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American City Business Journals Sep 24, 2004When three owners of Colorado ski areas went public in 1997, they had high hopes of revolutionizing the ski industry.
They wanted to create more value on the mountain for skiers and snowboarders, and boost stock prices for shareholders. They wanted to turn undeveloped land at the bottom of their ski mountains into revenue-producing assets and market those mountains in a more sophisticated way to attract more customers than ever before.
The resort owners - Vail-based Vail Resorts Inc., Intrawest Corp. of Canada and American Skiing Co. of Park City, Utah needed cash flow to realize that vision.
They thought the operating synergies of owning multiple ski areas and other types of resorts, as well as going into the real estate business with its sales revenues, would generate that cash. They believed consolidation could counter historic risks to the ski industry such as seasonality, high capital expenses, heavy debt, limited growth and a lack of snowfall.
A half-dozen years later, some of those hopes have come to fruition and brought success. Others haven't.
There are still pros and cons to publicly traded companies owning ski areas, according to those in the ski business.
The pluses of public ownership range from centralization of operations to availability of financial information to shareholders, analysts and resort communities.
"One thing about public corporations is they're required to provide reports to the Securities and Exchange Commission, and one can get a lot of information from those sources," said Charles Goeldner, former head of the University of Colorado at Boulder's Busmless Reseach Division. "They're a wonderful source of information."
Goeldner used to follow the ski industry as a teacher and prepared annual economic analyses for the National Ski Areas Association, now based in Lakewood.
Probably the biggest benefit of public companies owning ski areas, which cost a lot to run, is the ability to get capital by selling stock. Vail Resorts, for example, has been able to commit $500 million to a five-year redevelopment of its Vail ski area's Vail Village and LionsHead base areas.
"The ski industry is very capital intensive, and having access to significant capital gives publicly traded companies a competitive advantage," said Kelly Ladyga, Vail Resorts' spokeswoman.
The company also owns Colorado's Breckenridge, Beaver Creek (which includes the old Arrowhead ski area) and Keystone resorts. as well as Heavenly near Lake Tahoe on the CaliforniaNevada border. Vail Resorts markets Colorado's Arapahoe Basin resort -which it bought in the 1990s, but then had to sell to meet federal anti-monopoly regulations - for A-Basin's Canadian owner.
"We've been able to make nice onmountain improvements, which we hadn't been able to do the last two or three years," said Joan Christensen, spokeswoman for the Winter Park Resort in Grand County. "Access to capital is huge."
The city and county of Denver owns Winter Park, but in 2001, it picked Intrawest to develop and operate the resort via a joint venture because of the Vancouver-based company's greater financial wherewithal. In Colorado, Intrawest owns the Copper Mountain ski area in Summit County.
The Canadian company's portfolio also includes one of the world's perennially top-rated ski areas, Whistler Blackcomb in British Columbia, as well as Tremblant in Quebec.
Access to public markets also supposedly gives a company higher value, since shares in private companies - especially minority shares - sell at large discounts compared to public shares, according to financial experts.
Of Colorado ski areas' public owners, Intrawest and Vail Resorts have accumulated respectable market capitalizations of $744.7 million and $642.5 million, respectively, according to Yahoo!Finance. But American Skiing, after netting nearly $250 million from its IPO, now has a market cap of only about $6.7 million.
American Skiing's only Colorado resort is the Steamboat ski area in Routt County.
Public ownership of ski resorts also apparently hasn't sustained strong shareholder value, as initially hoped. But it has made millions for some corporate executives.
Vail Resorts appears to exemplify some ski industry watchers' concern that the company's controlling owner, Apollo Advisors LP of New York, got into the ski business for short term financial gain, rather than a long-term commitment to the ski business.
Apollo is trying to cash out of the company, recently putting it on the sales block for a reported $700 million. Some analysts put the company's true acquisition cost at more than $1 billion because of its $635 million in debt and $95 million in cash.
A potential deal involving the Texas Pacific Group and New York investor Henry Kravis of Kohlberg Kravis Roberts fell apart in August. A buyer probably would break up Vail Resorts and then resell its pieces, according to analysts.
Apollo already has taken $350 million out of Vail Resorts, according to the New York Post.
At the executive level, Leon Black, a former mergers and acquisition whiz at Drexel Burnham Lambert Inc. and Apollo's head, reportedly made $81 million selling his Vail Resorts stock when the company went public. Adam Aron, Vail Resorts' chairman and CEO, makes more than $6 million a year.
Meanwhile, Vail's stock recently traded at a little more than $18 a share, after going public at $22 in 1997 and peaking at nearly $32 a year later.
American Siding, especially, fell victim to one of the analysts' biggest concerns about public ownership of ski resorts: getting overleveraged. The company got itself into so much debt early on, it hasn't been able to dig out of that hole.
American became encumbered with $137 million in debt when it went public in the late 1990s. Soon after, the company had the state of Vermont breathing down its neck trying to collect $1.7 million in tax liens against its Mount Snow and Killington ski areas in that state.
Started by ski area owner Les Otten and originally based in Newry, Maine, American Skiing wanted to expand beyond owning just New England day resorts into bigger, Western destination resorts. But its debt forced the company to bring in Texas billionaire Robert M. Bass' Oak Hill Capital Partners LP, which got 49 percent of American for its $150 million investment, as a white knight. By 2001, after a failed merger between American and MeriStar Hospitality Corp. of Washington, D.C., Otten left the company he founded.
American Skiing's stock has plummeted to only 21 cents a share, after going public at $18. Originally listed on the New York Stock Exchange, the company's shares now trade over the counter.
Intrawest seems to be the biggest winner in the race to succeed as a publicly held ski resort owner for a couple of reasons, according to ski industry experts. The company already had experience owning ski resorts when it went public, and it knew commercial real estate as a developer and owner of office buildings in Canada.
"Intrawest is probably the safest bet," said one ski industry insider. "They don't have any illusions that they are not a real estate company that's very successful."
In the end, Colorado ski industry experts have mixed feelings about the viability of public ownership in that business.
Some, like Goeldner, contend the state's ski industry remains strong. Public and private owners alike have created some of the country's finest ski areas, and added other activities besides skiing to attract people to their resorts year-round.
"We have a very viable ski industry in Colorado," Goeldner said.
Others contend public owners of ski areas need a strong growth story to tell to shareholders, and ski industry growth may not be as robust as predicted because of the business's local nature. The ski business is very local because of resorts' dependence on a good relationship with their neighboring communities.
"The future of ski resort ownership is like with professional sports teams," said ski area broker Jerry Jones of Jerry D. Jones & Associates. "You have high net-worth people coming in, and resorts become trophies like a sports team. They get their ego reward from that ownership and being involved in the community."
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