This is Wall Street Week. I'm David Western bringing you stories of capitalism. Saudi Arabia's Vision twenty thirty project to reshape its economy has a deadline only four short years away. We go to the Kingdom to see how it's coming on. An important part of the plan, tourism plus Israel's startup nation has been put to the test with the Warren Gaza. Has the conflict slowed down the tech juggernaut or actually sped it up? And more people want to ski, but
they need snow and access to big mountains. We explore the pluses and minuses of one possible solution, so called Big Ski. But we start with the story of the week for the Federal Reserve with Chair J. Powell reacting forcefully to a grand jury subpoena looking into his testimony about renovations in the Fed's DC office building.
The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President. Public service sometimes requires standing firm in the face of threats. I will continue to do the job. The Senate confirmed me to do with integrity and a commitment to serving the American people.
Everyone from central bankers around the world to several Republican senators condemned the move, including Senior Senate Banking Committee member Tom Tillis, who spoke with Bloomberg on Capitol Hill.
If suddenly the threat of a lawsuit can take a chair out of play, how can anybody think that that's anything more than a de facto ending the independence of the FED. And we all know what that does to markets worldwide. I will block any effort to name any member of the FED board until this matter is resolved. To move on would almost validate that this is a way that you can actually get the FED under heel.
Bill Dudley is former president of the New York Fed and now a Bloomberg contributor. There was a lot of reaction to the news that there was a grand jury subpoena against the Federal Reserve and Chair Powell. A lot of reaction by politicians by the news media. There wasn't as much reaction actually in the markets. So is one of them right and one of them wrong?
Well, time will tell, but I think the market view is Look, the issue is subpoena. It's a long way from issuing a subpoena to actually having a grand jury, indictment a trial, and that's going to take so long. Paul is already longer going to be Chair. So I think the market view is this is sort of a lot of noise.
So it may not have the effects in the real world. But Chair Powell, who had repeatedly just sloughed off christ as the lass, had an entirely different reaction. It was a very I thought, forceful statement that he take.
Oh very much so.
And the contrast was how he behaved previously, where he was basically I'm not going to engage. I'm not going to engage, and this time he said, no, you crossed the line. You're accusing me of malfeasance and I'm not going to take it. And so I think it because because he was so measured before, this made it even more effective.
So you've been in the room and whenever we ask somebody who's on the FED, they say, oh, no, no, we paid no attention to politics all absolutely not. Doesn't affect us. But you are human beings. I mean, it must play in the back of your mind somewhere, even if it's not discussed in the meeting.
Look at the federals or transcripts of all the FMC meetings released lag of five years, and you won't see any discussion about political consideration. So I think that's actually true.
But you know, you're certainly right in the sense that if the administration is putting tremendous pressure on the FED to do something, that makes it a little bit more difficult for the FED to deliver what the administration actually wants because it creates the idea of are they doing it because they think this is appropriate for the economy, or are they caving to the administration's pressure. So I
think that's why it's actually counterproductive what they're doing. I can imagine Powell like thinking, should I do one more ray cut or not? Boy, Now, if I do a ray cut, it looks like I'm bending to this pressure. Maybe I better hold off. So it's actually making it more difficult for the feder cut rates.
Frankly, as you say, chair pole is terribly up. In May, there will be a new FED chair. How much difference will the chair make in themselves?
I think the chair is certainly important because one they control the agenda, the boards, Board of Governor's staff works mainly for the chairman, so that's a lot of authority.
But at the end of the day, in terms of the votes.
On the Federal Open Market Committee, the chair only has one vote, and so I think the influence of the chair really depends in part on how credible that person is in terms of making the case for the monetary
policy that he wants to see implemented. So if someone comes in and says we should cut one hundred basis points and the economy doesn't suggest that that's appropriate, the committee is going to say, well, that's what you think, but we're going to dissent against that, and that's really you know, that would actually be quite bad for the chairman if the Chairman serve of lost a vote to the rest of the committee. So I think there's quite
a few guardrails there. I think the broader question is can the Trump administration put enough loyalists into the Federal Reserve So it's not just the chairman, it's a majority of voting members of the Federal Open Market Committee. And that's why the LEAs of Cook case is so important, because if leeds a Cook can be dismissed for cause, So then maybe other people can be dismissed for cause and then you get a much more rapid turnover of the Board of Governors. Board of Governors has seven votes
on the FMC. The presidents have five, So if you could take over the Board of Governors, you could actually start to get the monetary policy you wanted.
From the outside, the job of Chair of the Federal Reserve looks pretty hard for anyone anytime. Is President Trump making it harder for the next chair with what he's saying and doing, including his grand jury subpoena?
Yeah, I think he is, because I think it's it's when the new chair comes in, people are going to be wondering, so are you President Trump's lackey or are you going to be on the side of independent monetary policy based on what the economy calls for in terms of inflation, unemployment, what what what interest rate? Pastoul we follow And so there's gonna be a question about are you supporting the idea of an independent central bank or not? And so the new incoming chair is caught in a
very difficult place. Frankly, I mean it's almost like they're going to get someone mad at them if they if they side on the side of independence of Monterrey. Pauls let's set the right monetary policy. That might run into conflict with the president. And obviously if he tries to push the president's agenda and the and the FMC thinks that's inappropriate, then he's going to get out on the wrong side of the FMC. So I wouldn't want to be the new chair.
Frankly, it strikes me when it comes to the Supreme Court, the President typically goes out of his way to say I didn't ask, for example, how they would vote on this particular issue. I didn't ask that question of ask. I'm not sure President Trump would have the same reticence with the next FED chair of not asking them specifically, what are you going to do?
I wouldn't be surprised if you asked them what to do. And I think if I was a FED schaer, I'd say it depends on the incoming economic data and what's wanted to keep the economy on a smooth clude path. I mean, look, I think President Trump, you know, is coming at it from a real estate development perspective, and which is lower rates are always good. But the reality is lower rates aren't always good, because if you set rates too low, the economy will overheat and you'll have.
An inflation problem.
It's sort of ironic in an environment where people are worried about affordability that inflation is the thing that really resonates with voters that you're pressing so hard for lower interest rates, which would actually probably make inflation worse.
President Trump has said repeatedly I have the right to express my views. I think I'm pretty sure this, and there is a first men right. Even with the resident United States expressive views. Is there a point where that expression of views actually starts to do long term damage to the institution.
I think how it depends on how you're expressing the point of view. You could say, my view is that the federshar Raser should interest rates more. Fine, that's just an impression of view. Powell is an idiot. He better lower interest rates by one hundred basis points or I'll fire him. That's a totally different expression of a point of view. One is saying what I think interest rates should be. The other thing, not only is what do I think introduce rate should be? This should be the
consequence of my decision. So I think there are two different things. So I don't think anyone quarrels with the President having a view on interest rates.
The latter is what the President has done, yes, which would imply there is some damage being done. How long lasting is that? I mean, there will be a new president at some point, and let's assume a new person comes in say no, I'm not going to criticize the FED anymore. Does it restore the credibility or is there lingering damage?
I mean, I think it depends on how the Federals are behaves over the next couple of years. You know, if the Federals are basically sticks to his knitting, he touch monetary policy independent way, keeps the economy on a smooth dijectory lasting damage. The President Trump's were swarted in his attempts to take over the FED.
But if President.
Trump is somehow successful in taking over the FED and getting a very accommodative monetary policy of the consequence that's not appropriate for the economic outlook, then of course there'll be more lasting damage to the FED.
Take us inside the room when the f OBC meets, because historically it's sort of been like secret, we don't know what's going on.
Well, you have the transcripts, and I think the transcripts tram trips are pretty accurate about what the meetings are like. You know, basically what happens at a meeting is typically you have a briefing from from the from the system open the manager about what's going on in markets. Then you have a briefing from on the economy from the staff, and then briefing on international staff, and then you have a go around and everyone talks about their views on
the economic outlook. It's a pretty collegial place. I mean, you know, if you you know, people want to understand the views of others. People aren't yelling and screaming and arguing, you know, vociferously. It's it's very respectful and you know, people spend you know, quite a bit of time, you know, when the meeting is not in place actually you know, you know, talking in the hall, the coffee, you know, having a cup of coffee on the break or at
the breakfast or lunch. So I would say, you know, I find it to be quite collegial, you know, and I think that's and I think that makes the institution function better.
A collegiate place where one in Lisa Cook and now two in the chair J Powell are under very public attack, a personal attack, and I think.
People are feeling there, you know, that could be me. So I think, you know, there's quite a bit of sympathy for what those two people are going through. So I think, yeah, I think the federal reserves of leadership, you know, including you know, all the FO ANDC participants are pretty you are very sympathetic to where Paul's coming from. And I think they feel really good about what he did and said it had to say in his video message this past weekend.
Up next competition in the Gulf between Saudi Arabia and the UAE. This is a story about transforming a brand. The Kingdom of Saudi Arabia has long been associated with the Muslim holy cities of Mecca and Medina, and perhaps even more so with oil, but the country's rulers have been trying to diversify. What if it could become a favorite vacation spot as well. Our colleague Jamana Bressecci brings us the story.
Many countries seek to transform their economies, but few do it with such a centralized approach and such vast amounts of capital. Through its vision twenty thirty, Saudi Arabia wants to shed its image as just an oil nation and modernize its economy. Its goal that comes from the very top, with the crown prints meeting President Trump and foreign business
leaders in the United States. At the end of twenty twenty five, more than forty percent of Saudi Arabia's GDP comes from oil, but by twenty thirty, the kingdom wants that number to be closer to thirty five percent, with around two thirds of GDP coming from non oil sources. Just this month, the country started opening its property market to foreign investors and announced plans to do the same
with its equity markets. After a year of poor returns, in twenty twenty five, Saudi Arabia's benchmark index dropped thirteen percent, despite strong stock performance in much of the rest of the world. Stephen Cook is a Senior Fellow of Middle East and Africa Studies at the Council on Foreign Relations.
Saudi economy has been a commercial economy, but it hasn't really had genuine institutions of a market economy. Independent core, which he hasn't even tackled yet, but rational investment laws and the things that investors really really need in order to operate outside of the hydrocarbon industry, you know.
With the Virgion twenty thirty, His Royal Highness the Crown Brands said, we have to diversify the economy. We don't want to continue relying on one source of income, which is the oil. In a time where we have a vast number of other things like mining natural resources, forest, fat, gold and nature. We can do a lot in its board culture and entertainment and tourism.
His Excellency ahmedal Fatib has been serving as Saudi Arabia's Minister of Tourism since twenty twenty.
Tourism was one of the main pillars of Virgin twenty thirty, and since then we have been working to modernize the country, build a new destinys, new airlines, read airlines, new airports including King Salman Airport, and the new hotels.
Leisure tourism might be relatively new to Saudi Arabia, but for centuries millions of Muslims have come to Mecca and Medina for the Hajh religious pilgrimage.
We are pleased to have the two holy cities.
They use to represent sixty percent of our international arrivals back in twenty nineteen and last year they dropped to forty six percent and the LEDGER increased, And therefore we will continue pushing and promoting travel for Ledger to Saudi Arabia.
Travel to enjoy your holidays in.
Saudi Arabia, and in the same time the religious tourism will grow to a much bigger number than what we are having today.
But now Saudi Arabia wants to put a new foot forward. It might look like the Maldives, but that's the Shabbara Sorts Saudi Arabia on the Red Sea.
Well, we were born out of Vision twenty thirty. Vision twenty thirty is trying to accomplish a number of different things for the country, amongst which obviously creating a vibrant society, opening up the kingdom and diversifying the economy.
John Pegano is CEO of Red Sea Global, a real estate development company founded by the Crown Ference himself to create the real estate that will become part of Saudi Arabia's tourism offerings.
We have a beautiful, pristine environment which in the world today doesn't exist. I mean, we've exploited our nature and our environments globally. When I first came to Saudi Arabia, I was shocked at how beautiful and pristine this environment was. We had beautiful islands, a coastline that was largely untouched.
Pegano's shock is exactly the image that the kingdom wants to change. Stephen Cook said, there's a long road ahead.
I was there before the opening up of Saudi Arabia. It was extraordinary because nobody had been there. But in terms of tourism, I think that yes, there'll be tourism from you know, major Muslim countries, Indonesia, Malaysia, India which has the second largest Muslim population in the world, even
though it's not a Muslim country. But also I think there is a genuine interest in attracting people from the West Americans and Europeans, and not just the kind of you know, adventure tourism that they may have seen so far.
Beach res words attract wealthy tourists, but the kingdom is also leaning into its rich history to combine luxury and culture for what it hopes will be a unique experience.
Iloid that is an incredible place, a place like no other. It's a region in northwest Saudi Arabia with incredible natural and cultural significance. It's located on the ancient and since route and many civilization has passed through four thousands of years.
Abiri Lakil is the CEO of the Royal Commission for Alahala, which means glory in Arabic. The city is one of eight UNESCO World Heritage Sites in Saudi Arabia and the kingdom has big plans to make the destination a central part of its tourism initiative.
Aloola is not just a historical site. Illola is a home. Many families has left there for generations, and I would say that an example would be Aliveela old town where it was inhibited by the families starting from the twelfth century until late ninety eighties. Now, if you bring all of this together, the ancient past, the incredible nature, protected nature, and the living culture and you know, living community, this
basically gets you a complete picture of Ilola. It's important to say that Aliola is Saudi Abas treasure, but it's also the gift for the world.
Which year did Alerala open for international tourists.
We started our efforts back in twenty nineteen. Today we have received around three hundred thousd and guests visitors to eleven thirty percent of which our international visitation. So we're try getting around two million visitors by twenty thirty five.
If Lalas planned to bring in two million visitors by twenty thirty five, sounds ambitious when it attracted only fifteen percent of that last year. That's because it is. It echoes the kingdom's big target of getting fifty million foreign visitors a year by the end of the decade, in addition to one hundred million local tourists. It's a goal that is even more stunning considering the kingdom only opened
its borders to leisure tours in twenty nineteen. Do you feel like you're on track to get there?
I'm very comfortable.
The fifty million will puts out Arabia among the top ten most visited countries around the world.
And how much of a.
Draw are those big mega events the World Expo potentially FIFA World Cup. How much of a draw is that going to be in terms of bringing in those international tours and where does it fit in to your broader plan.
It is very important for us to the rebeat the visitors who will come again and again, to spend their holidays in Saud Arabia, not to come only for business or to visit their families and friends.
Adding leisure tourism to its offerings requires a big capital outlay. The government plans to spend almost one trillion dollars in all to transform its tourism industry. Private investment in tourism rose to three point eight billion dollars in twenty twenty four, and about forty percent of that comes from foreign capital. How important is it to get private sector involvement with all of these events and projects that you're putting together.
It's very important. It is part of Vision twenty thirty. We want the private sector to drive. We are a regulator when we open the sector. The government started to stimulate the sector, but down the road this sector has to be run by the private sector. The private sector and the tourism build the hotel, build the shopping mall, and build the restaurants, et cetera.
And they operated.
They are the investor, they are the operator, but they have to The private sectors in Saudi Arabia is contributing heavily and building new destinations and the new experiences.
We cannot do it.
Alon the private sector rule is very vital to the success of this sector.
The Kingdom of Saudi Arabia also has stiff competition from its neighbor, the United Arab Emirates and beach destinations in Africa and Asia.
This is a dynamic throughout the region. There is competition among all of these countries in cities actually and even within them. You know, there's a competition between Abu Abi and Dubai, even though they're both in the UAE. And I think that that the Saudi has always looked themselves as the big dog in the region, but they lagged behind in terms of the kind of ability to attract businesses and firms and bilbies gleaming gleaming cities.
International visitors account for almost eighty percent of the UAEES tourism expenditure, and right now Dubai offers tour is something that much of the rest of Saudi Arabia doesn't alcohol, but even that is changing.
Well, you can get alcohol in the diplomatic core. You could always get it through diplomatic pouch, but now there's actually a shop. And so Saudi's proclaim, not officially, but they would say, you know, this is a precursor. This is the first step towards legalizing alcohol in the kingdom. I don't think anybody knows when that's going to happen, and from I think the Saudi perspective, that's not make or break. People will want to come to Saudi Arabia.
They'll want to see Jidda and Riad and al Ula and other places, and it won't deter them if they can't get a glass of wine, but it certainly would be a nice addition if they could.
A growing tourism industry is also changing things at home.
Look, I think that the transformation has been breathtaking. I first came to Saudi Arabia for the very first time in twenty seventy, and you know the changes in society, the changes I mean simple things like cinemas and music, women driving, and you know you're walking around today in a western business suit, which back then you probably didn't see.
The local community as are basically the heart of our vision. Since the beginning, we ensured that we have set in case an approach that ensures empowering our local community through education, seward shop and opportunities.
Is Saudi infrastructure ready to accommodate this potential influx of future tourists.
Oh, yes, we're ready.
Today we have catered for one hundred and sixteen without any issue. But definitely we are We're building new destinations, new experiences. I believe we are ready to cater for the with the projects in the pipeline and construction, whether read Airlines or King Salman Airport that will happen, and many other airports like Abha Airport, Asier Airport, which is important, and the hotel rooms that are under constructions in the a year and many other destinations or location.
We will be absolutely fine.
I don't think we will have a challenge to achieve the one hundred and fifty billion.
The irony is that to change the world's impression of Saudi Arabia, it needs foreigners to come see what it is. But it's also foreign capital that will help fund the success of its new image.
Coming up amid signs that the ceasefiring guys and may be more fragile than ever. We go to Israel to see what the fighting has done to the tech industry on which the country depends. This is a story about success born of adversity. Israel is known as the startup nation, because of all the successful tech companies it has hatched, accounting for more than one half of the country's annual exports.
There are more Israeli companies listed on the Nasdaq than any country in the world outside of China, in the United States and maybe Japan.
One might have thought that the Israeli tech juggernaut would slow down during the nation's war against Hamas, but it turns out that it's done the opposite. Since the war began in twenty twenty three, Israeli high tech companies have raised more money than ever, some fifteen point six billion dollars in twenty twenty five, up from twelve point two billion in twenty twenty four.
The entire tech sector, despite war, has actually grown considered record number of exits. This year, For instance, Google made its largest acquisition not just of an Israeli company, but its largest private acquisition of any company in its history, for over thirty billion dollars, where it bought the cloud security company Whiz in the middle of this post October seventh attack on Israel.
Dan Senor is the author of Startup Nation and The Genius of Israel, and hosts the Call Me Back podcast.
Israel's number of exits from the tech sector in twenty twenty five will be about three hundred percent higher than twenty twenty four. In the defense tech sector, which is an area of considerable growth, there are some fewer than three hundred defense tech startups on October sixth, twenty twenty three. In terms of the number of startups, the amount of private funding coming into Israel, and then the number of exits, it's all kind of multiples higher than we've seen in a couple of years.
Israel's tech sector has become one of the largest in the worldcounting for seventeen percent of the country's GDP, compared to thirteen percent for South Korea, ten percent for the United States, and less than five percent for the EU.
So for some time now, Israel has been punching above its weight. Highest density of multinationals that have set up operations in Israel, countries that don't set up R and D shops outside of the United States anywhere in the world, and they're setting them up many tech companies in Israel. So for some time now, Israel has been what we call the startup nation, this innovation ecosystem that much of
the world is depending on. The big changes. Most recently is more and more cooperation with the Golf with the Golf States, some in very public ways like the UAE and Bahrain, some in not so public ways like Saudi Arabia, where you're seeing more and more investment from these countries into the Israeli tech ecosystem because they realize to really thrive they need to coinnovate with another tech ecosystem.
There's four hundred and fifty multinationals that have set up shop in Israel, so when you talk about the maturity, it's not just the companies, it's the overall ecosystem has become so powerful because we've all been working together and figuring out how to develop things that benefit Israel and the world through this ecosystem.
Ellie Raisin is the chief strategic Officer at our Crowd, an online investment platform based in Israel that connects investors from around the world.
We've set up at our Crowd a Super Interesting Fund, which is a three part fund, or what we call the tree Pont Fund, between the US, Israel, and Korea for not just developing or designing deep tech, but being able to produce it in partnership with strong partners in Korea and in.
The US and why Korea particularly so.
Korea is a super energetic, highly technologized ecosystem and economy. To begin with, it's less well known because it's somewhat insular. At the same time, though the US looks at Korea is an incredibly strategic ally all all sorts of crossovers for our goals and our capabilities. Among the three countries where we really see that union is being incredibly powerful.
Israel is a good partner for the Korean startup ecosystems because they are very known for the startup colindations.
Yun Jun Kim is the CEO of NH Ventures, a subsidiary of non Here Financial Group. In July, NH joined forces with Our Crowd to create an eighty million dollar fund to invest in Israeli startups in Korea.
We have a lot of interest about the technology in Israel, but we don't have a lot of chance to visit each other and how to communicate each other. Fortunately, we can establish the CLNCIER fund between Israel and our Crowd and NH That makes a lot of information for from Israel to Korean Korea to Israel. We think Israel can be the good partner to support expand the Korean statsop go to the US market Israel also they can find
a pattern to manufacturing. Korea can provide the quick quality and leads theable price.
Israeli tech startups run the gamut from defense to cybersecurity, to biotech to AI, but whatever the technology, it often traces back to Israel's mandatory military service.
The military is sort of a bedrock of all Israeli innovation because of a couple of things. One is there many really fascinating technologies that are both defense in nature but also civilian in nature that are brought up through the military. And the other, less spoken about but highly impactful, is the incredible development of leadership and teamwork that happens in the military, and those teams and those leaders transition
into roles leading civilian companies. We invest in defense companies certainly, and cyber but most of our investments are most of our investments are in things that are commercial or civilian use.
Has that line between civilian and defense become blurrier as we talk about dual.
Use, Absolutely so. We see that all the time now, both because some inventions are inherently dual use and because many of the entrepreneurs are seeing a real opportunity now to serve the incredibly impactful defense needs that are experienced not only in Israel but all around the world for the reasons that we all understand.
So perhaps it should come as no surprise that the onset of the war also opened a new front for startup technologies, including those that may have been developed for civilian or dual use.
From day one, we wanted to bring innovation to the battery sector, the battery industry. We wanted to integrate our technology into every battery in the war. That's still our vision, but I think the vision is now even bigger as we see the potential in other markets.
CEO Moshel Biton so a clear potential for growth for his battery parts company once that Israel Hamas war started.
It's not a way we wanted to deploy our technology or if you'll ask me, what where Our vision or dream is not to be on the defense sector. But we understand now that this is also on obligations kind of. This is our service. That's one of the things that actually shifted and changed during October seven.
War is never a good thing, and the Israel Hamas war has been particularly horrific, starting with the attacks on Israeli civilians and followed by the devastation of much of Gaza.
Most of the investors, they were very They empathy and a lot of supports and asked how we actually manage and when we ask if we need anything. Of course, there are investors that were silent, and some investors even ask like direct questions about the situation in the war. And sometimes it's failed a bit accord when you know, fum, foreigner's blaming you on things that are not in your control a private company, business company, or not part or represent any government, and I'm blaming you.
The war definitely had impact in terms of which companies essentially were newly created or like we discussed where they leaned into in terms of their customer base or defense use cases. We also did see through the war investors sort of in some cases take a little bit of a step back because mostly because of optics, not because of anything substantive. And now that the war's over, I'll tell you that we've seen this huge pickup in foreign
investor interest in Israel. So in the last few weeks, I personally have hosted Japanese, Korean, and I'm about to host the Taiwanese delegation minutes before you and I joined this call, hosted as a large group of Canadian entrepreneurs here in our office. So what we're seeing is a real pickup in four or an investor comfort with investing in.
Israel out of adversity has come at least some success for the startup nation, success involving businesses from halfway across the world.
I think most important thing is Israel always try to go global because their domestic market is not so big, and Korea also need to expand the market horizon to the global market, but they have their own strength point. We try to combine those strengths points we can raise the global success. It's a very piscically separated, but our idea with NAG Investments and our Crows is making the same thing. So that is a very important thing. Israel and Korea also a very good relationship with the US.
We need to be opening up cooperation with Israel. So that was already starting to happen Beforetober seventh, and then obviously since October seventh, you've seen this incredible flourishing in ways that were completely unexpected in areas related to defense tech and cybersecurities that has just gone to another level. So many of those same players, the Gulf States in particular, want to piggyback onto Israel's strength in these areas even
more because they've seen how successful Israel has been. And then this startup nation that was buzzing long before October seventh, twenty twenty three, continues to do so.
Up next, skiing is more popular than ever, despite the lack of snow in some of America's top ski areas. We take a look at the ups and downs of big ski. This is a story about what you gain from joining a team and what you lose when you stopped flying solo. In the last twenty years, two major players came to dominate the ski industry, turning the sport from a local pastime into a global portfolio. Scarlet Food brings us the story.
This is the view open winter Park. I mean we are in desperate need of snow. You can see how fit in that snowpack is.
In the past year, skiers have dealt with record high prices, record low snow, and disruption on the slopes caused by strikes. Despite the challenges, the industry is booming, with the number of skiers rising almost seventeen percent from twenty sixteen, and for the sixty million plus skiers visiting US resorts each winter, there is a choice to make buy a megapass before
the season starts. That gives you access to up to eighty mountains around the world, but leaves you at the mercy of seasonal conditions.
Our job is really to have a long term relationship with our guests and so that they feel like they're making a commitment to us year in and year route good weather, bad weather.
Or go school by a less expensive pass at your favorite resort, preserving that hometown feel.
It's been a great thing, I think for our industry because it's a challenging industry that we have.
Ski mountains have to make a similar decision. Are they in with the megapass or are they out.
The one thing that hasn't changed is you get people to come here. They get out on the hill, they go skiing, they have a great time, and they want to come back.
Whatever they decide, they have veil resorts to think or blame. CEO Robcats introduced the Epic Pass eighteen years ago, offering a deal to skiers and shaking up the business of skiing in the process.
So it was a massive discount when we offered it at yeah, five hundred and seventy nine dollars, But the thinking was is that we could at that low price point, we could put many more people in the product, and all of a sudden that would start to create more of a subscription model to the ski business rather than just this kind of daily feast or famine model, which was the lift ticket business.
This relationship with Veil Resorts, now the largest ski resort operator in the world, goes back to the nineteen nineties when he oversaw a deal that rescued what was then Vail Associates. Katz joined the board and became CEO in two thousand and six. He left the company in twenty twenty one and returned in twenty twenty five. During his first go round, he grew the company from five resorts to a portfolio of thirty seven.
I think initially the pitch was just, hey, we thought that there was an opportunity for us to really apply better management techniques to these other resorts that we bought, And the two resorts that we bought initially were Keystone and Breckenridge, which were right down the road from Vale and Beaver Creek, and so the thought was also we could start actually managing them and doing it more efficiently.
We could also offer some things so people could go to these different resorts and market to that in a more unified way.
Vail initially targeted other neighboring resorts in Colorado.
The first group of founders that are Rappo Basin hung onto the place till seventy two, and other dependent guy owned it till nineteen seventy eight. And then in the late nineties what was called Ralston Resort, which was Rapo based in Keystone and Breckenridge, merged with Veil Associates, forming Veil Resorts.
It wasn't long before Vale controlled roughly forty three percent of Colorado's ski areas by count. In nineteen ninety seven, the US Department of Justice forced a sale on a Rapa Ho Basin, citing Vale's excessive market concentration. Still a Basin, as locals call it, chose to continue partnering with Vail, which meant it was included in the first iteration of the Epic pass.
The view at that point was that the company's multiple was well below a lot of other travel companies, and there was a real sense that the ski industry was really a feast or famine business where if it snowed, you did well. If it didn't snow, you didn't do well. And actually, ski resorts had been declining in the United States from like, you know, seven hundred and twenty ski resorts I think in the late seventies to five hundred.
And fifties resorts.
So the business was really struggling, and the focus was that there was not the stability and the confidence in the future of the industry because of the ups and
downs of weather. So the thinking was, how could we stabilize that, And so what we came up with was really offering an incredible value to our guests by giving them a huge discount on this season pass and trading with them right essentially giving them this great discount, this great value, but then also our guests taking some of the risk of weather for the rest of the season.
Before EPIC was introduced in two thousand and eight, a season pass at Veil Resort would cost you around eighteen hundred dollars. With an EPIC pass. Today, an adult skier has unlimited access to forty two veil owned or partner mountains around the world for just over one thousand dollars. How did this pass model change how you plan capital expenditures, how you assess risk overall?
It made a big difference. So you know, historically in the ski industry, you would wait to see how the ski season was, and if it snowed and you had to go to year, then you'd make commitments for the following year for capital. But as we started to do well with our season pass business, we all of a sudden started to move back when we were willing to commit. So we started saying, hey, wait, we could commit to things in December, or in September or in March the year before.
Then came competition. In twenty eighteen, Altara brought together Mammoth Resorts and Squaw Valley now known as Palisades Tahoe in California and Deer Valley in Utah. Soon Altara launched the Icon Pass, its version of the Epic Pass. Here's Jared Smith, CEO of Altera.
The premise or the thesis for the business was really that there was some space in the industry for another large player. The introduction of epic Pass by Veil was a game changer for the industry, no doubt about it. It's one of those unique products that is truly win win.
What we were able to do at icon Pass was take that core model, which was for Veil of its owned and operated resorts largely, and take that and put together a network of people that didn't have to be owned by the same corporation to enjoy those same benefits, and in turn, to give consumers the opportunity to have that same exposure in that same cost benefit analysis across a whole variety of other resorts.
The two dominant megapasses ushered in a new demographic of skiers.
The new megapass is really what it did initially was drive the prices down. It's just that there are ski areas out there, there are companies out there that do want to drive guests to that mega resort pass or that multi resort pass, and in doing so, they're trying to entice you with that great price point.
It's kind of a membership, right. So I think people historically said the only, you know, the only kind of person who could buy a season pass has to be a local. So the fact that we made the product price competitive for the destination skier, Somebody coming from New York or Florida or Texas, all of a sudden, they start to feel like they were a local as well.
For resorts, unpredictability reinforce the case for the megapass as the industry depends more heavily on capital intensive snowmaking equipment.
As we started to acquire resorts in different regions, all of a sudden, the pass provided access to different regions who all have different weather patterns, and so that made the pass even more attractive.
Where we're able to make some of the investment in the physical plants here, combined with the technology advancements that you've seen in the quality of things like snowmaking, which uses less energy and uses less water to produce actually more yield and what we're able to put on the hill.
But as demand for the Epic Pass grew, it became kind of a victim of its own success. Two seasons ago they al sold a record number of passes. It's too early to tally up this season's past sales, but Vale said the total number of skiers is down twenty percent from the same time last year.
The locals don't love the whole epic situation because of the crowds, because of the prices, because of the concentration on just finances and money.
I think there's no doubt that anytime you make something more accessible and more affordable, there's an opportunity that you have too much of a good thing right and you have some people who come, or lots of people who come as a result of that affordability, and they want to come at the peak times. So I think there are there are lots of examples in the ski industry of you know, peak windows on high holidays with great snow conditions where lots of people want to come out
and do the thing that they love. That can lead to longer lines.
In twenty nineteen, A Basin ended its partnership with Vail, cutting off ties with the epic.
Pass Arapobasin opened early. It was one of the first resorts in the country and the concept of ski resorts was very different back then.
I was a scale.
Alan Hensroth is president and COO of A Basin.
By twenty nineteen twenty eighteen, we felt we could really do this better. Not being part of vale Veil was a great company for us in a lot of ways, but we've kind of outgrown that and we're looking for something different. We just thought we needed more control over our passes, more control of people coming here, more control of the actual experience that all our guests were having.
And Veil was such a big successful company that they brought really more people here than we could handle at one time, So we made a change in our past relationships.
In twenty twenty four, A Basin completed its journey from being an independent resort to a partner of Veil, to independent again to now a partner of Alterra. For a ski area that's passed through the hands of companies big and small, A Basin is hoping for the best of both worlds, an independent feel on a megapass.
You know.
Of course, when the sale went down, you know, and it was almost a year leading to the closing of the sale, people were concerned. But as last year went on and they realized we weren't turning into a bunch of monsters, I think more and more people are accepting that A Basin's going to be okay and we're going
to do just fine. One thing about being part of a family of more resorts is, you know, there are some people that are committed skiers and they want to buy a season pass to one place and they're satisfied with that. But I think there's another group of people that like some diversity. They want to try different resorts, they want to ski at different resorts, they want to
have choices. And you know, when we decided to leave Vail, we could have been independent, but we thought people really wanted choices, and we thought we'd have the best future when there were opportunities for people to take advantage of those choices.
Today, you know, we have I think it's roughly two thirds of our resorts fall into that independent category. Like last year, independent resorts did see an uptick in visitation, which was great to see, and we saw a little bit of a little bit of decline in some of our larger extra large resorts. You know, just the way the aendulum swings is that if you're not happy in one aspect of the sport, maybe you're going to go find something a little bit different.
While Abasin joins a new team and navigates another chapter, there's still the choice to skied the old fashioned way at smaller independent resorts like mad River Glen in Waitefield Vermont, which runs on a skier owned co op model and is the last remaining slope in the continental US to operate a single chairlift.
We really are known for our black tails.
Matt Lillard is the general manager.
The co op has three thousand shares, but there can only be twenty five hundred owners of those shares, so everybody that has a share gets a vote. You can only own a maximum of four shares, but that's still only one vote. So that's one of the key things about a cooperative is you can't have somebody come in and buy up a bunch of shares and have an outweighted say, like you would a normal corporation.
What problems do the co op ownership structure solve that traditional ownership did not.
I think what it does is it was able to pull the passion that the skiers have for the mountain into an entity that can take care of So it enabled those people to have a say in what was going on here and support it with financially and with their visits. The shareholders have a bigger say in a cooperative than they will, you know, at a publicly traded place like Vale Resorts or something private like Alterra. So they get to say that we want low skiered nsity,
and that's one of their primary goals. It's written into the bylaws, it's written into the articles of the corporation. So that's basically saying that when you're on the mountain, they don't want it to be crowded. They want to be all the ski They want their own people whizzing by them.
He says. The co ops sold out of shares this year, even if that means bring skiers up one chair at a time. So I sit down, yep, So.
I sit down, and then what's our get going. You'll close the safety bar and that's it.
That's it.
That does it for us here at Wall Street Week, I'm David Weston. See you next week for more stories of capitalism.