Slow winter, slow summer for ski areas

Vermont Business Magazine, Sep 01, 1999

You can't fool Mother Nature. Two years ago, the American Skiing Company, owners of five Vermont resorts, including the state's two largest ski areas (Killington and Mt Snow) as well as Sugarbush, Pico and Haystack, in addition to three resorts in Maine and New Hampshire, moved to diversify its operations geographically in hopes of spreading out its weather risks.

Adding to its eastern resorts, the company. bought resorts in Utah, Colorado and California. Normally, if one side of the country has a poor weather year and ski season, the other side should have a good one. Last winter, however, the La Nina (EI Nino's sister) weather pattern brought less snow than usual to both coasts, hitting the entire ASC operation hard. Every ASC resort, save Heavenly Valley in California and Canyons in Utah was down.

In Vermont, Killington, the East's largest ski resort and renowned for being the first to open and last to close, had one day in December when it had only one trail open. On the season, Killington received just 183 inches of natural snow, well below its seasonal average of 250 inches. And 60 inches of this year's snowfall nearly one-third of its total did not fall until March. Rumors circulated all winter about American Skiing Company's poor performance and financial difficulties, its huge debt load ($400 million) and interest payments, and its nose-diving stock (currently trading under $5 a share). By August the rumors became fact when Oak Hill Capital Partners, a $1.6 billion investment fund controlled by billionaire financier Robert Bass of Fort Worth, TX, sank $150 million into the company to become majority owners.

The cash infusion likely saved ASC from looming insolvency, but came at a high price for its once high-flying president Leslie Otten, who saw his 51 percent ownership in the company he founded shrink to less than 27 percent. The cash infusion will help ASC pay down its debt and to continue its ambitious real estate development plans. For now, the management remains unchanged.

The ASC resorts were not the only ones hit hard by last winter's strange weather patterns. Only a strong March finish enabled many Vermont ski areas to avert what began as one of the worst ski seasons in recent memory.

"Ski areas had more trails open at the end of November than they did at the end of December," said Molly Kerr, Vermont Ski Areas Association marketing director. "They had to backtrack and start their snowmaking all over again all season long. It certainly increased snowmaking expenses."

December was so bad that the state had less than 45 percent of its skiable ter rain open over the critical Christmas holiday period.

"That's the lowest total I've ever seen for a Christmas period," Kerr said.

As late as the end of January, skier visits were down about 20 percent over last year's numbers. But thanks to a return to more seasonable weather in February, and particularly March, the damage turned out to be less than 10 percent off last year's 4.2 million skier visits. And many areas, while certainly not surpassing 1998 numbers, reported very respectable results, all things considered.

"We had a great finish," said Tracy Wing, sales director at Jay Peak. "We were a little behind 1998, but no big deal at all. March really pulled it out for us."

Mt Mansfield also reported it achieved similar results to 1998.

"Overall, with the challenges the weather threw at us, especially the timing of some of the weather, we're pleased with the results of the season," said Mike Colburn, Mt Mansfield marketing director. "The strength of February and March was certainly good to see. In a business that has not been increasing nor decreasing I think that this season, with all of its challenges, was an indication that there is a set amount of visits for skiing, that folks do ski. We didn't get the visits early in the season, but once it started snowing and we had more consistent conditions, people started coming out."

Okemo and Stratton also reported good seasons.

"We had a great year," said Michael Cobb, vice president of marketing and sales at Stratton. "It turned out terrific for us."

Overall, Cobb said Stratton's total volume of business for the '98-'99 ski season was about the same as the year before, but revenues were running ahead. He credited the strong showing to three straight years of major snowmaking expansions and improvements at the resort and to several new marketing initiatives.

"We strategized ahead to try and capture more revenue per skier," Cobb said. "Ski school, food and beverage, the additional retail we put in, special promotions and our lift and lodging packages actually all came out ahead of the year before."

Okemo also ran neck and neck with 1998's numbers.

"We ended up within about 2 percent of last year," said Pam Cruickshank, Okemo marketing director. "Considering the exceptional season we had in 1998 and the slow start this past season, being only 2 percent behind is quite remarkable." Like Stratton, Okemo actually saw increases in a few sectors: