Melding snow: The consolidation of the ski resort industry
Vail Resorts cemented its grip on the top spot in the North American ski resort industry by acquiring British Columbia’s Whistler Blackcomb last year for $1.1 billion. Photo Credit: Toshi Kawano
When it comes to winter sports, gravity can propel even the most novice skier or snowboarder to more than twice the speed of a full sprint. But even by those standards, the consolidation of the ski industry this year was impressively fast.
At the tail end of last season, KSL Capital Partners, owner of Squaw Valley and Alpine Meadows, partnered with Aspen Skiing Co. owner Henry Crown and Co. to buy Intrawest Resorts and its half-dozen ski mountains for about $1.5 billion.
A few days later, the group said it would acquire Mammoth Resorts and its eponymous Northern California mountain.
By August, the group had snapped up Utah's Deer Valley Resort, as well.
In fact, the buyout announcements took place so rapidly that the acquisition group still has not had time to come up with a name -- at least not one that it's ready to disclose. Its president, David Perry, would only say that the company would announce a name in time for the upcoming ski season.
"You have to give the group a tremendous amount of credit for tackling a large-scale consolidation of premium brands in a very short period of time," said Evan Reece, CEO of ski resort ticket retailer Liftopia. "We've been around for 12 years, so we've seen different ownership groups, but there is something special about this one."
While Vail Resorts bought mountains such as Utah's Park City, British Columbia's Whistler Blackcomb and Vermont's Stowe in recent years to emerge as the clear leader in the North American ski resort industry, this new group has clearly become a legitimate challenger.
For those keeping tabs, the magic number is 13. That's the number of North American resorts owned by each group. For Vail Resorts, that includes its eponymous resort as well as Colorado's Breckenridge, considered the country's two most popular resorts, as well as Whistler Blackcomb and Lake Tahoe's Heavenly.
In addition to Mammoth, Squaw and Steamboat, the new group, which is based in Denver, owns Vermont's Stratton and Quebec's Mont Tremblant. And its 13 doesn't include Aspen Skiing Co.'s four Colorado resorts, which technically aren't part of the new group but could be cross-marketed with its other properties.
In some destinations, the competition will be head-to-head. In Colorado, Vail, Beaver Creek, Breckenridge and Keystone will go up against the new group's Steamboat and Winter Park. Near Lake Tahoe, the new group's Squaw Valley and Alpine Meadows will take on Vail's Heavenly, Kirkwood and Northstar resorts. And with the Deer Valley acquisition, the new group has a Utah foothold against Vail's Park City Mountain Resort, which Vail linked to its nearby Canyons resort with a gondola in 2015.
With such resorts in tow, the new group will likely eventually pursue a similar strategy as Vail by selling season ski passes that allow entrance to affiliated resorts across the continent.
"There's a limited number of these destination resorts," said Erik Blachford, a partner with Technology Crossover Ventures and Liftopia board member who is a former CEO of Expedia. "With people flying in and staying and eating at restaurants, their total spend with a total day on the mountain is so much greater than the local, drive-to mountains."
Utah’s Deer Valley.
An era of challenges
The two companies will be competing for share in a U.S. winter-resort sector that saw skiers and snowboarders spend about $7.6 billion in the 2015-16 ski season, the most recent year that figure was tracked by the National Ski Areas Association (NSAA).
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"We're having a blast," Perry said last month. "We're private, we're well funded and we're going to grow this business."
Challenges for the sector include baby boomers aging off the mountains and the prospect of shortening winter seasons because of climate change.
What's more, it's expensive. Winter sports' reputation for exclusivity has been further cemented in recent years by rising entry costs for the casual skier. Walk-up lift tickets at many higher-end resorts now surpass $150. Still, opportunities to save money on skiing abound thanks to the season passes offered by Vail and groups such as Mountain Collective, M.A.X. Pass and Liftopia.
"The long-run bet on an increasing number of skier days isn't a good one, given climate change," Blachford said.
Blachford added that the rising day-pass prices continue to pose a hurdle for those looking to learn the sport.
"So it's a bit of a puzzle," he said.
While last season's U.S. skier and snowboarder visits rose 3.7% from a year earlier, to 54.8 million, that number is down from a record 60.5 million in 2010-11 and marks little change from the annual averages two decades ago, according to the NSAA.
Meanwhile, occupancy at western U.S. mountain resorts in the 2016-17 season fell 0.2% from a year earlier, marking the first occupancy drop since 2011-12, according to DestiMetrics, which tracks lodging across 20 mountain destinations in California, Colorado, Idaho, Nevada, Montana, Oregon, Utah and Wyoming. Lodging revenue rose 7.2% on higher room rates. (DestiMetrics was acquired in January by Inntopia, which is owned by Travel Weekly parent Northstar Travel Group).
Some analysts have suggested that North American ski visits have been hampered by the stronger dollar, which makes U.S. and Canada winter trips from abroad more expensive. Indeed, while the dollar compared to the Euro has weakened by about 6% during the past 12 months, the dollar is still 10% stronger against the Euro than it was five years ago.
Still, stagnating ski-visit numbers aren't confined to North America. Worldwide ski visits for 2015-16 totaled about 325 million, which changed little from 15 years prior, according to independent consultant Laurent Vanat, who released the ninth annual version of his International Report on Snow & Mountain Tourism in April. According to that study, regional market share also changed little, as the Alps remained by far the largest inbound ski market by attracting about 40% of the world's ski visits.
Regardless, longer-term challenges have caused many North American ski resorts to shut down. The number of U.S. ski areas has fallen steadily, to 481 today from 546 in 1991-92, according to the NSAA.
"Consolidation is the name of the game in the industry," Inntopia vice president of business intelligence Tom Foley said shortly after the Deer Valley acquisition was announced in August. "Fewer players in the field allows for a more dictatorial approach to pricing."
Vail Resorts appears to have overcome many of these challenges by buying up competitors and perfecting the art of season-pass sales through data-informed pricing and the branding of its Epic Pass season passes. With Vail leading the way, about 40% of last season's U.S. ski visits were on season passes, up from 34% in 2008-09, according to the NSAA.
Vail Resorts and its eponymous Colorado mountain. Photo Credit: Jack Affleck
Number of visits dropping
Vail Resorts' most recent financial results reflect this dynamic. While the company's 2016-17 skier visits jumped 20% from a year earlier, to 12 million, those gains were primarily from the Whistler Blackcomb addition; U.S. skier visits fell 5.4%, the company said in late September. Vail blamed poor early-season conditions in Colorado and the relatively late Easter holiday for the drop-off.
"Our investment to create the largest ski resort in the U.S. continues to generate excitement among skiers and drive strong yield growth," Vail CEO Rob Katz said in a statement at the time. "This year's results highlight the positive impact of our expanding geographic diversification, the stability provided by our growing pass program and the success of our guest-focused marketing efforts."
Vail Resorts officials declined to be interviewed for this story.
How the new group plans to take on both Vail and the sector's challenges remains to be seen. In the short term, the new company has a better chance of achieving economies of scale in areas such as technology and marketing, said Perry, who was complimentary of his more-established competitor.
"Vail Resorts does an excellent job. We have a lot of respect for what they've created," said Perry, who led Aspen Skiing Co. for 15 years before joining the new group this summer. "If you can get a group of resorts under one umbrella, it gives you scale, which allows you to invest to make the business effective."
Yet both Perry and Foley said that making too much of an effort to standardize multiple resorts poses its own set of risks by potentially alienating either the local communities or skiers and snowboarders drawn to the sports for their independent, free-spirited nature.
"No. 1, the resorts are the heroes," Perry said. "We want to make sure the unique nature of the brands is not only preserved, but enhanced. But if it's part of the business that's not customer-facing, then it's something that may be able to be centralized."
This was echoed by Foley, who said, "The fear is that those resorts will lose their unique flavor and the thing that differentiates them from their brethren."
The key to both companies' expansion may be finding ways to introduce more people to the sport, either at their own lower-end resorts or via partnerships with independent and smaller mountain-resort operators, and shepherding newbies into multi-day trips.
"No one sitting in Florida and New York who hasn't been skiing before is going to book a $10,000 trip to Jackson Hole," Reece said. "If you're [operating a resort] an hour and a half from a major metropolitan area, you have to think differently."
A lack of sampling opportunities
Still, such efforts have been sporadic at best. Speaking at the Mountain Travel Symposium (MTS) in April, Mary Jo Tarallo, executive director of the Learn to Ski and Snowboard Month initiative, noted, "There's not a whole lot going on between local areas and destination resorts."
Meanwhile, Kim Locke, vice president of strategic and corporate affairs at Lake Louise Ski Resort in Alberta, said at MTS that just one in five first-time skiers stick with the sport.
"A lot of people never really get to a great golf course without hitting 1,000 buckets of balls at the driving range," Blachford said. "There's no way to do that introductory thing [in skiing] without driving an hour or so and freezing a bit."
Vail Resorts addressed the issue of luring beginner skiers by acquiring Midwest resorts such as Minnesota's Afton Alps, Michigan's Mount Brighton and Wisconsin's Wilmot Mountain, which serve the Twin Cities, Detroit and Chicago drive-up markets, respectively.
Meanwhile, the new group's stable includes Bear Mountain and Snow Summit, which both serve the Southern California drive-up market, and Blue Mountain, which is a two-hour drive from Toronto.
Reece said the new group might have a further advantage by controlling a trio of resorts that, price- and stature-wise, fall between the higher-end destination resorts and the urban hills, providing yet another opportunity to move prospective skiers from the beginner-oriented ski areas to what Perry termed "bucket list" resorts.
Northern California’s Mammoth Mountain.
With the Intrawest acquisition, the new group also owns heli-skiing specialist Canadian Mountain Holidays, offering an ultra-premium option for advanced skiers.
"The one thing about this portfolio that makes it interesting is that they have Stratton, Tremblant and Snowshoe," said Reece. "Those resorts are premium but are not always required to be premium" because of their relative proximity to North American cities.
Both companies also have an opportunity to widen their audience by marketing their properties as year-round recreation destinations, using ski hills for hiking, mountain biking and other outdoor activities in summer months.
Recent summer-month results suggest that such a strategy would be a good bet. For the seven months ending in October, occupancy at western U.S. mountain resorts was little changed from record high figures the previous year, while revenue was up 7.2% from a year earlier, DestiMetrics reported last month.
With KSL as an owner, the new group has an additional opportunity to cross-brand between mountain and beach enthusiasts because of KSL's 2016 purchase of Hawaii-based resort owner Outrigger Hotels and Resorts, as well as its recent acquisition -- along with KKR & Co., a New York asset management outfit -- of Apple Leisure Group, owner of the all-inclusive specialist AMResorts.
While neither KSL nor the new group have disclosed plans to embrace such a strategy, it would be a wise one to pursue, according to Blachford.
"These guys are all doubling down on geography and building pretty substantial holding companies," Blachford said. "With climate change, the ski industry is kind of in a delicate spot. This is probably the front end of a move by larger companies that offer things in the offseason."