Will the Ski Industry Reap the Benefits of the 'All-For-One' Pass or The Real Costs?

[Geoff]

I'm sending Geoff a pm. He was at the home owners meeting last year and he explaned the goals ASC presented for getting skier visits to a certain level to allow for construction begin and how this relates to the discount passes

Here's the story as I understand it:
Several years ago, Killington was telling everyone that the Pico interconnect would happen in conjunction with the development of a new base village.

16 months ago, ASC lost that land when they defaulted on a loan. Their major financial backer, Oak Hill, ended up with the land so it was a way to pull assets out of ASC without needing to get blessed by the SEC. I guess it was legal but maybe a little shady. At the time, they were telling everybody that this new outfit was a "partner" and sort of implied 50%/50%. Come to find out that the deal is that Killington gets 25% of the profit, if any, from the development but has no ownership stake.

16 months ago, Killington announced that the interconnect to Pico was now decoupled from the base village project. They said they'd do the project when revenues and skier visits justified it. It all makes sense now that it's come out that Killington and ASC don't own or control the village project.

The Oak Hill subsidiary sold the land off to Centex; a massive property developer who builds both sprawling housing tracts and resorts in places like Hawaii. The amount of land we're talking about is huge. The snowshed parking lot and the land where the pro shop for the golf course sits. Uphill from the Snowshed snowmaking pond and up skier's right of the Snowshed quad. Killington still owns the Rams Head parking lot but the land that wraps around it starting at the magic carpet and wrapping around the downhill side of the parking lot. A plot of land uphill from the Vale parking lot between the Snowdon quad and Rams Head. A triangle of land that starts at the Superstar Quad and runs down to the Snowshed compressors halfway down Snowshed and down the access road. There's also a huge chunk of land below the Sunrise condos at Bear Mountain.

The snowshed parking lot gets relocated to uphill from Snowshed. The first construction will probably begin next summer. There's a big war betwen the town and Killington/Centex at the moment. The town doesn't trust the developer at all. At the moment, there are several spats:

* The developer wants to install roads with steep grades. The town is refusing citing the problems they already have with roads with steeper grades. The developer doesn't particuarly care that you can run a fire truck or ambulance up a road with 20 cars stalled on it in a snowstorm.

* The original plan submitted to the town and to Act 250 environmental review called for a bunch of retail at the street level and underground parking in the main development in the Snowshed parking lot. The developer obviously wants to reneg on this since jillion dollar condos and condo hotels are far more profitable than retail space and underground parking garages.

* There are some other promises Killington made to the town that they haven't delivered on. For example, Killington was supposed to build a walkway from Snowshed down to the Basin Ski Shop/Night Spot area so there would be a walkway the entire length of the access road. It's pretty hostile at the moment.

There's no telling how it's all going to turn out.

What I think is that Centex will figure out that the way they maximize their real estate profit is to own Killington outright. That way, they get 100% of the profit rather than 75% of the profit. They also have control over the way the resort is operated. The people who would buy $2+ million trailside trophy homes and million dollar condos aren't going to want to deal with the crowding caused by $349 season passes or the shoddy way ASC has forced Killington to operate. ASC continues to hemmorage cash and it's inevitable that they'll need to sell an asset to stay alive. Killington sold to Centex is the obvious choice.

Given the state of things, there's no way of knowing when Centex will actually break ground. I'd bet they start with some trophy homes somewhere and one condo-hotel in the Snowshed parking lot. It might be next summer but there are probably a lot of lawyers in the way.

 

[Vortex]

Thankx Geoff. Ctenidae has some of this also. Starting to get a picture here.

 

[ctenidae]

Caveat- mine's strictly from SEC filings and minutes from the Killington Town Board, but it does seem to tie pretty well to Geoff's local information. He's closer to it, so his insights may be better, but I just don't see Centex buying Killington. Doesn't seem to fit their profile. Stranger things have been known to happen, though...

 

[Vortex]

Both of your post brought forth info many of us did not have. That's why I read the posts.

 

[ski_resort_observer]

Maybe if the Town of Killington would hurry up and move to New Hampshire like they have been threatning to do for years things would be better. lol

The businesses in the area do not want more retail on the mountain.

Sunday night my wife and I walked up the beautiful sidewalk(looked pretty new) from the Garlic to almost the Wobbly Barn, very impressive.

It's been many years since I have been on the Kmart access road. My wife, a Rutland native, claims to be the first female liftie back in 1977. The access road was not as commercialized as I was led to believe. We enjoyed our stay at the Happy Bear Inn and a great meal at The Garlic.

 

[Geoff]

Maybe if the Town of Killington would hurry up and move to New Hampshire like they have been threatning to do for years things would be better. lol

The businesses in the area do not want more retail on the mountain.

Sunday night my wife and I walked up the beautiful sidewalk(looked pretty new) from the Garlic to almost the Wobbly Barn, very impressive.

It's been many years since I have been on the Kmart access road. My wife, a Rutland native, claims to be the first female liftie back in 1977. The access road was not as commercialized as I was led to believe. We enjoyed our stay at the Happy Bear Inn and a great meal at The Garlic.

If Killington became part of New Hampshire (fat chance), it'd quickly become wildly commercialized. With no sales tax, you'd see every big box store open on Route 4. With no state income tax and a lower corporate income tax, you'd see a lot of business owners uproot from the surrounding 20 miles and move there. From my point of view as a New Hampshire resident and Killington property owner, Killington is already ugly enough. I'd rather pay a little extra property tax to get the Vermont environmental and anti-sprawl laws.

By the way, The Garlic has a superb martini and tapas bar in the back. They're double-size glasses so 4 of their martinis forces me to yield the car keys. At happy hour, you get your first tapas item free. It's a nice way to eat dinner.

 

[Geoff]

Caveat- mine's strictly from SEC filings and minutes from the Killington Town Board, but it does seem to tie pretty well to Geoff's local information. He's closer to it, so his insights may be better, but I just don't see Centex buying Killington. Doesn't seem to fit their profile. Stranger things have been known to happen, though...

Yep. It might very well be wishful thinking on my part. 5 years of ASC austerity budget have caused Killington to degrade quite a bit. I'd really like to see an ownership change. Since Centex owns the development rights to all the real estate, they're the only possible buyer for the ski resort.

I think once in a while about what Killington might actually be worth. They do about a million skier visits. Their skier day yield must be in the $50 to $60 range. That gives them sales of about $50 million. They probably make about $5 million of operating profit. What's the business worth considering there's no real estate development potential? $50 to $75 million? Centex is going to sell five hundred million worth of trophy homes and condos over the next decade. Figure a hundred trailside trophy homes at a couple million per whack. Maybe 500 condo units at $500K to $1 million per unit if they take the resort upscale. The ski area is chump change compared to the real estate opportunity.

Wishful thinking but I think it makes some sense.

 

[riverc0il]

interesting point geoff about box stores on 100 and 4. i wonder if citizens considered the implications of new hampshirizing the town and putting locally owned business out of business and creating a strip, new hampshire boarder town style. just shows how much of a publicity stunt the whole thing really was.

 

[ski_resort_observer]

Since the town of Killington is a "Gold" (sending town) most of the property taxes go for the schools both in Killington and other towns as well.

Property taxes do not drive the enviromental laws/anti sprawl, civil unions etc...it's the people who live in "real Vermont" not places like Killington.

The Garlic was pricey but very good. We wanted to go the Pickle Barrel, again to relive old memories, but it was not open. :beer:

 

[ctenidae]

Man, looking at the financial woes of ASC, it gets worse and worse:

November 1997: ASC went public. Les Otten borrowed $15.5 million from ING to buy 833,333 shares

1999: Oak Hill Capital Partners (a private equity buyout firm) came in with $150 million to clean up some debt, gaining convertible preffered shares that represent about a 64% stake in the company

2001: Les defaulted on the loan to ING, turning all 833,333 shares (now worth about $4.5 million) over to ING. Les resigned as President and CEO. ASC sold Sugarbush, knocking $7.4 million off its debt load. Not much.

2002: ASC announced it was selling Steamboat to Triple Peaks (a consortium headed by the owners of Okemo) for $91.4, and wass delisted from the NYSE. Big year for ASC. Otten announced he is a 5% part of a group buying the Red Sox. ASC backed out of the Steamboat sale (they sold Heavenly to Vail for $99 million, instead. ), the Colorado courts ruled that ASC had to pay Steamboat a breakup fee. ASC appealed, asking their liablility be limited to a $500,000 "walk away fee". Triple Peaks sued for the $5 million breakup fee.

It just gets ugly after that. The whole Triple Peaks deal was pretty awful, it seems. TP ended up buying Crested Butte instead, financed in part, I'm sure, with ASC's $3.4 million (if memory serves) damages payment. After about 6 rulings and reversals. By this time, Oak Hill's ownership was down to about 44%, as another "Undisclosed" investor had come in with about $17 million. I'm guessing that's the Dallas boys who ended up selling the land to Centex.

This whole thing is a case study in mismanagement. I'll have to remember it for one of my future gaduate courses...


k

 

[ski_resort_observer]

That's a pretty accurate time-line. I would start with Otten talking Fleet Bank(now part of Bank of America) into lending him 400 million to buy SKI Ltd,,,the beginning of the downfall.

 

[thetrailboss]

Man, looking at the financial woes of ASC, it gets worse and worse:

November 1997: ASC went public. Les Otten borrowed $15.5 million from ING to buy 833,333 shares

WTF? :blink:

2001: Les defaulted on the loan to ING, turning all 833,333 shares (now worth about $4.5 million) over to ING. Les resigned as President and CEO.

And yet he still owns the restaurant across the road from Sunday River. Ironically I heard this news of his resignation in March 2001 ON MY WAY HOME from Sunday River ski day!!! Who would have thought?

ASC sold Sugarbush, knocking $7.4 million off its debt load. Not much.

So they bought SB for like $4 mill or something, invested $28 mill into it and then operating costs, and then sold it for JUST $7.4 mill or so? :blink: Is there something I'm missing here?

2002: ASC announced it was selling Steamboat to Triple Peaks (a consortium headed by the owners of Okemo) for $91.4, and wass delisted from the NYSE. Big year for ASC. Otten announced he is a 5% part of a group buying the Red Sox. ASC backed out of the Steamboat sale (they sold Heavenly to Vail for $99 million, instead. ), the Colorado courts ruled that ASC had to pay Steamboat a breakup fee. ASC appealed, asking their liablility be limited to a $500,000 "walk away fee". Triple Peaks sued for the $5 million breakup fee.

It just gets ugly after that. The whole Triple Peaks deal was pretty awful, it seems. TP ended up buying Crested Butte instead, financed in part, I'm sure, with ASC's $3.4 million (if memory serves) damages payment. After about 6 rulings and reversals. By this time, Oak Hill's ownership was down to about 44%, as another "Undisclosed" investor had come in with about $17 million. I'm guessing that's the Dallas boys who ended up selling the land to Centex.

This whole thing is a case study in mismanagement. I'll have to remember it for one of my future gaduate courses...


k

Good case study for my contracts course.

Is there any particular reason why the old 'Sunday River' trademark font style changed last season? Did Les Otten lay claim to that 70's/80's font?

 

[jscott357]

I was lurking around here and I had to add my two cents. First, I love all of the takes on the coporate misfortunes at ASC. I ski Mt Snow seven or eight times a year because its close and have always been amazed at how utterly mismanaged the place is. I havent been at another ASC resort in a long time(you'd have to put a gun to my head to get me back to Killington ever!)but I think I get the whole picture from my visits to West Dover.

Part of their operations issue has come from the all-for-one pass though. The mountain is terribly understaffed and I have come to learn, through the grapevine that this is because they cant get any of the local HS and college students to work there. It seems that the draw used to be that they paid squat but every employee recieved an expensive season pass- the likes of which a poor struggling student could never afford. Now the pass is so cheap that any quick thinking student can put it on Mom and Dads credit card without the parents even blinking twice. No reason to work at the resort anymore... not enough lifties to keep all of the lifts open thus creating lift lines from hell. I vote "Other".

 

[ctenidae]

Interesting observation, jscott. I hadn't even considered base operational issues when thinking about the cheap passes. I'd be willing to bet that, if the All-for-One's are a source of quick cash, they didn't think of that effect, either.

 

[bvibert]

Part of their operations issue has come from the all-for-one pass though. The mountain is terribly understaffed and I have come to learn, through the grapevine that this is because they cant get any of the local HS and college students to work there. It seems that the draw used to be that they paid squat but every employee recieved an expensive season pass- the likes of which a poor struggling student could never afford. Now the pass is so cheap that any quick thinking student can put it on Mom and Dads credit card without the parents even blinking twice. No reason to work at the resort anymore... not enough lifties to keep all of the lifts open thus creating lift lines from hell. I vote "Other".

Welcome to the forums Jon. Thanks for contributing!

Thats an interesting take on the staffing issues, I never thought of that aspect of the All-For-One pass. I guess it makes sense though.

 

[jscott357]

Thanks for the welcome. It's good to be here. Some great info - particularly when it comes to some of the smaller areas that I never really think about. I may just use the new info as an excuse to ski some of those places this season.

I got the info about the all-for-one staffing issues from a Mt Snow insider who also told me, at the end of last season, that ASC corporate was probably not going to renew the promo for this year. Spring and summer meetings brought about a different outcome so I guess we can infer that it makes them a nice load of the green because they know that they are compromising their staffing process and thus the quality of their service.

Im not sure if the staffing issue rears its ugly head out west so it may be as simple as a regional problem thats outweighed by the income generated nationwide. Either that or they're just not worried about being understaffed and delivering a lesser experience.

At any rate, Ill probably be at Snow 10 or 12 days this year and I didn't buy my A41 pass before the 10th. Not too bright on my part, I guess. I wish Stowe had a deal- now THAT would save me some $$$!

 

[tirolerpeter]

ASC Pass issues

Interesting read on the trials and tribulations of ASC. I noticed many foreign workers there last year; especially from countries south of the equator whose school vacations come in our mid-winter. I have also met many such individuals out west. I think the real problem is that corporations want people to work for very little and when they can't "out-source" the work, they "in-source" the workers from places that have lower wage standards.

 

[jscott357]

I see the same thing. Its not just limited to the ski areas themselves either. The area retaurants and hotels employ these "in sourced" people as well.

I do a great deal of HR consulting (though not in the area of recruiting) and I have always been intrigued by the ways in which the areas connect with these folks. Mt Snow seems to have a group from Chile - understandable; they work Portillo et al during the southern winter and VT during ours. Stowe also has a South American group, but the bus drivers tell me that they are always picking up groups from Jamaica to work back of the house.

I'm not sure what the compensation plan is but I'll bet that they house these folks and then deduct a board fee from their wages so that they lower their outlay even more. Interesting observation Tirolerpeter I had forgotten about that.

 

[Marc]

The foriegn worker practice certainly isn't limited to ASC though... we met a bunch of guys from Australia at WV...

I thought that it was kind of standard practice for a lot of places.

 

[ski_resort_observer]

The hospitality industry has been importing foreign workers for many years. When I was growing up in the Daks, 40 years ago, the big hotels brought in workers from the Carribean cause many jobs went unfilled. In the early 70's Aspen made national news for bringing 2000 workers from southeast Asia.