Expert: Aspen likely realized it had to move on ski industry consolidation before it was too late
The Aspen Times
The owners of Aspen Skiing Co. sat on the sidelines and watched consolidation sweep the ski industry for years before going whole hog this week in acquisition mode.
Some observers said it was probably now or never to get bigger, and that the Crown family might not be finished adding to its ski-area portfolio.
Mac Clouse, professor of finance at the Daniels College of Business at Denver University, said competition for consumers is more cutthroat than ever, not just for ski areas but for all industries.
“It’s tougher and tougher to be a small business in any marketplace and compete successfully against the larger firms,” he said.
He guessed that the Crown family of Chicago, which fully owns Aspen Skiing Co., observed the consumer trends and decided it was time to act.
“I think they’re perhaps seeing how things are being successful for Vail, and if they don’t start getting in now, it might be too late,” Clouse said. “Vail is seemingly looking to expand, as well, and these are some prime areas that Vail could have taken over.”
Perhaps the only real surprise is the high degree to which the Crowns acted, Clouse said.
On Monday, it was announced that affiliates of Aspen Skiing Co. and KSL Capital Partners, a Denver-based private equity fund, would form a new entity to purchase Intrawest Resort Holdings. Intrawest’s ski areas include Steamboat and Winter Park, which it operates via a long-term management contract.
That deal is worth about $1.5 billion, including Intrawest’s sizable debt.
Just two days later, the new entity announced it has an agreement to purchase Mammoth Resorts, the prize of which is Mammoth Mountain, the heavyweight ski area of southern California. The price for the purchase of the private company wasn’t disclosed.
The Los Angeles Times reported that Mammoth Mountain and June Mountain last changed hands for $365 million in 2006. The owner added Bear Mountain and Snow Summit in 2014 for $38 million.
The purchases by the affiliates of Skico and KSL will be completed by the end of the third quarter, assuming no issues arise.
KSL is bringing its ski areas, Squaw Valley-Alpine Meadows, into the mix.
Aspen Skiing Co.’s four ski areas will be owned separately by the Crowns from the new entity. However, Aspen-Snowmass will work closely with its new sister resorts, Skico officials said this week.
Former Aspen Skiing Co. executive John Norton, who is now a business consultant in Crested Butte, said he was surprised by his old employer’s move. He figures it was made over concern that Vail Resorts was going to “run the table” and acquire the most attractive independent ski areas. Vail Resorts has acquired Whistler-Blackcomb, B.C., Park City, Utah, and Stowe, Vermont, in recent years.
Norton said he felt Aspen-Snowmass was one of the few independent ski areas that could thrive in the ski industry without consolidation.
“Some places are so unique they don’t have to be on the normal supermarket shelves,” Norton said. “You don’t have to be part of a chain.”
Clouse agreed that some resorts probably don’t need to merge if their business is strong enough and they have solid community support. But if a ski area struggles to maintain its piece of the pie — which is increasingly possible in the era of conglomerates with bundled, multi-resort passes — consolidation might be the only option to grow.
An annual survey conducted for National Ski Areas Association indicated 481 ski resorts operated this winter. That is up from 463 last season. The number of resorts has been stable since 2005-06 after experiencing drastic reductions in the mid-1980s through early 1990s, according to the Kottke National End of Season Survey performed for NSAA after last season.
Charles Goeldner, professor emeritus at the University of Colorado’s Leeds School of Business and a longtime observer of the ski industry, said the acquisitions are “probably a good strategy” for the Skico ownership though not vital.
“They were so well-known that Aspen could have survived by themselves,” Goeldner said.
He figured the company was so profitable that the Crowns wanted to invest, and where better to invest than in the industry they know so well, he said.
Clouse expects more consolidation in the ski industry.
“Vail has shown that it works,” Clouse said. “The Aspen group is now going to discover the same kind of benefits that Vail has received.”
Aspen Skiing Co. Chief Operating Officer David Perry said Skico didn’t participate in consolidation through purchases of other ski areas in recent history, but that doesn’t mean it was idle. Instead it went the affiliation route. The company was a founder five years ago of the Mountain Collective pass, which has grown to feature two days of skiing at each of the 16 member resorts.
Intrawest participates in the M.A.X. pass with two other owners of multiple ski resorts, the Boyne USA and Powdr Corp.
Despite the shakeup created by Skico and KSL and affiliation of several resorts, the Mountain Collective and M.A.X. pass will still be sold for 2017-18. The new entity that includes Skico won’t be able to bundle its own ski pass for next season because commitments were already made for the collective passes.
“The beauty of the collaboration is it’s created more choices for skiers,” Perry said. “That trend has been going on for quite some time. I see it continuing — but the form of consolidation is hard to predict. It doesn’t always have to be ownership, it can be partnership. There are always new innovations out there.”
Perry, a longtime ski-industry veteran, said he’s heard from a lot of people this week who wanted to talk about the acquisitions that Skico’s affiliate is undertaking.
“Some people have been very surprised because we haven’t done it in a long time, but then those who have been in the industry for a long time and have really studied it may not be that surprised,” Perry said. “Aspen used to own Breckenridge. Aspen used to own half of Blackcomb Mountain.”
Skico sold Breckenridge during the 1987-88 ski season — before the Crowns had 100 percent ownership of Aspen Skiing Co.
The Crowns gained full ownership of Skico in 1993. One of their first moves was to merge with Aspen Highlands, which had been purchased by developer Gerald Hines.
Skico President and CEO Mike Kaplan hinted in a January 2015 interview with The Aspen Times that the Crowns would consider acquisitions that made sense.
In an interview in 2008, Skico managing partner Jim Crown disclosed the company had looked at acquisitions of Crested Butte and Telluride but decided not to pursue them.
Skico did venture outside the Roaring Fork Valley last year. It constructed one of its branded Limelight hotels at Ketchum, Idaho, at the base of Sun Valley. One observer in the financial field said he interprets that to mean Skico might be interested in acquiring the iconic ski area.
Perry said the acquisitions announced this week don’t signal the creation of a dominant, centrally managed ski conglomerate operated out of Aspen. Skico’s affiliated resorts won’t be required to sell an “Aspen burger” next ski season, one Skico employee quipped. And there won’t be a flag with Skico’s aspen leaf logo flying at the base of Steamboat or Mammoth.
Each of the places that the affiliates of Skico and KSL plan to acquire is special, Perry said. The ski areas are usually tied to small towns in the mountains that are proud of their unique identities and characters.
“We really want to honor the places that are great unto themselves,” Perry said. Later he added, “It’s not the central name of theme that matters. It’s the individual resorts that are in the collection that are far more important.”
Goeldner said Aspen’s move benefits the ski industry. Vail Resorts “has been king of the mountain” for several years, he said. Now there’s a rival large enough to challenge it.
“I think it probably makes it more competitive,” he said.
Clouse said he feels consumers benefit from the consolidation in the industry. Vail and the Aspen group have to offer competitively priced passes, as do smaller conglomerates. That will keep prices in check — and skiers happy.
“I think we’ll probably see more consolidation,” Clouse said. “The scary thing for the industry would be if Vail and the Aspen group merged.”
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