I usually do not send e-mails out on the weekend, but wanted to make sure everyone has been following the major news in the ski industry. Vail resorts recently announced that you will need a reservation in order to ski/ride. Passholders can select up to 7 days in advance to reserve and the remaining will be reserved the week of, one at a time. What does this mean for real estate in the short term? How will this impact ski real estate long term?
What was in the announcement by Vail resorts?
Vail and Beaver Creek will implement a reservation system to access the mountain during the 2020-21 season, Vail Resorts announced Thursday. Pass holders can reserve up to seven days in advance on their passes – called Priority Day Reservations – and as many week-of reservations as their pass product allows. Walk-up tickets will no longer be available for purchase at the window, but day-of guests can purchase tickets from their mobile devices and pick up their day-use tickets at the window.
This policy will be in place for all the Vail mountains: Breckenridge, Keystone, Vail, Crested Butte, Park City, etc… I would assume that other major resorts will follow suit.
This will be a giant cluster***
Unfortunately the policy sounds good on paper, but this is going to be a giant cluster**** and is sure to piss just about everyone off. There are some fundamental flaws/questions. Why bother paying for a pass if you are only guaranteed 7 days (and you might not get your days). If you are traveling with a family of four, why would you plan a vacation if you might not be able to ski?
I can guarantee that Vail will be gaming the system with a promotion that if you stay in a Vail property you will be guaranteed ski dates. Unfortunately with Vail, the largest resort provider, kicking off the season this way, look for Alterra and others to follow as they don’t want to get overwhelmed from the traffic that is leaving the Vail resorts.
Ill-conceived strategy
Vail’s strategy is ill- conceived and not very well thought out. Destination travelers are immensely more profitable than drive up traffic. The way the reservation system is setup it does just the opposite and discourages destination travel while rewarding the less profitable drive up traffic that can accommodate a week of reservation. Without the destination traveler and/or drastically reduced destination traveler, ski shops, restaurants, etc… in ski towns with Vail mountains are going to get creamed as their most profitable customers are not visiting. The airlines figured this out 20 years ago with tiered pricing. For example it is cheaper to fly on a Wednesday verse Friday. The same could work in the ski industry where a pass that allows weekend visitation is more expensive than Monday through Wednesday pass. The all you can eat buffet (ie: Epic Pass) at a low entry point does not work in the age of Coronavirus. It will be interesting to see how Aspen, who has not sold passes yet, adapts to the new environment.
Short Term Real Estate Impact
Nightly rentals are going to get creamed by the reservation policy. With uncertainty about ski reservations, there will be considerably less people booking ski vacations. It will be a bloodbath for nightly rentals as there will be less destination traffic and more drive-up traffic from Denver that can utilize the week of tickets and come up for one day. Ironically right after the news came out, I saw a number of listings of rental properties in Copper Mountain come on the market for sale. There will likely be a number of sales of short-term rentals, but there is ample demand to absorb them.
Commercial property will in the short term take a large hit. Many businesses will not be able to survive a winter without a large quantity of destination travelers. Look for retail, restaurant, and non-Vail hospitality properties to take a substantial hit. The failure rate of small businesses will be large this Winter due to Vail’s strategy.
Long Term Real Estate Impact
The various ski towns in Colorado are desirable places to live and visit and will remain so in the long term. The virus is a short term blip that will ultimately pass and life will return to some sort of normalcy. Long term values will be fine in the various ski towns as inventory is at historic lows, build costs are astronomical, and there is a flight to smaller trendy micro cities like Steamboat, Crested Butte, etc…
Summary
This winter is going to be rough for nightly rental owners and commercial property owners along with their tenants. The reservation system will drastically reduce the most profitable customers that many businesses rely on and encourage short-term drive-up visitation. Fortunately, this should hopefully only last this season with more normalcy returning 21/22!
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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