Aspen Skiing Co. sets course to handle ski industry consolidation trend
January 30, 2015
It's been more than 20 years since Aspen Skiing Co. has acquired a ski area, but the company won't rule out an acquisition to stay competitive in the evolving industry.
Skico President and Chief Executive Officer Mike Kaplan said the ongoing consolidation in the ski industry is a trend his staff is watching.
"Consolidation means more resorts have the resources to compete with us for our target markets," Kaplan said in an email interview with The Aspen Times. "We are seeing this in the form of additional investments from our competitors in on-mountain improvements, improved technology, growing international markets, enhancing air service and building out their bed base."
When asked if Skico is interested in acquiring other ski resorts, Kaplan said, "Nothing is imminent and I will not speculate, but we are considering opportunities as they arise."
“The question is how many ski areas are out there that are candidates for consolidation? The acquiring has been done. Now there are just a few gems out there.”
President, National Ski Areas Association
That indicates that the company, which has been hyper-focused for so long on its four ski areas within the Aspen area, could expand its reach.
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The Power of Four
Skico's marketing mantra under the guidance of Chief Operating Officer David Perry has been the "Power of Four" — the diversity of a single lift ticket that provides access to more than 5,000 acres of terrain at Aspen Mountain, Aspen Highlands, Buttermilk and Snowmass.
But the company has shown signs it wants to diversify and expand. Prior to the recession, it was working on a land purchase to expand its five-star Little Nell Hotel brand to Jackson Hole, Wyoming. That goal died during the economic slump, but Skico announced this month it will expand its more value-oriented Limelight Hotel brand to the base of the Sun Valley ski resort in Ketchum, Idaho. Skico acquired property, tweaked existing approvals for a hotel and is undertaking a $60 million project.
The owners of Skico, the Lester Crown family, of Chicago, haven't been averse to purchasing a ski area when it made sense. The Crowns, who had been limited partners, gained 100 percent ownership of Skico in 1993. That same year, Texas-based developer Gerald Hines acquired Aspen Highlands, then independent of the other three local ski areas. Hines and Skico worked out a merger, which brought Highlands into the Skico fold.
Skico also once owned Front Range-oriented cash cow Breckenridge until it sold the ski area during the 1987-88 ski season. Breckenridge is now a vital part of ski industry giant Vail Resorts' vast network.
Fewer ski area operators
In a presentation in December to a packed house at the Aspen Business Luncheon, Kaplan explained why he believes Aspen Skiing Co. — and Aspen — must be concerned about ski area consolidation. The industry used to be dominated by mom-and-pop resorts during the boom years of the 1950s, '60s and '70s. Now, fewer companies increasingly control it after the mergers and acquisitions that started in the 1980s.
"Now this consolidation is happening at an accelerating pace," Kaplan said at the luncheon. "In this business, we have to keep an eye on that. What's it mean? It's going to mean much more aggressive capital investment by these companies, both in technology and lift infrastructure and connecting resorts and really going after the customer with a multi-resort pass."
Big business in the ski industry aims to capture a skier or snowboarder at their nearest hometown resort then lure them to a destination resort — where an overnight stay is required.
"They look to keep that customer from beginning to end," Kaplan said.
Later in his presentation, Kaplan summed up the issue, "The main point is, it's more competitive than it's ever been on all sides of our business and we need to be aware of that, focused on that and treat it with a sense of urgency."
Skico executives have pressed that point in multiple public discussions about lodging regulations in Aspen and the expansion of the Aspen-Pitkin County Airport. They are aggressively trying to win support for their position and urging supporters to express their views to the Aspen City Council.
Kaplan said in an Aspen Times interview that ski industry consolidation isn't just an issue for Skico but for Aspen and Snowmass Village, as well.
"We are hearing from a broad spectrum of guests that the bed base needs to be updated and we need to offer more options to compete with other mountain destinations," Kaplan said. "The airport is our lifeline and the planned upgrades are necessary to ensure we can continue to attract a number of commercial air service providers flying the next generation of regional jets, and to provide a critical mass of seats through non-peak periods in winter and summer."
Critics of that view say there is only one Aspen and the key to keeping it sustainable is to keep it unique.
Skico also is taking steps on its own to protect its market share in the ski industry. Skico is teaming with other independent, iconic ski areas to offer a joint ski pass. The Mountain Collective is good for two days each at Aspen-Snowmass, Jackson Hole, Alta-Snowbird, Mammoth, Squaw Valley-Alpine Meadows and Whistler-Blackcomb, among others.
Skico also is looking for further expansion of its hotels to ski resorts and urban markets. Customers at those other hotels would be offered enticements to visit Aspen-Snowmass.
"The potential depends upon the specific circumstances in each contemplated location," Kaplan said. "Building a hotel requires a high level of public-private collaboration and the right market dynamics. So, we do see the hotel brands continuing to expand, but under no set timeline."
Consolidation played out?
Vail Resorts was the 800-pound gorilla of the ski industry even before it completed the $182.5 million purchase of Park City Mountain Resort in Utah in September. The company also has a long-term lease for Canyons Resort, also in Utah.
Vail Resorts now owns or controls 12 ski resorts in the U.S., including Vail Mountain, Beaver Creek, Breckenridge, Keystone and Arapahoe Basin in Colorado, three around Lake Tahoe, California, two in Utah and two "feeder-breeder" ski areas in the Midwest. Vail Resorts offers its Epic Pass, which offers access to those resorts plus limited access to partners in Europe and Japan. In short, it's a juggernaut. But it's not the only ski industry giant.
Powdr Corp., which bungled its lease of Park City Mountain Resort and lost out to Vail Resorts, still owns seven ski areas, including Cooper Mountain.
Intrawest, once a bigger player, still owns five resorts, including Steamboat, and it leases Winter Park.
CNL Lifestyle Properties, a real estate investment trust, owns a baker's dozen of ski areas but tends to lease them out to resort operators. One of its main partners is Boyne Resorts, which owns four of its own ski areas and manages several others.
Other small companies own a handful of high-profile resorts. KSL Resorts owns Squaw Valley USA and Alpine Meadows Ski Resort. It also owns a 24 percent interest in Whistler-Blackcomb in British Columbia.
Sinclair Oil Corp. owns Sun Valley and Snowbasin, Utah.
The number of operating ski areas in the U.S. last season fell to 470 in winter 2013-14, down from 735 in 1983-84, according to the Kottke End of Season Survey and Report, commissioned annually by Denver-based National Ski Areas Association, a national trade association. While the decline isn't necessarily related to consolidation, it's further proof that mom-and-pop operations are endangered in the ski industry.
Michael Berry, president of the National Ski Areas Association, is uncertain the consolidation trend will continue.
"The question is how many ski areas are out there that are candidates for consolidation?" Berry said. True candidates, he said, must have brand appeal and financial viability. "The acquiring has been done. Now there are just a few gems out there."
Berry wouldn't discuss individual ski areas that fit the criteria or ski companies that potentially remain in a buying mood.
It's obvious that independent ski areas in Colorado and Utah that might be coveted by big players are few and far between. Telluride and Alta fit the bill.
Benefit or curse for consumers?
Berry believes the consolidation has benefited consumers. The big players offer cut-rate passes good for access at multiple resorts in the competition to lure customers.
Vail Resorts was guarded with its comment on consolidation trends in the industry and its direction, but spokeswoman Kelly Ladyga said the company believes the company and consumers have benefited from its acquisitions.
"Through our sales of season passes, we provide our guests with a strong value proposition in return for guests committing to ski at our resorts prior to, or very early into the ski season, which we believe attracts more guests to our resorts," Ladyga said in an email. "We believe that we invest in more capital improvements than our competitors and that we can also create synergies by operating multiple resorts, thus enhancing our profitability."
Not everyone is convinced that consolidation is good for the industry. Mountain Rider Alliance LLC, a grassroots association of snowboarders and skiers, said it works for "positive change in the ski area industry as well as supporting the environment and surrounding communities."
"I don't think consolidation is a good thing," said Jamie Schectman, the alliance's chief executive officer and co-founder. "I believe friendly competition between ski resorts benefits the customer."
He points to an acquisition in California and its effects on lift tickets. Alpine Meadows charged $72 for an adult ticket. It was purchased in 2011 by KSL, which already owned rival Squaw Valley. Adult tickets have soared to $119. Children's lift tickets at Alpine Meadows went from $10 to $68, he said. Many people feel the 50-plus year heritage and culture of Alpine Meadows is vanishing because of the merger, Schectman said.
Some Aspen Highlands loyalists felt the same about the once-independent ski area. Highlands offered more affordable lift tickets and season passes prior to the merger with Skico.
Schectman suspects the consolidation will continue, particularly on the West Coast, where this is shaping up to be the fourth straight winter of subpar snowfall. That will stress some small, independent ski areas and make them ripe for acquisition, he said.
"Much like a Wal-Mart squeezing out mom-and-pop stores, the consolidation is hurting smaller, independent feeder-breeder ski areas," Schectman said. "And it's important to remember that these independent, community-focused ski areas are an important part of the ski industry ecosystem. Without a lower price and barrier to entry, skiers won't join the sport and (purchase) the $100-plus lift tickets."