Vail Resorts orders 10 percent energy cut
Aspen, CO Colorado
VAIL, Colo. ” Facing rising energy costs and a slowing economy, Vail Resorts CEO Rob Katz ordered employees Thursday to cut the company’s energy consumption by 10 percent within two years.
“While an ‘energy layoff’ might seem a little ‘out there,’ I believe it will start becoming the norm for businesses to stay competitive in this new environment ” both for profitability and sustainability,'” Katz wrote in an e-mail to employees.
Besides rising oil costs and a sluggish economy, Katz also cited a need to reduce carbon emissions.
“You have the perfect storm, so to speak,” he said.
The e-mail didn’t mention any specific ways the company would cut energy, with Katz saying “everything is on the table.” The energy cuts will be adjusted for snowmaking and grooming related to weather “fluctuations,” Katz said.
Reducing consumption while still using energy-hungry snowmaking and snowcats to make for good skiing won’t be easy, Katz said.
“This is an area that will require significant thought and discussion to make sure we consider every possible alternative to improve efficiency, but without detracting from one of our core strengths in any way,” he said.
Randy Udall, an energy expert who is former director of Aspen’s Community Office for Resource Efficiency, gave kudos to Vail Resorts for the initiative.
“I salute this effort,” he wrote in an e-mail. “Vail Resorts deserves a round of applause. To meet the goal, they will have to take a close look at snowmaking and grooming operations, two very large users of energy ” and of greenhouse gases. Using coal-fired electricity to make snow cannibalizes the climate on which skiing depends.”
Udall added that he thinks the chances are good that Vail Resorts can achieve its goal.
Matt Scherr, director of the Eagle Valley Alliance for Sustainability, also commended the goal, saying that rising price of fuel is pushing conservation efforts.
“You always care when your budget gets squeezed,” he said.
But he noted that Katz coupled the economic reasons for the effort with the environmental reasons.
In 2006, Broomfield-based Vail Resorts announced that it would offset all of its electricity use ” 152,000 megawatts per year ” with renewable energy credits.
Vail Resorts owns Vail, Beaver Creek, Breckenridge, Keystone and Heavenly. It also owns and operates hotels and resorts across the West and in the Caribbean.
As I am sure all of you are aware, the economy has been having some trouble lately. There are lots of possible explanations for why, but what’s important for us, at Vail Resorts, is be cognizant of the environment we operate in and react appropriately. The good news is that our company is in a strong financial position. This allows Vail Resorts to continue to make the critical investments for our future. Examples of this would include the new Keystone gondola, the new Ranch, Children’s ski school at Beaver Creek, One Ski Hill Place in Breckenridge among others. In addition, we are also making investments in the support we provide our employees- by bringing in terrific talent to oversee new efforts in recruiting and development and ensuring we have the best tools available to support all of you.
At the same time, to ensure we stay in a strong position, we do need to tighten our belts. Not in ways that would take us off our mission, but in ways where we can become more efficient. This was the genesis of the program we launched this past November called “Use Less…Do More”. It was a call to action and a challenge to see if we could find ways to use less energy, while still improving upon the experience we provide our guests. We have already made great strides in that effort, such as our early success with the employee carpool initiative and assuring greater awareness of energy use throughout the organization. Today, events have come together to make this effort that much more critical.
First, as I mentioned, the economy has gotten even tougher- making it even more important to become more efficient. Second, the price of oil, which was approaching $90 per barrel in early November, was just over $135 per barrel. Combining these factors with the environmental necessity to reduce carbon emissions and you have the perfect storm, so to speak. The issue of energy usage needs to be a company-wide imperative. Now, when you waste energy you are not only impacting the environment and squandering resources- but you are literally burning huge amounts of money. And looking across our company, we spend over $25 million per year on energy (including gasoline, diesel, natural gas, propane and electricity), so these are serious dollars for us.
Today we are announcing mandatory energy layoffs. We will be requiring people to layoff their energy usage. We will be targeting a mandatory, company-wide 10% reduction in our energy usage. What does that mean? It’s a 10% reduction off of the quantity of energy we used in Fiscal 2008, independent of the price, and adjusted for weather related fluctuations for snowmaking and grooming. Our plan is to achieve the first 5% for all of Fiscal 2009 (and have it included in the 2009 Budget) and the next 5% to come by the end of Fiscal 2010. Like any announced change- generally the first reaction is “there’s no way we can do that.” And I want to acknowledge up-front that this will not be easy, especially because the requirement of “Do More” remains. We must find a way to do this in a manner that allows us to keep driving the guest experience. How?
Well, everything is on the table. First we need to look at all of our day-to-day practices, many of which were put in place when oil was $20 per barrel and gasoline was $0.90 a gallon (not over $4.00!!!). Second, we need to continue to evolve our culture and take this even more seriously. For a growing number of us, when we see energy being wasted, we see the environment being damaged. However, at this point, we also need a culture that sees energy being wasted as literally seeing dollar bills being crumpled up and thrown away. Third, with our strong financial resources, we should be looking at every project that offers a good return and allows us to reduce energy use and become more efficient. With oil over $130 per barrel, projects that may have been “iffy” before may be very compelling today. This needs to become a priority in our capital budgeting process.
A big portion of our energy is used to provide a core part of our experience in the mountains- the snow surface. This is an area that will require significant thought and discussion to make sure we consider every possible alternative to improve efficiency, but without detracting from one of our core strengths in any way. This is also an area where usage can fluctuate based on weather conditions. As mentioned earlier, we will be excluding those weather-based fluctuations and really focusing on efficiency.
What’s next? As we all come together to create the budget for Fiscal 2009, each operation will be asked to provide their plans to achieve these energy savings. We want to have these plans finalized by August 1, 2008. Each of your managers will be working with you to discuss and develop these plans and the environmental coordinators at each resort will be available to help support those efforts. During Fiscal 2009, we will be bringing in further outside resources as we try and unearth the tougher to find savings. And at the end of Fiscal 2009, we will conduct an audit of our activities as we review our past success and plan on how to drive even further reductions.
While an “Energy Layoff” might seem a little “out there”, I believe it will start becoming the norm for businesses to stay competitive in this new environment- both for profitability and sustainability. I am asking everyone to treat this as one of our highest priorities and pledging my support and the Company’s resources to make this a reality. Given everything we have accomplished together, there is no reason that we cannot take a leadership position on this issue- for the benefit of our shareholders and the environment.
All the best,
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