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SAM Magazine—Vail, Colo., March 24, 2020—These are stressful times, and there's not much time to plan ahead. So, on Saturday SAM talked to someone who thoroughly understands the business, and has time to think: Chris Jarnot, recently retired SVP of Vail Resorts and a veteran of more than 30 years in the industry (and 2007 SAMMY Hall of Famer). We asked about strategies and tactics for the coming days, weeks, and months, and what past crises might teach us.
Can you compare this to any previous crises?
After watching the first tower come down on 9/11, we knew it was going to change things, but we didn't know how. The night that the NBA shut down, my two boys and I were home watching the Nuggets game when they made the announcement in real time about Rudy Gobert testing positive for coronavirus, and games being canceled right then with arenas full of people, and the season being suspended. I felt the same thing as I did on 9/11. This is going to change our culture, but we don't know how yet.
So, how can resorts proceed?
The response in the current environment has to be both short term and medium term. Short term meaning this week, and medium term being the couple of weeks after that.
This week, it's time to sort out decisions about 2019-20 passholders and pre-purchases. On social media, passholders are already complaining about what they think might happen to them. So you have to resolve that soon.
See what this coming week holds, find out what's going on with your business. You have to decide what's necessary for your business vs. what's right for your customers. Those can be difficult decisions.
Next week is time to look ahead to summer and next season's pass sales—when do you start, what prices, etc. For example, you have to start making decisions about early summer, early June events—you have to decide what you're doing about those things in the next week or two. You have to consider the force majeure clause of contracts—you can cancel events, but you’re probably still on the hook with music acts, event producers, etc., at this point. If your state or local government cancels public events, then you can usually cancel unilaterally. Without that, you have to talk to your event organizers and negotiate the contract. It’s worth talking to your governor, mayor, or county commissioners about their plans. And, of course, talk to your attorney about the contract.
For next year's passes, it's time to make adjustments to your plan. Hopefully you realize already you have to adjust your regular deadlines. People are generally not going to be making decisions to buy next season's passes this spring, especially if their job has been eliminated or their stock portfolio is 70 percent of what it was last month. In making the decisions about saving your business and cash flow, you have to adjust your expectations.
As for just what that means, you can take a couple more weeks to make those decisions. Use this time to do some modeling of how that might look, and explore different scenarios. Then, figure out how and when to communicate your new plan to your guests.
What should resorts focus on?
That depends on the individual business. At this point, you've been through the decision to shut down and what that means to guests who were going to be arriving, and how to deal with employees who expected to work for a few more weeks, how do we help them get home, etc.
Now, focus shifts to, "How are we going to secure our business, and make sure we can open next year?" It's time to get on the phone to lenders, and call elected representatives. Get ahold of your elected representative. We need to make sure our industry is on their radar screens in the same way that the airline, hotel, and theater operators are. We have to reach out and make sure they recognize our role in our communities, and our needs.
We can be leaders in the community. For the most part, the resort company is probably OK. Resorts completed most of their seasons; they are generally going to survive and get to next fall. The real stress will be on all the businesses in town, the restaurants, ski shops, transit companies, etc. Some are smart enough to work with lenders, some will need more help. The ski company can provide leadership and help those businesses with all the tactical steps, even such basic things as who to call. We can coordinate with chambers of commerce and help make those calls on behalf of our communities, which could impact all the employees who are displaced.
Harvard Business Review has been a good source for guidance. There's lots of good advice on its website on leading through a crisis. Lots of minute-to-minute, day-to-day advice.
What would you ask of suppliers?
These next couple of weeks, depending on supply chain disruptions, I want them to keep me up to speed on their situation. I'm not making decisions now about cap ex if I haven't already. If I had made a decision, I'd start asking what can I back out of or cancel. What has the supplier already bought, how do we work out a new plan? I'd start having those difficult discussions, see what we can work out. There's contracts, and there's how can we resolve this.
Now is also a time to chart your best-case plan for next December. But I'd also hold off on making decisions on what to buy this summer for at least a few weeks, until the situation becomes clearer. The availability of labor is going to change, suppliers will be hungrier, contractors will be more competitive. It will be a different story going ahead. Start to contemplate those things, but don't pull the trigger on anything yet.
How should resorts communicate to customers?
First, shut down paid marketing, use all the unpaid ways to communicate. Be on top of that. From what I've seen, resorts are doing a great job. Customers are wary and based on what I have seen on social media, some are expecting to get screwed for the things they had pre-purchased from you. So, ask for patience while you work out refund policies, etc., and then follow up. You have to be responsive to all that, immediately.
I always had to remind myself how fortunate we are to work in an industry with guests who are passionate about what we do. You have to empathize with your guests, understand their distress, and put aside any annoyance with their reactions. It seems resorts are doing that.
Travel is a human right. People will travel—they have been traveling since prehistoric times. The business will come back. But like after 9/11, this is a generational change, and we have to figure out what that means. There may be a longer delay to the recovery, it might not be back completely by next winter.
How's this compare to the financial crash in 2008-09?
It's not unlike the recovery from 2008 crisis. The market's crashed again, the economy will be at least as impacted as it was then. Investors and those who rely on their investment income will probably behave a lot the same way. In addition, though, how activity and travel has been permanently impacted by the coronavirus will be layered on top of that.
The upper echelon of the economic strata will figure out how to come out fine, they always do, but even they will be impacted in the short term and will pull back.
In 2008 and 2009, we saw people shift their travel habits. In the leadup to 2008, they had shifted consumption up and we saw some of the middle-tier-price-point resorts benefit. Then those customers disappeared. The same will likely apply again. That may mean fewer trips to destination resorts, and more people will stay closer to home, and visit less-expensive resorts. We can expect something like that.
The hard part to predict is the reaction to the pandemic, which will be layered on top of the economic reaction, and that's very different than 2009.
Any final thoughts or advice?
One thing that concerns me for next year is, how does this virus play out relative to the mountains? Right now in the Vail Valley, we're as impacted as any place in North America. The fact that visitors come here from around the world, that's something to be concerned about. We have the benefit of the fact that our sport is outdoors and naturally separated, but it’s also cold and at altitude. We have to start thinking now about how to mitigate the impact of the virus and the specific concerns travelers might have about our business for next season.
Looking ahead, I have huge concern about our communities and the displaced employees. If we get into late June with restaurants still closed, for example, I can't imagine how that works its way out.
It will be in our interest to step up and make sure that government helps out, that those small businesses get the assistance they need. We have to help local governments figure that out. Make sure your community benefits from government rescue packages so we all get to the other side of this crisis.