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 THE CONSOLIDATION CONUNDRUM

The decades-long trend of resort ownership consolidation recently kicked into high gear (see reports on Mammoth and Intrawest purchases).  What it means for the future of the industry remains to be seen, but this chess game has been playing out for a long time.

Vail Resorts’ billion-dollar acquisition of Whistler Blackcomb a year ago and more recent purchase of Stowe Mountain Resort have created quite a stir. These moves likely prompted the newly formed entity between Aspen SkiCo and KSL Capital Partners (which we assume will have a more prosaic name at some point) to ally themselves and agree to purchase Intrawest and its six resorts for $1.5 billion, as well as the four Mammoth Resorts areas. Check. But not check mate, as we expect to see more acquisitions in the very near future.

Once the SkiCo/KSL deals close in the fall, this new powerhouse will control six resorts in California, six in Colorado, and one each in Ontario, Quebec, Vermont, and West Virginia. That diverse portfolio could offer real competition for Vail’s Epic Pass, which has become the gold standard of season pass products from the standpoints of value and diversity.

But it’ll be some time before we know what types of products The Entity will eventually offer. Season passes for 2017-18 for the properties it’s acquiring had already gone on sale, including two different and extensive partnership programs (see Season Pass Comparison Chart), and all will be honored next winter.

Industry leaders and experts have varied opinions about the impact of these acquisitions. Some take an optimistic approach, saying they will raise awareness of skiing and snowboarding, perhaps make it more affordable, and thus boost the industry overall. Others are more skeptical, believing that independent areas and smaller multi-area companies will suffer. With so many variables in play—geography, products, pricing, competition, public perception, the economy, etc.—it’s difficult to predict how it will all shake out, and what impact it will have on the ski industry as a whole.

All agree that the bold moves made by Aspen/KSL were in direct response to Vail Resorts’ recent acquisitions, and its likelihood of future expansion. Put simply, “This was a torpedo aimed at Vail,” said one observer. Or as one resort president put it, “Aspen made this move to counter Vail’s Bataan march through the ski industry.” Another industry strategist said Aspen/KSL is “trying to capture/intercept some of the migration routes of Vail before it can make in-roads.” That especially applies to California, but also the Northeast.

No wonder some onlookers are offering words of caution. They fret about the influence of two companies that will soon control roughly 35 percent of the skier visits in the U.S. (and perhaps 15 percent of the visits in Canada). How will that affect independent ski areas? What variables in this chess game play to their favor, and which pose a threat?

Among the optimists, Ski Vermont president Parker Riehle welcomes Vail’s entry into the Northeast market, especially for what it will do for the consumer and the public’s perception of skiing as a whole. Riehle’s hope is that VR’s presence will change the dialogue on the cost of skiing. By introducing the Epic Pass to the Northeast, and the pricing adjustments that have already been made by Stowe’s neighboring resorts, he foresees the public dialogue shifting—from “expensive and only attainable for the few,” as it has been in recent years, to “affordable for many.”

VR’s impact on Stowe and its neighbors is already evident. Stowe’s once-$1,800 season pass will be replaced by the $859 Epic Pass—and include access to all of VR’s other properties. In response, neighboring Sugarbush completely shook up its product mix, dropping its season pass prices and adding new age-specific products. Even as far south as Okemo, which draws from metro areas to the south more so than Stowe’s market to the north, early-bird pass prices were lower than the previous year’s by more than $200.

According to one resort VP, independent operators should be scared. The real threat, he says, is to the resorts that rely on 30 to 50 percent of their business coming from destination visitors (i.e., Big Sky or Whitefish). “They will struggle to play in this sandbox with these two large kids.” The giants’ neighbors, such as Sierra-at-Tahoe and Sugar Bowl, may need to work harder to thrive. Ski areas located near urban centers will not be affected, he believes, if they continue to offer a quality product and embrace their role as feeder mountains.

Another resort leader brings up a more subjective concern: “Corporatization is good for the shareholder, but not for the soul of the sport. What will happen to the soul of our ski towns? Are they more town, or more resort?” That question suggests a real opportunity for independent ski areas to differentiate themselves from the conglomerates and other competitors. The market will likely have to make adjustments, but savvy operators will figure out how to shine.

Does this all sound familiar? It should. Twenty-years ago, SAM addressed consolidation in a multi-part series. At the time, Intrawest, American Skiing Company, Booth Creek, and Boyne Resorts were gobbling up areas at a dizzying pace. Resort leaders voiced many of the same hopes and concerns then as they do today. And as SAM founder David Rowan succinctly put it back in late 1996: “The trend toward consolidation will continue. This is neither good nor bad, just a logical inevitability.” (Download "Consolidation - Analysis and Direction" and "Consolidation Gets Mixed Reviews."

David also pointed out the decided advantages multi-resort companies have in several aspects of business, and boiled it down to the concept of critical mass. “When [critical mass] is achieved, it can provide access to new thresholds of capital, attracting strategic partners, give purchasing leverage and generate marketing torque,” he wrote. That holds true today. Both Vail Resorts and the Aspen/KSL entity own properties that achieve critical mass (i.e., they’re all successful mountain resorts with strong visitation), and thus will reap the inherent advantages.

Access to capital and purchasing leverage are major factors that could expand the gap between the behemoths and—well, pretty much everyone else. It has, and will, allow larger entities to expand and make more capital improvement faster than the rest. “In one form or another, the buying power of a multi-resort company is exerted at the supplier level. That’s the real world,” David wrote.

The greatest difference between that earlier round of consolidation and the current one has been the explosive popularity of multi-area season passes. Twenty years ago, many doubted that such marketing gambits would prove successful. Now that these passes have shown their worth, they are part of the resort landscape.

One way or another, resorts will have to respond—through differentiation, pricing, or both. Resort ownership consolidation is not going to end anytime soon. The question is: which resorts will be next? Let the speculation continue.