WINTER SPORTS: THE NEW CASH COW?
“The ski business is an odd little segment of industry that is better left to people who understand it, who deeply care about it, and who are willing to have a less predictable bottom line than most big corporations will tolerate,” Fortune Magazine famously wrote more than 40 years ago.

No longer. Investment whiz Mike Shannon, the “S” in KSL, which bought Squaw Valley last fall, now sees the ski industry as a cash cow. He points to four key attributes of successful business, all of which apply to winter resorts: a unique product and location; diverse and growing customer base; scalable, diverse operations; and high barriers to entry.

That helps explain why winter resorts have recovered from the recession so well. He pointed out that, measured by EBITDA, winter resorts were off 25 percent from peak (2007-08) to trough (2008-09), and will be about 5 percent below the peak this season. Fitness, hospitality, and gaming, he noted, saw EBITDA fall 30 to 50 percent, and are still down at least 30 percent.

Partly, the success of winter sports has been due to their clientele, which tends to be wealthier than average. That matters, because unlike previous recessions, labor compensation is still lower than it was back in 2007. Corporate profits have recovered better than in other recessions, and that has benefitted the folks who take destination vacations. But, Shannon warned, those rising profit levels are unsustainable if labor compensation continues to lag.

Still, winter resorts—and not just the large ones—continue to draw visitors. Midwestern areas have been exceeding capacity more and more, and many are sprucing up this summer, we hear, so that they can handle the crowds more comfortably.

VAIL: HOW IT’S DIFFERENT—AND NOT
Not that anyone needs confirmation that Vail Resorts (VR) is different from other ski area businesses, but Vail Resorts provided it anyway in the company’s comments on its winter-quarter results. “Visitation is influenced by the economy, not snowfall,” VR told investors.

Anyone else feel that way? We didn’t think so. For most areas, it’s still important for snow to fall in visitors’ backyards.

Vail hasn’t completely rewritten the financial book, though. It’s still a ski company, as opposed to, say, a real estate developer with skiing as an amenity. The company reported $868.6 million in total revenue for fiscal 2010, and of that, $807.6 million came from resort operations. About 35 percent came from lift ticket sales alone. A third of that total comes from season’s pass sales, which help provide a reliable revenue stream.

In another telling development, VR said it would be paying its first-ever dividend to shareholders, a sign that the industry has reached a level of consistency and success few on Wall Street ever thought was possible.

SPRING, SUMMER RE-OPENINGS DRAW CROWDS
The abundant snowfall this past winter spurred many resorts to extend their seasons or reopen after they were closed. And the response offers yet more evidence of the lure of skiing and riding. Overall, the final skier visit numbers are likely to rise by 100,000 to 200,000 thanks to the late-season turnout.

How crazy has it been? One area reported more than 3,000 people showed up over Memorial Day weekend. Aspen had more than 1,700. In California, resorts reported that guests were calling to inquire about lessons over the July 4th weekend. Areas politely explained that the skiing and riding were really aimed at intermediate and better participants, but you have to like the consumer enthusiasm for taking up winter sports in summer.

DEBIT CARD FEE CUT TAKES EFFECT JULY 21
Chalk one up for the little guy! As SAM has reported recently, debit card fees were scheduled to be cut significantly as a result of the financial reforms passed in the wake of the most recent banking crisis. A last-ditch effort by the banks to postpone the cuts failed in early June, clearing the way for the Federal Reserve to cap debit card transaction fees at $.12. This has the potential to save the average resort tens of thousands of dollars in card swipe fees, and to save businesses collectively about $12 billion a year.

The banking industry waged a furious battle to postpone the new fee structure, claiming it would lead to higher fees for checking accounts or other banking services. Business representatives argued that the one or two percent savings per credit card transaction would be passed on to consumers. It’s likely that neither of those scenarios will be as severe as that; we’d be happy if businesses were able to keep more of their revenues and pass fewer of them to bankers, who have replaced lawyers and journalists as Americans’ least-respected professionals.

WHERE’S J.P.?
The strange case of Tamarack Resort in Idaho continues to get more and more strange. After Tamarack Resort founder and majority owner J.P. Boespflug missed a series of court dates regarding foreclosure proceedings in May, a warrant was issued for his arrest. When he failed to show up for a contempt hearing, after missing a deadline for revealing financial documents related to the foreclosure proceedings, he was found to be in contempt. The court also made Boespflug subject to fines of up to $5,000 a day. At press time, his whereabouts were unknown.

Boespflug has said that his personal losses at Tamarack total $45 million. He is also on the hook for $4.9 million to Bank of America for a lease on lifts that Boespflug personally guaranteed.

A lawyer for Bank of America said he suspects Boespflug has been shielding assets and is a flight risk. When Boespflug sold his home in Boise last February for $1.2 million, he had already transferred the assets to a Nevada corporation he set up in 2009. The deed was notarized from the Cook Islands in the South Pacific, a known haven for “fraudulent asset-protection trusts,” the attorney said.

Boespflug had gone underground by May 13, when his attorney found Boespflug was no longer living at his last known address, and had been in contact only via e-mail.

SMARTSTYLE, SMART PARKS
Terrain parks continue to grow in popularity, and so has the range of riders’ skill levels. With that in mind, this year’s SmartStyle DVD has been updated to reflect these changing freestyle terrain environments. The new 6.5-minute DVD was filmed on the Stash run at Jackson Hole to give an example of a different style terrain park that uses more wood and shows different sized parks. The DVD also features a professional voice-over and added a backcountry safety video. SmartStyle has been a key piece of the successful overall effort to reduce injuries in terrain parks; one recent study by Dr. Jasper Shealy found that per-capita injury rates in the terrain park are lower than on the rest of the hill.

MAN BITES DOG: BLIXSETH SUES TAX OFFICIALS
A federal judge dismissed the State of Montana’s $57 million tax dispute against Tim Blixseth, founder and former owner of the Yellowstone Club, in June, saying the state failed to file its claim in the proper venue. In response, Blixseth has asked the judge to punish Montana tax officials for illegally trying to force him into bankruptcy. Blixseth is seeking punitive damages, pledging to donate any award to legal organizations that serve the needy.

In mid-May, a federal judge ruled that the Montana Department of Revenue had erred in bringing the action in the state of Nevada, since Blixseth does not live or work there. Montana, along with Idaho and California, had initially sued Blixseth over back taxes, but Blixseth paid $1.9 million to settle affairs with Idaho and California, on condition that he not seek sanctions against officials there.

Blixseth has accused a variety of Montana officials, including the governor, of conspiring against him in the attempted forced bankruptcy action—an accusation that all the Montana officials deny.

The attorney for the Montana Department of Revenue said the move for sanctions would be fought vigorously, and termed the judge’s ruling on the venue a narrow one that did not touch on the legitimacy of the state’s tax claims. Those issues, he declared, “are still alive.” Which means that the legal issues surrounding Yellowstone are still far from dead.

KEEPING A LID ON IT
Helmet bills are making their way through the legislatures in California and Pennsylvania. The California bill would require helmets for everyone 17 and younger, and places responsibility for compliance on the individuals and their parents. The situation in Pennsylvania is less clear, as there are two different versions under consideration, including one that would put the burden of compliance on resorts.