SAM Magazine—Broomfield, Colo., June 19, 2024—Just how far can season pass sales take a resort? That's surely a question that many areas have been asking themselves. And it was a topic that was explored in some depth during the Vail Resorts conference call with analysts following the company's presentation of its Q3 results June 6.

Quarterly analysts' calls are often an exercise in a company's ability to avoid answering difficult questions about its financial performance. However, VR CEO Kirsten Lynch provided a fair number of valuable insights into the Epic Pass, including projections for the 2024-25 season and the percent of revenue derived from passes vs. day tickets.

In toto, the call revealed how VR attempts to maximize and stabilize its revenue via pass sales. Since VR has developed this concept more than other resorts—passholders accounted for more than 70 percent of visits in 2023-24—its results provide a glimpse of the future for others who are pursuing the same path.

Epic Stagnation

First, a few topline numbers: through the end of May 2024, pass product sales (all versions of the Epic Pass and Epic Day Pass) for 2024-25 declined about 5 percent compared to the prior year. Thanks to an 8 percent price increase for all Epic Pass products, revenues increased 1 percent. A shift in product mix, to a greater percentage of lower-priced Epic Day Passes, partially offset the price increase.

Other key indicators: renewal rates among longer-tenured Epic passholders (those who have bought Epic for three or more years) were higher than last year, but renewals for shorter-tenured passholders were down.

Lynch further stated that she did not believe would-be Epic Pass holders were simply postponing purchases from spring to fall. "We believe the full year pass unit and sales dollar trends will be relatively stable as compared to the spring results," she said.

All this suggests that the big jump in Epic sales—up 62 percent in units and 43 percent in dollars over the past 3 seasons—has plateaued. And there's no clear path to regaining momentum on pass sales.

Lynch noted that historically, day ticket buyers have been the single largest source of new Epic Pass buyers in the spring. While snow conditions also impact Epic Pass sales, "they are not the primary factor," she added.

The problem for VR is that day ticket sales were down 17 percent compared to the prior year. As Lynch noted, that created "a smaller audience as the primary source of new passholders."

Day Ticket Prices a Deterrent?

Why the decline? Well, it's possible that the price of a day ticket, nearly $300 at VR's premier destinations, has driven some day skiers out of VR's market. One sign of that: lift ticket visitation declined due to weather in the early part of the season, Lynch said, but did not fully return to typical behavior even after conditions improved. "We had expected typical spring historical guest behavior, and we did not see that with the improved conditions," Lynch said.

As a result, those non-guests did not see the comparative value in VR's pass products, which went on sale in early March.

Megan Alexander of Morgan Stanley pressed the pricing question, asking whether price is having an impact on day ticket sales, and thus on the pool of potential Epic buyers. "The goal is to push people to the advanced commitment, but at the same time, you're talking about the lift ticket guests being the funnel for that," she said.

The dilemma: a too-low day ticket price might not provide enough encouragement (i.e., financial pain) to make the jump to Epic products; a too-high price might dissuade a guest from coming at all.

Lynch provided a nuanced reply. She noted that there are other sources of new Epic buyers, such as lapsed passholders and ticket guests, as well as "prospects."

Further, she noted that "our pricing strategy is set very deliberately to move people into advanced commitment." And VR has been very successful in that. Lynch said that the Epic Day Pass has been "a huge portion" of the 62 percent increase in advance-purchase Epic sales.

"I do not at this point believe that the 17 percent decline [in day ticket sales] is related to the price of lift tickets because we tend to move those people into Epic Day Pass versus it just being direct on leaving the sport," Lynch added.

We might suggest that skiers and riders have more than those two options, such as choosing other less expensive resorts, and that not everyone is willing to make buying decisions several months in advance. But we digress.

Local, regional options. Lynch also noted that day tickets at some VR resorts are priced less aggressively. "The other part of our strategy is that we have a diverse portfolio of resorts, and some of those are local, some of those are regional, and some of those are destination," Lynch said. "We have a network that allows a lift ticket purchase at a very reasonable price, with first-time programs to support them (beginners) as they start the sport at low prices at those local resorts."

We might suggest that it's not just beginners, or those who live near VR's local resorts, who are looking for a reasonably-priced day ticket, and that not everyone has access to reasonable prices at VR resorts. A day ticket in Colorado for VR resorts was as much as $299 in 2023-24, for example, while VR's Ohio resorts charged $60-$70 midweek. But back to the call:

Epic vs. Ikon

A few analysts asked Lynch to compare VR and Epic to Alterra and Ikon. They wondered why Ikon sales trends were more positive, and whether Ikon was positioned as a higher-tiered product than Epic. Again, Lynch delivered a nuanced response.

On pass sales, Lynch said that context is helpful. VR's Epic Pass is further along its life cycle, she pointed out. In its early years "the types of guests that we were converting were the high-frequency, high committed guests, and now our pass has been in existence for significantly longer than their passes," she said. "We have expanded dramatically the growth of our pass business going into less committed or lower frequency skiers and riders.

"Where we are in the stage of the product life-cycle is dramatically different, and the types of guests and the products that we offer are dramatically different. But mostly, I'd say, it's that life stage piece."

It's all about commitment. Lynch approached the premium-quality question from a different angle, saying that VR has grown pass sales "to get to over 70 percent of our visits committed in advance, and that is our strategy and that is our focus, and I think that is likely different for them.

"We know that pass is price-sensitive and the decision-making between a lift ticket and purchasing a pass, we have a lot of data on what the price sensitivity is to move them over," she added.

"We are always monitoring what that price elasticity is, because the goal is not to move people out of pass and back into lift tickets. ... We need that revenue stability in a high fixed-cost business to deliver the results that you saw this year, 28 percent less snowfall for the winter and visits down 8 percent, but still having revenue up 1 percent and EBITDA up 6 percent.

"We obviously pay attention to what they're doing, but I think our business strategies and goals are different than what they're trying to accomplish," she concluded.

Gearing up. Speaking of business strategy, it's worth noting that VR is investing more than $10 million in its My Epic Gear program for 2024-25. That's a significant sum, but one that could provide a new revenue source as pass sales stall. It could also tie passholders even closer to VR. The Epic Gear program, remember, provides freshly tuned gear daily for a cost of $50 per day. That could prove attractive to passholders who ski or ride 10 days or less.

VR clearly believes the uptake will be substantial. "I feel pretty good about our assumptions on My Epic Gear," Lynch said. "It's really incumbent on us to convince our guests that ... this is a better option than either owning or renting gear because it's a subscription and we have it ready there for you."

In other words, even if VR is reaching peak Epic, the company can still find new ways to make more money.

Report by Rick Kahl

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