Ski Areas Don't Make Money From Skiing...

[le dog]

on Powder's December issue there was an article by matt hansen, on the first page it said: "with real estate tanking and resorts facing bankruptcy, the ski industry comes crawling back to the only people who can save it: skiers". it's a quite interesting read and the bottom line is: the more you stray from you core base, the more you risk failure. stick to skiing and (as long as there is snow), you won't close operations anytime soon. the author writes about Tamarack, the Yellowstone Club and plenty of others that focused more on real estate and fancy condos and forgot that mountains (it seems) are for skiing. here in Italy I haven't seen a single resort going bankrupt, I presume it is because all mountains are close to the cities and a good portion of those going there, are real skiers who just enjoy the outdoors (even though if you go to Cortina..well, that's a different story. that's the getaway of choice of the rich and famous and where you can find the most Lamborghini/Ferrari/Bentley per square meter, ridicolous).

[MESKIBUM]

The problem is simple.

During the real estate boom, which lasted at least from the early 1990s to about a year and a half ago (and since the early 1980s in some places), selling real estate made MUCH more money than lift operations.

Example: Kirkwood sells 10,000 season passes at $325 = $3.25 million. That's maybe five tiny slopeside condos during the boom.

So what happened is that ski resorts started being bought and sold for their value as real estate ventures, not for the small amount of money they could generate from operations. When you're building 100 new condos every year, it doesn't matter if your lift operations make money or not: in fact, condo buyers want to ski somewhere with lots of high-speed lifts and slopeside amenities, so you *must* spend enough to lose money on operations in order to attract the real estate buyers.

The problem here is that the mountain is now a loss leader for condo buyers, and the needs of actual day skiers are generally ignored in the rush to cash in on the real estate.

Northstar is a classic example: since they redid the base village, anyone who actually drives there to ski has to walk what feels like half a mile, in their ski boots, past every single hotel and shop in the base village, in order to get to the lifts. It's like they're taunting you for being of such low class that you couldn't afford to stay in one of the expensive hotels or condos at the base.

Kirkwood is another classic example: the centerpiece of the base lodge isn't a restaurant or the warming area: it's the REAL ESTATE OFFICE. Want to buy a lift ticket? Good luck finding the counter...it's hidden around the side and not signed. It's easy to see what their priorities are.

Mt. Rose, OTOH, is a good example of a ski area that actually makes its money off of skiers, and they treat day skiers well. The parking areas are right next to the lifts, food prices in the lodges are reasonable, passes are cheap, lift tickets aren't insane, and they run a cheap all-day basket check for families with kids and layers and bag lunches.


The only way to fix this is for the investors that bought ski areas for hugely inflated values -- as if they were real estate ventures -- to lose their money, go tits up, and for the ski area to be resold at a (much lower) value that reflects actual cash flow from operations.

Period.

As long as investors purchase ski areas for inflated values that can only be recouped by selling real estate, ski areas will suck.

This is why the economic crash is, in the long term, good for skiing. It will shake out the real estate speculators, and return at least some of the mountains to people who understand the economics of running a ski area.

Bingo! You nailed it. That is why I don't have any cravings to head back to CO. Vail...FAIL! Beaver Creek...FAIL! Copper Mtn...FAIL! Way too friggen expensive for what you get. Give me Powder Mtn, Alta, or Solitude anyday over the others. I wonder if Snowbasin makes money. Never been there, but I hear that it's really swanky, which is of course why I've never been there. $65 lift tickets is more in line with the average ticket price than Vail's $96 ticket.

[BigDaddy]

No one's said it yet, so I will. Mad River Glen. It's all about the skiing, reasonable rates and still making money with a recently revamped SINGLE chair!!!


We don't need no stink'n high speed six packs!!!

[neckdeep]

Targhee still has a relatively low cost structure in place. Considering that the skiable property covers 2500 acres it has the four main cost inputs fairly low, I imagine. It only uses one shift of groomers and grooms a minimal 5-10% of terrain. Only two real lifts and two old ones(blackfoot could be eliminated for further savings). No snowmaking. Fairly small staff compared to other resorts with that much acreage.

Of course, that only exists thanks to the Teton county, WY county commisioners. If ownership had its way, the place would be currently be Tyvek city and smothered with incomplete lifts, driveways to empty lots and a hundred million bucks of bad debt. The original development proposal included three little chairlifts dedicated to serving real estate sales....thats right, they just served houses! Elevators for those too lazy and rich to walk and, to me, that just says it all. How would skiing be enhanced by a massive commercial plaza and indoor parking garage? So they could put in an outlet mall at 8000 ft on a dead end road? Somebody call MENSA and tell'em there's a new society of geniuses. Sadly, that still is the guiding "vision" of ownership(a spoiled tit of a man who cuts the employee bus service while building a 9 million dollar mansion for himself). As a member of a founding family of Vail, I doubt he'll be comfortable in this cow country until it looks more like Vail. To him, a ski resort is a huge place with a thousand employees that line up to kiss your multi-millionaire father's ass and now its his turn to feel the lips. And why not? If you can rig up a naked swindle of 100 million dollars worth of public land in exchange for some grizzly infested swamps noone wants, maybe you really can do anything.

Targhee priority #1 still is unlocking the windfall in the land stolen from from the public treasury. It was a swindle truly worthy of a russian oligarch, they will never stop trying cuz the profit can't occur until the land is developed or sold to another developer at discount. As mentioned before, blatant public subsidy of private ownership is an often hidden element in the ski hill real estate scam's massive profitabilty. Like debt costs and marketing, it's yet another example of how the high "profitabilty" of the real estate side of operations is really the result of systematically externalizing costs. Its rigged and it creates moral hazard. One can afford to make extravagant and stupid decisions if he gets land at a cost of only 10% of what he himself claims its worth.

[srsosbso]

I wanna thank Spats for explaining this phenomenon.

I moved to Rossland/Red Mountain BC in 1989. It was a ski area that ran on skier visits. Interestingly, it was actually member owned from its beginnings (first chairlift in western Canada) until they sold in 1989. Apparently the members' board decided to sell because they could not afford the necessary infrastructure maintenance, and they sold the place FOR A DOLLAR to private owners. The sale had some requisite stipulations about a few relatively low-key upgrades.

In the meantime, I spent 7 years in New England from 1997 to 2004. I liked Jay Peak and Burke Mountain alot- low key and skier focussed. I went a few times to Killington and Okemo and Stowe. What a bunch of shit-shows. I took my kids to Okemo on a powder day and they were running the fucking snowmakers- presumably to extend their season! No offense to anybody here who skis in those places, but, in a nutshell, I quit skiing and took up ice climbing for my years in New Hampshire. It wasn't that the skiing was awful, it was the vibe, the experience, that I hated.

I moved back to Rossland in 2004, and in the meantime the resort had sold again. It now clearly operates on the "Spats principle" of operating at a loss and making money out of real estate sales. Needless to say they are currently in trouble, selling off recently built condos at below their own construction costs. Fortunately their business model precludes borrowing money, so it is investors who are out of luck.

Because they are cheap, the changes have been pretty minimal. However, it now takes 25 minutes to ride two chairlifts to the top of Granite (when it used to take 18 minutes on one), because the lower chair serves potential "ski-in, ski-out" condo development. There's also talk about base area development that would push the locals parking further and further from the lifts (though thankfully the recent $ crash has put the brakes on that.) Last year the real-estate office was front and center when you arrived, but that got moved too, thankfully.

What I find most troubling is the lack of forethought. Unless the people behind the mega-resorts mentioned above plan to build more and more real estate FOREVER, the clear endpoint is a money-losing ski operation with unaffordable lift and snowmaking systems and horrible parking, and a tapped out real estate market. How can this work in even the moderate term? These fuckers don't care about that do they- they'll have made their fortunes off condos, sold the business, and be living in the sunbelt not giving a shit about skiing. Unfortunately, whoever owns it then is left trying to run an IRREVERSIBLY overdeveloped mountain with expensive operating costs that perhaps CANNOT be run 'in the black' without any new real estate ventures to fund the ski hill operations. What the hell happens then????

Thanks again, Spats, for making sense of this.

[john c]

As far as targay goes. Gillete the trust funder who owns the place is neck deep in ponzi real estate. Since the land swap was moving at such a slow place he jumped in deep in the valley. That huge commercial thing on the corner is his and has a 20,000 dollar a month service on the debt for it. It sits half empty right now and is being rented for a small percentage of that loan. As well when you are driving the road to the ski hill, take a peak at the red hawk development, that's his as well. Yeah the overgrown one with one model home sitting in it. Empty lots with all services run to them on fresh blacktop. Targay had a working business model but third generation trust fund guy wanted to bring Vail to Idaho and is now eating a dick. And every time you buy a ticket it goes to pay the interest on the debt for this shit.

As for reveljunk. The uphill capacity is much larger than the amount of people skiing there. I know that for sure. Why they installed an expensive Gondola instead of a bubble quad shows their basic ignorance for skiing. This would have saved them huge money and allowed for oh say four double chairs up top. Imagine terrain from Kokanne bowl all the way around to the far side of the north bowl. They would have actually had a ski hill instead of a fancy gondola to nowhere. Their latest upgrade was extending the gondola, down. nuff said.

[neckdeep]

Sounds like you used to live here. I knew a John C who worked up there for years but he didn't ski, that's not you is it? And the places you mentioned are only the big visible tip of an iceberg sized real estate portfolio. Get this, my brother was actually in elementary school with the owner back when we were little kids in Nashville. Sez he can't remember whether he personally gave the guy a wedgie but that you can take some satisfaction in knowing that he was sort of boy who got a lot of wedgies in P.E. class. Kids don't care who your parents are....


Q: what do you call a dozen ski hill dirtpimps buried up to their necks in sand?


A: not enough sand...

[montanaskier]

ski companies, even the mom and pop ones are a business and all businesses want to make money. You make more money by increasing traffic or increasing the average each person spends while in your business. While we here at TGR don't like groomers and ammenities, the masses do. Grooming and nice ammenities is what drives traffic to your hill. Terrain that is more slanted towards green circles and blue squares is what the masses desire. Why do you think CB wants Snodgrass so bad? Skiing has become a sport for the rich, something to do on weekends and holidays and my guess is that it continues to be that in most areas.

[neckdeep]

Sure, economics dictates that there will be successful niches for upscale skiers. Problem is, too many wanna-bes are competing for the Aspen/Deer Valley/JH patrons. It is impossible in a society that sees a dwindling middle class and more wealth concentrated in the hands of fewer and fewer families. Plus, the obvious demographic challenge in the passing of boomers from skiing age. Right when the industry should have been focused on sustaining the sport in a declining market, they pretty much went in the exact opposite direction and made it more expensive and elitist. Soon the old boomers will be downsizing and very few seniors hold on to second homes. Trust me - luxury vacation real estate is going to be a loser for decades. Gen X is too small to pick up the slack and most of my professional Gen X friends are worried about how to come up with 200k to put a kid through a good college; they don't ski much anymore let alone buy vacation homes. Gen Y is dirt poor, looking for a job and paying off student loans. Who was supposed to buy all this stuff anyway? If the price of a slopeside condo goes up at all, it'll be because of inflation. Anybody buying lightly used chairlifts these days? No? Scrap metal it is.

Let's face facts: the recent explosion of ski hill real estate frenzy had almost nothing to do with the quality of a mountain and its on-slope infrastructure. It was all about the delusion that buying slopeside would be like falling ass backwards into a pile of gold and that your house/condo would make you easy money. The dramatic failure of that lure will crush slopeside real estate demand as the boomers divest. Stagnant prices or a continued negative trend in prices is likely at resorts that don't JH or Aspen appeal to the superwealthy.

Tamarack is the test case, I think. It's not the greatest mountain, I know, but its a lot better than many eastern/midwest resorts and it is blessed with proximity to Boise. Boise is one of the quickest growing cities in the west and it has a lot of young, athletic families. If, in five years, Tamarack has been restructured as an affordable overnight destination for Boise families and is filling its chairs in winter and its golf course/bike trails in summer, then there is hope. As for a place like Revy, out at the ass-end of nowhere with mostly impoverished loggers as a local customer base....yeah, good luck with that up there, guys. Gets my vote for resort most likely to be pulled out just to stop the losses.

[enlosandes]

This isn't spam, nor will I link the site, but the whole premise of starting a GLOBAL SKI CO-OP is what this discussion is centered around. It's time for us skiers to take but skiing from greedy land developers and corporations that don't care about the sport.

A ski area shouldn't be solo focused on making a profit, it should be focused on making the skier happy. If that occurs, the profits will follow.

[garyfromterrace]

Just to keep things balanced, a community service cooperative could serve the same purpose. No debate here, just stating the facts.

[XXX-er]

red mountain in rossland used to be a ski society and was bought out in the 80's or so by a private company

the 1st lift was a community project built by the people of trail & rossland and from what I heard they "borrowed " alot of stuff from cominco ,everyone in the company was in on the action ,everyone looked the other way and it was good for company morale

the whole town was completely union so of course the ski patrol was union too

[byates1]

MRG, what they are doing is, and has been, working. it is possible. if i skied ski area's, i would support this type of operation.

[Chainsaw_Willie]

A quad up international will destroy that terrain. Way too many people, way too quickly, to way too small of an area. Yes the PNW hills make good money. The thing about it though, is they are only one peice within a large conglomerate. A profitable peice. This is fucked on so many levels for us. The #'s a place like Stevens Pass, Crystal, Snoqualmie do on a busy Saturday or a whole season should dictate a much lower lift ticket price. But these zombie capital funds put those high profit margin earnings into a greater pot. This profit is siphoned not only out of state, but away from the entity that earned it. In a normal business situation this profitability would result in reivestment in said business as well as allow for a continued lowering of prices.

This megaconglomerate corporate business model has simply allowed for more money to be leveraged. We are talking defaults right now running well into the hundreds of millions at places like YC, Moonlight Basin, Intrawest and more coming. All on an overleveraged ponzi real estate speculation. massive credit lines given off perceived future earnings that ain't ever coming..... And Revelsjoke is just another example. We are talking about the biggest set of east coast hard pack skiing golf course developers to ever set foot on the West side of the continental divide. Junk product by junk developers. All their marketers could think of was get the 6500 vert and we win. Wrong, as skiing matters more than a #. Jam a Gondie and a chair and claim it, call it the next Whistler. A few hundred mill up front and 800 mill on the back end. Not so much.

This sounds good to me. Sounds like the conglomerates that own the areas here in WA are in financial trouble and no matter how profitable these local areas are they can't make up for the losses in out-of-state areas. I will henceforth pray that these conglomerates go right down the drain, never to be heard from again, and that WA's ski areas can return to local ownership.

[enlosandes]

Interview with Matt Hansen of Powder Magazine that's very relevant to this thread.

http://www.kdnk.org/attachments/2009...nsenPowder.mp3

[El Chupacabra]

Northstar is a classic example: since they redid the base village, anyone who actually drives there to ski has to walk what feels like half a mile, in their ski boots, past every single hotel and shop in the base village, in order to get to the lifts. It's like they're taunting you for being of such low class that you couldn't afford to stay in one of the expensive hotels or condos at the base.

Kirkwood is another classic example: the centerpiece of the base lodge isn't a restaurant or the warming area: it's the REAL ESTATE OFFICE. Want to buy a lift ticket? Good luck finding the counter...it's hidden around the side and not signed. It's easy to see what their priorities are.

Mt. Rose, OTOH, is a good example of a ski area that actually makes its money off of skiers, and they treat day skiers well. The parking areas are right next to the lifts, food prices in the lodges are reasonable, passes are cheap, lift tickets aren't insane, and they run a cheap all-day basket check for families with kids and layers and bag lunches.

^ Agreed, agreed, and agreed. Kirkwood could be so much better than it is -- it seems like KW is trying to become the Northstar of South Tahoe, when KW doesn't realize that to do so is not a good thing.

Going to Northstar feels like going to Disneyland on a holiday weekend: park waaaaaay out in one of the back lots, wait for a bus, get on the bus, wait for the long slow drive to the village... walk through the village, wait in line, walk some more, wait some more, get on a gondola, wait some more....

hey, it's lunchtime! Wait in lunch line, eat lunch, wait some more.... get in line... and finally, maybe, get on a chairlift.

Mt. Rose is small. But it is so very well run. It reminds me of Southwest Airlines: the people who work there actually care about what they do, and they like their work. Kirkwood and Northstar, and places that follow their model, feel like Delta Airlines: they're shortsighted, they don't care, and they will nickel-and-dime you to death. ($20 if you want to park close enough to the base to actually see the ski area = $20 if you want to actually check a bag on your flight.)

[/rant]

I think I'll go backcountry skiing today.

[hutash]

Spats nails it. Vail is the worst I have seen. Even after taking the bus you still have a long fucking walk through that god-awefull village. I can almost see not having the parking lot too close. Lets face it, it is prime real estate no matter the marketing strategy. But and bus stop what seems like miles from the lift Sure it's Fail, but just about every other CO hill is the same. It is occurring everywhere. That is why Mt. Rose is still high on my Tahoe list, and Flatstar, Hellvenly and Squalid Valley are not. Mammoth, at least has a decent amount of near parking, but more is being lost to pass/vallet parking all the time

[Woodsy]

J,
to answer your questions I think Ski hills still make $ from skiing, but that money isnt as big as can be made elsewhere, especially in the early aaughts in real estate

I was just back in UT and skiied at a few places and talked to peeps involved in mtn ops at all and they still track their daily success based on lift tix sold v. forecast for the day and the week
I wont say where as not to light up the flames on any areas and calls of BS on places supposedly driven by condo develpopment but YOU know who I know and where they are now and the rest.
the fact that folks at 3 different resorts could tell you how their ticket #s were the day and week before the way any hotelier I know tracks occupancy or ADR shows me it is still a profit center.

[dumpy]

**Disclaimer, I've been pounding Manhattans all night and tend to talk out of my ass even when sober. Plus I have the attention span of a garden slug and didn't read every thread.**

I see two major models being followed in the ski world, have been for a while, but it's more evident now. Ski profit centers and real estate profit centers. IMHO ski profit centers have a longer future, but real estate profit centers can give day skiers more bang for their buck. Which is which is not always that evident.

I'm a huge proponent of the feeder hills, ski profit centers. Skiing is a sport to be enjoyed all winter long, not just on vacation. I always thought of the ski areas in my beck of the woods as a feeder hill, where people go to ski. Starting last year, I got a pass at a different mountain than I had in the past, slightly larger than the othes. Small place, ~30 trails, slightly less than 1,000 vert, 5 chairs. They've made a big push in condos (out 8 ski areas in a 2 hour radius, only one with lodging), I thought they were fucking crazy. Tonight after skiing decided to take a spin through their new (gorgeous btw) condo/waterpark/spa/hotel complex across the street from the hill. The parking lot was fucking packed. Lots of out of state plates, every room seemed to have a light on. It;s a feeder hill acting like a destination resort, they've been doing it gradually all along, but now it;s escalated.
I don't fucking get it, especialy in the midst of a recession. Day passes at this place are kind of expensive ($50ish, vs. $30ish at competitors), season passes are reasonable ($300ish if done at the right time). Maybe the season pass is the reason. However this mountain only gets ~100 inches a season, the lifts are old and shitty and the terrain (when compared to where the out of staters could drive to instead) is limited. Based on plates, some of these people could have traveled to Whiteface, Stowe, Sugarbush, etc in the same ammount of time or even less. (FWIW the slopes don't seem much more crowded snce their new development, maybe folks are going for the waterpark).

Compare this to a place like Snowbasin. Amazing terrain, bathrooms that make the ones in Saddam's palace look like an outhouse, excellent snow, brand new lifts, etc, but no lodging. Sure the ticket prices are higher, but not when compared with operating costs. How the fuck does Snowbasin pull it off? Even Pow Mow has lodging.

Not really sure what the fuck the point of this post is, other than I want skiing to be about skiing, sometimes real estate subsidizes skiing (which works until it fails, I'm ok with it at some places when times are good), some mountains need real estate and others somehow pull it off without being dirt pimps and I don't want my local hill to fail cause of some stupid real estate decisions.

[donkeykong]

Starting last year, I got a pass at a different mountain than I had in the past, slightly larger than the othes. Small place, ~30 trails, slightly less than 1,000 vert, 5 chairs.

^^Greek peak? I'm going tomorrow, i'll have to check out this craziness.

I don't have much useful to add to this thread, but i am enjoying the insight.

As an east coaster who only gets in one or maybe two big trips out west a year, i mostly have to go to the destination-type resorts. i'm getting really sick of $90+ lift tickets and disney attractions.

That being said, a large majority of "people who ski" (not skiers) want all these bells and whistles and are willing to pay for it. I think its going to be a long time before any of these trends reverse, lift prices go down, $12 burgers, etc, even though the recession has given ski area profits a swift ass kicking.

Hell, i'd even be ok with it if 15 yrs from now prices are the same, given inflation and all that jazz.

[dumpy]

^^Greek peak? I'm going tomorrow, i'll have to check out this craziness.

That would be the one. How they are making any $$ on real estate there is beyond me. Take a swing through the Hope Lake Lodge area, it looks very nice, but really out of place. I'm thinking a waterslide poach is definitely in order at some point this season.

I may be there tomorrow too. If you see someone in mostly black on some white Scott Missions, ask for change. Warning, it was bulletproof today.

[neckdeep]

**

Compare this to a place like Snowbasin. Amazing terrain, bathrooms that make the ones in Saddam's palace look like an outhouse, excellent snow, brand new lifts, etc, but no lodging. Sure the ticket prices are higher, but not when compared with operating costs. How the fuck does Snowbasin pull it off? Even Pow Mow has lodging.

.

I guess the whiskey made you forget about the Winter Olympics. SnowBasin's state of the art infrastructure upgrade (just the roads coming up to the hill must have cost a fortune) was accomplished with the massive public spending and revenue associated with the SLC olympics. And the day ticket is less than Targhee, which has lodging income and maybe 15% of the cost structure to deal with...

[dumpy]

I guess the whiskey made you forget about the Winter Olympics. SnowBasin's state of the art infrastructure upgrade (just the roads coming up to the hill must have cost a fortune) was accomplished with the massive public spending and revenue associated with the SLC olympics. And the day ticket is less than Targhee, which has lodging income and maybe 15% of the cost structure to deal with...

Yeah, Bourbon makes little details like that slip away... That and I have only been there post 2002, no idea what the place looked like pre-games. That really makes a lot more sense now.

So in other words, Snowbasin is kind of running on borrowed time. They got a shit ton of cash handed to them to upgrade for the games, did the upgrades, but now are just running like any other ski area. As time goes on, they will have to either, a)jack ticket prices, b)go the real estate route, c) let their grandeur fade a bit. Is this a correct assessment?

[eldereldo]

Locally Sunshine Village and Lake Louise are still hills that rely on Ticket sales, not through any lack of desire to build real estate, but for he fact that they are in a national park, and in Canada that means NO commercial development. So perhaps despite their bitching about not being abkle to update/upgrade and add anything they want, they ended up being saved from themselves. But they do have a lot of tourist revenue they can rely on, unlike say Fortresss mountain which is gone because it couldn't pay its costs, and the owners were tired of subsidizing it from other, profitable (some via real estate) ski hills.

[skiski]

There's nothing wrong with the real estate based ski area per se. Honestly, I know some moderately wealthy vacation type skiers from the east who really really love Deer Valley. Good for them. They need a place to ski too.

To me the problem is that every other resort saw how much some people loved deer valley, and how much money deer valley made off of it, and decided that they too could be a deer valley. Jackson Hole has wasted tons of money on trying to be a deer valley. Why? They have an incredible mountain, with what is, in my opinion, the best terrain/snow combo in the lower 48. They could attract a lot of people who really like skiing with just decently nice accomodations (I mean, it's good to have the facilities be kept up so that their not-so-hardcore family members have something to enjoy, but the natural beauty of that area should be a great way to attract vacationers as well).

A lot of Summit County Colorado seemed to decide to go this way as well. Tamarack was an attempt to build a new deer valley from the ground. It sounds like Targhee took it lightly in the ass and is very lucky they did not take it a lot harder.

In the end, I think some of these places will go bankrupt and the assets will be purchased at prices that will allow the new owners to sustain a profit from ticket sales. Places need to look at their particular strengths based on location, terrain, etc. and find their own niche. With it's location, Tamarack really should be another reasonably priced alternative for boise skiers, targhee should stay as a "variation" for jackson tourists and locals, though i could see some moderate expansion of the number of people who vacation primarily in targhee. Aspen and Deer Valley have the swanky names that should continue to attract wealthy people who want to be pampered (aspen for those who can actually ski, deer valley for those who can't). The Canyons should be returned to nature (jesus, do you really think a third resort, inferior in every way to the other two, is necessary in the PC area?) Wasatch front areas should keep their costs down and focus on profits from the day skiers and others who will travel for their great snow and airport proximity.