With reports released today announcing that 10 million Americans have had to stop working due to COVID-19, it is no longer news that the coronavirus outbreak has had a major economic impact worldwide. Vail Resorts is no exception. In a press release yesterday, Vail Resorts estimated a $200 million loss due to early closings this season. The company also announced it would bring “nearly all” of its year-round hourly employees to the United States in the coming days to deal with unforeseen financial shortfalls and stop plans to lift new seats, expand terrain, and so on. The full press release below:
“Today, Vail Resorts CEO Rob Katz shared the following note with U.S. employees about difficult business decisions due to the ongoing impact of COVID-19, including some unfortunate things affecting the Company’s U.S. employees:
We continue to find ourselves living in an unprecedented period as the situation with COVID-19 becomes more and more challenging, with everyone across our planet now facing very real and significant health risks and impacts. This crisis has had a particularly serious impact on the tourism industry. At the moment, all of our mountain business, motels, retail and transportation are out of business and it’s becoming less and less obvious as things will start working again. Two weeks ago, we reported that the early closure of our North American operations would result in the Company losing profits of at least $180 million to $200 million in the third quarter ended April.
I very much hope that both the economy and tourism will return to normal by the time our North American winter begins eight months from now. However, we also need to keep in mind that we have significant business operations that will be open over the next few months – our Australian winter, the Grand Teton Lodge Company, as well as summer accommodation, retail and mountain activities at our North American resorts, It accounts for more than 20% of our total revenue. Given the very real possibility that home accommodation orders across the globe could be renewed and travel declined regardless, our business in May to October is at risk. We will work hard to reopen as soon as possible, but much of this is now out of our control.
Because of these realities and to ensure that we can overcome the financial challenges ahead, we are taking certain measures, including a number of measures that will unfortunately affect each of our U.S. employees:
We will employ nearly all additional hourly employees year-round in the United States as of April 4, 2020, for at least the next one to two months, without pay, but with full health care coverage for any affected employees currently enrolled (the Company will pay all premiums).
We are implementing a six-month pay cut for all salaried employees in the United States, starting at 5% for those up to Year 27, 7.5% for Year 28/29, 10% for Year 30/31 and then up to 25% off for our most senior executives.
I will give up 100% of my salary in the next six months.
We will eliminate 100% of cash remuneration for our Board members for six months.
We will be suspending the Company’s 401 (k) match for the next six months.
We are reducing our investment costs from $80 to $85 million, with the intention of postponing all new lifts, expanding terrain and other mountain renovations, while protecting the majority of our maintenance capital expenditures.
We will eliminate june and September dividends for shareholders, saving the Company more than $140 million.
I realized this was very disappointing news and I was hoping we wouldn’t have to take this action. But with each passing week, the financial consequences become more and more apparent. For our year-round hourly employees, I am disappointed that the majority of you have not been able to work in the last three weeks and I assure you that we will end this process as soon as possible after we have clear information about reopening our business. For our year-round salaried employees who are working from home, in more difficult cases than ever before, I’m really sorry to have to ask you to provide more by accepting a pay cut – we ask people to accept a little sacrifice so that we can get through this storm together and Ready to come back strong for next winter. For those of you who have questions, your leader will be in touch to discuss the situation with you in the coming days.
I’m sure many of you are wondering if these actions are enough. Will there be more changes coming up? Again, if I’m being honest with myself, I have to give the toughest answer to any CEO — I really don’t know. Maybe things can be quickly improved. But it’s also possible that these challenges could force us to delay or cancel our upcoming summer. In that case, more measures may be needed.
I’ve made decisions over the past few weeks that I could never have foreseen in my nearly 30 years in the skiwear business. I recognize the impact of today’s decisions on you and I don’t take them lightly. I am humbled and grateful for your passion and dedication to each other, to our community and our industry – that’s what makes our sport and this Company so special. Know that, I am fully committed to helping manage our Company and our entire industry forward so that we can all continue to thrive in the years to come. During this challenging time, continue to prioritize your health, safety, and well-being.