Relentless Pursuit of Profits Can Hobble Your Ability to Compete

By April 22, 2022 General

In mid-March, the publicly traded company Vail Resorts made a public splash with its announcement to pay its labor force $20/hour across the board for the 2022-23 ski season. At face value to those outside the industry, it looked like a positive media moment for the company. 

One might conclude that Vail Resorts is a wage leader in the industry (it hasn’t been), or that resort workers are difficult to recruit. Truth is that all industries have experienced challenges in recruiting in an era of long covid. 

Conventional wisdom might even suggest that Vail Resorts is resetting the wage scale across the industry as it seeks to attract the best talent. 

But as reported by the Wall Street Journal and others, a closer look reveals this is a response to issues that can’t and won’t be solved with a wage increase:  

  • From November – January of this season, Vail Resorts stock was down 15 percent while the market itself was up nearly 10 percent – a 25 percentage-point swing when other publicly traded travel and leisure companies saw modest increases or remained flat. 
  • Coming into the 2021-22 ski season, Vail announced a $200 price cut to its season pass – valid across all 37 of its resorts – in hopes of selling more passes, which it did. Sales increased by 76 percent. 
  • Labor shortages impacted by Omicron and the high cost of housing in resort locations, coupled with an increase in visitors, created long lines, overcrowded resorts, and poor customer experiences.

Driving purpose: profits or people? 

In my previous blog I referenced Peter Drucker by saying the purpose of a business is to create and keep a customer. Vail Resorts is experiencing the challenges that ensue when purpose is misguided. 

In my opinion, Vail Resorts pursued profit ahead of its people and the customers it serves. A quick surge in profits looked good on paper, but those sales still required delivering a desired customer experience. While they were good at creating a customer, keeping them has and continues to be much more difficult.

When workers are few and crowds are large, tensions rise. Customers eventually lose their patience. When workers get pushed beyond their limits and do not feel respected, they quit. In the end everybody loses. 

Meanwhile, competitors in proximity of Vail Resorts’ locations sell passes at a higher rate, employ people at a competitive wage that isn’t $20/hour, and uphold a higher purpose that rallies their employees to serve their customers, not simply shareholders. 

At its core, this was a test of the operational strategy and culture in place at Vail Resorts. Now it serves as a case study for companies to carefully consider their stated purpose and how it supports their operational strategy and culture. 

Companies that exist solely to make profits will constantly find themselves chasing after the market or the next shiny new thing. 

Companies that exist to achieve something beyond profits create the opportunity to build loyalty – assuming the product or service itself is good. The value of that loyalty when reciprocated by employees, partners, and customers, is priceless.

The competitive advantage of a strong culture

The ripple effect of the 2021-22 ski season will continue to reverberate when seasonal workers return for 2022-23. The stock price and customer satisfaction feedback have combined to weaken the company, forcing it to pay more per hour than its competitors and more than it should. Knowing what workers experienced, they will have to weigh whether that modest bump in the hourly wage is worth it, if they believe a shift in culture is possible, and if customers will return at a clip that ensures they can maintain employment throughout the season. 

Those who compete for customers with Vail Resorts are wise to stay the course if they believe in their culture and the value of their product and service.

Companies with cultures rooted in putting people first and rewarding workers with incentives to live out the company values will continue to attract employees and customers alike, which makes a “wage war” for workers unnecessary.

Further, companies will see that offering $18/hour with the right culture and added incentives outweighs chasing an inflated wage that, in time, won’t be sustainable as markets soften or a recession occurs. That’s not to say that some employees aren’t worth $20/hour, and they are the ones who will benefit from performance-based incentives. 

If you believe like I do that competition is good, you want to see Vail Resorts bounce back. Operating from a level playing field is where companies put in the demanding work to differentiate themselves, offering greater value and experiences to employees and customers. 

Running a profitable business is a good thing. But a relentless and unchecked pursuit of profits can be the one thing that prevents your company from being the competitive force it aspires to be.

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