by expanding operations. However, unless the company can prove that this recent upward trend in cash flow will continue, it should not pursue either of these options.
Vertical integration is not a common practice in the resort industry because of the Department of Justice involvement and anti-competitive environment. Vail Resorts does partner with 18 companies including Volvo, Sprint, and Pepsi, each highly competitive in their respective industries, to bring their customers the best in quality and service. These companies are to Vail what suppliers are to a manufacturing firm. Without them, the company could not operate. Vail strives to maintain good relations with its partners, in an effort to reduce partner turnover as much as possible (snow.com, 2006). The buyers of Vail's product are the end consumers. They are the purchasers of the lift tickets, the guests at the hotels and the shops, and the like. Vail has dominating market share in its industry and is on the cutting edge in regards to the latest resort concepts. These factors combined with the fact that Vail offers superior customer service and quality to its guests weakens the threat of powerful buyers to little, if any.
The merger and acquisition trend that began in 1897 with sixty-nine mergers continues today at a rapid-fire pace. 3,700 mergers were reported to the anti-trust regulators in 1997 alone. Vail Resorts has been an active participant. Horizontal integration by Vail and companies like it is a series of strategic moves by which a company may increase market share and market power. This is a sign of the maturing industry that Vail Resorts is a part of. The belief behind these mergers is that the consolidation of the industry will allow ski companies to offer consumers lower ticket prices, more improvements, and more amenities (Kanther, 2005).
One of the key competencies of the Information Technology department at Vail Resorts is creating intriguing and entertaining web sites. These web sites are essential in marketing to a large amount of people in a large area of space. Web sites everywhere are seen by millions of people each day; Vail equips theirs with simple navigation and access to purchase lift tickets and resort packages among the many amenities it offers. The web sites Vail owns and operates are www.snow.com, www.vail.com, and www.vailresorts.com. These sites are created with high end software to create a very "hands on" experience.
When creating a web site, one must incorporate ease of use, simple navigation, fast loading speeds and attractive colors. Vail has achieved all of these characteristics, in which when users first log onto the site, they are prompted to select the connection they use; in this case High Speed (DSL, Cable, T1, Broadband alike, using Macromedia Flash) and Low Speed (Dial up alike). Once selected, the user is taken to a page where they may query information about the mountain, weather, current events, vacation planning, and current activities.
This technology has allowed Vail to market itself to many people electronically, while keeping digital records and dates maintained through databases. Keeping records electronically, rather than on hard copy, allows the company to save time and money. In turn, the company no longer has to deal with keeping books and records by hand. Vail stays up to date with the most readily available technology to help market their product to the world. Vail has created a successful web site, both with advertising the mountain and their lodging amenities. Having a cutting edge web site can be a creative competitive advantage which will help Vail to be successful for years to come.
Just as Vail ski resort has endeavored to expand their customer base to increase probability and superior service in their industry. We seek to offer services throughout the year instead of, for months, which will increase a steady profitability and increased demographic region. One strategy is to expand Vail's operations on a global scale. This approach will attract more customers creating the loyalty to the company. In addition, one market we are endeavoring to reach is the Ecuadorian population. The in the environmental conditions are favorable during the off-season in the United States. Another plan is to offer summer activities within United States. This will require new products to meet our customer's needs in the resorts thereby, increasing profitability and diversifying on the services. We believe the strategies will help better utilize the months during off season.
* Create a strong presence in the Australian market through the global expansion of operations to increase the Company's profitability in what are now the "off-season" months.
* Create a strong presence in the Ecuadorian market through the global expansion of operations to increase the Company's profitability in what are now the "off-season" months.
* Expand operations through product proliferation by the addition of resorts with an emphasis on extreme summer sports to reap the benefits of the summer climate in the United States, particularly in the western region.
As listed in the strategic alternatives section, all three possible alternatives would help the company with their financial struggles during the "off-season" months of the year. Although, further research shows that only one alternative will feasibly help solve this problem. By expanding their operations into the Australian market of the leisure industry, Vail Resorts can produce profitable income during the United States "off-season." With Australia being conveniently located south of the equator, the winter months of this region is directly opposite of the United States. By merging with a ski resort that already exists and holds a strong name in the Australian market, Vail Resorts can implement their marketing strategies with the established company's strategies and can produce a "top-of-the-line" ski resort in Australia. This is a low risk plan that can produce substantial profitability for Vail Resorts. It will increase their profits during the "off-season" months as well as having a back up source of income if the environmental conditions in the United States bring a downfall to the ski industry during the winter months.
While expanding our operations into the Ecuadorian market might seem like a feasible alternative, further research shows that the profitability in this market is not as substantial as the Australian market. By comparing the existing markets in the two countries, we determined that profitability would be greater in the Australian market.
Expanding our operations into the summer segment of leisure activities would be a great way to increase profitability, but we believe that this would be a hard market begin. Vail Resorts has excelled in the ski industry and does not have the experience necessary to produce a summer resort that will stand out from the others. The cost of acquiring the right personnel to achieve such a high quality summer resort would only further the long term debt of the company, instead of reducing it. Therefore, expanding our operations into an already existing Australian ski resort would be the best alternative for Vail Resorts.
Vail Resorts will implement a plan to acquire a 51% ownership in another ski resort that operates during the North American summer months. By integrating with a company that operates south of the equator, Vail will be able to generate revenue during both seasons of the year. This will help reduce the risk of lost revenue if the environmental conditions during the ski seasons are not optimal, as well as increase the revenues of the company during the resorts off-season months. Packages will include a season pass for all of Vail's resorts, including the added resort. This will allow the dedicated skier to enjoy their recreational sport all year long.
With this plan in mind, we have chosen to purchase Mount Buller, which is located in Australia. The winter season in Austrailia begins in May and lasts until the end of August, with temperatures ranging from the high forties to the mid-sixties. On top of Mount Buller, temperatures range from the high twenties to the mid-thirties. This will allow for beautiful skiing and snowboarding conditions during the United States summer months. The winter season in Australia begins as the United States summer season begins in the United States (cia.gov, 2006).
Vail Resorts plans to finance the entire amount of the investment in Mount Buller from "Cash and Cash Equivalents" in order to avoid long-term debt. In order to give Alpine Resorts a lucrative profit of 15 percent, Vail Resorts plans to offer $102.3 million for 51 percent ownership in the company. This amount will be paid in full with cash at the time of purchase. In addition to the purchase price, $10 million will be allotted to improvements on the premises, for items such as guest accommodation renovations and on-mountain equipment, and $20 million will be put towards the marketing and promotion of Mt. Buller/Vail Resort in the United States and Australia. Vail Resorts expects a healthy return of 16.59 percent from this investment, which is based on 51 percent of Mt. Buller's forecasted profits for 2007 derived from a moving average of the previous 2 years.
The main purpose of merging with a major player in the Australian ski market is proliferating the Vail name and the quality that it implies across the globe. This "new" resort will appeal to the higher-income cliental in Australia, but an effort to maintain its current client base will be made. This association with Mount Buller will help to give Vail Resorts an already established customer base. These two intangible assets will provide strong brand loyalty, thereby increasing the future return on investment. In order to penetrate both markets, we will allocate 50% of our advertising budget to each country to raise awareness of the merger.
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