CEO talks about Skico’s past, future
December 30, 2005
Editor’s note: Aspen Skiing Co. CEO Pat O’Donnell sat down with Aspen Times Community Editor Catherine Lutz last month to discuss the state of the ski business and the Skico. Below are extended excerpts from their conversation.Catherine Lutz: What’s the state of Aspen/Snowmass? Pat O’Donnell: I think we’re doing well. There’s been a sea change in how we look at our competition. Not many years ago, before the consolidation of public companies, we all had roughly the same number of skier visits, we were all kind of on a level playing field. Then, with the consolidation of Vail Resorts and Intrawest, with our 400,000 visits we became a niche market player. We were almost a boutique, regardless of our worldwide reputation.So you find yourself marketing differently. We had a reputation going back into the ’70s that we were strictly for the elite, and we strategically applied ourselves to get that other constituency of skiing and snowboarding back to Aspen/Snowmass. A good example has been our great investment in the Winter X Games, the outdoor concerts in Aspen and extreme terrain at Highlands. We really dedicated ourselves, rather than just take care of the baby boomers, which is groom, groom, groom corduroy for the higher-end guest. We tried to take a more multifaceted approach to all aspects of our business.Right now we’ve had compounded growth for as many years as I can think back in terms of skier visits. We continue to grow; we continue to invest capital at a high rate, and I think our reputation is stellar, right up there with everybody else. I think Aspen/Snowmass right now is the happening place.How do you measure your success these days, since skier visits are no longer the only barometer?You have to look at how much capital is required in this business, and you’re looking for a return on that investment. You can’t justify it simply on ski tickets, so you’re always trying to get a little better yield on ski tickets. But you’re also looking for other sources of revenue. So you say, ‘What would happen if we got into the food and beverage business? Our lease is coming up, rather than renew it, what would happen if we’d control it ourselves?’ So the bottom line is, though it sounds a little callous, it’s business: We are trying to realize a larger share of the customer’s wallet. And we do that by getting into businesses that are pertinent to our core business and our values.
That being said, it really has transitioned into real estate – that’s where the bigger money is. All the major companies that have big requirements for capital investments have gotten into the real estate aspect, especially at the base of the hills. It’s the only way you can get enough money in a short period of time to deal with major capital improvements. You just can’t rely on a slow trickle of income from the normal ski area revenue sources.How does Base Village fit in with the future of Aspen/Snowmass?I don’t think anyone can argue that Snowmass [isn’t] tired and deserved a renaissance if it’s going to be competitive as a mountain resort. It can’t have it both ways – have a new exciting mountain with capital improvements and no way to pay for it.Mountain improvements in the short term (about 24 months) total about $50 million. Our ownership gave us that $50 million, and there’s no way I can return that with an increase in skier visits. So if you want to put in massive mountain improvements you’re gonna have to find a way to pay for it. And one of the most obvious ways is to build real estate at the bottom of your hill. Base Village, we felt, was an infill project, better than letting Snowmass continue to sprawl.If Base Village had not been approved, none of these mountain improvements would have happened. Things would have been funded one at a time – as a chair wore out you’d replace it.We also feel this is an opportunity to update the lifts and restaurants and really make Snowmass competitive. I think if you travel around the U.S. and Canada, you see how high the bar really has been raised by competitive ski resorts. And that’s your customer that visits those places. Does Skico have a plan on how to deal with the ‘hassle factor’ of Base Village – the inconveniences during the construction period?I don’t believe there is a hassle factor. The first thing that is going to be different, and if you want to consider it a hassle factor, is parking. So there’s a reduction in parking. I think more people will have to park at the Rodeo Lot, and we got some of our employees to park at the golf course, as we’re running our own shuttles. So I acknowledge there is less parking but not [that] great a percentage. We continue to encourage people to use mass transit, and that’s been our mantra long before Base Village was approved. And of course the free skier shuttle is still running directly to the mall.
When we talk about the hassle factor, what we’ve been hearing from our guests in Snowmass in particular is having no children’s center. We’re trying to eliminate the hassle factor of taking your kids across Fanny Hill, perpendicular to the flow of ski traffic, by building a $15 million world-class children’s center. With improvements such as these – and next year the gondola going to the bottom of Elk Camp [will be in place] – mathematically speaking it’ll be almost impossible to have a line at the bottom with both lifts going. The hassle of having your children learn on Fanny Hill will be gone, because children will be put in the gondola and taken to a dedicated area at Elk Camp.These kinds of improvements obviously don’t pop up like mushrooms overnight, they take time, and there’s got to be some patience exercised by everybody. The hassle factor may be in the eye of the beholder and may have to do with one’s patience level, but I think the outcome will be worth it.Is there a cost to Skico if, during this construction period, Snowmass alienates local skiers?I don’t believe there is. First of all the voters voted it in, regardless of what the margin was. They knew what the timetable was going to be, the inconveniences, and that there’s going to be some sacrifices made on a year-round basis.Many people are willing to think in the long term. Are they going to be inconvenienced? You bet, but I don’t think you can put a dollar value on it. We are putting out an extraordinary effort in our training, our expectations, and our accountability, especially in customer service, to do everything we can to maintain every customer we’ve got. Is Skico doing anything to mend relations with the people in Snowmass Village who are unhappy about Base VillageI think it’s going to be deeds rather than words, as things come online, and a good positive effort is put forth by the developer and ASC. There’s no sense in making people lots of promises. No. 2, a very useful tool I’ve used for creating dialogue is advisory committees. I suggested forming a Base Village advisory committee, a mix of representatives of all facets of stakeholders in Snowmass Village, and bring them to table. So we understand from the developer’s point of view and the customer’s point of view of what we could do. That’s the second thing – reaching out and getting us all to go through this thing together as a team effort.
Lastly we’ve got an open-door policy. If people have questions or suggestion or a better way of doing things, or how to make it more streamlined, we’re as close as a telephone call.How is Aspen/Snowmass doing in the ski area arms race?I’d probably put ourselves up against anybody as far as how much we’ve got. We’ve just put in this beautiful six-pack, but it’s not necessarily a differentiation factor – it’s not as if we’ll go to the top because we have a six-pack. Look at the investment in Highlands, which hands-down has the most modern lift system in North America – 100 percent of the lifts have been there five years or less.Fixed grips are done on two bases, not just on the financial but also based on required load – how many people you have to move up the hill. There’s no sense in a detachable lift in Deep Temerity when the math just doesn’t work out – you’ll never have a need for that. It’s an art and a science, and we don’t do it in a vacuum. Would you put a detachable lift to replace the FIS chair on Aspen Mountain? Certainly not. Would you put a detachable new lift at 1A? Absolutely. If you look at the cost of the gondola on Snowmass, that’s a $12 million machine going in.Things get expensive – we’re replacing all the cars on the Aspen Mountain gondola this spring.Are there any plans for opening new terrain?Deep Temerity is the big thing right now, and we will continue to enhance it. It’ll take between two and five years to open more lines there.Of course we’ve got Burnt Mountain someday. The trigger will be when we have more skier days to warrant that terrain. Now we’ve got our hands full building two huge restaurant facilities, a gondola and the Elk Camp recreation area.Do you still ski? Do you get up to Highland Bowl?No. I skied all my life, until my I hammered my knees after jumping off too many things, and being involved in sports like mountaineering, carrying lots of heavy packs. Six or seven years ago, somebody said, if your knees are sore you gotta try snowboarding. And I literally got on and have never gone back.-Catherine Lutz