Telluride, Crested Butte, Purgatory, Steamboat, WinterPark, Eldora, Copper, and others have all chosen new partners or switched partners. The ski industry is not monogamous; there is so much hooking up and breaking up that we are going to need to call Jerry Springer to help us sort it all out. What does this have to do with Walmart and Costco? What impact does this have on various resorts? How about real estate?
The ski industry is changing rapidly. Many resorts will perish and as a result the recent marriages are of necessity, come and go quickly, and are not equitable! Furthermore, there are fundamental changes occurring in the ski industry and not everyone currently will have a “mate” when the dust settles.
Walmart and Costco rule skiing?
Aaron Brill, the owner of Silverton mountain in SW Colorado said: “the Ikon and Epic passes 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 and Crested Butte recently announced they are getting on the Epic Pass train and Copper/Eldora got on the Ikon pass train. The two passes are approaching consolidation much differently.
The Walmart model:
Vail resorts epic pass is going for the lowest cost model to drive volume to its resorts. Think of Breckenridge; it is one of the busiest resorts in the country. Vail might be heading towards a “Spirit Airlines” model where getting on the plane is inexpensive and they make their money by the add ons (assigned seats, bags, etc…). Vail resorts is beginning this shift. For example, the cost of food at Breckenridge is almost double Steamboat. My wife was at Breckenridge with our daughter and got chicken nuggets for lunch… the cost $40 dollars for lunch! At Breckenridge parking is also 10-20 bucks whereas in Steamboat there are several free lots close to the base area.
The Costco Model:
Alterra’s Ikon pass is adopting the Costco model. It is a little more expensive than Walmart, but you get better service and a higher end experience with mountains like Steamboat and Snowmass. Like Costco, the Ikon pass isn’t trying to be the low-cost leader and then nickel and dime you on everything… at least not yet.
Why is this important?
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. For example, Alterra recently announced five hundred 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 500 million in one season to upgrade the resorts. The huge capital Alterra and Vail have will be difficult if not impossible to match.
Will being part of a pass help a resort?
Although resorts like Crested Butte are joining the Epic pass. This will not fundamentally solve the huge capital issues. Joining a pass will likely create more volume for a resort but operating independently had higher margins on their pass sales. The net gain for a small resort will be negligible at best. The pass sales will not solve the fundamental capital issues. Small independent resorts will struggle to stay up to date with the larger “corporate resorts”.
What about real estate?
The Costco and Walmart of skiing in Colorado provide an interesting roadmap for real estate. As soon as Alterra announced the purchase of Steamboat and Winter Park, real estate in both markets appreciated considerably. The market factored in the positive news to the ski area from the purchase. If you were buying or holding real estate, follow the passes. The areas owned by Alterra and Vail will perform very well as they continue to get large capital improvements that are required to continue to drive traffic to the various resorts. World renowned destination resorts like Telluride will also be fine Outside of these markets and the “tier one” resorts you need to be careful. For example, look at Purgatory and Granby ranch. Both areas are at greater risk of price declines due to industry consolidation as they will not have the funding to stay relevant in the changing industry.
Walmart or Costco?
Regardless of whether you like Costco or Walmart, Ikon or Epic both are leaders in their respective niches. Both passes offer a roadmap to investing; real estate in each of the respective resorts owned by Alterra or Vail will continue to outperform other markets because of the large capital each will continue to invest to attract visitors. Make sure you choose your “pass” when looking at resort real estate.
Additional Reading
- https://www.denverpost.com/2018/03/12/alterra-mountain-co-improvements-ski-areas/
- https://www.denverpost.com/2018/03/14/independent-ski-areas-epic-ikon-season-passes/
- https://www.denverpost.com/2018/03/14/crested-butte-mountain-resort-epic-pass/
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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 the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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