Epic vs Ikon


Results 1 to 9 of 9

Thread: Epic vs Ikon

  1. #1

    Epic vs Ikon

    The Epic vs. Ikon M&A Battle That Will Transform Your Ski Season
    2019-03-01 10:00:36.277 GMT

    By Kyle Stock
    (Bloomberg Businessweek) -- Even among the world’s most
    polished ski resorts, Deer Valley—with its vast carpets of
    flawlessly groomed snow spread across four Utah peaks—was always
    conspicuously clubby. Skiers can pick up a free copy of the Wall
    Street Journal on their way to the fire, while instructors eat
    lunch in separate employee cafeterias, lest they mingle with the
    guests. “The idea was to replicate the service and experience of
    a five-star hotel,” says Bob Wheaton, who ran the resort for 22
    years before stepping aside in January.

    But when the lifts started cranking this season, things
    looked a little different. Among the affluent families were
    young couples and packs of Salt Lake City friends navigating the
    runs for the first time. The reason: Deer Valley had suddenly
    become a bulk-buy product. In 2017 a new conglomerate (later
    dubbed Alterra Mountain Co.) bought 11 of America’s most popular
    ski resorts and teamed with dozens more mountain owners to honor
    a single-season lift ticket called the Ikon Pass. Compared with
    buying a string of daily lift tickets for as much as $200 a pop,
    the Ikon Pass (which ranges from $599 to $899) can pay for
    itself in as few as three days. Only one other product is in
    direct competition with Ikon: The Epic Pass from Vail Resorts
    Inc. admits skiers to its aggressively expanding chain of 20
    destinations including the company’s namesake ski area in
    Colorado’s Rocky Mountains.
    Together, Alterra’s and Vail’s passes can be swiped at 58
    North American resorts, as well as a handful of resorts in
    Oceania and Europe. The two competing conglomerates are trying
    to turn occasional skiers into frequent skiers and frequent
    skiers into serial skiers who incidentally buy a lot of
    midmountain beers and slopeside hotel rooms. Deer Valley and
    resorts like it have become a sort of research and development
    lab forecasting possible futures for the long-struggling ski
    Skiing isn’t necessarily a bad business—it’s just lumpy and
    volatile, given natural cycles both economic and meteorological.
    (Industry lifers jokingly refer to it as “snow farming.”) As a
    result, ski resorts have historically attracted two types of
    owners: affluent families willing to ride out some tough years
    and investors looking to leverage chairlifts to sell condos. But
    in 1997, a third approach emerged when Vail Resorts bought
    nearby Keystone and Breckenridge in Colorado for $310 million
    and prepared an initial public offering. The plan was to make
    skiing a viable business on its own rather than a convoluted
    real estate gambit. Vail would buy ski areas and improve them,
    attracting more (and more affluent) skiers.
    In 2008, Vail introduced the Epic Pass for unlimited lift
    rides at all of its (then five) resorts for $579, roughly one-
    third the cost of other existing passes. In providing such an
    inexpensive end run around daily lift tickets, Vail seemed to be
    leaving money on the table. But there was an important catch:
    Pass sales were offered only before the season hit its stride,
    closing right before Thanksgiving. By getting skiers to buy
    early, the company locked in a mass of customers and raked in a
    pile of revenue during its slowest months. Its season-pass
    revenue increased 22 percent in the first year, from roughly $78
    million to about $94 million.
    Much of the strategy came from Rob Katz, a square-jawed
    graduate of the Wharton School and a rising star at Apollo
    Management LLP, the private equity firm that bought Vail out of
    bankruptcy and steered it onto the stock market. As a New York
    native, Katz had learned to ski on Hunter Mountain, a few hours
    north of Manhattan, and as Apollo’s winter sports enthusiast
    he’d slid onto the Vail board in 1996, at age 29; 10 years
    later, he’d taken the chief executive officer job.
    Gradually, Vail added resorts in different regions of the
    country as a hedge against weather. If Colorado’s Rockies were
    snow-starved, the company could make up the difference in
    California’s Lake Tahoe region or Utah’s Wasatch Mountains. By
    2017, Vail had 13 properties, including Whistler Blackcomb in
    British Columbia, one of the most trafficked resorts in North
    America. The cost savings weren’t great; Vail couldn’t share
    much equipment or staff between mountains. But there was a
    revenue upside—as the empire grew, it enjoyed a network effect.
    Epic Pass holders traveled across the country, from Afton Alps
    in Minnesota to Heavenly in California, while still staying at
    Vail properties. Independent resorts teamed up in various
    alliances to sell season-pass products, but these rickety
    coalitions changed from year to year and never kept pace with
    In the 10 years since Vail began selling the Epic Pass, its
    shares have nearly quadrupled. Last year, despite anemic
    snowfall, the company still got almost half of its revenue from
    lift tickets. For every daily visit by a skier, it collected
    $168 and paid only $135 in expenses, a 20 percent profit margin.
    “It’s been the ultimate Teflon stock,” said Stifel Financial
    Corp. analyst Brad Boyer. In response, virtually every ski
    executive drew up a plan to either join up with or compete
    against Vail. Among them was Rusty Gregory, CEO of one of the
    country’s busiest resorts, Mammoth Mountain.
    Gregory first clicked into a pair of skis a couple of weeks
    after finishing a final season as a University of Washington
    linebacker. He put off graduate school to help skiers onto lifts
    at Mammoth. “I was probably the most gregarious liftie on the
    mountain,” he says. Gregory befriended Mammoth owner Dave McCoy
    and was soon welding lift towers. Eventually he ran human
    resources and negotiated with investment bankers to sell the
    resort twice, most recently to Starwood Capital Group, a private
    equity firm. Now, with a 15 percent ownership stake, he lives at
    the Four Seasons Hotel Denver with his camper van parked out
    front. (It won’t fit in the hotel’s garage.)
    Gregory squeaked through the Great Recession more bullish
    on skiing than ever. Even though people stopped buying slopeside
    condos, they kept coming to ski. In 2016, having weathered the
    worst of the storm, the industry’s private equity owners wanted
    an exit. Starwood Capital was looking to sell Mammoth and its
    sister resorts, Big Bear and June, and Fortress Investment Group
    LLC was trying to offload its majority stake in Intrawest
    Resorts Holding Inc., a conglomerate of seven mountains that
    Vail had soundly whupped. It was a rare opportunity: 10 of North
    America’s most popular winter playgrounds on the block at the
    same time.

    Ever the gregarious liftie, Gregory suggested Starwood
    Capital join forces with the Chicago-based Crown family and KSL
    Capital Partners LLC, a private equity firm led by two former
    Vail executives. “It was the kind of thing that probably
    wouldn’t have happened if we hadn’t been casually drinking beer
    together for years,” he says. The descendants of the
    industrialist Henry Crown owned a number of Colorado resorts
    known for fine dining and being favored by celebrities. KSL
    Capital, which owns California’s Squaw Valley, had previously
    worked with the Crown family on developing Aspen Snowmass in
    Colorado. In April 2017, KSL and the Crowns bought Intrawest for
    $1.6 billion and folded in Mammoth, Big Bear, June, and Squaw
    Valley on undisclosed financial terms. David Perry, longtime
    chief operating officer of Aspen Skiing Co., took command of the
    deal, with Gregory as a close confidant. Both men knew size
    would equal safety, so they began calling their buddies, which
    eventually led to the formation of Alterra.
    In October, Alterra invited leaders of the continent’s
    largest non-Vail resorts to New York City’s Gansevoort hotel.
    Their pitch was, “If you won’t let us buy you, honor our season
    pass, and we’ll split the revenue even-steven.” Under the
    partnership agreements, a resort would be paid for each day a
    skier swiped her Ikon Pass—either a negotiated fee or a “blended
    rate” based on how many Ikon days were tallied over the course
    of a winter. Stephen Kircher, president of Boyne Resorts, which
    owns nine properties spread from Maine to Oregon, says the offer
    went over well, particularly among ski areas that had been
    fending off Vail for years. “I emailed them within about eight
    seconds,” he says.
    Soon after, Vail started making similar calls, offering to
    host partners on its Epic Pass. “We were all in play,” says
    Jerry Blann, who was then the president of Jackson Hole Mountain
    Resort Corp. in Wyoming. Through the winter of 2017-18,
    America’s biggest ski mountains were picking sides. Jackson Hole
    went with Alterra, as did Sugarbush in Vermont, plus Boyne
    Resorts and Powdr Corp.—two smaller conglomerates comprising 18
    resorts, including Montana’s Big Sky and Vermont’s Killington.
    By the time flurries starting falling this past fall, an
    additional 11 resorts had signed on to the Ikon Pass, and
    Alterra had purchased two more resorts.
    Vail’s mergers-and-acquisitions squad was also working
    overtime. The company snapped up five resorts over the summer
    and fall of last year, including Stowe in Vermont and Colorado’s
    Crested Butte. Telluride Ski & Golf Resort CEO Bill Jensen went
    with Vail largely because it had a long track record managing a
    number of resorts under one season pass. He figured his mountain
    would lose up to 15 percent of its out-of-town business if he
    didn’t align with one pass product or the other. “We’re a rural
    place,” he says. “I have an entire community to think about, not
    just the ski resort.”
    Wheaton, the former Deer Valley president, estimates he’d
    been turning down acquisition offers for the resort every two
    weeks for almost a decade. Most of the time he wouldn’t even
    bother to relay the bid to the families that owned the resort.
    But Alterra’s offer, still undisclosed, was on a different
    scale. “I thought, ‘Well, this is one I better call them about,’
    ” he says. “It was like, holy s---.”
    On a crisp, sunny morning in late December, a massive snow-
    grooming machine trundled up one of the slopes at Steamboat, an
    Alterra resort northwest of Denver. The rig ground to a stop on
    a midmountain plateau, cranked out some reggae, and started
    slinging Mexican food. Taco Beast, as the machine is called, is
    a paragon of Alterra’s approach to the ski business: a $300,000
    experiment that resort managers didn’t bother running by
    headquarters. By 2 p.m. the food truck had sold almost $2,000 in
    tacos before crawling off to restock.
    “We’re not selling widgets here—we’re creating
    experiences,” Gregory says. He claims this approach was critical
    in getting independent mountains to sign on to Alterra’s season
    pass over Vail’s. Erik Forsell, the marketing chief, says the
    best metaphor is the beer industry: If Vail is Budweiser,
    Alterra wants to be a six-pack of craft brews.

    At Vail, Katz bristles at the implication that the
    company’s resorts are homogeneous. Sure, there’s still a small
    band of crusty ski-town lifers driving around with “F*ck Vail”
    bumper stickers, irate that their favorite lift was upgraded to
    a high-speed quad or some jobs were moved to Denver. But that’s
    a small demographic, and savings aren’t easy to come by in the
    ski business, Katz notes. “There are plenty of things I hear
    from guests that they think we should do better,” he says. “I
    never hear that Breckenridge looks like or feels like or gets
    confused with Vail or Park City or Whistler or Kirkwood or
    One thing Vail resorts have in common, besides matching
    employee parkas, is technology. Every Vail pass or ticket is
    embedded with a radio frequency identification chip, which is
    automatically scanned like an E-ZPass at every one of the
    company’s 430 lifts. Vail knows how much, where, and with whom
    each guest skis. The data are used to predict how likely the
    person is to return to a Vail resort. It’s a Big Data play in an
    historically analog industry, and the machinery will only get
    smarter every time Vail swallows another resort.
    Right before Christmas, Alterra was still moving into its
    new headquarters just east of downtown Denver. Cardboard boxes
    and computer screens were stacked against panoramic windows
    framing the Front Range and a handful of breweries and weed
    stores. “You’ll have to excuse us,” Gregory said. “We’re kind of
    building the airplane as we’re flying it.” Alterra won’t say how
    many Ikon Passes it sold, but orders were ahead of expectations
    by 30 percent, and the company was on track to book $1.5 billion
    in annual revenue.
    In a suburb 18 miles north, Vail headquarters was more
    organized but arguably less chipper. On Dec. 6 shares of the
    company had plummeted by almost 18 percent when it reported
    season pass sales slightly lower than expectations. A few weeks
    later, shares fell an additional 13 percent when Vail said it
    welcomed smaller-than-expected crowds leading up to the December
    holidays. Boyer, the analyst at Stifel, lowered his target price
    on Vail. “There is that ‘Eff Vail’ crowd out there, and those
    folks embraced Ikon from the start,” he says. “It’s definitely a
    competitive threat.” Even so, Vail pass sales have increased by
    an average of 13 percent a year for the past six years, and the
    company is on the cusp of selling 1 million season passes for
    the first time, thanks in part to a new sales program aimed at
    service members and military veterans.
    Vail’s growth is impressive relative to the industry at
    large. The number of U.S. skiers (about 9 million last year) and
    how many days they log on a mountain (53 million) have changed
    very little in the past two decades, according to the National
    Ski Areas Association. Meanwhile, the $8.4 billion industry
    faces an existential crisis on two fronts: climate change’s
    feast-or-famine cycles of snowfall and a tide of baby boomers
    heading for the permanently aprés-ski scene of hip replacements
    and retirement homes.
    Nor has skiing shed its stigma as an expensive pastime.
    Alterra and Vail may be exacerbating the problem as they
    increase daily rates to nudge people into buying a season-long
    lift ride. “In the eyes of a potential new skier, that’s what
    skiing costs,” says Evan Reece, CEO of online lift-ticket
    marketplace Liftopia Inc.
    Reece spends his days trying to persuade resorts to price
    daily tickets the way airlines price seats, fluctuating
    constantly based on a range of factors including weather and how
    far in advance someone is purchasing. It’s an economically
    proven way to maximize value and get novices on the hill at a
    discount; it’s also a tough sell. Reece worries that as the
    industry rewards the loyalty of its core customers, fewer people
    will give skiing a try. “There’s some amount of the market
    that’s going to vaporize overnight if the industry keeps
    doubling down on season passes,” he says.
    Katz says the focus on regulars helps the industry: “The
    more days we can get out of somebody, the more likely it is that
    they’ll continue skiing.” He says he’s heartened that
    participation has held stable, a contrast to the hordes of
    weekend warriors giving up on golf.
    In mid-December, Gregory flew into Deer Valley to see how
    things were going. After a conference call, he loped up to the
    lift to meet Wheaton, who’d delayed his retirement and signed on
    as a sort of roaming consultant for Alterra. They’re two
    unlikely ski bums turned even less likely ski executives.
    Wheaton, a native of Detroit, is short with a rancher’s belly.
    Gregory, who paid for his few finance courses by welding
    bridges, hulks with a linebacker’s head. On the lift ride up,
    they were sanguine about the future of their industry. Who
    wouldn’t love this? they wondered, as the sun saturated the
    Wasatch Range. “I can tell you one thing,” Wheaton said, “we’re
    not done shopping, and Vail’s not either.”
    Disembarking, the men tucked their chins to the wind,
    leaned into the descent, and carved sinuous turns with near-
    perfect form. In the parlance of the sport they love, they
    ripped, zipping past crowds of new guests at speeds that seemed
    almost reckless.
    2017/18 = 37
    2016/17 = 31
    2015/16 = Depressing
    2014/15 = 28
    2013/14 = 27

  2. #2
    Pretty sure cutting and pasting an entire article is illegal and could get this forum sued. Why not just link it?

  3. #3
    Quote Originally Posted by billo View Post
    Pretty sure cutting and pasting an entire article is illegal and could get this forum sued. Why not just link it?
    Oh please....

    Its on the Bloomberg terminal, not on a web site yet so there is no link.
    2017/18 = 37
    2016/17 = 31
    2015/16 = Depressing
    2014/15 = 28
    2013/14 = 27

  4. #4
    Quote Originally Posted by billo View Post
    Pretty sure cutting and pasting an entire article is illegal and could get this forum sued. Why not just link it?
    It's rather annoying visually, but I think AlpineZone is safe from the wrath of Michael Bloomberg.
    President - Bicknell's Thrush Extermination Solutions (BTES), LLC

  5. #5
    Quote Originally Posted by BenedictGomez View Post
    It's rather annoying visually, but I think AlpineZone is safe from the wrath of Michael Bloomberg.
    Maybe everyone can starting quote the OP too. That would look even better.

  6. #6
    Sure, joke about it now, but who's going to run this site when Nick gets tossed in jail?

  7. #7
    Quote Originally Posted by Domeskier View Post
    Sure, joke about it now, but who's going to run this site when Nick gets tossed in jail?
    Who’s running the site now?

    shit happens, wear a helmet.

    Breck - 12/2 12/22 12/23 1/5 1/6 2/9 3/10
    Taos - 1/26
    Keystone - 2/24
    Crested Butte - 3/25 3/26 3/27

  8. #8
    Quote Originally Posted by gmcunni View Post
    Who’s running the site now?
    No one. If Nick goes to jail, he might even have time to arrange an AZ summit next year.

  9. #9
    Quote Originally Posted by slatham View Post
    Oh please....

    Its on the Bloomberg terminal, not on a web site yet so there is no link.

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
All times are GMT -5. The time now is 8:24 AM.