“Rated” resorts are normally owned by publicly-held corporations — examples are Stowe (AIG), Keystone (Ralston-Purina), Sun Valley (Little America Corp.), S.K.I. Ltd., and Northstar (Fiberboard). Non-rated resorts are usually owned privately — like Mammoth, Crested Butte, and Timberline. These companies may have to jump through extraordinary hoops to finance new construction.
According to Bob Gulko, president of the financial services firm Ullr, privately held companies often show weak balance sheets because they expense most investments in order to reduce their tax burden. “That leads to an understatement of assets and an overstatement of expenses, so the book value looks low,” he points out.
At the same time, Gulko says, credit officers are under “tremendous scrutiny from federal regulators not to make questionable loans. And the ski industry is viewed as riskier than it really is.” Financial institutions, Gulko says, perceive the ski business as weather-critical, ignoring the fact that snowmaking has evened out the cash flow at many resorts. A prudently-managed ski area, clean of major debt, can be a very sound credit customer, Gulko says.
Because of the tight credit situation, some ski areas have had to postpone new lift construction. Where capital improvements have gone ahead, it’s often thanks to loans secured on the personal guarantee of an owner rather than on the strength of a corporate balance sheet.
In effect, Gulko says, a two-tiered ski industry has emerged. Rated resorts can get floating-rate loans, in almost any amount, as low as 4.5 percent, while non-rated will pay at least twice that rate if they can find money at all.
The discrepency is just one more element in the “them that has” equation, leading big resorts to grow bigger and feeder areas, unable to upgrade facilities to a competitive level, into bankruptcy.
More Foreign Ownership Likely?
Low interest rates, of course, have led to a weakened dollar. Now, cheap dollars and restricted growth opportunities at home may lead some European companies to expand into the North American market. Rumors center around St. Anton (said to be looking for a joint venture partner) and Compagnie des Alpes, operator of eight resorts in France.
Both companies have maxed out development potential in their own backyards and face rapidly rising environmental restrictions. Because it’s become nearly impossible to start up a new ski area in the U.S., they perceive any existing resort — even with a shaky balance sheet — as a future high-demand product. A European partner should look like an angel to many loan-starved North American ski operators.
Nippon Cable Storms B.C.
Case in point is Nippon Cable’s big investment in British Columbia. This family-owned company, the Doppelmayr licensee in East Asia, controls five resorts in Japan. Over the past summer managing director Masayoshi Okhubo engineered the direct buy-out of the underdeveloped Tod Mountain and bought a 23 percent silent partnership in Blackcomb. Purchase price for Tod was not disclosed, in deference to the seller, but the Blackcomb price was $25 million, Canadian. Part of the funds will be used this fall to build Blackcomb’s fifth high speed quad.
Tod Mountain, a sprawling 3,100-foot giant, is currently served by three ancient double chairs; the master plan, due to be completed in April by Ecosign Planners at Whistler, could conceivably call for a dozen new lifts (Doppelmayrs, presumably).
Darcy Alexander, general manager of Tod, indicated that Okhubo’s motivation was to diversify his company’s holdings, pointing out that Nippon Cable was already busy developing a tournament-caliber golf course at Kelowna. “British Columbia offers particularly good investment opportunities,” Alexander said. “The B.C. Ski Area Policy Act has stabilized the financial situation, and the climate for ski resort growth here is as good as anyplace in North America.”
Wholesale Shipments Up
At the end of May, according to USIA figures, ski shops had ordered 633,000 pairs of skis for early season delivery, up 23 percent from pre-season orders last year.
As John Fry noted in this space last month, wholesale shipments hit a modern-era low last year of about 780,000 pairs of skis, boots and bindings — including preseason, close-out and restocking orders. That was down 42 percent from the historic high of 1.35 million shipped in 1988-89.
Yet while wholesalers suffered, the situation at retail wasn’t quite so grim. Retailers last year worked through their own excess inventories (perhaps five percent of stock nationwide), and sold about 125,000 snowboards, a category not included in ski-makers’ figures. Bottom line: ski shops may have moved the equivalent of 930,000 pairs of skis onto the slopes last winter — off 32 percent from ‘88-89.
Assuming a “normal” ski season, in which ski shops buy another 25 percent in reorder and closeout merchandise, wholesale shipments might total out at 993,000 units this year (including snowboards, of course).
Snowboards now represent 15 to 16 percent of units sold, and shred business insiders say their volume is growing 25 to 30 percent a year. If a ski area isn’t selling 15 percent of its lift tickets to board riders, it may be missing the boat.
FIS Delegates for Sale?
When Sestriere, Italy — backed by Fiat’s Agnelli family — won the nod to host the ’97 Alpine World Championships, rumors and charges flew that Agnelli had simply purchased delegate votes with cash and cars.
Maybe, maybe not. “Sestriere has excellent facilities and made a very solid presentation,” says FIS VP Hank Tauber. “They could have won on their merits.”
Complicating the political scene at FIS is the breakup of the Eastern bloc. Soviet satellites used to vote together, Tauber points out. “Now, as a matter of principle, they won’t,” he says. And Eastern European delegates, hard put in their collapsed economies even to feed themselves, may be susceptible to various financial influences. “Personally, I’ve seen no evidence of vote buying,” Tauber says, “but the Swiss were upset and may have blown the issue out of proportion.”
The International Olympic Committee has ordered that its own members may no longer accept free travel, lodging, meals or other gifts. “Perhaps FIS could use some sort of code of ethics,” Tauber says, “but how would you enforce it? If you give a delegate money and put it someplace secret, who’s going to know?”
Meanwhile, John Dakin of the Vail Valley Foundation says his organization is going ahead with its bid for the ’99 championships, based on Vail’s facilities and track record. “We’ll spend about half a million dollars over three or four years,” he says. “It’s all pretty basic.”
Mt. Hood Meadows Lift Delayed
Mt. Hood Meadows had planned to get its Gulch Lift quad operating in the fall. But a challenge to the area’s master plan — approved by the Forest Service back in 1978 — delayed start of construction, and only the foundations and footings will get done this summer.
According to general manager Clay Simon, the opposing party is an umbrella group called “1000 Friends of Oregon,” a preservationist organization that has pledged to oppose every project at Mt. Hood Meadows because the resort’s plan calls for expansion from 8,600 to 15,000 skiers-per-day capacity. The current hold-up involves an ethnological study, ordered by the courts a year ago and due to be delivered in October. The study won’t affect construction of the Gulch Lift, Simon says, but if it finds that expansion will impact the local native Americans, it could tie up expansion plans.
Jackson Hole Sale
The mid-July sale of Jackson Hole resolves the long-standing dispute between founder Paul McCollister and stockholder John Deuss, a fight that has halted all construction on the mountain since 1987.
At issue was the $3.6 million investment Deuss made in Jackson Hole. Now John Resor and John Kemmerer III have bought out both McCollister and Deuss, for an undisclosed sum. McCollister gets a consulting contract, but won’t be involved in day-to-day management.
Resor’s family owns Snake River Associates, holder of 7,000 acres of Jackson Hole ranchland, including much of the property surrounding Teton Village. The Kemmerer family founded the Kemmerer mine in Lincoln County, Wyoming, which produces 4.2 million tons of coal each year. They sold the mine in 1981 to Gulf Oil, for $325 million.
Resor indicates that the new partners will “first seek solutions to problems at the base area, then develop a five-year plan for the mountain.” That plan should include at least one high speed quad to speed skiers out of the base area, but maximum mountain capacity probably won’t go beyond 5,000 skiers per day. In 15 years, Resor said, he expects to have one of the few big-mountain resorts not cluttered up with commercial development — and that, he feels, should be a highly marketable commodity.
