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Vail Resorts (NYSE: MTN) has been a hidden winner on the market in recent years. Shares of the ski-resort operator have more than tripled over the last five years, and jumped nearly 800% over the last decade.
Skiing and snowboarding haven't suddenly come into vogue, however. Instead, those gains can be attributed to two key pillars of Vail's strategy: First, the company has aggressively pursued acquisitions, including its $1 billion takeover of Whistler/Blackcomb in 2016, the most visited ski resort in North America. The second key to Vail's success has been its Epic Pass. Introduced in 2008, the all-encompassing pass gives skiers and riders access to all of the company's resorts for an entire season for one reasonable base rate.
Combined, those strategies have proven to create shareholder value. Vail has leveraged its new properties to offer more varieties of passes, and raise the price of the Epic Pass. The pass has also created a reliable revenue stream for the company, and offered Vail's most devoted customers a good value for their money. In addition, having skiers and snowboarders visit Vail's resorts more often has boosted rental, lodging, and dining income, creating a virtuous cycle. Last year, Vail sold more than 740,000 passes.
However, success in business attracts competition, and a new rival has emerged to challenge the Epic Pass. The newly formed, privately held Alterra Mountain Company has essentially copied Vail's strategy, rolling up several high-profile mountains including Mammoth and Squaw Valley in California, Deer Valley in Utah, and Washington's Crystal Mountain, and has partnered with independent ski resorts like Aspen and Jackson Hole to offer its own all-encompassing season pass called the Ikon Pass for the first time this season.
Both passes start at $899, and like Vail, Alterra is strategically raising prices as opening day approaches. With winter just around the corner, now is peak season for pass sales.
Image source: Vail.
A chill in the air
On the surface, Alterra's move certainly looks like a threat to Vail. For the last decade, Vail has essentially been the only ski resort operator to offer an all-encompassing pass like the Epic as no other company had the properties to match it. Now that skiers and snowboarders have a choice between the Epic and Ikon, it's very likely that some who would have bought the Epic will try the Ikon instead, especially due to the caliber of the Ikon's resorts, as it seems to grant access to nearly all of the top non-Vail-owned mountains in North America.