Vail resorts flexes retail muscle |

Vail resorts flexes retail muscle

Steve Raabe
The Denver Post

VAIL – Vail Resort Inc.’s evolution from simply a ski-area operator to a corporate conglomerate has chilled its relationship with some local business owners who say the company is squeezing out competition.

The resort giant has earned accolades for its long-term strategy of adding lodging, retail, dining and ground transportation to its core ski business, becoming a rarity among resort operators – a publicly held entity that is performing well.

But Vail Resorts’ move toward vertical integration also has brought out dissent from those who say the company has harmed competitors, shut down its critics and abandoned the good-neighbor persona that was once its hallmark.

“They’ve gone too far,” said Patrick O’Winter, chief executive of Lakewood-based Christy Sports, a competitor to Vail Resorts’ retail operations. “They control so many aspects of the business. They dictate who does what and where.”

O’Winter said Christy has suffered multimillion-dollar revenue losses from Vail Resorts forcing his stores out of prime retail locations to make way for Vail-owned sporting-goods and rental shops.

Broomfield-based Vail Resorts said its vertical integration is good for customers, allowing them to book a complete vacation with one phone call or mouse click. The company handles all the details – and pockets all the revenue from customers patronizing company-owned hotels, rental shops, retail outlets and restaurants.

Analysts laud the diversified strategy as one of the best in the travel business. The $1.5 billion resort company routinely outperforms its peers in financial metrics and used its integrated structure to sidestep the worst of the recent recession.

Critics, however, chafe at what they view as an anti-competitive conglomeration that has turned the mountain resort into a company town at the expense of independent business owners.

Longtime Vail business owner Kaye Ferry describes Vail Resorts’ style as “arrogant” and said the company’s proposed $1.5 billion “Ever Vail” mixed-use development in west Lionshead will further funnel business away from local merchants.

“They’ve always been able to hold the best retail locations, and they’ve been able to capitalize on that,” Ferry said. “Does that make them bad guys? No. But it characterizes their style of doing business.”

Vail Resorts chief executive Rob Katz said the corporate-diversification strategy has been well-received by consumers and has helped all businesses – company-owned and independent – by maintaining a steady flow of visitors, even as the recession hit other tourism firms hard.

“What’s important is bringing more people to our resorts,” Katz said last week from the panoramic 10th-floor conference room of Vail Resorts’ headquarters at Interlocken business park in Broomfield.

“Our goal is to deliver the best guest experience possible,” he said. “We’re performing well because of the guest experience we deliver.”

Vail’s success has occurred in contrast to competitor American Skiing Co., which went out of business in 2007. Another major competitor, Intrawest, owner of Steamboat Ski Resort and manager of Winter Park, is attempting to restructure $1.2 billion in debt.

Vail Resorts’ vertical growth spurt kicked off in the mid-1990s. Bankrolled with $266 million from an initial public-stock offering and fresh off its acquisition of Breckenridge and Keystone, Vail Resorts began buying hotels, slopeside real estate and retail operations.

From its start in 1962 as a single-mountain ski area with a $5 lift ticket, Vail Resorts now owns, co-owns or operates:

• Five major ski resorts.

• 3,900 hotel and condominium rooms.

• 145 sporting-goods and rental stores.

• Six golf courses.

• 90 restaurants.

• Colorado Mountain Express, the main shuttle service from Denver to mountain resorts.

Vail Resorts’ revenue grew from $435 million in fiscal 1998 to $1.15 billion in 2008 before taking a recession-related hit to $977 million last year.

As it has become vertically integrated, some of Vail Resorts’ other actions have created tensions.

Vail caused a split in the ski industry in 2008 by canceling its membership in Colorado Ski Country USA in a dispute over the trade association’s mission and budget. As a result, Ski Country lost its largest member and $800,000 in annual dues.

Undercurrents of concern from Eagle County residents about Vail Resorts’ connection to the community were stirred up anew in 2006, when the company moved its corporate headquarters from Avon to Broomfield.

For Christy Sports, friction with the resort operator first arose in the 1990s, after Vail Resorts declined to renew store leases that Christy held for prime spaces at the base of Keystone and Breckenridge.

After Christy vacated the storefronts, Vail Resorts placed its own retail and rental operations in the sites.

O’Winter said he lost up to $2 million in annual sales and $400,000 in profits from each of the two shuttered stores.

Vail Resorts’ big push into sporting-goods retail came in 1998, when the company merged its relatively small retail arm with the Denver-based Gart family’s chain of stores in a new entity called Specialty Sports Venture.

Ken Gart, president of the retail unit, said he sees plenty of competition in mountain-resort sales and rentals.

“There’s significant competition in all of our markets,” he said. “And from a customer standpoint, I don’t think people care who owns a store.”

O’Winter views the competitive landscape as Vail Resorts controlling the majority of preferred sites next to ski lifts, with other chains relegated to less-desirable locations.

Hard feelings surfaced again this ski season when, according to O’Winter, Vail Resorts attempted to shut down a Christy Sports booth at a Vail-sponsored Mountain Dew promotional event at Breckenridge.

Christy refused to leave the event, and Vail eventually dropped the request, O’Winter said.

“But it’s an example of their abuse of power, and it’s typical of their heavy-handed style,” he said.

Katz said he is not familiar with either the Mountain Dew incident or Christy’s leases at Keystone and Breckenridge.

However, he said Vail Resorts’ position in either case would be to protect the company’s financial interests and to take appropriate advantage of sponsorships or retail opportunities.

Ghiqui Hoffman, owner of the Laughing Monkey women’s apparel store in Vail, said Vail Resorts’ strong presence in retailing has changed the character of the community.

“We’ve always valued mom-and-pop businesses here,” she said. “But by having more corporate-owned stores now, it makes the shopping experience less exciting for customers.”

Lifthouse Lodge owner Packy Walker said he has mixed feelings about Vail Resorts’ ability to funnel guests into its 99-room Arrabelle at Vail Square hotel across from his lodge.

“I figure they will book their own places before they will help us book ours. Why wouldn’t they?” he said. “But the Arrabelle has been good for Lionshead. It’s brought a lot of interest in.”

Vail Resorts’ Katz notes that vertical integration, giving the ability to manage many components of a guest’s visit, enabled Vail to recently receive its highest score ever in an industry survey that measures customer loyalty.

“There is a lot of value to that style,” said Gary Horvath, managing director of the Business Research Division at the University of Colorado’s Leeds School of Business. “It’s a very smart thing for Vail to do. If they can control all aspects of a visitor’s experience, they can ensure that all those experiences are positive.”

What’s good for Vail Resorts comes at a cost to local businesses, said David Gorsuch, who opened his landmark Gorsuch Sports in Vail in 1966.

“It’s tough on small retailers,” he said. “They’re after every dollar that comes into town. That’s the American way, I guess. We just need to focus on providing great service to our customers and find a way to get along with the big company.”

Steve Raabe: 303-954-1948 or

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