The News
The biggest risk to Vail Resorts’ business is the weather. So you might think it would be an active participant in the prediction markets around snowfall. You would be wrong.
“For us, the storm has to be exactly right,” CEO Rob Katz said on the latest episode of Semafor’s Compound Interest. “It’s when the snowfall comes or the temperature before and after the snowfall. Trying to come up with a clear weather pattern that we could truly hedge in the markets is not as simple as it might look.”
When CFTC Chairman Michael Selig defended betting sites like Kalshi and Polymarket, he noted their usefulness to big companies looking to protect themselves against specific risks like weather. A dismal snow season in the Rockies resulted in a 15% drop in skier visits at Vail’s mountains this year, and 12% drops in ski-school and dining revenue.
But even if companies like Vail decide not to hedge the weather, their customers might do so to protect themselves in case their all-you-can-ski passes — a model pioneered by Katz at Vail — turn out to be duds. This winter, traders bet more than $6 million on Kalshi on a single New York City blizzard.
Katz is a boomerang CEO, back after a handoff to a successor in 2021 went poorly. The number of season-long passes sold has fallen the past two years. A labor strike at Park City infuriated skiers — one in particular. Local billionaire and Cloudflare CEO Matthew Prince has needled Katz to sell him the mountain, saying that Vail’s roll-up model has led to a worse experience. “That’s not on the table,” Katz said. Neither are robot ski instructors.
In this article:
Transcript
Rob Katz:
I agree it is an issue, but the entire food supply, New York and Los Angeles being underwater, there are some other things that are going to happen before there’s no snow in Vail.
Liz Hoffman:
Welcome back to Compound Interest from Semafor Business. I’m Liz Hoffman, Semafor’s Business and Finance editor rejoined after a brief hiatus last week by my colleague Rohan Goswami.
Rohan Goswami:
That was hard. That hurt me.
Liz Hoffman:
Rohan, maybe a weird question as this long winter in New York is finally ending. Do you ski?
Rohan Goswami:
You know, that is hardly the weirdest question you’ve ever asked me. I do not ski at all, much to everyone’s chagrin. What about you?
Liz Hoffman:
I do ski. I learned when I was like 25, so there’s a ceiling on how good I will ever be, but I do spend a couple of days-
Rohan Goswami:
So I have time. I can learn.
Liz Hoffman:
Oh, that’s disheartening. But I do spend a couple of days and a bunch of money every year letting gravity do its thing. I ask because our guest today is Rob Katz, who’s the CEO of Vail Resorts, the giant ski company, owns iconic mountain, Park City, Whistler. And Rob kind of reinvented skiing as a business. He was a private equity guy, got involved at Vail in the 90s when he was at Apollo, took over in 2006 as CEO and he did a very private equity thing, which that he productized the sport of skiing. He launched the Epic Pass, the pre-sold, kind of all you can eat ski pass that totally changed the business model of the industry, turned what had been kind of a feast or famine business into a steadier one that Wall Street loved, bought up a bunch of resorts along the way and it worked great until it didn’t.
Rohan Goswami:
Yeah. I mean, it was a tough go when he left and Kirsten, his replacement, didn’t do so great. There was very famously a huge labor problem that turned into a customer problem that turned into a PR problem for them at Park City. And that all led to him coming back and we’ve talked a lot about boomerang CEOs and now Rob is one of them. The stock, by the way, is still not doing great.
Liz Hoffman:
Yeah. And Vail and the ski industry in general, I think, has become a bit of the poster child for what people sort of call the enshitification of everything, kind of overcrowding bad food, a sense that the experience is just not as good as it used to be and that we’re all being kind of sold a bill of goods. And Rob is trying to fix all that. He’s got some headwinds. Obviously, he’s a very bad snow season out west and he has the longer term problem of it getting warmer almost everywhere. But he’s also selling something the economy’s really running on right now, which is experiences. You see Airbnb making that pivot. There’s a real return to IRL stuff which is coasting on this-
Rohan Goswami:
Please, don’t say that.
Liz Hoffman:
I love it. Don’t Gen Z me. But there’s a real return to, as they say, touching grass, touching snow. And it’s coasting, I think, on this cultural backlash to technology and slop. So I’m excited to talk to Rob who kind of reinvented the business of skiing and is now in the position of having to do it again and hope to reinvent the sport while he’s at it.
Rohan Goswami:
The enslopification of everything. We’re going to take a quick break and when we come back, we’ll be joined by Rob.
Liz Hoffman:
Rob Katz, welcome to the show.
Rob Katz:
Thanks so much, Liz. It’s great to be here.
Liz Hoffman:
So you are a boomerang CEO. You ran the company for 15 years, handed it off in 2021 and came back last year. Why?
Rob Katz:
I have a real passion for both this company, the people in it, and honestly the whole industry. And I felt like there’s going to be a new future for this industry with new challenges and opportunities. If I could play a role in helping to be part of the team to make that happen, that was something that was critical for me to jump into.
Liz Hoffman:
Let’s wind back the tape a little bit. You’ve been involved with Vail since the ’90s. You were a private equity guy and sort of went native, went into the PortCo, as they say. How did you get here?
Rob Katz:
At a school, I joined an investment bank called Drexel Burnham. Drexel went bankrupt back in 1990. And shortly thereafter, I wound up joining a new private equity firm as the fifth person in the New York office called Apollo.
Liz Hoffman:
A lot of Drexel DNA at Apollo.
Rob Katz:
Yes, exactly. And then in 1991, Apollo made an investment in the distressed debt of the holding company for what was then just Vail Associates, Vail and Beaver Creek. So I wound up working on that investment, assessing it. And then after we made the investment, we wound up taking control of the company through a bankruptcy that they were going through. And so I’ve been kind of in an oversight role and on the board all the way back since the early ’90s and then have been CEO since 2006.
Liz Hoffman:
And you left in 2021 and things did not go smoothly, I would say, in the aftermath of that. You came back last year. So talk to us a little bit about where do you think the company went wrong perhaps in your absence and what you’re trying to do now?
Rob Katz:
Honestly, there was a number of external events. I think when I stepped down, had a sense that COVID was really behind us, but actually it turned out in kind of December and January, December of 2021, January of 2022, was kind of the height of the global labor shortage. I think the company was caught a little bit off guard and that’s all on me. Yeah, we were not fully staffed for that season and had a number of operational challenges right at the same time as we were seeing really peak interest in the ski industry in part because of COVID. That kind of set us back on our heels and I think we never kind of got an opportunity to really take the network that we had built over the prior 10 or 15 years and really put it to work.
The success that we had had prior to that was really about building the network and building our season pass program. Yeah, the ability to take that and turn it into a guest experience opportunity is something that still lays ahead.
Rohan Goswami:
The Epic Pass was obviously a revolutionary concept at the time. It worked incredibly well. Things have been sort of different over the last two years. Sales have been declining. Is that model just broken?
Rob Katz:
Yeah, I don’t think it’s broken at all. Even over the last, I think it’s four years, we’ve grown season past sales units 50%. So it’s not unreasonable or kind of surprising that it might come down a couple of points. I’d also say that we’re now running at season passes represent over 75% of our visits. And so there is some maturity and I think you’re seeing that throughout the industry. The last couple of years were the first years that lift tickets actually grew and season pass visits came down. And I think that’s a natural thing just given the rapid growth that we saw.
But that model I think is not only not broken, but actually critical for the industry because in a season like we just went through where we had tough snow, it actually really provided the stability that allowed ski resorts across the country to really be in a much more stable position.
Rohan Goswami:
In that same vein, I mean, you alluded to this in sort of giving us the run up of your career. M&A has historically been like a big part of the way you think about the business. Earlier this year you signaled, I think probably for the first time, that if not a pause, then you were going to sort of deprioritize it. Can you walk us through a little bit why that is and what your thinking is around M&A and deal making right now?
Rob Katz:
Yeah. I think what we said is that just given the number of acquisitions that we did in North America over a 10 or 15 year period, there’s not as many opportunities in North America. And candidly, the network and the quality of ski resorts that we have in North America is quite powerful. And so I don’t think that should be the priority. And when we were building the network, it really was not about just getting bigger to get bigger. It was actually about creating a season pass that was compelling enough for people, plus ultimately having the size and scale to elevate the guest experience, which is something that now is on the horizon. But no, right now I think there’s a much bigger opportunity for us to kind of optimize the network.
Liz Hoffman:
Does the business model make you more reliant on scale if you have this sort of all you can eat pass that you’re sort of incentivized to keep adding properties to that pass?
Rob Katz:
I don’t think so because I think our goal was really to have a network that was strong enough to make the pass compelling enough to our guests. I think when you look back and you see how much growth we had in season past sales and went from like 10% of visits to 75% of visits, I feel like we’re in a strong position there. I don’t think we need to keep chasing scale in North America. I think we’re at a great spot. Certainly if there were unique opportunities where we could add something that would really make a difference to the guests, we would. But right now it’s about turning that network that we’ve built into something more compelling for the guest. That’s really our focus now. It isn’t necessarily to continue to scale by acquisition.
Liz Hoffman:
Okay. Just one more on that, which is what is one mountain that you don’t own that you’d love to own?
Rob Katz:
Oh, there’s tons, of course.
Rohan Goswami:
You got to pick your favorite.
Rob Katz:
Sure. There’s amazing mountains out there. Aspen, Jackson, Telluride, Sun Valley, Big Sky. These are all incredible places. Yeah, it would of course be terrific in our network just like they are for Ikon right now. In our business, these assets for many individuals and families that own them, these are part of their history. And so ultimately it’s not really just about us running to run out and buy a resort, it’s when if ever are some of these folks interested in selling? And so of course we’re interested, but it isn’t really what we’re spending our time on.
Liz Hoffman:
One thing we’ve talked a lot on this show about is the subscriptionization of everything and whether that’s kind of hitting its limits with consumers, we’re getting tired of it. Epic Pass, I mean we’ve kind of invented that really certainly for the sport, was early to it. As you say, it’s maybe gone about as far as it can go and you’re sort of having to rethink that a little bit. How do you think about everything becoming subscriptions now? And skiing was early to that, but it’s not the only place obviously that it’s happening.
Rob Katz:
I think there’s a compelling nature to it. I do think one of the things that we did when we created this model was we tried to give guests huge value if they were willing to be part of this subscription. And in our case, it was not just being part of a subscription, but it was buying their skiing in advance of the season. And so we really created this trade where we would take a lot less money for each visit that somebody was going to make to our resort and in return, skiers and riders were going to make that commitment before the season. So it gave the company more stability during the ups and downs of weather.
In the end, of course, it’s true that there’s going to be some maximum potential. There’s always going to be skiers and riders who don’t want to make that commitment early on. And it’s our job to then go after them with all these other opportunities, not just to season pass, but be more creative and aggressive on just daily lift tickets, which is what we did this past year. To me, I see subscription as you have to provide value to your consumer to be part of that subscription. I think for us, this means it’s not just adding resorts. We have to continue to provide a better experience, more value, more benefits for them so that they want to stay in.
Rohan Goswami:
I think it was a 20% cut for the younger end of your demo for the upcoming season. Is that basically just a customer acquisition cost? It’s like a marketing spend or is that going to be a more fundamental reset going forward in the ’27, ’28 seasons of how you’re pricing the pass?
Rob Katz:
It’s a few things all at once. One, Gen Z in total, this kind of younger consumer, is going to be critical for the ski industry going forward. We have to make sure that they are engaged in the sport, which not only means that they’re skiing every now and then, but it means their participation, their frequency. That’s what’s going to matter in terms of whether they stick in the sport for the long run. So in our minds, being more aggressive around that cohort makes a ton of sense.
Back in 2021, we reduced past prices 20% for all of our passes, and it was a big driver in getting more people into the program. We then raised price, part of it was inflation, part of it was just being more aggressive in the seven to 8% per year over the last four years. And what we saw was that that was something that was passed through quite easily to a lot of our older skiers. But to this cohort, the young adult kind of Gen Z, no, that impacted them differently. And so we were kind of almost rolling back those prices for that group, which again, we think is critical to the future.
Rohan Goswami:
What has that done to your average customer age?
Rob Katz:
I don’t know that off the top of my head and I’m not sure if we’ve released it just for us, but for the industry as a whole, it’s getting slightly older. The concern, if you go back a ways back into the ’90s and all that was that as the baby boomers grew up, basically skiing was going to go downhill. The advent of the snowboard and the X Games and Red Bull events, the Winter Olympics, that really re-energized the sport. And so actually the ski industry’s had some of its all time record years over the last few years. It’s critical for us to continue to reengage that next generation.
Liz Hoffman:
Let’s talk about Park City, flagship mountain, strike there last year, which I think an escape event for a lot of customer frustration. But for the Vail and the industry in general, is there anything you’d have done differently?
Rob Katz:
Yeah, there’s no question. That was not a good experience for our guests and that has to be the core of who our company is and what we stand for. And so when I look backwards, yeah, I think I’ve been pretty public about the fact that, one, I think the company has to do a better job of making sure we avoid any kind of a strike, ever, that we don’t want to see that we want our employees on the mountain working. So we have to make sure that we’re putting our best foot forward. I think that also is true for any of our employee groups that are part of a union. They’ve got a responsibility and I think they could have done a better job, candidly, in that situation.
But most importantly, to the extent that we have any kind of an employee issue, we have to deliver the full guest experience regardless. And that was something we didn’t do there. And that’s something the company is ensuring and preparing for and can’t happen. That guest experience has to be paramount and that was a place where we clearly fell down.
Rohan Goswami:
Part of your problem is that your customers are incredibly wealthy. I think you know where I’m going with this. You have one of them, Matthew Prince, who’s kind of taken really personal and direct aim at you, wants to buy Park City from you.
Rob Katz:
I think it’s great to see the passion and enthusiasm that he has for us and for Park City. As you mentioned, we have a lot of very wealthy guests and community members in a lot of our communities and they have strong feelings and they have views. And I think all of those are important for us to take in. I don’t think we’re going to run down and follow anyone’s individual perspective. That’s our job. We’ve got to figure that out. But yeah, in terms of selling the resort, that’s not on the table. We see Park City as a critical asset for us. It’s just not a road that we’re going to go down.
Liz Hoffman:
I mean, he said a couple weeks ago that sort of talking about the 10-year stock returns, I think that, what did he say? You’re done as well putting your money in a hole. Okay. But I mean, I think he thinks the company should be more asset light, should sell off resorts to local owners is I think seizing on the very business model of scale that you’ve built and sort of thinks it’s degraded the sport in some way. Is there some deeper truth in that, whether you want to engage with him or not on the specifics around Park City?
Rob Katz:
I don’t think so. I actually think that there’s going to be power as you look to the future in banding resorts together. It’s a difficult business. We’ve got a lot of things that are challenges, including the weather and with greater weather variability I don’t think each resort trying to fend for itself is a good long-term strategy. I also think that there are ways that we can deliver for our guests by being part of a network. And so I’m not necessarily a fan of the asset light model, at least not for our company and in terms of where we’re trying to go. And that doesn’t mean I’m not respectful of other people’s views, I am. But it’s not where we are right now.
Liz Hoffman:
Let’s talk about that experience because I think there is some sense that the experience has just gotten worse, long lines, bad food. The sense that skiing in the US is worse than it used to be and worse than skiing almost anywhere else. How do you fix that?
Rob Katz:
Yeah. Well, first of all, I’m not sure that that’s true. So I think when you look at lines, actually, I think lines ... I mean, certainly I’ve been skiing since the ’80s and I would say that lines today are the best they’ve ever been in terms of the speed of our lift network, the quality of lifts. There are going to be moments of crowding. There are. And just like there is in any leisure sport on peak days, you’re going to have that. And we have certainly some of that.
I think on the food piece, absolutely opportunities for us to make the food better. I think there’s opportunities for us to use technology in ways that are much more compelling for the guests. We’ve started to. We have an app which allows you to get on the lift without going to a lift, just with your phone and without actually having to buy a lift ticket or deal with the window or anything like that. But there’s much, much more that we can do that I think could prove out the model of what we’re doing. But I would say, yeah, I look around the world and I actually think there are aspects of each country or region’s experience that are different and unique, but not necessarily as if one is better than the other.
Rohan Goswami:
I think if your industry is pretty immune to technological innovation in that it’s a physical thing, what other technology would you be adapting here?
Rob Katz:
So one of the biggest things that I think is an opportunity is gear. No one can get on the mountain without skis or snowboard, you have to have it and you have to have boots that go with that, but the business hasn’t changed at all. So you have a lot of people that own gear but almost never use it. So sure, there’s somebody who might ski 70, 80, 90 days a year, but most people ski 5 or 10 days a year at best if they own gear. So the other 350 days of the year is literally just sitting in their garage. And then you have the rental business where you’re not typically getting the best equipment, you’re not getting a great fit. You’re having to go through this very laborious, time-consuming process each time you come. And we actually see from tons of research that equipment is one of the biggest reasons why people don’t join the sport, the comfort of it and the hassle of it.
And so, our view is you can use technology and some size and scale to actually start creating a much, much better experience for the guests where they can actually get the exact boot and the exact skis that they want without owning it and that we can make sure that it shows up at whatever resort at whatever day or time that they would need it.
Rohan Goswami:
That feels like a good spot to take a break. We’ll be back with more from Rob after this.
The View From
Rachel Oppenheim:
Welcome to What’s Working, the special segment within Compound Interest, brought to you by our seasoned partner, Amazon Business. I’m your host Rachel Oppenheim, some of our Chief Revenue Officer, and I’m joined by Doug Gray, Amazon Business VP of Technology.
Doug, you talked to a lot of organizations that actually use Amazon Business. In those conversations, how did they say it’s changed how they work?
Doug Gray:
A favorite part of my job is when I get to hear from customers when they tell us how Amazon Business is simplifying their buying, driving efficiency, and helping their entire organization save time and money.
Carnival Cruise Line is a great example. They have to supply 25 floating cities.
Which means getting hundreds of pallets on board in super tight time windows. And they told us that even when they have consistent needs from port to port, it used to be so frustrating. There were tons of emails, spreadsheets, and chasing down approvals. But with Amazon Business integrated into their process, teams now can trust that what will arrive before it shows up will be there.
They know supplies will be consistent from stop to stop, and approvals can all happen digitally.
Now orders that used to take weeks can happen in minutes, and because they can see what’s being bought and make smarter choices in the moment, they’ve been able to cut back on the just-in-case inventory and free up space on the ship for more fun things.
Transcript
Rohan Goswami:
To go back to your customer base, everything you’re talking about is a scale play. And so there is this tension, isn’t there, between having a really premium product, but you’re also still trying to grow the sport?
Rob Katz:
It’s the history of the industry itself. We have to keep investing in infrastructure, in lifts, in new restaurants, in parking, in transit. We have to constantly be providing new solutions so that when people come to our resort, yeah, they are having an amazing experience despite the fact that there’s more people. Now it’s important to remember that we’re in an industry that barely grows or maybe grows 1% per year. If we do a great job at everything we’re trying to do, we’re not growing more than a couple of points above that. So we’re not talking about explosive growth in visits. And so the crowding piece we think can be very manageable most of the days of the year we’re not even close to capacity at our resorts.
Liz Hoffman:
You’re in the ski business, but you’re in the experiences business, you’re in the vacation business. Is there an argument for, I don’t know, why don’t you merge with a cruise company? This is an industry that you are trying to grow, but structurally just isn’t growing and you’re competing for marginal vacation dollars with a ton of traditional companies and non-traditional companies, Airbnb, Disney, they’re all in this business.
Rob Katz:
In our minds, I think our focus is really on being the best ski company out there. And I think combining with another aspect of the business, I think there are opportunities with that, but there are also challenges because the businesses are very different. And I think that’s true if you look at Marriott, if you look at the cruise companies, most of these companies are not actually going into other parts of the travel industry. They’re trying to be amazing at what they do. And I think that’s really the calling for us as well is not to start thinking, “Oh, hey, we could be a cruise company or we could be a casino or we could be a theme park company.” Those are different companies with different challenges. But I think for us, we have to make sure that skiing is accessible, that skiing is easier, that skiing is welcoming so that we compete well versus all of these other choices.
Liz Hoffman:
Honestly, casinos on the mountain is an interesting idea.
Rohan Goswami:
I was just thinking it’d be pretty incredible and you could probably get a James Bond movie shot there too. Who is your biggest competitor? Is it Alterra? I mean ...
Rob Katz:
It’s in two ways. I think the Ikon Pass is certainly the biggest competitor to the Epic Pass, but when it comes to our individual resorts, it’s not really Alterra, it’s the individual resorts that we’re competing with. Many of the best resorts in the Ikon network are not part of Alterra. So Aspen, Jackson, Sun Valley, Big Sky. These are all great resorts and we are competing with each one of them day in, day out for guests.
Rohan Goswami:
Let us talk about the weather. I mean, you alluded to this, but it was a horrible season for snow out and out West and generally and more broadly, climate change is going to change how we ski and is going to change the entire nature of your business. How do you hedge for that risk? How do you solve for that? You can’t solve climate change.
Rob Katz:
No, we can. And I think when we look back at this year, it was awful the worst winter for both Colorado and Utah. Now that said, important to highlight that for the Northeast, it was actually one of the best winters ever in the Northeast. So that highlights that it’s really about the variability, not necessarily that snowfall is going away, certainly in the short term. But for us, it really is about the season pass. It’s making a great economic value for our guests, this incredible value. It’s one of the best in travel, but in return, guests understand that they’re buying a pass and it may not be a good season or it could be an incredible season. That for us has really provided the stability that we need and that our communities need.
And I think when you look back at one of these years, one of the things that’s most interesting is that if you look at the town of Vail, the town of Breckenridge, the town of Aspen, they actually had pretty reasonable years. They did not get hurt as much because people still came because we provide this plethora of activities, not just us, but the communities as well.
Rohan Goswami:
For sure.
Rob Katz:
So that people actually feel like, no, they’re still going to go on vacation. They may not go on the mountain as many days, that’s true. But actually that keeps people engaged, which I think is critical. Second is we’ve got to just constantly reach out to this next generation. I think there’s a unique experience that skiing provides to people that’s not easily replicated anywhere else. And in our minds, it’s key for us to showcase how with more snowmaking and more technology, they can make that commitment to come on vacation and make this part of their lives.
Rohan Goswami:
I mean, I get that. I want to press you just a little bit more though. I mean, I forget if it was The Journal or The Times, but there was a particularly jarring story I read about a longtime ski town in the Alps that has had no snow, I think it was in Italy, no snow for 10, 15 years. How much of your portfolio, as it stands now, do you see that being the case in say 2050 where even with snowmaking and whatever alternative technologies you have, it just isn’t viable anymore?
Rob Katz:
Well, here’s what I’d say. I mean, we have mountains at some of the highest altitudes, truly, in the world and in the Rockies in particular, which is where most of our visits come from, it is possible that we could look out at 2050 and maybe there’s not going to be snow at Vail. But if that’s the case, I think we’re also seeing some pretty big changes in the world.
Rohan Goswami:
Ski might not be top of the priority.
Rob Katz:
It’s not. And I do try and remind people, I’m not trying to minimize it. If anything, I’m trying to say, look, I agree it is an issue, but the entire food supply, New York and Los Angeles being underwater, there are some other things that are going to happen before there’s no snow in Vail.
Liz Hoffman:
Do you hedge weather?
Rob Katz:
We don’t hedge weather. And one of the reasons why we don’t is because it’s very unique. It’s not just total precipitation or total snowfall, it’s when the snowfall comes or the temperature before and after the snowfall. So we have found that trying to come up with a clear weather pattern that we could truly hedge in the markets is not as simple as it might look because of these kind of variations. We even have situations where it can snow too much, like during Christmas and actually that hurts our business. But of course, if you hedge that, we would be on the wrong side of that hedge in both counts. We’d have too much snow, which would be costing us in a way in the hedge. Plus, we’d have lower visits because it snowed so much. So for us, we really feel like ... That’s not to say there could never be a way to financially hedge it, but we’re much more on the business design approach of how to provide stability.
Liz Hoffman:
You should talk to Kalshi and Polymarket and say, “This is actually the product that we want.” No, because I think when the Chairman of the CFTC was sort of out defending them saying this is an institutional market that companies use to hedge things like weather, it sort of feels like if you’re not using it to hedge things like weather, who is? I don’t know.
Rob Katz:
For us, the storm has to be exactly right to really have the benefit for us. Where it’s a little bit different when you’re thinking about other components. But, it’s true. And I think the other piece is we’d have to know that this is a market that would work for 10 years, not just one year and then the whole thing would go away the next year.
Rohan Goswami:
There is a thought that just occurred to me that obviously Epic Passes are famously not refundable, except for very specific events, not refundable. And is there a model or a world where you would shift to a pricing model that is maybe more dynamically priced with the help from AI or as weather prediction gets more sophisticated and you’re actually able to pinpoint what snow levels will look like on certain days of the year, we will be in that world soon enough, just the way the singularity is going? Is AI and what it unlocks for you changing how you’re thinking about pricing, whether it’s increasing or decreasing it or making it more variable?
Rob Katz:
Yeah, it’s making us a lot smarter. If you think about it for us, we have almost 40 resorts in North America. They each have so many different lift tickets that they offer to their guests. Plus we have all these season passes. We have, if you add them all up, like 250 different types of season passes with all the various cuts that we do. So trying to assess that data and understand what the guest is telling us about all of those various products is almost impossible to do without AI. So one of the things that actually led us to some of the changes we made to our past program this year was this kind of AI and machine learning that really led into that.
But I think beyond that, it allows us to really provide, I think, a much better guest experience in the future. And I think that is where we’re investing our time now. How do we use AI, just like a lot of companies to make a, what is, let’s face it, a difficult vacation. You’ve got equipment, you’ve got your kids, you’ve got to get them to ski school, you’ve got to get on the mountain, and food. How do we take all of that and make it simpler and AI is like one of the most obvious solutions to that.
Rohan Goswami:
More robots on the mountain, potentially?
Rob Katz:
No robots on mountain. No robots.
Rohan Goswami:
No robots on mountain?
Rob Katz:
No robots.
Rohan Goswami:
I could see an all-terrain robot being great at delivering coffee or food or even getting equipment. Really, no robots?
Liz Hoffman:
Rohan’s a real concierge guy. He’s an opera ski guy. I’m not sure he’s actual ski guy.
Rohan Goswami:
Let’s be clear. I’m not a ski guy. I just like to drink and eat good food.
Rob Katz:
Well, that’s perfect. You should come as well. No, but I think in the end for us, we have to always be careful that the experience we’re providing is one that is in the real world, IRL, and it is out on the mountain and all the technology and AI, things like that can all be happening behind the scenes to make things easier, but it cannot get in the way of the core experience.
Rohan Goswami:
Do you think consumers, your consumers, are getting a little over-teched, a little over AI? Maybe they’re tired of seeing a world with no humans. Is that the driver behind the bet? Help me understand that.
Rob Katz:
Yeah, I think that everyone in travel and leisure needs to be really careful about removing humans from the interaction because, and I would say right now we are not in any way planning to remove the people, the thousands of people who work on our resorts because we think they are critical to providing that experience. And I think that, yes, a lot will be lost if people start to try and replace that with robots. Now that said, how we provide guest service in the background and when you’re calling up or what you could see on your phone or how we communicate what’s going on, no, that’s still critical and that’s where technology can really make a difference. We will be one of the last people to try and have whatever ski instructors be robots.
Rohan Goswami:
That would be terrifying for a kid. The uncanny valley that would-
Rob Katz:
Exactly. It’s not The Jetsons. We’re not The Jetsons yet.
Liz Hoffman:
Why is skiing so much better in Europe? Or do you actually dispute the premise of that question?
Rob Katz:
I do dispute the premise of that question. Absolutely. I think there are aspects of skiing in Europe that I love absolutely. But no, I think the totality of the experience, if you told me I can only ski in one region for the rest of my life, it would absolutely be in the Rockies. It would not be out in Europe. But there’s no doubt that the food quality in some of the smaller restaurants in Europe is amazing. I mean, really, really unique. The history, right? Obviously we think it’s a big deal here that some of these towns go back 50 years. When you’re in Europe, it goes back hundreds of years and that comes through, the full experience. And I would say that Europeans I think on balance are a little bit more about in just the enjoyment, the drinking and the eating, where in the US people are much more about the true, how many vertical feet am I getting in a day?
By the way, you ski in Europe and, yeah, there’s not as much off piece skiing. There’s so many people just skiing on ... Here it’s much more of a kind of, I don’t know, I’d say almost like freeing experience where the whole mountain is available and people are kind of going everywhere. To me, it’s just different.
Liz Hoffman:
I probably should have asked earlier when we were talking about the ski pass, I was going to make a joke and I was like, “Is this all securitized somewhere inside your old firm?” But actually is it? The enduring beauty of subscriptions to Wall Street is that it is cashflow that can end up inside Apollo? Does that change the way you finance these companies?
Rob Katz:
It hasn’t for us because we have pretty low leverage, so it hasn’t been a priority for us. I think we’ve been able to access the credit markets easily. I think we have a lot of confidence from both bond holders and banks, so it hasn’t made sense for us to do something like that. For us, it’s less about financial engineering and more about engineering the guest experience.
Rohan Goswami:
Liz joked at the beginning about being a boomerang CEO, but she and I actually, we did write a story very early on at my time at Semafor about Boomerang CEOs and we graded them. So I’ll ask you this, what’s the metric that you want this second tenure to be graded by? And please don’t say stock price, please.
Rob Katz:
No, I won’t say stock price. But what I would say is I did some research on boomerang CEOs before I came back because I did know that it’s a term that’s out there. Did you guys coin it? Maybe you coined it.
Rohan Goswami:
I don’t think we coined it. Did we coin it?
Liz Hoffman:
Let’s put it out on the internet. We did coin it. Trademark Semafor.
Rohan Goswami:
Let’s say we coined it. We did. We did. TM.
Rob Katz:
So what I would say though is that I think the pitfall of the boomerang CEO is pretending that everything is the same as when you were last there. And so to me, I think where I’m grading myself is trying to take the wisdom that I may have from 16 years of being a CEO, but understanding that none of those stories are necessarily reflective of how this company is going to roll out now. And so trying to show up and be open to change, embracing change, taking in new feedback, new ideas, all the rest of it. And so to me, in my mind, what’ll determine whether I’m successful or not here is whether I can essentially create the conditions where we are taking this as a fresh start, looking at the environment in a completely new lens and not looking backwards and saying, “Hey, we did this for 15 years and our stock went from 20 to 350, so therefore we’re geniuses and we can just keep doing it.”
To me, where I’m grading myself is like, am I starting from scratch, new, and kind of taking a beginner’s mindset? Which is harder to do for sure when you’re a little bit older.
Liz Hoffman:
You could have said stock price, by the way. I mean, you’re off a low base, so you could have said that. We would’ve allowed that as an answer.
Rob Katz:
I know that everybody ... That’s how people are going to-
Rohan Goswami:
But that’s how every CEO grades themselves is their stock price.
Rob Katz:
And you know what? Look, the stock price, there’s so many things that go into that. But yeah, I think one of the things I certainly was proud of before was we were one of the best performing stocks in all of travel. And so, as I look to the future, of course, that’s important for us to be back in that group.
Rohan Goswami:
Yeah. Is there any boomerang that you looked at and you said, “I want to end up like that.” Steve Jobs had a good run.
Rob Katz:
He did have a pretty good run. And Howard Schultz the first time around, I think had a pretty good run as well.
Rohan Goswami:
He’s boomeranged so many times it’s hard to keep track of-
Liz Hoffman:
We’re going to quit another word for the third time around. I don’t know what. Does the boomerang keep coming back?
Rob Katz:
Yeah. Exactly That’s not going to be me. That’s not going to be me.
Rohan Goswami:
Is that a commitment? This is your last ...
Rob Katz:
Yes, that is absolutely a commitment.
Liz Hoffman:
Is there anything that you’ve been thinking about that we didn’t ask you?
Rob Katz:
Maybe one of the things that I would share is, and maybe this goes with being a new CEO is, I understand that we’re pivoting as a company and that that’s not something that happens overnight. I think realizing that making long-lasting change and creating a moat around your company in a new environment is something that takes time, that takes actual execution day in and day out, no matter how good your ideas are. And that’s something I’ve learned sometimes the hard way, the last go around and I’m keeping that front and center right now.
Liz Hoffman:
But your moat is you have to own a ski mountain to be a ski mountain operator. I mean, your moat is bizarrely physical-
Rohan Goswami:
It’s a pretty high barrier to entry.
Liz Hoffman:
... it’s not AI. It’s not like you got to own the mountain, there’s got to be snow on it.
Rob Katz:
You do. But in the meantime, how do we add an extra point of visitation per year? How do we increase our capture? And I’d say in a way, yes, we have an incredible moat in that there are no new ski resorts being created, but the flip side is it’s hard to grow and we’re not in a growth industry. So how do you create a powerful investor model within those constructs? And that to me is what I think is quite interesting.
Liz Hoffman:
Have you thought about leasing GPUs? That seems to be a growth business.
Rob Katz:
No, definitely not smart enough to be able to do that.
Liz Hoffman:
Yeah, there’s got to be some AI Jensen play-
Rob Katz:
We don’t have any excess GPUs lying around.
Rohan Goswami:
They are notoriously hot and mountains are notoriously cold.
Rob Katz:
Yeah. I’m not sure if you look at some of their public reaction to putting data centers in places, I’m not sure they want them on the mountains.
Liz Hoffman:
I don’t think that will enhance the customer experience.
Rohan Goswami:
Would not like that.
Rob Katz:
No, I don’t think so.
Liz Hoffman:
Well, listen, thanks a lot, Rob. This was a lot of fun.
Rohan Goswami:
This was really fun. Thanks, Rob.
Rob Katz:
No, I appreciate it too. It was great. I really appreciate the time.
Rohan Goswami:
As you know, Liz, I’m not a skier, but I found that really fun.
Liz Hoffman:
You’re like an indoor cat.
Rohan Goswami:
That’s the meanest thing possibly you’ve ever said to me.
Liz Hoffman:
That can’t possibly be true.
Rohan Goswami:
An indoor cat?
Liz Hoffman:
Seem like a guy who likes a good concierge to me.
Rohan Goswami:
You said that to him. It’s like I can’t catch a break with you. I guess actually let’s start at the end. How do you think he’s going to do his second time around?
Liz Hoffman:
Look, I think boomerang CEOs are boomerangs because the handoff did not go well. So it’s usually a sign of things not having gone great. The way he talks about the business, he says, “We should have a better app where you can get all of your gear.” That is totally true and also extremely table stakes, that is a 2018 idea.
Rohan Goswami:
Pivot to video.
Liz Hoffman:
Great that they’re getting around to it. But no, I mean, look, they have ... As you rightly pointed, plenty of companies have gone wrong trying to widen the funnel. The key is to sort of keep your core constituency, as you rightly pointed out, are rich people who get mad when things aren’t perfect with bringing new people to the sport.
The tailwind that they have is this return to IRL experiences that every company wants to be an experienced company right now. That is fundamentally what they are selling. And if you can turn the dials in the right way and make it a slightly better experience, then I think they’ll do great. But skiing, it’s sort of, as we talked about at the top, the enshitification of everything, I think that is a place where people sort of have felt it acutely and he’s got to turn the dials and get that back on track.
Rohan Goswami:
Well, because honestly, so much of it sucks. You’re standing, waiting in the cold for food or to race down a mountain, then you go back up the mountain, you’re standing and waiting again.
Liz Hoffman:
Yeah. I got to tell you, I had some very good ski days this year, but often when I’m skiing, I’m like, “Do I like this? Is this fun?”
Rohan Goswami:
Yeah.
Liz Hoffman:
And that’s not a good thought to have running through your head when you’ve spent-
Rohan Goswami:
Thousands of dollars.
Liz Hoffman:
... 700 bucks to be there for the season. So yeah, I think it’ll be interesting. I was fascinated when he says that they don’t hedge weather. If not them, who? And he sort of seemed like it was a product design problem, but that sort of feels like something that the prediction markets should get pretty good at in a hurry.
Rohan Goswami:
And I wonder, and we danced around this a little bit, but at some point the way they price this has to change. The consumer appetite to underwrite a full season of uncertainty, no matter how much money they have is not going to be forever.
Liz Hoffman:
Because their consumers are going to be hedging this, right?
Rohan Goswami:
Right.
Liz Hoffman:
Let’s say that there’s a Kalshi market on how good the snowfall’s going to be next year. Okay. Even if Vail isn’t participating in that market as a hedge on its revenue, their users who bought an Epic Pass are going to absolutely use it.
Rohan Goswami:
I could sense palpably your disappointment that Apollo, or KKR, is not financializing the cash flows off this. And why do you think that is?
Liz Hoffman:
I was disappointed and he is an ex-Apollo guy. So if he cannot sell the cash flows from Epic ski passes in a AAA rated bond back to Apollo, then nobody can. And we have perhaps found the limits of the financialization of everything.
Rohan Goswami:
You can financialize hotdogs, but not ski passes. What a shame.
Well, that’s it for us this week. Thanks for listening to Compound Interest from Semafor Business. Our show is produced by the always incredible Josh Billinson.
Liz Hoffman:
A special thanks to Anna Pizzino, Katherine Bilgore, Claire Einstein, Rachel Oppenheim, Tori Kuhr, Valana Wang, Garett Wiley, Stephanie Chang, Rohan’s new ski instructor and Daniel Hoeft. Our engineer is Bob Mallory and our theme music is by Steve Bones.
Rohan Goswami:
If you like Compound Interest, please follow us wherever you get your podcasts and don’t forget to review us.
Liz Hoffman:
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