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It's A 'New' England In Post American Skiing Company Era

By Roger Leo
February 23, 2009

Reinvestment and rejuvenation at some of New England's premier mountain resorts has been the dramatic end result of the demise of American Skiing Co. and subsequent sale of its assets.

Investment in facilities and operations at Killington, Sugarloaf, Sunday River, Mount Snow, and Attitash was essentially on hold for a decade.

Then came those rocking few months in 2007: ASC sold Killington to POWDR Corp. for $85 million; Mount Snow and Attitash to Peak Resorts for $73.5 million; and Sugarloaf and Sunday River to Boyne for $77 million in cash and assumption of $2 million in debt, with Boyne immediately reselling the two resorts to CNL Income Properties Inc., which leased them back to Boyne as operator.

Since the sales, the new owners and operators have invested about $50 million in lifts, snowmaking, and urgently needed facilities maintenance.

"ASC was at the end of the line for a lot of reasons," Peak Resorts President Tim Boyd told The Industry Report. "Continued ownership by them would have only been to the detriment of the resorts. Financially there was nowhere else for them to go."

Boyd said the sale was good for the resorts, as it made reinvestment possible, and also was good for ASC.

"As timing would have it, they sold their resorts at a very good time. If they were trying to sell now they wouldn't have been able to move them," he said.

Peak Resorts' purchase of Mount Snow and Attitash came after careful study, Boyd said. He said Peak's offer was based in part on the amount of investment needed for upgrades to snowmaking, and figured in savings that would be realized through vastly more efficient guns.

"We had the credit all set up, and the whole deal was based on due diligence on the numbers the way they are," Boyd said. "How the economy plays out going forward is anybody's guess."

Mount Snow and Attitash have refocused on basics under Peak's ownership.

"Obviously, we've taken the resorts in a different direction. Our emphasis has always been more operational rather than real estate driven. We've worked on infrastructure, snowmaking, things we think are important to put out a quality product. Our goal is a quality product, not trying to sell condos. From the skiers' perspective, that's a positive thing," he said.

"I think the biggest impact obviously has been on the snowmaking side. We've introduced fan technology into New England at a much greater level than ever before. The reaction from our customers has been extremely positive even in light of dire economic times we're going through this winter. The improvements we've made have given us a big edge in maintaining numbers in spite of the economy," Boyd said.

"To us it's still all about the snow. It's great to have facilities, new chairlifts, but like a golf course, if you don't have good greens, it's hard to get anybody to come to play," Boyd said.

Stephen Kircher, President of Boyne Resorts' Eastern Operations, said ASC resorts were on hold for many years.

"That's what we found, exactly that, kind of a pause button put on the region, and the pause button's now on play," Kircher said.

"There's a renewed focus on product, and one of the benefits of ASC not having reinvested in awhile, they missed a big move in snowmaking technology. With energy costs, there's been a big push to improve snowmaking and make it more efficient. That's helped the product and the bottom line.

"That's the epitome of good greening: improve the product, protect the environment, and save money all at the same time," Kircher told the IR

"Things are moving forward, certainly over the last 18 months. The next 12 to 18 will be kind of making sure everything's working the way it's supposed to work. Capital markets are putting pressure on everybody, even if they're profitable, to hold the belt a little tighter," he said.

The investments are being well received by skiers and snowboarders, he said, with numbers holding well at Sunday River and Loon, though a little less so at Sugarloaf.

"That's tied to Sugarloaf's longer distance. The closer in you get, the stronger you are in terms of budgets and trend lines. When you can get to a ski resort without an overnight stay, those resorts are benefiting. Farther out, there's not the same response to the capital. That's the trend line: Fly-to destinations are soft; the Colorado areas are quite a bit off; Montana is 9 percent off.

"It's the first time we've seen a drop in Montana in over a decade," Kircher said.

Boyne's portfolio includes a blend of drive-to and destination resorts, balanced geographically to weather unfavorable local weather patterns, and economic trends that are changing the behavior of skiers and snowboarders.

"Going into this season we were hopeful. We definitely thought with drive-to resorts, if they had the snow, people would come, and that's absolutely what's happening. Early indications are for only a 6 or 7 percent drop nationwide off the all-time record numbers of last year. That's astounding given the numbers last year," Kircher said.

"We have a lot more season to go, and weather is going to play a role in that. If we have good snow, people will continue to come. All are at risk of seeing a drop-off if we have an extended drop-off in the weather," he said.

Chris Nyberg, President and General Manager of Killington/Pico, said ASC had started out with a program of keeping Killington up to date.

"They started replacing lifts, put in a gondola and some high-speed lifts, focused on all the right places. Unfortunately, as we all know, they ran out of funds," Nyberg said.

"I had to right-size the business and change the model to fit our needs to get enough money to the bottom line to reinvest in the resort. That strategy is evidenced by what we did this summer when we built the high-speed detachable lift, the first new lift in 10 years here. Slowly, but surely, we'll continue to invest in the mountain. We'll continue to upgrade our snowmaking system which is huge, but old," he said.

Even though ASC continued to invest in snowmaking, Nyberg said, the resort has seen a 20 percent reduction in energy costs for snowmaking under POWDR's ownership and more improvements are coming.

"What we've done is provide a better on-mountain experience. We've taken the experience on the hill, moved it off the ‘It's too crowded and too crazy here' motif that had tended to become what Killington was known for. I've got 7,000 people on hill right now and it's very, very comfortable," Nyberg said.

Another impact of the breakup of ASC has been a rise of season pass prices across New England to market levels. New England operators breathed a collective sigh of relief over the end of ASC's bargain basement pricing since, to compete, passes at many resorts were held at levels deemed too low.

ASC's regional passes were a volume-based strategy, Nyberg said.

"If you get a whole bunch of people here, you'll make some money on passes, but you'll also capture ancillary revenue from rentals, food and beverage, retail, this type of thing. That does work but, in our case, makes for a more crowded experience on the mountain and in the lodges," he said.

"What we did with our pass structure here at Killington for almost two years now, we just basically simplified the pass product and took it to market level. We're right in line with Sugarbush and Okemo and the rest of the guys north and south of us. It was a substantial increase in price for guests used to paying for an All for One or the Eastern Pass, but there was very little pushback. People got it, they figured it out," he told us.

"Speaking in general for all the resorts - I'm very familiar with Sunday River, Sugarloaf, Mount Snow, and Attitash - I think all of them are now somewhat relieved because they're now able to reinvest into the resort and the customers are already seeing that, seeing improved on-mountain product, whether in lodges or on the slopes. You're not seeing so much of the fanfare and marketing and fireworks at night and all the other stuff that, in my mind, is kind of gimmicky. It's all about skiing and riding. At the end of the day, it's all about the quality of the experience that people get to enjoy," Nyberg said.

What It Means: Build it and they will come (back) seems to apply to former ASC resorts across New England, rejuvenated by tough financial calculations, broad investment in new technology, and market-driven pricing. A phoenix is rising and it's already paying off - even when the economy is plunging.

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