Ernest and Barry discuss Baskin’s strategy for fixed income. Then they discuss what to do when you own a stock that is going nowhere. This leads to the feature discussion on Vail Resorts, the stock has been flat for years but its fundamentals are improving.
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Podcast Transcript
Barry Schwartz
Hello and welcome to the Long Term Investing podcast with Baskin Wealth Management. I’m Barry Schwartz, chief investment officer. Baskin Wealth Management is an independently owned investment management firm with almost $2 billion in assets under management, providing customized wealth management solutions and services to families and foundations. In this podcast, we ignore all the noise and have conversations that make sense about the things that matter in today’s markets. It’s what we talk about with each other here in the office, and we want to share those conversations with you. Please stay tuned for our legal disclaimer at the end of the episode.
Welcome back to the podcast. First off, I just want to say that Baskin Wealth Management stands with Israel and the atrocities that have happened there are just horrible, and our thoughts and prayers are with those that have suffered the losses and obviously we know lots of clients, friends and family who know friends and family have suffered there. And so like I said, our thoughts and prayers are with them and let’s move on now to investing stuff.
Ernest, thank you for joining me on the podcast today. We’re going to talk quickly about interest rates, before we get on to our feature conversation. We’ve been talking about a lot about interest rates which, as you know, Ernest, have moved up to very high levels. Ernest when I started in this business about the summer 2000, when I started working for David Baskin, I remember we were buying bonds for clients that paid around 7%. And I remember Ernest that there were these things that came out a few years later called income trusts, that paid 8 to 10%. And so high interest rates are I mean, we forgot for 20 plus years that interest rates can’t get to these levels, but they were there before. And so for clients for their fixed income parts of their portfolio, although, you know, rising interest rates can hurt stock prices. We talked about it in many podcasts. It can be pretty good for those looking to save money as well as, you know, invest portions of their safe money into fixed income. And Ernest we’ve been buying some very short term corporate bonds with yields that we haven’t seen in a long time, paying well over 6%. And so your thoughts on, you know, interest rates being good for the safe, so called safe, safe or less volatile parts of your portfolio.
Ernest Wong
Well, as you mentioned, 7% interest rate on bonds doesn’t even sound like a real number in recent memory. Yeah, I think the big discussion is, is about the long bond which has certainly moved quite a bit higher over the last little while. Today you can get a with five year for over 5% I think.
Barry Schwartz
Yeah, five year GICs they have started to come down. Definitely the one year GIC. Some are touting that they’re almost as much as 6%. For those that don’t know what a GIC is, it’s a Canadian guaranteed product, up to $100,000, where you lock in an interest rate. And that’s essentially the risk-free rate. You have no liquidity. You can’t sell it until it matures. But if you’re getting close to 6% on extremely safe product, compared to things that have some risk element in them, have to obviously have higher yields to get you to buy them.
Ernest Wong
And if you’re a retiree or somebody who’s looking for a safer income, it hasn’t been this attractive for a very long time, especially if you consider things like, like fees to the financial advisor or taxes.
Barry Schwartz
For sure.
Ernest Wong
And I think that’s one reason why you are seeing a very strong influx into fixed income products.
Barry Schwartz
Now, of course, let’s peel back the onion just a bit on fixed income because as the words imply, that your income that you receive is fixed, unlike an investment in a business or shares in a company, where your payouts could increase as well as your investment or your ownership and could appreciate in value. Whereas your income from a bond is fixed. You have no upside unless you own a very long bond and interest rates plummet and of course the key element is inflation. Ernest, right. So you always should talk about fixed income in context of inflation. If inflation is running 3 or 4%, which it is in the US, and as well as Canada, if you’re getting 6% or 5% on a GIC after inflation, maybe after fees or taxes, you’re still not earning a significant rate of return, probably more than you are earning pre 2022. When interest rates were 2%, inflation was 1%, but not it’s not still a really great value.
Ernest Wong
No, but I think that’s one of the reason why, maybe, if you look at the sell off in in so-called rate sensitive stocks, it’s because for a very long time and certainly through Covid the bonds you owned were earning nothing and negative.
Barry Schwartz
You were earning negative. That’s correct. Remember, some bonds were even offering negative yields. But you’re absolutely correct. If you’re getting 2% on a bond, inflation is 2%. Most money managers have to charge you for assets you’re not, and that income that you’re receiving is taxable, you’re not making a lot of money on fixed income at 2%.
Ernest Wong
And now if you’re getting 5% on government bonds and GICs, then it makes a lot more sense to increase the bond portion of your portfolio and, and maybe pull back a bit on the equities.
Barry Schwartz
It does. It does for sure though, we can’t get too excited about 5 or 6% if you’re getting after inflation. I saw you someone tweeted you, Ernest, that some of the dividend stocks and other companies that have high yields now the yields have gone up. It’s looking attractive to own them and I think your response was you tell me what the GIC is going to be. And I’ll tell you if that 7 or 8% I’m getting from a dividend is attractive.
Ernest Wong
Well, I think the other thing is that dividends are a much more complex topic. Yeah, you have to, because in essence, it’s a claim on a company’s profit and not a, a guaranteed interest payment like a bond or a GIC. If you’re investing in a company with a dividend yield, you have to consider whether the business is profitable, whether they have a lot of debt on their balance sheet, for example. And these are all the things that you have to consider. And so I don’t think it’s people saying, oh, you’re getting 8% on name your dividend stock.
Barry Schwartz
Enbridge and TransCanada pipeline I think are paying 8% right now.
Ernest Wong
And they’re saying, well, that’s still really good relative to your government bond.
Barry Schwartz
Yes. Who knows?
Ernest Wong
Yeah. Who knows? It’s hard to say.
Barry Schwartz
Let’s quickly just talk about our strategy for fixed income for our clients and what we’ve been doing. We don’t have a crystal ball. I like to think we’re pretty smart, but we definitely got concerned when interest rates fell to low levels and they’ve been in low levels for a long time. And as a result, Ernest we kept our bond maturities for many years at very short durations. Essentially, we didn’t want to buy bonds that had long maturities, especially when interest rates were near zero. And so we tried to contain ourselves and not reach for yield. You know, we said, okay, we’ll get 2% on a shorter bond instead of getting 2.5% on a longer bond. That was actually the right decision, though no one rewards you for owning fixed income when it has negative years when interest rates went up. So I mean, 2021 was an okay year for fixed income. Obviously interest rates were low, 2022 just terrible so far in 2023 are our fixed income performance have been a little bit better because we continue to be very, very short. But if interest rates continue to go high from here, it’s tough to make money on bonds. The only thing I would say to those listening is bonds are their own asset class. They’re not cash. There’s an asset class where you’re trying to invest, fixed income, where you can get more liquidity and maybe even bet on interest rate movements, as well as trying to figure out how long you want to lock in a certain type of interest rate. And so with interest rates at these levels, we’re still keeping our maturities, Ernest, very short, but certainly have moved them up a little bit as 6% looks pretty good to us for now
Ernest Wong
And I would add, that’s especially if you think that inflation is going to be under control in the next little while where you could possibly get some upside as well.
Barry Schwartz
That’s right. So I mean that’s from our research. From our analysis. We believe that inflation, it may not come down to 2% level anytime soon, but we think it’s come under control. And we’re, we’re thinking that the governments are near the end of their interest rate hike cycle. And maybe the economy will slow down as the interest rates impact that, you know, raising interest rates to six, 7% is going to slow the economy in the next few months, we think. And so it’s probably a good place to be to start buying some short term bonds and locking in those nice yields. Anything else you want to add there?
Ernest Wong
Nope. Well said.
Barry Schwartz
Ernest, you wrote a blog on our website. We’ve been doing a lot of podcasts, so less time for writing blogs. But why don’t you talk a little bit about what you wrote, and then we’ll move on to our feature discussion, which is a company that comes out of that blog.
Ernest Wong
So the topic of the blog was what to do when a stock you own does nothing. And I think a lot of times if you if you look at a stock like if it’s up a lot, then you feel great. If it’s down a lot, like it’s not too hard to figure out why it’s down. Usually either something, either they made a big mistake or the whole market is down and it’s not really their fault.
Barry Schwartz
Well, you should always just take the approach that the other guy is wrong and then you’ll feel better.
Ernest Wong
But sometimes stocks just do nothing for a long time. You sit with it and you, you come up with your initial thesis and then you own the stock and then you buy it and then it doesn’t do anything for like seven, eight years.
Barry Schwartz
Yeah. And that can be painful. Maybe you’re still collecting a dividend. So that maybe might soften the blow. But you know, in this day and age we want instant gratification from our investments. We’ve all read that the regular investor is trading a lot more often. They’re quite impatient and they’re not going to hold the stock that’s not working. And let’s talk about I guess that’s the national conversation is stock price versus fundamentals.
Ernest Wong
Exactly. And I think that’s really the key. I think that the rationale on why people want to sell these stocks, that that quote unquote, aren’t working is because I think people treat their portfolios as a sport team where they have a variety of players, and some of them are going to be playing well, some of them don’t do well, and so you want to kick the players out that don’t do well for ones that are going to do better.
Barry Schwartz
That makes sense in sports.
Ernest Wong
I think people don’t really realize that, stocks are not exactly the same as sports. Like stock prices in the short run, and even maybe even in the medium run, are largely a random walk. That’s the term that we use. A lot of things happen often beyond the management’s control of what happens. So a great example is in Covid, right? If you were running a travel and leisure like a cruise ship company, right, there’s nothing you could have done that would have protected your business.
Barry Schwartz
Nothing
Ernest Wong
You could be the greatest CEO in the world and your business still went to zero. So I think if you have a stock that doesn’t do anything for a long time, you need to be humble. And if you and evaluate whether what you thought you knew about the company is still true, like if your thesis was that it’s a great business that’s going to keep gaining share and they’re not gaining share anymore, then you were wrong. But also recognizing that sometimes things happen and stocks just become out of favor for reasons that can’t be controlled.
Barry Schwartz
Yeah, I guess are you wrong because the stock price didn’t do something for X number of years? Does that make your thesis wrong? It certainly doesn’t do wonders for your portfolio, and it certainly draws attention when you’ve picked or recommended a name that is not working stock price. But when are you actually wrong on that stock?
Ernest Wong
Well, I think it’s safe to say if a stock’s down like 80%.
Barry Schwartz
You’re probably wrong.
Ernest Wong
Either you were wrong or you dramatically overpaid for the stock.
Barry Schwartz
All right. So you explained a little bit. So when you have a stock a stock in your portfolio that may be underperforming, maybe its peers, maybe it’s underperforming other investments in your portfolio, obviously you want to double check your thesis.
Ernest Wong
And I think that’s something you should be doing anyways.
Barry Schwartz
So talk to us about let’s say earnings. We have a stock that’s underperforming for 3 or 4 years. You’re getting heat from Barry. You’re getting heat from other portfolio managers. Clients may want to talk to you about it. Why is this one down? All my other ones are working or what. What have, you know, what do you do to get comfort that you know the stock that stock is still okay to keep.
Ernest Wong
Well, I think it comes down to, for me at least, I think the number one analytical factor is the management. Do you still believe that the management knows what it’s doing? I think in a lot of situations that we’ve looked at like the management tells a good story, but I’m like they keep telling the same story and earnings don’t really go anywhere. And at some point you got to wonder if they actually do know what they’re doing. And in those cases like this it may be the fact that you’re the one who’s slow to wake up to the fact that the management doesn’t know what they’re doing.
Barry Schwartz
It could be true.
Ernest Wong
Yeah. And so then maybe it’s time to look for another idea.
Barry Schwartz
Yeah. Well, definitely over a long if you held a stock for a month and hasn’t done anything, then that’s on you. And you got to figure out what type of investor you are. But if you held the stock for three or 4 or 5 years and it hasn’t worked like you thought it worked, but yet the fundamentals are improving. You know, maybe you need to talk to other investors, maybe those that are negative on the stock, maybe those that have a short position. You know, you have to reach out and get a good idea where you could be wrong on that investment, not just a nasty Twitter troll reaction. Good one moron, something like that. It’s not going to be helpful to you.
Ernest Wong
But the flip side is that the business world is a messy place sometimes. Sometimes even for the best company. Like things aren’t going to work out perfectly. And being able to recognize that. Sometimes things don’t show up in in earnings for a long time. So let’s say a company was building a new factory, right? Like if you build a factory, it’s a risky thing. They might go over cost even if it was a great idea. Maybe demand falls in the meantime because of a recession and all sorts of things can happen.
Barry Schwartz
Well, so in the past, Ernest, I’ve sold stocks because they haven’t done anything and I’ve always regretted it. Maybe not the next day, but definitely a month, a year, whatever time period later. Because the thesis more often than not comes true. So I don’t want to do that anymore. I want to sell because management hass disappointed us or, you know, we or we figured out our research is completely wrong. But, you know, I guess this leads us to our future discussion about an investment that we have that hasn’t done anything. But you and I and the rest of the Baskin Wealth Management team are excited about it, but it doesn’t seem that anybody else is. And so we’re going to talk about Vail Resorts.
Ernest Wong
Well, hasn’t done anything, I wouldn’t say that’s entirely true. The stock has done tremendously over the last 15 years. Just not in the last five, six years. So, Vail, just for a bit of background – Vail’s the largest operator of ski resorts in North America. They own Whistler, they own Vail, they own Beaver Creek. These are big resort areas that people like to go to to ski in one of these places.
Barry Schwartz
Millions of attendees every year to their assets.
Ernest Wong
Yes. They have about 19 million skier visits, which is about a fifth of all attendance in North America. Now the ski industry is a fairly mature one. Like, people aren’t really skiing as much as they used to. And there have been no large new ski resorts built in the last, call it 40 years or so.
Barry Schwartz
Okay.
Ernest Wong
The ski industry has also been a historically been a pretty tough business because if it doesn’t snow one year, then nobody goes. And it’s basically a write off. So and because the ski season only lasts for about 4 or 5 months, you can easily go without revenues
Barry Schwartz
And you really need it to start snowing before Christmas because so much money is made over that winter break. And that’s what didn’t happen for some of Vail Resorts properties last year.
Ernest Wong
Yes. So what Vail’s CEO recognized, the former one, Robert Katz, is that look, it’s not going to snow everywhere every year. So if we own some resorts in Colorado, will own some in Vermont, will own Whistler and BC. We’ll own Lake Tahoe and even maybe own some in Australia and Japan then. Even if it doesn’t snow in one place, you’re fine because you still have the other places and the risk of poor weather is spread out across the resorts. So that’s the first thing. The second thing that Vail recognized, which totally transformed the ski industry, is that they launched the Epic Pass, which is a season pass where you pay about $800-$900 bucks or so up front for unlimited access to Vail’s properties and some other properties.
Barry Schwartz
And then they have different tiers. If you’re only going to go a few times, if you’re not going to go to the elite properties, if you’re only going to go to the ones and maybe more in the northeast where they’re driving distance, but they’ve got a pass for you where you can prepay. And that obviously, as you’re going to mention, lowers the risk for Vail.
Ernest Wong
Yes. So the key for the epic pass is that you pay up front. So Vail already has your money regardless of whether the weather is good or bad. And so if you put these two things together. Geographic diversification of resorts across the world, basically, and the fact that the customers, 70% of its customers today pay up front. It’s a pretty good business now because that that that is not really sensitive to weather fluctuations.
Barry Schwartz
Although there was an article the other day that, you know, the weather for the last three, four years has not been good. So obviously, and I think we’ll get into that a little bit about concerns about climate change and how that’s affecting snowfall.
Ernest Wong
No, the cherry on top of this is that because Vail’s business is so much more predictable than it used to be, they can now invest in the business. They can invest in technology, they can invest in nicer restaurants, they can build faster chairlifts, you know, all these kinds of nice things.
Barry Schwartz
When there is a good day, when they do get some good weather, everybody complains that there’s too many people there and the waits are too long. So what they need to do, obviously, is invest in chairlifts and better moving equipment.
Ernest Wong
And this strategy, Vail’s strategy, has been tremendously successful. It was so successful that basically every ski resort in North America was either forced to partner with Vail or not have any attendance. Yeah, or sign up with some of the competing pass products which exist.
Barry Schwartz
So Vail was the instigator. And then there’s been other passes from another group. I think it’s Alterra. So that gets you the ability to ski in other resorts across North America.
Ernest Wong
And if you look at just the numbers it’s been very successful. Attendance is up I think about three times since 2014. And remember this is a mature industry.
Barry Schwartz
So attendance at Vail Resort Properties up 3x since 2014.
Ernest Wong
Now some of this is from acquisitions.
Barry Schwartz
Still they acquired park properties I think Ernest in 2018 or 2019.
Ernest Wong
Peak Resorts
Barry Schwartz
Peak Resorts and those were more of the northeast properties. And that really prior to that Ernest Vail was really more at West.
Ernest Wong
That’s right. Now the stock. The reason we’re talking about Vail is that the stock has done nothing for about six years, basically since they bought Whistler in 2016. And there’s a variety of reasons for that. Number one is that after they bought Whistler, the valuation the market became very enthusiastic about Vail stock pushed it to a pretty high valuation. We just for some disclosure, Vail paid stock for Whistler so we inherited a large chunk of our position in Vail from that acquisition.
Barry Schwartz
Correct.
Ernest Wong
But so the expectations for Vail from the beginning were already pretty high. Number two is that Covid happened from 2020 to 2021. There were two years when attendance was terrible
Barry Schwartz
Even into parts of 2022. There were restrictions and issues and concerns that people had. So almost three full ski seasons of no skiing.
Ernest Wong
Yes. And Vail has held up much better than the rest of the ski or travel and leisure industry, because during Covid they still made money because people could still go skiing.
Barry Schwartz
Yeah, it’s an outdoor activity. You may not be able to fly there, but you could certainly drive with your family. And I remember when the ski resorts were open during Covid, it was pretty seamless. You may not have been able to grab a beer inside, but you could pretty much do everything else.
Ernest Wong
So that’s definitely impacted the company in a few ways. Number three is that last year was a was a rough year for Vail because of inflation. Whistler and all these properties are kind of in the middle of nowhere so it’s a challenge for Vail to attract people to, to go and work there. And they had a bit of staffing challenges over the in given the wage inflation over the past and a little while.
Barry Schwartz
Just a huge demand for part time jobs in the past few years has been incredible. So are you saying things have gone under control?
Ernest Wong
And so if you put all these things together, I think the market is kind of lost confidence in the growth thesis, especially since the architect of the whole Vail Resorts strategy decided to retire as well
Barry Schwartz
Has he remained on as executive chairman? Or he’s completely out of the business.
Ernest Wong
Yes, he he’s kind of like a Bezos like involvement in the company where he, I don’t think he’s partying on yachts, but he’s wants to spend more time with his family and on philanthropy. But he’s still providing strategic guidance on major decision making to the company.
Barry Schwartz
And for those who want to read more about Rob Katz, there’s a great book called Ski Inc. Highly recommend it. I think it’s pretty reasonable in Kindle, and Ernest and I both have read Ski Inc. Check it out.
Ernest Wong
Yes, I was going to say that.
Barry Schwartz
Oh, sorry. Well, whatever, man. I got to it faster than you. All right.
Ernest Wong
And so, put together like I think the stock is really attractively valued today. You’re getting an 8% free cash flow yield for a very high quality portfolio of ski resorts. They’re paying a 4% dividend yield. They just finished investing in capacity upgrades, so they’re in good shape for a little while. The labor situation is certainly much better than it was last year. And I think there’s growth opportunities ahead of it as it continues to acquire more resorts.
Barry Schwartz
There’s also pricing power. We didn’t talk about that a few years ago prior to Covid, after Vail had come out with this epic pass, they lowered the price to try and spur demand. And it worked. It was very successful. Then, of course, Covid hit, but now prices, they’ve started to raise prices back up for the epic pass, as well as those that you know, attend without a pass.
Ernest Wong
So that’s, I think, another reason where the market lost confidence in Vail for a long time. I think investors viewed Vail as kind of like a Disney World kind of thesis, where they would basically raise prices every year above inflation forever. So and I think it was the 2021 ski season, they announced a 20% price cut. Investors understandably, I think they said, well, look, Vail is not Disney World. They have to cut prices to gain attendance so they didn’t want to own the stock.
Barry Schwartz
The pricing power thesis was out the window.
Ernest Wong
I think this was one of the most shrewd business decisions that I’ve seen in a company that I’ve ever studied. If you look at the price cut, ski resorts, by their nature, are fixed cost businesses like the mountains are there, the chairlifts are there, the people are there. It doesn’t cost Vail much more money, whether an extra person goes or not. Vail recognized that coming out of Covid, they had a once in a generation opportunity to incentivize people to go out and ski. Because people were stuck at home for a long time, they were looking for things to do and the pricing had also gone a little bit higher than it used to be. So they announced a big price cut after their competitor had announced pricing to add more people. And this was very successful. They added a lot of. Like millions of new epic pass holders and ance these people bought the epic pass, they tried it. They liked the skiing and they become loyal customers. And so as a result of this pricing action, Vail today is a much bigger company, like they have more attendance and they have still opportunities to raise pricing going forward.
Barry Schwartz
So I want to talk about valuation. I want to talk about the balance sheet. Because some people have mentioned there’s some balance sheet risk and growth opportunities for Vail. So you know valuation 8% free cash flow yield for a business that has I mean this is not a business that you and I can open up ski resorts tomorrow to compete against it. You know, these are once in a lifetime assets. Pricing as you mentioned, they have ability to pull some levers there. Looks like Ernest, you mentioned, did you mention in your blog that Vail’s, they’re looking at 7% to 11% increase this year and in top line because of pricing and attendance activities.
Ernest Wong
Yeah. That’s the management’s guidance. Management’s guidance.
Barry Schwartz
So you’re looking at a company that could I mean the weather is impossible to know, but could grow top line by double digits. Could grow bottom line by double digits, 8% free cash flow yield. That’s it seems to us, is a very attractive valuation. Any comments on that, Ernest?
Ernest Wong
I think the one other thing I would note is that there they are buying back stock. Yeah, I think the like good, good companies recognize when their stock is cheap and they use extra cash flow to buy back stock.
Barry Schwartz
And they’ve also been retiring shares for the last number of years because as you said it a fixed cost business and generates a lot of free cash flow.
Ernest Wong
They’ve really ramped up the buyback once the stock dipped. But I think to your point on the balance sheet is they raised some pretty cheap debt in the depths of Covid and they in essence used that money to buy back stock.
Barry Schwartz
Now they issued some pretty cheap debt. I think they issued it at 0%.
Ernest Wong
Yes.
Barry Schwartz
And they’re convertibles right.
Ernest Wong
So at a much higher price.
Barry Schwartz
They’ll have to after. But either way they may have to refinance that debt at a much higher interest rate. Any concerns Ernest about it’s balance sheet.
Ernest Wong
No I think, overall leverage is still quite reasonable, and I think the most important part is that, again, it’s a much less cyclical business and sensitive to weather than it used to be because of what they’ve done with the season pass and with owning a variety of resorts in different places.
Barry Schwartz
So let’s talk about growth opportunities to finish off on Vail. As you talked about, they mentioned they acquired Peak Resorts. Can’t remember the year they acquired it. Was it pre-COVID right.
Ernest Wong
Peak was pre-COVID. Yes.
Barry Schwartz
And they also recently made some investments in Australia, although it has turned out to be a lousy snow season for the Australian resorts this year. So that also was affected the stock price somewhat. And they also made an investment for the first time ever in Switzerland, in Switzerland, in the Alps.
Ernest Wong
Yes, it’s called Andermatt-Sedrun.
Barry Schwartz
And so is this a like a little tasty bite that they’re trying to get some sense of? And do you expect more. You know, you I think you’ve spoken to the management and the indication of any acquisitions that they’re thinking about outside or inside North America.
Ernest Wong
Inside North America, there’s still opportunity for acquisitions. I think the nice thing about Vail is that if you look at who’s partnered with the Epic Pass, you can get a pretty good sense of who they’re eventually going to acquire. So that includes Telluride. That includes resorts with the Canadian Rockies up in Banff and includes Mount Saint Anne so those are some that they’ll probably acquire at some point.
Barry Schwartz
And every single property that comes on to this epic pass, I hate to use this term, but it creates a little bit of a flywheel effect, right? It’s more credits. They can sell more ski rentals, more food, more you know, it all works together and maybe builds a better experience for those that attend those ski resorts as well.
Ernest Wong
And I think the key is that they own a bunch of regional ski resorts as well. So not places that you would fly to, but like they have a couple little ski resorts in upstate New York. Like let’s say you live in New York then you buy your epic pass and then you said, hey, look, I can go to Whistler without having to pay. And I think internationally, I think they’ve talked about making acquisitions in Japan and, longer down the road, like they’ve certainly started to dip their toes into Europe, which is, which is surprisingly like a three times bigger than North America. In terms of skiers.
Barry Schwartz
There’s no end to the acquisitions. So climate change, this is the big one. Everybody is talking about it. And the obvious is, you know, the world is getting a few degrees warmer, unfortunately. Won’t that mean less snowfall? And how can that be good for skiing?
Ernest Wong
So the first thing is that Vail has probably more than anybody, invested a significant amount of capital in snowmaking equipment to maintain ski conditions. I think like last year in some of their resorts, it was so warm that they couldn’t even make snow but that’s more of a one off.
Barry Schwartz
Could be an El Nino effect or whatever they call it, and there could be some arguments that if the world heats up by one degree, maybe that would lead to more snowfall in some areas.
Ernest Wong
Yes and that’s the second point, is that, in a consolidating industry, usually the best properties end up becoming better because number one, they have the best properties and people want to go to the best resorts and they have the best snowmaking equipment. So as the industry declines because of climate change or because of whatever, then they might actually gain attendance.
Barry Schwartz
So, Ernest, I learned to ski when I was six years old at Earl Bailes Park at Bathurst and Shepherd. They had a tiny ski hill, and I learned with my sister, but my parents didn’t ski, so there was never any follow up. And so I never went skiing again until I married and my wife said she wants to be a ski family, always goes skiing with her brother and my older son and got me back into skiing when I was, I don’t know, mid to late 30s. I’m scared of skiing Ernest and my a few times that I’ve gone skiing Lake Placid in Vermont during Family Day weekend in February was like -1000 degrees. That wasn’t very fun. So skiing is not really in my future, but my family does. Half of us. I have two kids, so my wife and my son and my brother in law go away every year and guess where they go? Whistler, and this year they’re talking about going to Vail. So they love the experience at Whistler. They love the skiing at Whistler. And hopefully they’ll continue to go as long as they can. So what about you? Does your family ski any interest there?
Ernest Wong
I’ve been trying to teach the kids how to ski. I think they like it, although if it’s like -20 then, you know, I don’t really want to go. Yeah, they’re okay, but not me.
Barry Schwartz
Yeah, I’m a baby as well. Well thank you everybody for joining us. And we’ll see you back here real soon. Take care.
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