New England Vail Buys Stowe Mountain Resort (updated Title)

[nay]

According to the Vail press release the purchase did NOT include many of the lodges at the mountain and did also NOT include future real estate development sites. So maybe Vail will not be looking at dropping season pass prices and then making up the short fall with lodging visits and real estate sales.

Vail has said publicly that they (Vail Development Corp) cannot be the primary real estate developer at each resort, and might focus on a limited number of luxury properties across the expanding portfolio.

This is why the "beds on base" concept is important: they don't have to be developed by Vail, just by somebody in order to create the captive tourist market for the adjacent services.

All of Vail's major recent acquisitions share the features of an already established base and already established multi-season tourist market. What Vail does is provide the connective tissue, at the heart of which of course is the EpicPass and the on mountain infrastructure across the portfolio.

What seems to irritate people Is the monetizing of that strategy, although that hardly wasn't already the case at Whistler, Park City, Deer Valley, and Stowe. Which arguably means those local skiers just got a huge benefit of now being tied to the EpicPass.

I get that people think Vail is going to eat the world, but they don't want "ski areas" where the only possible connective tissue would be being "on the pass", unless it's something like Perisher where you are after the Japan market for a Southern Hemisphere customer base. So Vail is going to own all of the places you already claim to hate, and probably none of them you don't.

And if they take on a major development project by say buying Mammoth, it would be a departure from current strategy. Vail has so much to do in terms of the on mountain two season infrastructure strategy and the coming year round EpicPass. I'd be worried more about their impact on boardwalk visits as a seaside resort owner than an acquisition of a place the ski world thought was immune to their influence.

 

[Muleski]

I'm going to return a bunch texts and phone calls, and weigh in later. Not surprising news.

I posted the "hope 85% is good" comment to be an encouraging optimist. This is going to be pretty disruptive in a lot of ways. I think we'll see some fallout here, which might affect the New England ski industry quite a bit.

We shall see. This is an interesting one. When it first surfaced a couple of months ago, I recall an industry friend making it very clear to me that the plan would be to significantly increase skier days. And those increased numbers would be coming from other NE areas, other VT areas.

VR has a fat wallet. We'll see how they plan to invest.

Back later.

 

[Philpug]

If that happens will they connect the two?

Vail is all about skiable acreage, this would give them the largest amount of skiable acreage in the east..w/in 25 acres, I am sure they will find 26 acres somewhere.

 

[nay]

The most surprising thing to me here is that there isn't at least one other company following a similar strategy to Vail.

Well, they are, but without the market reach. Look at the base development at Copper and Winter Park, for example, much of which just seems silly sitting there in isolation. Those two just happen to also be on a pass (RMSP), despite different ownership (Powdr and Intrawest).

The major original two season model in North America comes from two primary sources: 1) downhill mountain bikers who will pay for a summer lift pass, and 2) cultural amenities like music, food, and wine festivals driven mostly by a combination of wealthy tourists and retirees and/or a big local market like Denver.

Winter Park is known for its summer MTB product, considered from what I read to be #2 to Whistler in North America (I don't travel to MTB and want to earn my downhills so can't comment), but the Fraser Valley isn't a home to wealth or any meaningful cultural amenities.

WP does have mid-mountain assets for food, so they do weddings and some lift 'n dine tourist stuff. So WP can sell MTB passes, but the beds on base are not likely well utilized in summer and likely aren't going to be because Fraser is slummy. Copper doesn't have any mid-mountain infrastructure and pretty much no summer season product. So its beds on base are likely all the more idle, making their village smell even more like an Albatross. Contrast that to the seriously smart upgrades A-Basin is doing to bring skier days without needing a real estate ROI.

This is why, IMO, Vail talks about summer and is developing a multi-season infrastructure strategy. When you look at skier demographics, having to support base and on mountain asset ROI with a 4-5 month ski season is a recipe for going out of business. There's a reason window prices are so outrageous at these places. But the real "resort" places have an incredible capacity to compete with wallet share from other summer destinations, especially in a warming world.

And the idea of "connecting" resorts, especially with gondolas and hiking trails, is more appealing in summer. It's not like this model doesn't exist in the Alps. As is oft heard locally here: "They came for the winters, but stayed for the summers." Thinking of all of this only in terms of skiing is the blind spot Vail is deftly exploiting.

 

[Erik Timmerman]

Vail is all about skiable acreage, this would give them the largest amount of skiable acreage in the east..w/in 25 acres, I am sure they will find 26 acres somewhere.

I have a friend that is a surveyor. She has already been tramping around in deep snow surveying for new lifts.

 

[cantunamunch]

I have a friend that is a surveyor. She has already been tramping around in deep snow surveying for new lifts.

So... would VR ever be in a position to build out Jumbo...

 

[nay]

I have a friend that is a surveyor. She has already been tramping around in deep snow surveying for new lifts.

Out of curiosity, what is your initial reaction to the idea of expanding/modernizing the Stowe lift schematic?

Especially if it were to ultimately connect to Smugglers?

 

[fatbob]

And the idea of "connecting" resorts, especially with gondolas and hiking trails, is more appealing in summer. It's not like this model doesn't exist in the Alps. As is oft heard locally here: "They came for the winters, but stayed for the summers." Thinking of all of this only in terms of skiing is the blind spot Vail is deftly exploiting.

Definitely - the lifts may be quieter in the summer but definitely any serious ski area in Europe has a whole bunch of activities from kids playgrounds at the top of every lift to treasure trails, orienteering, zorbing, mountain scooters etc etc as well as the obvious mountain biking and hiking. Lift pass strategy is a mix, sometimes it is free with hotels signed up to the local tourist board (who presumably pay into a fund) sometimes, buses are free but you have to buy a lift pass etc etc.

 

[Jersey Skier]

I feel like VR is pricing me out of all my favorite ski vacations. What does an Epic Pass typically cost?

 

[nay]

I feel like VR is pricing me out of all my favorite ski vacations. What does an Epic Pass typically cost?

$800 (ish). Most likely they are pricing you and a whole bunch of other people in.

 

[nay]

Definitely - the lifts may be quieter in the summer but definitely any serious ski area in Europe has a whole bunch of activities from kids playgrounds at the top of every lift to treasure trails, orienteering, zorbing, mountain scooters etc etc as well as the obvious mountain biking and hiking. Lift pass strategy is a mix, sometimes it is free with hotels signed up to the local tourist board (who presumably pay into a fund) sometimes, buses are free but you have to buy a lift pass etc etc.

That description sounds a lot like this:



The day ticket last summer for EpicDiscovery for an adult? $89.

When you can get it on your EpicPass at a bunch of different resorts across North America....???

 

[KevinF]

I have a friend that is a surveyor. She has already been tramping around in deep snow surveying for new lifts.

A new lift? Where? Develop the underhill side? No more hiking the chin? Lift serviced angel food laps?

 

[Josh Matta]

probably bottom of toll house to somewhere near the top of triple....

bottom of sensation to top of sterling at smuggs.

 

[Jersey Skier]

$800 (ish). Most likely they are pricing you and a whole bunch of other people in.

I don't see it, but maybe I'm missing something. I'm a skier. My wife and son "go skiing." Sure I'd love to ski a bunch of resorts for $800. But I live in NJ. So it's 6+ hours whether I drive to Stowe or fly West. $2400 lift tickets for the one week of skiing that my wife or son will do each season pretty much just eliminates a Vail property. Pretty sure 5 day tickets each would be over $2k also. Never mind the Disney priced meals.

 

[Yo Momma]

I have a friend that is a surveyor. She has already been tramping around in deep snow surveying for new lifts.

OH NO............Not the Bruce trail!!!!!!!!!!! ARRGH!!!!!! LOL

 

[Lorenzzo]

To gain insight as to Vail's motivations it's useful to look at other similar industries that have seen the recent emergence of public companies. The closest analogy here is REIT-s. As with pretty much all public companies the primary motivations are share price and then to a lesser extent size.

When REIT-s re-emerged in the 1990-s things shifted towards public ownership of RE as REIT-s had a lower cost of capital than non-publics. Along the way they attempted development through taxable subs thinking their generous multiples would then be applied to development income. After all, home builders had great multiples on development income so they assumed the same would apply to them

What they found instead was Street valuations treated development income as a one time event so valuations only improved 1:1 whereas repeatable income realized in their principal activity was more like 20:1. They then lost focus on development and often partnered with independent developers instead of doing development themselves as that was treated as somewhat more repeatable.

To make their numbers work better believing development income was more repeatable than the Street would give credit for they then trumped up other income growth prospects, which the Street bought even though it was a tiny % of earnings and would always be so.

This dynamic applies to VR. If you look at the numbers, other income numbers i.e. summer, are not a material percentage and the reality is they are highly unlikely to ever become so. Katz, prior to Vail, was an exec with Leon Black which did primarily real estate transactions. He no doubt understands all of this and in any event valuations have followed suit.

In most (all) industries there are games companies play with generally naive Street analysts and this is one of them. The other income story creates a valuation pocket for development income.

 

[TheArchitect]

This has been obviously in the works for a while. Huge news for sure and interesting how it will change the ski resort landscape. As I said in our article, I don't see the Smugglers Notch announcement too far behind.

I may be alone on this but if they acquired Smuggs and replaced the lifts I'd be very happy. I love the terrain but hate, HATE the lift system so I don't ski there anymore.

 

[crgildart]

Does the EpicPass have black out dates/times?

 

[SBrown]

Does the EpicPass have black out dates/times?

It depends on which product. The main one didn't used to, but I see they added the Whistler dates this season with holiday restrictions. That may change next year.

 

[Muleski]

Anybody think that a lot of people are putting the cart before the horse?

I'm trying to get a handle on Smuggs. One owner, probably would JUMP on a good offer. Despite what he says publicly. Integrating it into Stowe? One piece is a likely connector lift and that is where it starts. And a lot of love and investment. And I am just taking about the ski piece. Off the hill...Smuggs is not Stowe. Nope.

The four season thing is interesting. The town of Stowe is a tremendous destination, year round. Has always been busier in the summer and fall than during ski season. Not sure how pressing developing a four season model at the mountain is, though it sure is how VR is moving everywhere else.

I absolutely get the increased acreage with Smuggs, and the ability to create a connected village, etc. Would take a big investment. ROI?

If it's what they are selling to the analysts who follow them, and make the market, that might be all that counts.

One of my friends this AM mentioned that his radar is picking up on VR being in talks with Intrawest about one property, or two. Tremblant? Also with O-Z, the investment firm that is buying CNL's portfolio of resorts. Two, perhaps three there. Sunday River? Crested Butte?

My gut tells me that KSL has to be nosing around, based on the huge pile of cash sitting on their table. I think they have different interests. Not the same as the Epic Empire.

Interesting times.