Can the UnVail of Mike Shannon and Jim Crown give Rob Katz and Vail Resorts a run for ski industry money?
by Allen Best
Vail Resorts has a new 800-pound gorilla to tangle with in the ski industry. Or maybe it’s a 700-pound gorilla. Whatever its precise size, this new company—still unnamed as of early October—has bought ski areas across the United States this year from California to Vermont. And by August, with the announced intent to purchase Utah’s Deer Valley, now consummated, some observers believed it was at parity or at least near parity with Vail Resorts, the ski industry giant.
The business strategy for this new enterprise remains unknown, which is perhaps fitting for a company that still has no name. Until it does, it might as well be called UnVail. But even that has an ironic twist, in that UnVail is at least partially the creation of former Vail executives who now live in Vail.
The new company is a joint effort of two pools of money. One side comes from the Crown family, owners of the Aspen Skiing Co. and its four ski areas and now expanding line of four-star hotels, called Limelight.
The Crown family fortune comes from industrial Chicago, and it’s a remarkable story. It starts with poverty in the form of Henry Crown, who was the son of a Lithuanian immigrant sweatshop worker. He left school in eighth grade but started a business selling steel in 1915. When he died in 1990, the New York Times described him as a “billionaire whose life exemplified the Horatio Alger rags-to-riches story of American industrialists.” Hotels, buildings, railroads, meat-packing plants, coal and sugar were among the assets, but also—beginning in 1958—a major stake in the aerospace industry in the form of General Dynamics.
The family still owns about 10 percent of General Dynamics, according to a Forbes profile, the family’s single largest asset. As of 2015, Forbes ranked the Crown family as the 27th wealthiest in the United States. A key figure in Aspen is Jim Crown, grandson of Lester Crown.
KSL Capital Partners is probably best understood as an enterprise of Mike Shannon. Originally from Wisconsin, he was a banker in Chicago when he was tapped at age 25 to take the reins of Vail Associates, the precursor of Vail Resorts. The holdings then consisted of Vail Mountain and Beaver Creek. That was in 1986.
In 1992, he left skiing and joined forces with New York investor Henry Kravis and another Vail executive, Larry Lichliter, to form KSL Recreation. They invested in golf course, spas and the like. That firm was sold in 2004, and in 2005 Shannon joined Erick Resnick, a former executive at Vail Resorts, to create KSL Resorts. According to his profile on the KSL website, the firm has raised over $6.5 billion in equity capital commitments and investments exclusively in travel and leisure businesses since 2005. To add intrigue, both Shannon and Resnick are said to live in Vail.
Then there’s Vail Resorts, which is no longer based in Vail but rather in the Boulder area, at the foot of the Rocky Mountains. It been phenomenally successful during the last 20 years since it became a publicly owned company. Two statistics tell just how successful this enterprise has been: Stock prices were $16 at the initial public offering in 1997. On a recent Monday shares were selling for $216.
During these 20 years, the number of ski areas has grown from 2 to 14, including one in Australia and Whistler Blackcomb in Canada. Two ski areas at Park City were merged to create the continent’s largest single ski area.
Vertical integration is another key feature. From airport shuttles to restaurants to rental shops, it seems that Vail Resorts has a finger in every part of the resort pie. At the center of this vertical integration and geographic expansion has been an old, simple idea: a deeply discounted annual ski pass but carefully branded under the name Epic. Rob Katz, the chief executive, has sprinted with this simple but powerful concept.
Upfront sales matter, greatly. But what may matter most, says Rick Kahl, editor of Ski Area Management, a trade magazine, is that people spend the same total amount during a day at a ski resort, whether they bought their ticks in advance or on that day.
“So, if you, as a guest, buy your ticket in advance, you might stil l spend, say, $100 while at the area—on food, drink, retail, a lesson, etc. If you buy your ticket that day, you tend to spend less on all the other things,” he explains.
Of course, many of Vail’s customers spend well more than $100 a day. The trick of the epic Pass was securing that commitment early.
Will UnVail use the same strategy when ski pass prices at its 13 ski areas are announced in spring 2018? That was the early speculation. But Kahl says it’s an open question how UnVail will leverage its assets. He notes that in buying the former Intrawest ski areas, UnVail also gained 1,100 acres of developable land. He also notes that Shannon, at an industry meeting several years ago, before the new UnVail partnership was announced, indicated that the skiing market was ready to accommodate more real estate development and an expanded bed base.
A key place to watch this new industry show-down is at Park City, where the two resorts will compete side by side: Park City Mountain Resort, the continent’s largest, vs. Deer Valley, perennially at the top of ski rankings. The purchase was completed recently, putting UnVail now at 13 resorts across the United States that collectively host about 7 million skier visits. Vail Resorts last year did about 12 million skier visits.
Is the ski industry big enough for these two big gorillas? After all skier numbers have been flat or even declining since 2010. But the rise of Vail’s stock prices explains why this new partnership of Aspen and former Vail executives are getting in the ring. How consumers will benefit is the answer still to be provided.