Vail Resorts, Inc. (NYSE:MTN) announced today that all employees at their ski areas will face a wage cut effective April 2 for year-round workers and next season for seasonal employees. It was either slash paychecks or jobs and President/CEO Rob Katz, chose the former to preserve guest experiences.
"We're preserving jobs rather than (generating) massive layoffs," said Kelly Ladyga, Vail's vice president of corporate communications told OnTheSnow.com today (3/12/09). "I can tell you that the vast majority of employees realize that and feel very fortunate today."
"If we cut back too far in our employees, we're not going to be able to deliver that experience that people expect," Katz told Fox News. "We've asked everyone to take a little bit less. That gets us a really good savings and lets us go forward and really focus on what we need to focus on - which is next season, next year, and this summer."
Katz included himself in the cuts and waived his salary for the next 12 months, which according to Businessweek.com is $835,414. The 39-year-old CEO will still have an income of $2,526,141 in "other compensation" and stock options. Katz said he will take a 15 percent salary reduction after the one-year period. Each outside member of Vail's board of directors has also decided to reduce their annual cash retainer by 20 percent.
"It's clear that with the uncertainty that lies ahead, reducing cost is an imperative," said Katz. "Before I can ask (others to take less), it has to start with me. I have to lead by example and set the tone for everyone. By asking everyone to take less, starting at the top, we can continue to focus on our mission of extraordinary resorts, exceptional experiences."
The across-the-board wage cuts will run on a sliding scale from 2.5 percent for seasonal employees to 10 percent for executives. In other words, a ski instructor making $16 an hour might make $15.40/hr instead.
On the bright side, to make up for the ding, each full-time, year-round employee will receive a grant of stock-based incentive compensation with a value on a sliding scale from 1.5 percent of salary to 7.5 percent of salary for executives.
Soon, there will be more than 2,500 employees owning stock; up from approximately 260, giving more employees ownership in Vail Resorts. According to Forbes,, these cuts will save the company more than $10 million. Following the announcement, Vail's stock climbed 12.42 percent this afternoon to close at $18.56, but that's still a lot less than the company's 52-week high of over $49.
Will employees walk? With most companies banking on worker's fears of unemployment and a thin job market, Vail employees will likely opt for job security and a little less money in their pocket, over a lay off. The silver lining is that if Vail's stock eventually climbs back up to last year's levels, pay cut losses will be recovered.
"We are positioning ourselves for the future," added Katz. "We have a strong balance sheet and can survive the downturn." Good news for everyone.