Resorts and the Great Recession

Sure, the economy isn’t looking so bright. And ski resorts and manufacturers are feeling the effects. But there’s good news for skiers: Deals are plentiful, which means you can actually afford to go skiing.
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Sure, the economy isn’t looking so bright. And ski resorts and manufacturers are feeling the effects. But there’s good news for skiers: Deals are plentiful, which means you can actually afford to go skiing.

The cruddy economy brings with it two outlooks, one dire and one sunny. The bad news: Everyone’s broke. The upside: Everyone’s broke, but that means powder comes cheap. And skiers, just like savvy commodities traders, should buy low. So get that new pair of boards that seem to be permanently on sale. Buy a season pass for cents on the dollar. Hell, buy a pad in the mountains.

Deals abound because the ski industry’s past year has been almost as bad as General Motors’. The government, however, hasn’t seized control of any mountains just yet. But just as the skiing world has never seen a time as glittery as 2000 through 2007, it has never seen a nadir as intense as last season.

Perhaps no mountain sums it up as well as Idaho’s Tamarack Resort. Tamarack opened for skiing in 2004, the first major from-scratch U.S. destination resort put together in 24 years. Celebrities like Andre Agassi and Steffi Graf purchased real estate. Suddenly patches of grass near Donnelly, Idaho, that had been worth nothing were worth millions. Then came reality. Tamarack defaulted on $250 million in debt and entered receivership in late 2008. In March of this year, its lifts stopped turning for good.

Similarly, as the free-money machine stopped churning and consumers said no to $15 burgers, $90 lift tickets, and $1 million condos, ski-industry income statements wilted and mountains became less crowded. “A lot of places just got absolutely hammered,” says James Chung, president of Reach Advisors, a resort-industry consultant.

The carnage is widespread. Moonlight Basin, a large new resort attached to Big Sky, Montana, laid off 90 workers while it strained to renegotiate debt originally floated by the now-dead Lehman Brothers. Skiing, in some cases, has some strange bedfellows, none stranger than AIG, which is now primarily owned by U.S. taxpayers. The disgraced insurer is peddling Vermont’s Stowe Mountain Resort and it’s likely the buyer will pay less than the $400 million AIG recently pumped into the mountain. The seemingly unsinkable Deer Valley, Utah, perhaps the most upscale of conventional resorts, has its problems too, as the separate Deer Valley Lodging has approached insolvency, failing to pay some property owners their share of rental incomes.

The tremors have shaken even industry titan Vail Resorts, which saw a lift-ticket revenue decline of nine percent. Worse, overnight bookings slipped 13 percent. Vail chief executive Rob Katz, setting an example, decided to work a year without salary, which was part of $10 million in salary cuts at the company. Business looked dire at Intrawest too, whose parent company, Fortress, teetered on bankruptcy last fall. Intrawest may sell Quebec’s Mont Tremblant to shore up its other assets.

People are doing more than sniffing out lift-ticket deals and sneaking in their own PB&Js. They’re shunning ski manufacturers too. Sales of snow equipment declined five percent last season. Ski shops sold 75,000 fewer pairs of alpine skis and 34,000 fewer snowboards. Rossignol has had layoffs and asked its sponsored athletes to take a cut in pay along with its remaining staff. “I definitely had the economy card pulled on me more than once during contract negotiations,” says Michelle Parker, a pro who skis for, among others, K2, Dakine, and Orage. “We’ve had less photo shoots and fewer big trips. Things are dialed way back.”

The good news: It still snows, and skiers still ski. “The core skier is still out there skiing and that’s a large part of our market,” says Anna Olson, spokeswoman for Jackson Hole Mountain Resort. Jackson recorded 438,000 skier days, its third-biggest year, but that’s down nine percent from the previous year, its record.

Real estate, the culprit in much of the wider economic mess, can also be blamed for thinner times at resorts. Slopeside studios in Crested Butte that saw their values rise as high as $220,000 in 2007 are now changing hands for as little as $80,000. The ripple effect is clear. Don’t count on seeing shiny new lifts or brand-new terrain any time soon. “A lot of the investments that these resorts were making were tied to explosive real-estate values, and that phenomenon has obviously stopped—I think you’re not going to see the same kinds of big projects in the industry going forward here,” says Dave Riley, CEO of Telluride Ski Resort. Riley’s mountain enjoyed the good times itself, adding a new lift to Revelation Bowl last winter.

Some Eastern resorts actually benefitted from people scrapping their annual ski trips out West. Vermont’s mountains saw season-pass sales spike 10 percent, with Okemo Mountain Resort enjoying the biggest jump at 30 percent. “The resorts that got hurt the most are the destination resorts with few day-trippers and an emphasis on luxury,”
Chung explains.

The clear winner in this environment, of course, is the consumer. “There were tons of great deals last winter and we’ll see them again this winter,” Chung says. “If the economy didn’t wallop you, it’s a great time to be a skier.”


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