Vail Resorts announces "organizational changes" |

Vail Resorts announces "organizational changes"

Scott N. Miller
Vail CO, Colorado

VAIL ” The nation’s economic slump hit home at Vail Resorts Thursday.

Vail Resorts CEO Rob Katz Thursday sent an e-mail announcing several cutbacks, including 50 layoffs from the company’s year ’round staff of 3,300. Another 92 open jobs have were eliminated. In addition, the company delayed raises for many workers and announced that all executive pay would be frozen in 2009. Vail Resorts will also stop matching employee contributions to the company’s 401(k) plan.

The company is also reorganizing its marketing department, leaving people at its five resorts ” Vail, Beaver Creek, Keystone, Breckenridge and Heavenly in California ” but doing more centralized marketing from corporate headquarters in Broomfield.

The company refused to disclose what positions were cut or eliminated or at which locations the cuts came.

Katz’s message cited the continuing national economic slump and a decline in lodging reservations as the reasons for the cutbacks. He also wrote that more cuts could come.

“I wish I could guarantee to everyone there would be no more changes,” Katz’s message stated. “But just like some of the smartest economic minds in the world are not sure what is coming next, we don’t know either. And in any event, there will always be more changes ” whether easy or hard to accept. The key is for us to stay ahead of whatever is coming.”

Avon-based ski industry analyst Jerry Jones said Vail Resorts is probably on the right track.

“I think they’re doing the proper thing,” Jones said. “They’re looking at their forecasts, the number of rooms booked and passes sold.” And, Jones added, other companies are doing the same thing.

Intrawest, whose holdings include Steamboat Springs, Copper Mountain and the Whistler and Blackcomb resorts in Canada, announced its own round of layoffs recently.

“We had to be responsive to the economy,” Intrawest CEO Bill Jensen said.

Jensen, the former president of Vail Resorts Mountain Division, said Intrawest is trying to ensure that customer service isn’t affected by the cuts, a pledge Katz made in his message.

“We really went the extra mile to assure what we did didn’t affect guest service,” Jensen said.

So how can a company maintain guest service while cutting staff?

“It’s an overall business issue,” Jensen said. “You have to evaluate the efficiencies technology provides.”

While Vail Resorts’ cuts are small compared to its overall staff size, Jones said there are places a company simply can’t cut.

“The main thing is safety ” on lifts, in crowd control and so on,” Jones said. “I’m sure they’re not cutting back on those.”

Jim Cooper, manager of the Double Diamond Ski Shop in Lionshead, said he’s actually be adding employees this year to beef up his customer service.

“I hate to hear about Vail Resorts’ cuts,” Cooper said. “I think we saw their on-mountain service was cut way too early at the end of last season.

“I think as long a they keep the on-mountain service great, we’ll be OK here,” Cooper said.

Former Vail Resorts president Andy Daly, now a Vail Town Council member, said he thinks the company will live up to its pledge to maintain service levels.

“It’s in their best interest to live up to that,” Daly said. “The whole community is sensitive to the fact that people coming this season are going to expect something extra.”

And, Jones said, Vail Resorts and Vail are in good position, all things considered.

“They have an opportunity to do better than anyone else in this climate,” Jones said. “They’ve got the Epic Pass. That’s a lot of skier days already in their basket.

As everyone by now is aware, we find ourselves at this moment in an unprecedented environment. After almost 5 years of strength, the world’s economy is facing numerous challenges that are depressing consumer confidence and reducing consumer spending to levels not seen in decades.

The banking system has almost ground to a halt, causing huge issues for anyone – individuals or companies – looking for a loan. Our country is already in a recession, with the only unknown being for how long and how severe, but many are already

making comparisons to the Great Depression on 1929.

All of this has combined to cast a cloud over our upcoming ski season. In September, we reported that advance bookings were down significantly and it is still unclear how much of that is folks delaying their bookings or deciding not to come at all this year. Combined, all of these points paint a cloudy picture for the foreseeable future.

But there are also some very bright spots about our Company in particular. The five mountain resorts we operate are 5 of the top 10 most visited in North America and all get outstanding marks from our guests. And regardless of what the economy might do- our mountains will remain forever unique and special.

Our lodging, real estate, retail and transportation businesses (CME) are all in very strong positions and are well integrated into the core mission of our company, providing exceptional experiences at our extraordinary resorts. Our sizeable season pass program, unique not only among other ski resorts, but also within the entire travel industry, remains a tremendous strength, allowing us to leverage the strong customer loyalty our Company enjoys and provide our guests a very advantageous value.

Over the past five years of economic strength, our Company showed great discipline by using our cash to reinvest in our resorts and pay down our debt. As a result, we find ourselves with a very strong balance sheet and assets that have been primed for the future. Most importantly, all of us at Vail Resorts bring a passion for our business that will remain undeterred, even in the face of a tough road ahead.

All of these factors enable our Company to not only survive, but to make us even stronger for the future. During these tough times, we must stay true to our core values and all of our stakeholders and we must be maniacally focused on delivering the exceptional guest experience that we are all about.

But even with all of these strengths, our Company will not be immune to the economy around us and it is imperative that we not stick our head in the sand about some of the bad news that is out there.

Our Company needs to be agile and adapt our efforts to address some of these challenges, but to do so in a way that stays true to our mission. We need to find ways to operate more efficiently without taking us off the long term path. We need to take a proactive, aggressive stance, always being ahead of whatever this current environment may bring our way.

Importantly, our Company had begun the process of identifying efficiencies in early 2008, with particular focus on anything we spend outside the Company, including ongoing efforts on all of our purchasing, our energy use and our own travel and entertainment expenses. We had also begun to reduce fees to outside consultants, trade groups and service providers.

However, with the external challenges continuing, we have decided to implement certain changes to address these new hurdles. In doing so, the senior leadership team went through an exhaustive process to identify any areas where the Company could further reduce expense, including personnel expenses, without losing any productivity or impacting the guest experience.

Making these decisions is always a tough judgment call that will be open to disagreement or second guessing. Some of that is to be expected. However, what I can tell you is that the process used to make these decisions was thoughtful, comprehensive and included significant input from across the Company.

They represent our collective wisdom on what we believe is the right response from our Company, as of today, to the external marketplace. I can also assure everyone that none of the following changes will in any way impact the guest experience

(i) We have made the difficult decision to let go approximately 50 people out of our 3,300 year-round staff and eliminate an additional 92 open or unfilled positions. The positions include employees from the Coordinator to Director levels across all of our business units. Ending someone’s time with the Company is always difficult and I can assure you that everyone impacted will be treated fairly and with dignity.

(ii) All merit increases for those Grades 26-30 have been deferred from October 1 to January 1 and there will be no salary increases of any kind given to any Executives during all of Fiscal 2009. This policy has previously been communicated to those impacted.

(iii) The Company will be suspending its match of employee 401(k) contributions for all of calendar 2009, but will revisit the policy based on the economic outlook for calendar 2010.

(iv) We will be reorganizing our Company-wide marketing efforts, leaving the brand/resort leadership and all local and rapid-response efforts at the resorts, but providing centralized support for all of the creative and paid media efforts we undertake across the company.

To some, these changes will seem drastic, to others it may seem like not enough. More important than that debate, however, is for everyone to integrate the news of these measures and then quickly return to what needs to be our collective focus- delivering the outstanding product and experience to all of our guests.

Toward that end, people often ask me what I worry about during these challenging times. While it might surprise many of you, it’s not the economy, the travel industry or our stock price. It’s the guest experience. In this of all years, when our guests reach into their pockets to give us their hard-earned and precious money, they expect and deserve to be dazzled, delighted and whisked away from this tough environment. It is our responsibility to make sure that happens, and I pledge my full support and the support of the entire leadership team to ensuring that we all deliver the way we know we can.

I realize that the most common question at a time like this is, “Is it over or will there be more changes in the future?” I wish I could guarantee to everyone there would be no more changes. But just like some of the smartest economic minds in the world are not sure what is coming next, we don’t know either.

And in any event, there will always be more changes – whether easy or hard to accept. The key is for us to stay ahead of whatever is coming, ready to show how our Company can outperform not just in good times, but in tough times as well.

All the best,

Rob Katz

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