Skiing Notes from Ira Riklis

Ira Riklis continues:

Our operating problem is that we lose money during the summer season. Obviously, in a resort known for the skiing, BIBs are more precious in the summer and we have less to sell them. This is really a shame because the summer activities in a resort like Vail really do rival the winter activities.

Aside from the obvious of hiking (which is made more interesting by being able to take the ski lifts up to attractive areas), the summer activities include riding a bicycle non-stop from the top of Vail Pass back into the Town of Vail. This experience approximates the experience of skiing down a mountain. It’s a real rush. There is also river rafting over rapids, golf and tennis, mountain biking, ATV (all terrain vehicle) trips, four wheeling off road trips, and much more.

We once went off road with Mike up to an old cabin originally built by the 10th Mountain Division as a training facility. There we had an elegant picnic, wine and all, way above the valley. The views were breath taking. It was an experience I will never forget. And all those fine restaurants in the Valley, which I’m going to write about later, are easy to get dinner reservations. I hope someone reading this blog will choose to visit a ski resort in the summer.

Ira Riklis continues:

You may wonder how comping the customer pays off for us and contributes to our unbroken string of annual earnings. It actually is a rather straight forward calculation.

Of our 11 stores, two of the properties are owned by real estate investors. On those two stores we get 3 year leases and every 3 years the rent is reset to suck out ALL the earnings from that store. The investor doesn’t care a lick that we contribute to the successful skiing experience of the vacationer, only about maximizing return on their property. I’m not condemning that attitude; it makes perfect sense.

It also means that a real estate investor is the wrong landlord for us and we will never rent a store owned by an investor ever again. Hotel operators and condo associations also care about maximizing their returns, but the calculation by which they achieve their returns is more complex. For the typical 250 unit property, if the goodwill that we build in the minds of their customers contributes to just a 5% rise in occupancy only during the Low Season, then that is worth much more to the property than even doubling the rent on our store.

We have become known for building this kind of customer goodwill and having this effect for the benefit of the hotel such that we no longer purchase existing stores. Instead, real estate developers and condo associations will offer us attractive packages to move into their property as an amenity for their customers. We are generally offered 10, 15 year leases at attractive rents and with renewal options, often with the landlord either contributing towards or outright performing the space buildout.