Vail Resorts

Despite laying claim to the three most popular ski mountains in the United States, Vail Resorts has a problem: Not enough beds. Colorado’s Vail, Breckenridge and Keystone resorts are No. 1, 2 and 3 in skier visits. Along with Beaver Creek they provided Vail Resorts, Inc. a whopping 4.7 million skier days last winter, or 8.7 percent of the nation’s total. But that count is down 3.5 percent from the previous season. The relative stagnation in skier numbers, both nationally (at about 54 million annually) and for Vail, underlies the company’s desire to vertically integrate-that is, to control more businesses and so collect for itself a larger slice of the vacationer’s dollar.

“The company’s business strategy is not only to increase skier days,” states Vail Resorts’ 1998 annual report, “but also to increase resort revenue per skier days by capturing a higher percentage of total spending.”

Translation: Vail is expanding its reach outside lift tickets, which last year accounted for only 42 percent of the company’s revenue. Principal among its other interests is real estate sales, which added $73.7 million to the company’s coffers in its last fiscal year (about 18 percent of revenue).

“All of us resort companies have the same goal, and that is to create bed base for the ski area,” says Jim Thompson, president and CEO of Vail Resorts Development Company, a Vail Resorts subsidiary.

“The theory is to create beds for people to buy lift tickets. What we have in the Vail Valley is a little different from some other places, in that the demand for property is so high that it’s very difficult to create bed base. Beaver Creek is in the $400 to $1,000 per square foot range. Prime property in Vail is $1,200 a square foot.”

As a consequence, Vail Resorts confronts a maxim of base village development: If a buyer pays more than $500,000 for a condominium, he or she is highly unlikely to rent it out. That means that when the owner isn’t there, the condo is dark-the antithesis of the warm beds so coveted by resort operators.

“It has always been the ski industry’s philosophy to build small units and hold the price down, but when you get into $500 or $1,000 a square foot, those units get pretty small,” Thompson says.

Consequently, “we believe the future, for us, is to be in the interval business,” Thompson says-some variation on timesharor fractional ownership. By dividing the cost of expensive real estate among multiple owners, Vail-like almost everyone else in the resort renaissance business-thinks it can supplant cold beds with hot ones.

Not that intervals will be cheap. Hyatt’s first timeshare project opened this winter in Beaver Creek; timeshares sold at prices ranging from $18,000 for a low-season week in a studio to $330,000 for two Christmas weeks in a three-bedroom suite.

Unlike Intrawest or American Skiing Co., Vail does not want to be in the development business. “We sell the land to others who do the development,” says Thompson. The approach reduces Vail’s risk, yet is usually structured to allow VR to share in developer profits.

For more information, contact: (888) 773-8858; www.slifer.net.

Breckenridge, Colo.

Vail Resorts’ project with the most potential-and the most potential for conflict-lies at the base of Breckenridge’s Peak 7, where Vail owns 270 acres and envisions 850 new residential units, restaurants, retail space and conference facilities. The company’s plans for the area are likely to be brought up for public review in the spring of 1999. In the meantime, critics worried about too much development around Breckenridge have criticized Vail Resorts and the U.S. Forest Service over the latter’s decision not to consider planned Peak 7 lift and trail improvements in light of the expected base development. They are linked, these people say, but Forest Service officials insist-despite industry trends to the contrary-that base and mountain projects are unconnected.

Keystone, Colo.

In a joint venture with Intrawest, Vail is developing 1,031 acres at the base of Keystone. This massive project, begun in 1993, will eventually result in 4,561 new lodge and residential units and 382,000 square feet of commercial space in six neighborhoods. Two of these neighborhoods are already well on their way; River Run will contain 860 residential units and 250 lodge units, along with half the total commercial square footage, all at the base of River Run Gondola. Immediately south, Ski Tip Ranch encompasses 86 new townhomes.

Condos at River Run are selling for about $400 a square foot, for prices up to $600,000. Of the 470 condos and townhomes built by the end of last July, 433 were sold or under contract. Another 266 units are slated to be built this year.

Beaver Creek, Colo.

Bachelor Gulch, a 1,410-acre, on-mountain enclave, is the middle link in what Vail Resorts calls “village-to-village” skiing. Bachelor Gulch grabbed the industry’s attention in the mid-Nineties when Vail Resorts Development sold 102 single-family homesites for about $1 million a crack. Almost all of the unsold property remaining at Bachelor Gulch-474 units-is expected to end up as a lodging or interval-ownership project, to be completed in the next five years.

At Arrowhead, development of 213 units is being staged around the 85,000-square-foot Arrowhead Alpine Club, patterned after a golf club but designed for skiers. This downvalley development of the western end of the “village-to-village” link may become increasingly popular.

“People are getting older-they don’t need such close accessibility to skiing,” says Mona Look, senior associate broker with Ron Byrne & Associates Real Estate in Vail. “A lot of people are moving downvalley because they get more value.”

Lionshead, at Vail Mountain’s base, is ripe for redevelopment, which should begin in 2000. Vail Resorts currently is working up plans to redevelop 10 acres at the Lionshead base; likely products will be a small hotel and more of the fractional ownership so critical to the company’s future.

the 470 condos and townhomes built by the end of last July, 433 were sold or under contract. Another 266 units are slated to be built this year.

Beaver Creek, Colo.

Bachelor Gulch, a 1,410-acre, on-mountain enclave, is the middle link in what Vail Resorts calls “village-to-village” skiing. Bachelor Gulch grabbed the industry’s attention in the mid-Nineties when Vail Resorts Development sold 102 single-family homesites for about $1 million a crack. Almost all of the unsold property remaining at Bachelor Gulch-474 units-is expected to end up as a lodging or interval-ownership project, to be completed in the next five years.

At Arrowhead, development of 213 units is being staged around the 85,000-square-foot Arrowhead Alpine Club, patterned after a golf club but designed for skiers. This downvalley development of the western end of the “village-to-village” link may become increasingly popular.

“People are getting older-they don’t need such close accessibility to skiing,” says Mona Look, senior associate broker with Ron Byrne & Associates Real Estate in Vail. “A lot of people are moving downvalley because they get more value.”

Lionshead, at Vail Mountain’s base, is ripe for redevelopment, which should begin in 2000. Vail Resorts currently is working up plans to redevelop 10 acres at the Lionshead base; likely products will be a small hotel and more of the fractional ownership so critical to the company’s future.