Marketing Analysis of Vail-Colorado - Research Paper Example

Running Head: Vail-Colorado Vail-Colorado of the of the Vail-Colorado 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). Marketing Analysis 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. Production Analysis 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. Financial Analysis 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). References Coy, Jeff and Harralson, Bill. (2005). 17 Predictions on Future Resort Development. Retrieved February 6, 2006, from the International Society of Hospitality Consultants (ISHC), website: http://www.ishc.com Hawks, Troy. (2005). NSAA Releases 2005 National Demographic Study. Retrieved February 6, 2006, from the National Ski Area Association (NSAA) website: http://www.nsaa.org Hemscott Americas. (2006). Industry Center - Resorts and Casinos. Retrieved February 5, 2006, from Yahoo!Finance, website: http://ca.us.biz.yahoo.com Hill, Charles W. L. and Jones, Gareth R. (2004). Strategic Management: An Integrated Approach. Boston: Houghton Mifflin Company. Hone, Keri. (2006). Events for National Safety Awareness Week 2006. Retrieved February 6, 2006, from the National Ski Area Association website: http://www.nsaa.org Kanther, Fredl. (2006). Merger and Acquisition Trends. Retrieved February 5, 2006, from Manfred G. Kanther's Web Page, website: http://home.att.net Kanther, Manfred G. (2005). Merger and Acquisition Trends. Retrieved on February 16, 2006 from Manfred G. Kanther's website: http://home.att.net/kanther/chap3.html Link, Geraldine. (2004). Ski Industry Releases Annual Environmental Report. Retrieved February 6, 2006, from the National Ski Area Association (NSAA) website: http://www.nsaa.org Pasquariello, Alex. (2005). Developers Push Ahead With Mammoth Ski Village. Retrieved February 5, 2006, from High Country News.Org, website: http://www.hcn.org United States Securities and Exchange Commission. (2006). Form 10-K. Retrieved on February 27, 2006 from the Securities and Exchange Commission website: http://sec.gov/Archives/edgar/ data/812011/000081201105000035/form10k.htm Yahoo!Finance. (2006). Industry Browser - Services - Resorts & Casinos - Company List. Retrieved on February 27, 2006 from the Yahoo!Finance website: http://biz.yahoo.com/p/711conameu.html Menozzi, Laura. (2005). Preliminary Report Indicates 2004/05 Season as Fourth Best on Record. Retrieved February 6, 2006, from the National Ski Area Association (NSAA) website: http://www.nsaa.org (March 2005). Vail Resorts has profitable second quarter. Denver Business journal. Retrieved on March 7, 2006 from Denver Business journal's website: http://www.bizjournals.com/denver/stories/2005/03/07/daily41.html (2/28/06) Hoovers, Inc. (2006). Resorts. Retrieved February 5, 2006, from Hoovers, a D&B Company, website: http://www.hoovers.com NSAA. (2006). Retrieved February 6, 2006 from the National Ski Area Association (NSAA) website: http://www.nsaa.org Orman, Suzie. (2006). Retrieved February 9, 2006 from the Suzie Orman Show on CNBC. Development. (2006). Retrieved on February 20, 2006 from Vail Resorts Development Company's, Website: http://vrdc.com/index.cfm Ski Magazine. (2006). Retrieved on February 20, 2006 from Ski Magazine's Website: http://www.skimag.com Snow. (2005). Retrieved on February 20, 2006 from Vail's Website: http://www.snow.com Vail Resorts. (2002). Retrieved on February 20, 2006 from Vail's Website: http://www.vailresorts.com (2006). Our Partners. Retrieved on February 27, 2006 from the Vail Resorts website: http://snow.com/info/partners1.asp Read More