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September 2010

Blue Pages :: September 2010

CONGRESS CONSIDERS SUMMER AT AREAS... XANADU DOO-DOO... VISAS FUND JAY PEAK EXPANSION... MORE LESSONS FROM TAMARACK... GENERATIONALLY SPEAKING... USSA: PARTNERS WANTED

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Congress Considers Summer at areas
Legislation that would formally encourage the development of more summer activities at ski areas around the nation is working its way through Congress. The law, the top legislative item of the NSAA at the moment, would revise the National Forest Ski Area Permit Act of 1986, which governs ski area use of public lands. One bill has been approved in the House; another awaits action in the Senate.

The Senate’s Ski Area Recreational Opportunity Enhancement Act would grant the U.S. Forest Service the power to permit “other seasonal or year-round natural resource-based, outdoor-developed recreational activities and associated facilities (in addition to skiing and other snow-sports) as the [Agriculture] Secretary determines to be appropriate.” It adds that these activities should “encourage outdoor recreation and enjoyment of nature” and “to the extent practicable harmonize with the natural environment.”

In short, the new bill would align the 1986 law with activities already taking place at resorts on National Forest land and provide for the addition of new activities. The Senate bill explicitly approves mountain biking, disc golf, ziplines, and ropes courses while barring tennis courts and golf courses, swimming pools, water parks, and amusement parks. There is no mention of Alpine Slides and mountain coasters, but they could be allowed on a case-by-case basis.

With next to no opposition, the biggest barrier to the bill’s passage this year is the general discord in Washington. NSAA is urging resorts to contact their Senators and support the bill’s inclusion in the Omnibus Public Lands Bill. More detailed information is available online in the NSAA's Legislative Action and Alert Center (www.nsaa.org).


Xanadu Doo-Doo
The debut of the star-crossed Xanadu Meadowlands project, which includes what could become the first indoor ski dome to open in the U.S., has been put off until at least 2013. The latest would-be developers have been forced into bankruptcy, about $875 million short of completing the project. Xanadu was originally scheduled to open in 2007, but financial troubles have slowed it repeatedly.

The project has numerous resort ties. The current passel of creditors includes Fortress Investment Group, which owns Intrawest, and Credit Suisse, which has made several controversial and disastrous loans to Western resorts. The Related Companies, which had been developing the Snowmass Base Village until it was foreclosed earlier this year, has been negotiating with past and present groups to complete Xanadu.

Ironically, the ski slope portion of the facility has been ready for years. Lifts and snowmaking are in place and ready to operate. But tenants for the rest of the two-million-square-foot facility have been slow to sign on, a portion of the space remains undeveloped, and there’s a particularly ugly façade that the current creditors are determined to replace. Still, with the new Meadowlands Stadium set to host the 2014 Super Bowl, nobody wants the bad publicity of having a hulking, incomplete Xanadu sitting dark alongside it.


VISAS FUND JAY PEAK EXPANSION
Jay Peak is developing a 170-room hotel, lodge and 60,000-square-foot indoor water park, the largest in the Northeast. And it’s all being funded by foreign investors who were given U.S. residency permits in exchange for their money. Jay has already built a 57-suite hotel, an indoor ice arena and clubhouse for golf, cross-country and snowshoeing funded in the same manner. The entire development, $125 million in all, is aimed at making Jay a four-season resort and the economic engine for northeastern Vermont.

The EB-5 investor visa program is the key. In return for green cards, foreign investors put up $500,000 cash in qualified investments. At Jay, about 250 investors from 43 countries have provided $125 million in equity. And it’s “patient money,” as Jay president Bill Stenger says; the resort has no legal requirement to ever repay it (though it does plan to do so once the business is well established, five or more years from now). The investors are granted conditional green cards that lead to permanent residency if their projects create jobs. And the Jay construction should: Stenger expects the current development will support 750 to 800 full-time jobs at Jay, while a third stage of development could add even more. And the growth at Jay will fuel additional local jobs.

The EB-5 program was created in 1992, but didn’t really take off until about 2004, when regulations made the program easier to navigate. The program is due to sunset in 2013, but Stenger believes it will be extended, since it injects capital into rural, high-unemployment areas and creates lasting jobs.


More Lessons From Tamarack
As SAM went to press, Tamarack Resort was about to be purchased by a Utah investment group, or perhaps run by the homeowners association. Or, another investor could step forward, or the resort could lay dormant for another year. Ever since the resort was shuttered in 2009, all bets are off.

But oddly, Tamarack in dormancy shows us a lot about the health and future of the industry. First, consider the Tamarack Municipal Association’s plan to reopen the area. It’s based, in part, on the association’s war chest, which is sufficient to pay the bulk of the resort’s annual land lease to the state and hire 60 to 70 former employees to get the resort functioning again. That includes lifts, grooming, snowmaking, snowsport school, and rental operations.

The association includes nearly 400 members, many of whom are locals who bought at fire-sale prices when speculators were wiped out in the real estate collapse. At Tamarack, the combination of the Great Recession and the closing of the resort dropped prices by up to 70 percent. Lots of folks picked up very nice second homes just a few hours’ drive from Boise. Aside from the extent of the price slide, you can’t find a better example of the trends described in “The Future of Real Estate” on page 27.

And how about those former employees who have ridden out the economic downturn, hoping for a revival at Tamarack? Their love of the mountain lifestyle has been harshly tested. And yet they have hung on, scraping by, holding out for a return to better times.

No doubt about it, our industry is changing, right along with the rest of the economy. But the attraction of mountain experiences, for both guests and employees, remains strong.


Generationally Speaking
When will Boomers depart winter resorts and communities? This has become an almost yearly preoccupation of winter resorts. And there’s no question about it, Boomers will eventually fade.

But it could still be awhile. Research firm A.C. Nielsen believes that Boomers will comprise a significant portion of the population over the next decade. More importantly in the long run, it expects Gens X and Y will have smaller households and fewer children (read: future resort customers). They will earn, and spend, less. All this makes it imperative that resorts lure non-traditional types to the mountains. Think minorities, for example.

At the moment, though, Boomers have annual spending power of roughly $1 trillion. One other thing we know about Boomers: they are unpredictable. "We as a species have never had this many older people before. It's new ground," Doug Anderson, Nielsen’s senior VP-research and thought leadership, told Ad Age magazine. Could Boomers retire in droves to the mountains, as some resort real estate pros expect? Stranger things have happened.


USSA: Partners Wanted
The U.S. Ski and Snowboard Association has not always had a smooth relationship with resorts. But it took a big step in that direction at its Partner Summit in late July. At the Summit, new chief revenue and marketing officer Andrew Judelson invited partners into the association’s planning for the future. It was a good start on a more open dialogue.

Partner relationships have never been more important to the organization. USSA is taking on some new disciplines as they approach Olympic status, and that is adding to its budget at a time when sponsorship sales are becoming more difficult.

Resorts, the home playing fields for USST athletes, play a key role. Most recent case in point: Telluride’s hosting of the Snowboarding World Cup last December, which served as a qualifying event for Olympic snowboardcross. Telluride was named Rookie Partner of the Year for its effort. For its part, Telluride received great PR and TV exposure early in the winter.

Resorts and USSA could create more mutually beneficial initiatives, too. Athletes as well as team officials recognize the need to increase participation in the sport as a means of generating more support for World Cup and Olympic teams. Partnership, anyone?