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The superconcentration of American ski resorts : a model for the European Alps to follow ?

 

Prior to the 1990s, traditional American ski areas were owned by families or privately held companies. In the past decade however, ownership of multiple ski areas by publicly traded corporations has become the predominant model.

A variety of market forces brought about this change. The primary motive of course, was profitability. Skier visits in North America have been declining in the last few years. As a result, competition for visitors is fierce. As in other areas of commerce, acquisition and consolidation of competing entities is the sign of a maturing marketplace, where the greatest potential for new profits lies not in the growth of the market but in the control of what sales occur within the existing market.

Changing customer interest also played a large role. Now, destination ski resorts not only compete among themselves for visitors, but also with a new variety of exciting family vacation choices such as Disney World, Las Vegas, or adventure cruises. Even for committed skiers, good snow, lifts and a place to sleep were no longer enough. The "total vacation experience" became paramount and the ambience and special character of the town critical. Today's guests-products of the high-speed millennial lifestyle-want to arrange lodging, equipment rental, lift tickets, childcare and extra activities with one phone call. Many smaller ski areas unable to meet these changing demands have simply closed, while others with good basic infrastructure and the potential to meet these demands have become the target of consolidation. Corporations, able to protect investors from personal liability and raise funds by selling stock, have become the model for most of these acquisitions and mergers.

At the outset of corporate ownership and consolidation movement, the primary advantages were believed to be threefold. First, there was the ability to raise large amounts of capital for reinvestment in the resort through the sale of stock. Second, there were economies of scale. Third, corporate ownership of multiple resorts reduced potential losses from bad snow years through geographic diversification. None of these assumptions proved to be entirely true.

According to John Frew, five-year president of Colorado Ski Country USA, a business association of all Colorado ski resorts: "Now that the theory of consolidation has been tried, tested and proven it is best not to jump to the conclusion that bigger is better." The experience over the past several years has disproved many of the expected benefits of consolidation. For example, it was thought that the ski resorts would be able to save a great deal of money on advertising through joint marketing and promotion. Instead, corporations found that guest's decisions about where to vacation depended on the personality of the resort. This required completely different marketing efforts for each entity. Ski areas realized savings on big-ticket investments such as new ski lifts and grooming equipment, but such savings didn't materialize in other areas. On-mountain restaurant supplies, for example, cost almost as much as they did for small resorts once shipping and storage costs were considered. Mountain operation costs were about the same as before consolidation since each ski hill requires committed staff who know each area intimately.

Even geographic diversification didn't reduce the risk of bad snow years--a few years ago, the entire country suffered a snow drought.

The most successful consolidation efforts have occurred where the resorts owned in common are in close proximity and where there's strong local management of resort operations. The biggest advantage for some of the super-consolidators has clearly been the ability to raise huge sums of money for reinvestment. Vail Associates, which owns Vail, Breckenridge, Keystone, and Beaver Creek has been able to invest hundreds of millions of dollars in their resorts through their corporate ownership. Yet the North American Skiing Company, which owns Heavenly Ski area and Steamboat Springs among other, and was perhaps undercapitalized from the beginning, has seen its stock value plummet, and is now unable to make significant investments.

There are other aspects of corporate ownership that need to be fullyunderstood before embracing it as a model for the Alps. A corporation's first loyalty by definition and by law is to its shareholders. Return on investment is measured in quarterly reports and daily trading values in the stock market. This may be in conflict with making long term investments that are good for the town but which take many years to pay off. A corporation has no emotional connection to a town, only an obligation to direct funds to the most lucrative opportunities for its shareholders. Corporations can and do change their investment focuses very quickly. A town may invest years in cooperative planning only to see the corporation walk away. The ski resort may become a secondary concern to a corporation with many holdings and diversified product lines when those other areas of interest show greater profit potential. A successful resort may also see the locally created profits go to fund other corporate enterprises across the globe.

From a community point of view, no matter how great the working relationship between the town and the corporation, there is always uncertainty about who the town will be working with from one year to the next. "Ultimately, all the big decisions will be made outside of your town," said Bob Mcluran, who has been town manager of both Jackson Hole, Wyoming, and Vail, Colorado.

Fortunately, external decision-making isn't always bad. Aspen Skiing Company's (ASC) ownership spends most of the year in Chicago. But recognizing the symbiotic relationship between ski resort and community, the company has made an exceptional effort to align its values with those of the town. For example : last year, ASC planned an expansion on one of its mountains. Community response to the project was negative. Instead of plowing forward with the projects as developers typically do, ASC withdrew the application. Shortly after this experience, the company convened a community environmental advisory committee which meets quarterly and addresses issues of local concern on a continual basis. ASC has also helped preserve large tracts of open space, subsidized mass transit, contributes a major portion of marketing funds for the towns of Aspen and Snowmass, and continually supports and constructs employee housing. The company's numerous environmental initiatives are built on the concept that the beauty of the natural environment is the source of the company's profit. To this end ASC has purchased wind power for one lift and part of a restaurant, and deconstructed and recycled old buildings to save landfill space. One of the company's more innovative projects has been to purchase locally raised beef from ranchers. While the beef costs more, guests receive a natural, antibiotic-free product that supports local agriculture. By paying ranchers a premium for their product, ASC helps protect open space and cultural heritage.

Of course, Aspen's situation is unique, and is due in large part to CEO Pat O'Donnell's vision and the willingness of ownership to endorse that vision. But regardless of how a ski area decides to interact with the community, any successful resort is comprised of many partnerships-corporate ownership and consolidation does not change that. Ski areas depend on government and community to provide basic services such as police and fire protection, public transportation, affordable housing, and land use development approvals. Many privately held interests within consolidated resorts play a major role in that resort's success: hotels, restaurants, retailers, taxi companies, airlines, etc. Consolidation of ski resort ownership does not eliminate the need to constantly negotiate a shared vision with the community.

A primary goal of sustainable economic development is to get all community members rowing in the same, mutually agreed-upon direction. This can best be achieved by defining and implementing a strategic plan for a resort that has the input from all community stakeholders. Partnerships with clearly defined roles and expectations and commitments are essential. This approach can lead to appropriate choices of ownership and investment models for the Alps.

  

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