Intrawest sells to Aspen and KSL

[Dave Marshak]

I really can't see them keeping the eastern resorts. I know RCR tried to buy Tremblant years ago, but was stopped by the government. Blue Mountain, Ontario would be a good catch for a local group. The American resorts I don't know too much about.

I think eastern resorts close to big cities are a key part of long term success. Poconos/Catskills/southern Vermont is where a lot of destination resort skiers learned to ski. Nobody is taking their family to Vail for a beginner lesson.

dm

 

[Mike King]

I think eastern resorts close to big cities are a key part of long term success. Poconos/Catskills/southern Vermont is where a lot of destination resort skiers learned to ski. Nobody is taking their family to Vail for a beginner lesson.

dm

Well, that's what you'd think, but most of the group lesson business in ski school is beginner lessons.

We still have to see what the vision is that leads to the monetization of whatever collection of assets the KSL/Aspen tie-up finally winds up with is. Feeder resorts appear to be a key component of Vail's business model, but that doesn't mean that they are necessary or a part of the Aspen vision. Still no real word on that, and given that KSL/Aspen is a private company, there's no requirement for them to divulge it to the general public (which would include Vail). They most certainly have had to disclose the strategic outlines to their lenders.

Some of us associated with Aspen are concerned about the depth of management and what the new entity may do to the unique culture of Aspen. The Crown family has not run, or required SkiCo to run, as a (short-term?) profit maximizing business. We are very invested to find out how things will really change or, for that matter, are intended to change.

Mike

 

[mikel]

I wouldn't be the least bit surprised if KSL has some that lurk here. Just sayin. You never know who you are on a lift with and on one of the last weekends at WP/MJ we ended up on Pano with KSL. "I wouldn't expect to see any major changes at WP/MJ other than some improvements." The specific improvements were not mentioned. New pass products are a given and some of the questions asked were around passes. Was WP/MJ our home mountain? Where did we normally ski? What pass were we there on? etc.

 

[lonewolf210]

Well, that's what you'd think, but most of the group lesson business in ski school is beginner lessons.

We still have to see what the vision is that leads to the monetization of whatever collection of assets the KSL/Aspen tie-up finally winds up with is. Feeder resorts appear to be a key component of Vail's business model, but that doesn't mean that they are necessary or a part of the Aspen vision. Still no real word on that, and given that KSL/Aspen is a private company, there's no requirement for them to divulge it to the general public (which would include Vail). They most certainly have had to disclose the strategic outlines to their lenders.

Some of us associated with Aspen are concerned about the depth of management and what the new entity may do to the unique culture of Aspen. The Crown family has not run, or required SkiCo to run, as a (short-term?) profit maximizing business. We are very invested to find out how things will really change or, for that matter, are intended to change.

Mike

I'd be surprised if feeder resorts didn't become in some way apart of the KSL business model with them begginng to build a portfolio of resorts. The Season Pass model provides Vail with a smoothed steram of income but more importantly it locks people into their eco system. Holding all the smaller resorts ensures that a majority of the patrons are taking their trips to a Vail property. It's like apple or google. Once you have one of the products your much more likely to own more of them because everything works together.

I was talking to a guy that worked in the Town of Breck tourism office and the average amount of money a family spends in a week there is no around $10k. A huge portion of that is going to vail in some way. They own hotels and rental shops. They even own a number of stores on main street in town. As such I wouldn't be surprised to find out that there are feeder resorts that are essentially loss leaders.

 

[Mike King]

I'd be surprised if feeder resorts didn't become in some way apart of the KSL business model with them begginng to build a portfolio of resorts. The Season Pass model provides Vail with a smoothed steram of income but more importantly it locks people into their eco system. Holding all the smaller resorts ensures that a majority of the patrons are taking their trips to a Vail property. It's like apple or google. Once you have one of the products your much more likely to own more of them because everything works together.

I was talking to a guy that worked in the Town of Breck tourism office and the average amount of money a family spends in a week there is no around $10k. A huge portion of that is going to vail in some way. They own hotels and rental shops. They even own a number of stores on main street in town. As such I wouldn't be surprised to find out that there are feeder resorts that are essentially loss leaders.

Yep, that's the Vail business model. It has been interesting to observe it's evolution over the past decade. The season pass price wars started in 1998 and Vail found something interesting: fixed revenue from season passes better matched the fixed costs of running a resort. Revenues were more stable and less dependent on the weather. As early as 1998, they saw the value of vertical integration by buying into Specialty Sports Ventures, a sporting goods retailer (buying Gart out later). In 2001, they further vertical integration by buying Rock Resorts. They bought CME in 2008.

Somewhere along the line, they saw the value in geographic diversification and bought Heavenly (in 2002), Northstar and Kirkwood (2012), the Canyons and Park City. Then they saw the value that feeder resorts could add to the season pass and the assets in the vertical chain of hotels, ski rentals, on-mountain dining, and transportation services. That led to the acquisition of Brighton, Wilmot, Perisher, and Stowe. They could then justify buying yet another destination resort of Whistler.

All of this is my logic of their acquisitions, and is by no means complete. But it is how I justify the assemblage of assets that Vail has.

Aspen is not Vail, and the collection of assets in the Aspen/KSL portfolio differs. There is on-mountain retail in Aspen of Four Mountain Sports, but no big rental chain like Breeze nor a retail powerhouse like Colorado Ski and Golf and Aspen Sports (those are owned by Vail). There's the Little Nell and Limelight, but no Rock Resorts (and the Grand Teton Lodge Company) that's in the Vail portfolio.

My point is that the assets are different. Thus, the business strategy may be different. And a copycat strategy may, or may not, be on the table. So, we've got to wait and see what the Aspen/KSL tie-up will really yield. Will there be divestitures? Further acquisitions? Will it be a premium brand experience? How importation is some sort of pass to the overall target market?

We will see. But we are all waiting to see what really is coming down the path.

Mike

 

[Jilly]

I wonder what happens to the commercial rental properties.? The lower floor of the buildings in both Tremblant and Blue Mountain were bought and then leased by a sister company of Intrawest. It was out of Florida. Think it was Joe's family.

I see the point in feeder resorts to whole package. Never though about it. I just thinking about each individual resorts on their own. I don't consider Blue Mountain, Ontario a destination resort. Maybe for a weekend. But it is a "country place" for Toronto people. Tremblant is similar for Ottawa and Montreal. But they do run some programs for the Brits. So it's more a destination than a weekend.

 

[Philpug]

I think eastern resorts close to big cities are a key part of long term success. Poconos/Catskills/southern Vermont is where a lot of destination resort skiers learned to ski. Nobody is taking their family to Vail for a beginner lesson.

dm

I am waiting for either or both of these conglomerates to pick up a Poconos resort. IMHO Camelback and Bear Creek are two that would be at the top of the desired list of Vail because of the lodging that is there. Vail loves their turn key opperations. JF/BB is another place that can be had and fits close into the models. But to have a Poconos resort as a feeder option to go with the midwest.

 

[fatbob]

I think there is a difference between Ksl/Aspen resorts and Vail Resorts and that is soul/character. Vail Sucks! Now I've got that out of the way I'll say why it isn't the whole story. Course Vail places have character but it's tucked away in the people and less in the assets IMV, bar Kirkwood which is an outlier and possibly the old Park City. Aspen/Ksl just seem a bit more lived in and therefore a cookie cutter approach seems less appropriate.

 

[The Dad]

I've always understood KSL's business model to be to find assets that are underpriced vs their potential due to a few identifiable issues that KSL had the financial or operational resources to remedy. They remedy the issues, resell the property (typically within 5-7 years), and enjoy their profits. Basically, it's the commercial scale version of a house flip - they're not buying them to live in them.

It's certainly possible that this deal marks a change in that strategy. To be sure, they changed tactics due to changed circumstances, including Vail's creation of greater Park City (which mooted KSL's plan to drive value by turning a merged Squalpine into the largest ski area in the US). But that doesn't mean that the overall strategy changed. I don't know - I don't have special insight - so I'll be waiting to see how this plays out.

 

[fatbob]

I think Squalpine may have marked the first departure from the KSL old model given its been a while and the glorious build out has yet to happen. Lot more to chew in the new world too. Somewhere along the line someone has to clock that the keenest skiers and the influencers don't necessarily need the deluxest ski in/out condo and the $100 massage to do your peer to peer promotion for you. In fact providing a great skiing experience at a fair price without making me feel like a second class citizen is enough to win my vote (looking at you Nstar remote parking and Beaver Creek new enhanced pay lots)

 

[Rich McP]

and the $100 massage

I'd like to know where you find a $100 massage these days.

 

[lonewolf210]

Yep, that's the Vail business model. It has been interesting to observe it's evolution over the past decade. The season pass price wars started in 1998 and Vail found something interesting: fixed revenue from season passes better matched the fixed costs of running a resort. Revenues were more stable and less dependent on the weather. As early as 1998, they saw the value of vertical integration by buying into Specialty Sports Ventures, a sporting goods retailer (buying Gart out later). In 2001, they further vertical integration by buying Rock Resorts. They bought CME in 2008.

Somewhere along the line, they saw the value in geographic diversification and bought Heavenly (in 2002), Northstar and Kirkwood (2012), the Canyons and Park City. Then they saw the value that feeder resorts could add to the season pass and the assets in the vertical chain of hotels, ski rentals, on-mountain dining, and transportation services. That led to the acquisition of Brighton, Wilmot, Perisher, and Stowe. They could then justify buying yet another destination resort of Whistler.

All of this is my logic of their acquisitions, and is by no means complete. But it is how I justify the assemblage of assets that Vail has.

Aspen is not Vail, and the collection of assets in the Aspen/KSL portfolio differs. There is on-mountain retail in Aspen of Four Mountain Sports, but no big rental chain like Breeze nor a retail powerhouse like Colorado Ski and Golf and Aspen Sports (those are owned by Vail). There's the Little Nell and Limelight, but no Rock Resorts (and the Grand Teton Lodge Company) that's in the Vail portfolio.

My point is that the assets are different. Thus, the business strategy may be different. And a copycat strategy may, or may not, be on the table. So, we've got to wait and see what the Aspen/KSL tie-up will really yield. Will there be divestitures? Further acquisitions? Will it be a premium brand experience? How importation is some sort of pass to the overall target market?

We will see. But we are all waiting to see what really is coming down the path.

Mike

That's certainly true but I have a hard time coming up with a different business model that benefits from a portfolio of resorts. The buy and flip model that Dad mentions above is viable but then the recent purchase of multiple resorts from Intrawest would seem questionable...

 

[Mike King]

There are most likely divided interests between KSL and the Crown family. KSL is a private equity fund, and will look to exit the investment at some point in the future. They invest with a strategy of improving the target business, but they do need a liquidity event at some point to monetize the return and facilitate a return of and return on the capital invested. Presumably the Crown family is a strategic investor seeking some sort of synergy with their existing business, Aspen Skiing Company. They are the obvious buyer from KSL when the liquidity event arrives.

But buy, improve, and flip (for KSL) is a generic strategy. It doesn't go to the question of how to improve. That's what we are waiting for.

Mike

 

[Jenny]

I'd like to know where you find a $100 massage these days.

Michigan. And that would be a 90 minute deep tissue one from my massage therapist.

 

[New2]

More news: http://www.denverpost.com/2017/05/09/aspen-steamboat-ski-area-merger/

Great article! "By mid-February, after due diligence, six parties — three ski area operators and three financial firms — remained." We know that Aspen was one of the three ski area operators. Who else? Any insight or speculation? Possibilities that come to my mind...

- Vail definitely has the wherewithal, but seems like there's no way they'd be allowed to add Winter Park to the stable of I-70 resorts, which means either spinning it right back off or else divesting one of the other mountains. Steamboat's kind of questionable, too. Would it have been worth pursuing a deal when one or both of the highest-profile Colorado assets would need to be divested?

- Powdr? They could've kept the RMSP resorts together. And seems like maybe Stratton-Pico-Killington-Tremblant would be a potent combination back east (although I don't know the Northeastern market at all, so maybe not). But this is the same family-owned business that flubbed the PCMR lease renewal and saw its head take cash out of the company to buy Snowbird in his own name, rather than the company's. Could they really have made it through due diligence to be a finalist for a transaction of this magnitude?

- Boyne? CNL's filings made it sound like Boyne was highly leveraged, and they were writing off Boyne debt as uncollectable. Not the picture of a company in the running for a billion+ dollar acquisition.

- Sinclair Oil? With oil prices low, maybe Sinclair was looking to further diversify and leverage the crowds at Intrawest areas to boost Sun Valley attendance and kickstart Snowbasin's real estate development?

- Deer Valley? Telluride? Jackson Hole? All seem like long shots, and a huge leap from where they are now to running so many ski areas.

- Some resort operator from outside the US? I don't really have a good idea of what major players are out there.



Beyond these three finalists, there were also thirteen other "strategic partners in the global ski industry" who were involved in purchase discussions before February.

 

[The Dad]

I think Squalpine may have marked the first departure from the KSL old model given its been a while and the glorious build out has yet to happen.

I suspect - without special knowledge - that the intent was likely to sell with the expansion / connection approved, not to wait for it to be built. It's something like a 20-year plan.

The buy and flip model that Dad mentions above is viable but then the recent purchase of multiple resorts from Intrawest would seem questionable...

Unless the new plan is to increase the value of their ownership stake and then turn around and sell their stake, rather than the whole property.

 

[soulskier]

Here's Rusty Gregory's Press Conference discussing the Aspen/KSL acquisition of Mammoth Resorts. Lots of interesting tidbits.

 

[Muleski]

Here's Rusty Gregory's Press Conference discussing the Aspen/KSL acquisition of Mammoth Resorts. Lots of interesting tidbits.

Curious of the timing. Do you know of this was his April 17th Press Conference?

He got himself over his tips on a couple of things, I had heard before seeing this. One is essentially saying that the plan is to take it public, before the deal has even closed.

And IPO is a likely exit strategy, years down the road. Obviously Gregory has a significant greed index related to this, and despite anything he says, KSL outbid the rest. Mammoth has been working with bankers for along time. Note Rusty talking about his team spending so much time in NYC. He basically said that the team was put together {2014?} to get this done.

My "tidbits" are not new. It seems like a lot of folks, even in the press disagree. My source are people who are directly in the deal one way or another, or VERY close. This whole thing has been brewing for a long, long time.

All that KSL/Aspen are competing with Vail for is the intimate skier dollars. And they want to carve off the top end of Vail's current skiers. The people who may not like the homogenized resorts.

1. This has just begun. Look for this group to be buying some special properties and selling some dogs. Or non destination resorts. My hunch is that three or four are gone over year one. And more are being "discussed" right now.

2. They do not intend to be Vail 2.0. This is not about the Epic Pass, on the cheap. A consolidated pass, absolutely. I hear that consistently. Do not be thinking this is about playing Vail's game and cheap passes. Nor is it about I/70 or "feeder mountIns."

3. High end, unique perfect destination resorts. No homogenized product at all. Same umbrella brand, but unique destinations. He mentioned that a bit.

4. I think almost any one of us can imagine the shopping list. I suspect that a couple that most assume will "never" be for sale will be sold. And I assume that Vail is right in the mix.

5. Look for both of them to be in on former CNL properties, now owned by Och/Ziff. My hunch is that all are being marketed. No sure what fits for KSL/Aspen. I can think of a couple...on the feeder hill/Vail plan they might have interest in quite a few. Of course either one needs to deal with buying out the operators who hold long leases. Nothing money can't fix.

In the end, my hunch is that we'll see that everything is for sale in this business, and everybody has their price!

Will be great spectating!

 

[nay]

I think eastern resorts close to big cities are a key part of long term success. Poconos/Catskills/southern Vermont is where a lot of destination resort skiers learned to ski. Nobody is taking their family to Vail for a beginner lesson.

dm

Huh? Breck and Vail alone have as many skier days a year as all of Vermont.

I know people like to think that people learn to ski at small places, but the reality is an awful lot of people learn to ski at the small places inside big places.

 

[nay]

There are most likely divided interests between KSL and the Crown family. KSL is a private equity fund, and will look to exit the investment at some point in the future. They invest with a strategy of improving the target business, but they do need a liquidity event at some point to monetize the return and facilitate a return of and return on the capital invested. Presumably the Crown family is a strategic investor seeking some sort of synergy with their existing business, Aspen Skiing Company. They are the obvious buyer from KSL when the liquidity event arrives.

But buy, improve, and flip (for KSL) is a generic strategy. It doesn't go to the question of how to improve. That's what we are waiting for.

Mike

Or the Crown family is exiting.