Downhill Slide: Fueled by Mergers and Buyouts, America's Corporate Ski Resorts Are More about Real Estate Than Ski Runs

By Clifford, Hal | Sierra, January-February 2003 | Go to article overview

Downhill Slide: Fueled by Mergers and Buyouts, America's Corporate Ski Resorts Are More about Real Estate Than Ski Runs


Clifford, Hal, Sierra


BOOMS AND BUSTS are historical afflictions of mountain towns, but one industry was determined to defy the odds. Participation in skiing exploded after World War II, growing with the baby-boom generation. By the mid-1970s, almost 750 ski areas were up and running. But the downturn was easily predicted. Growth in "skier days" plateaued in 1980 and hasn't moved much since then. The population was aging.

This stagnation threatened the industry as a whole, but for the largest ski-resort developers in North America, it became an opportunity--one predicated on turning once-folksy ski-lift operations into massive real estate ventures. By 2000, a trio of publicly traded corporations that sell one-fourth of the nation's lift tickets had trumped demographics. That year, they reported combined before-tax profits of $212 million on $1.8 billion in revenue. At 12 percent, that's more than double the profit margin of the industry as a whole.

The future of skiing seemed to lie in the hands of the Big Three--Vail Resorts, Intrawest, and American Skiing Company--and that future could be found at their sprawling mountain resorts, like Killington, Vermont; Breckenridge, Colorado; Mammoth Mountain, California; and 23 others. The companies promised to revive the sagging fortunes of America's most popular winter sport by two seemingly contradictory strategies: investing heavily in snowmaking, ski lifts, trail grooming, and new terrain, while making skiing itself a less significant component of business success.

From Stowe, Vermont, to Boyne Mountain, Michigan, to Truckee, California, privately held ski areas and ski resort companies concluded that they, too, had to play the Big Three's game. In the process, the sport of skiing morphed from a more or less environmentally benign outdoor experience into a destructive, extractive industry. Environmental damage increased as ski areas sprawled. And it was all made possible by the U.S. Forest Service, the developers' "partner in recreation," which leases public acreage for ski runs, allowing resort operators to scar mountain slopes with clearcuts and turn quiet alpine valleys into real estate bonanzas.

REAL ESTATE DEVELOPMENT ALONGSIDE ski resorts is nothing new. As early as the late 1950s, the founders of Vail were selling home sites to help pay for their new ski area, and in the late 1960s the developer of Snowmass, Colorado, made it clear that his goal was to build a condo village at the bottom of his mountain. But the massive shift to winter sports as a "loss leader" that propels revenue from more lucrative operations at the base of the mountain took new systematization, financial clout, and marketing genius.

Baby boomers were moving into their peak earning years, the time when people buy vacation homes, and company accountants eagerly did the math: If boomers buy vacation homes at the same rate as their parents, the number sold annually could jump by a third or more, rising steadily until 2013, when the youngest boomer is 49 years old and the buying binge is expected to begin a long decline. Intrawest, for one, has built or plans to build about 23,000 residential units and 1.59 million square feet of commercial space at 14 North American mountain resorts.

The transformation from ski business to big business was summed up by Joe Houssian, CEO of British Columbia-based Intrawest, who described his work as "a marriage of snow and steel, land and lumber, membership and service to create a company that redefines the mountain resort industry." Vail Resorts puts it more bluntly in its 1997 annual report: "To facilitate real estate development, VRDC [Vail Resorts Development Company, the firm's real estate arm] invests significant capital for on-mountain improvements. These improvements enhance the value of the company's real estate holdings." Skiing would be the carnival barker, the come-on to attract people to the real action: real estate sales and shopping in new "villages" at the base of the slopes. …

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