It is ski time in the Rocky Mountains with over 250 inches in many of the resort communities. Do you know where the picture was taken (hint it is a “Costco” resort, email me if you know)? Although there is plenty of snow and cold weather, mountain resort real estate remains hot with inventory down 27% in Breckenridge and prices increasing almost 5%. What do you need to know before investing in ski real estate? What are the best investments today? What do Costco and Walmart have to do with investing?
A little primer on ski real estate
Before talking about investing in ski real estate, it is important to highlight the changing ski landscape that is also reshaping the real estate landscape.
There are lots of changes in the winter resort industry are underway that will continue to be the key driver of ski resort real estate. Aaron Brill, the owner of Silverton mountain in SW Colorado said: “the Ikon (owned by Alterra/KSI) and Epic passes (owned by Vail resorts) represent the Costco and Walmart of skiing. He calls it big box consumerism creeping into skiing.” (source Denver Post). The new model in the ski industry is consolidation and most resorts are getting on one of the two trains. For example, Telluride announced they are getting on the Epic Pass train and Copper/Eldora got on the Ikon pass train. Skiing is following the retail model of consolidation. Vail and Alterra have led the huge consolidation and it will be difficult for anyone else to match them.
Skiing is becoming more capital intensive:
Gone are the days when people went to ski just to ski, now they expect alternative year-round activities from mountain coasters to miniature golf, to mountain biking, to five-star dining. The new generation of skiers also demand consistent skiing conditions, small lines, and a variety of terrain. All these amenities cost millions of dollars to both construct and maintain.
For example, Alterra recently announced fifty million in upgrades to Winter Park, Steamboat and others including a new gondola, upgraded base improvements, etc… A smaller independent company would not have the ability to invest 50 million in one season to upgrade the resorts. The huge capital Alterra and Vail have will be difficult if not impossible to match.
Small resorts will be unable to compete:
With the increasing capital demands, smaller resorts will be unable to compete and will become niche players to survive. For example, a small resort like Purgatory (in Durango, CO) will be unable to compete with Vail. This past season Durango was only able to open about 90 days due to lack of snow (and lack of snowmaking equipment) while others like Granby Ranch (outside of Winterpark) just went into foreclosure. Imagine if you planned a vacation to ski only to find out the resort had to close early due to poor snow conditions. This resort will survive but is unlikely to thrive in the new capital environment. Many smaller resorts will perish while others will become niche players.
Consistent income is key in the industry
Although winter weather is unpredictable, the two behemoths in the industry have developed a way to “hedge” against lackluster snow. Both Vail and Alterra offer season passes that are sold at substantial discounts to increase their revenue. For example, a steamboat adult season pass used to be almost 1200 dollars, once Steamboat was bought by Alterra they became part of the Ikon pass. Now you can get unlimited skiing at Steamboat for 899 and you also get unlimited skiing at Copper Mountain, Mammoth, etc… For a reduced price the buyer of the Ikon pass gets substantially more value. Why would Vail and Alterra sell passes so cheaply? Their goal is to get your revenue early regardless of the weather. Once you buy the pass you will feel an obligation to use it and therefore spend on parking, food, rentals, lessons, etc…
Where should you invest?
Just because a property is affiliated with a pass doesn’t mean that they will have the capital to continue to invest in the mountain. Affiliated resorts partnered with one of the two passes to drive traffic. For example, Arapahoe basin is part of the Ikon pass, but this doesn’t mean that Arapahoe basin is going to have 50 million to invest in a new gondola in any given year. On the other hand, properties owned by Vail or Alterra will have the funds to heavily invest in their own mountains. First focus on properties owned by either Alterra or Vail, then focus on other tier one resorts (like Telluride). Beyond these two tiers there is considerably more risk on any real estate investment.
Below is a list of owned mountains by Vail and Alterra throughout the country. (note Alterra’s owners are associated with Aspen skiing, although a separate company I’m lumping them under Alterra)
|Alterra Mountain Company||Vail Resorts, Inc. (NYSE : MTN)|
|Squaw Valley | Alpine Meadows, California||Afton Alps, Minnesota|
|Bear Mountain Resort, California||Beaver Creek Resort, Colorado|
|Blue Mountain, Ontario||Breckenridge Ski Resort, Colorado|
|Deer Valley, Utah||Heavenly Mountain Resort, California/Nevada|
|June Mountain, California||Keystone Resort, Colorado|
|Mammoth, California||Kirkwood Mountain Resort, California|
|Snow Summit, California||Mount Brighton, Michigan|
|Snowshoe, West Virginia||Northstar California, California (1)|
|Steamboat Ski & Resort Corporation, Colorado||Park City Ski Area, Utah|
|Stratton, Vermont||Perisher Ski Resort, Australia|
|Tremblant, Quebec||Stowe Mountain Resort, Vermont|
|Winter Park Resort, Colorado||Vail Mountain, Colorado|
|Whistler Blackcomb, British Columbia|
|Aspen Skiing Company||Wilmot Mountain, Wisconsin|
Crested Butte, CO
|Aspen Highlands, Colorado|
|Aspen Mountain, Colorado|
|Snowmass Ski Area, Colorado|
Alterra and Vail are just the beginning of deep industry consolidation. Many resorts that have not been bought by one of these two will struggle to survive with the new capital structure required in the ski industry. Until further consolidation shakes out, for the most stable return on your real estate investment focus on the resorts owned by the two current giants and pick Costco or Walmart. These will be your best long term buys as both of these companies have substantial balance sheets to weather any storms.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all we need is our simple one page application (no upfront fees or other games).