Mammoth purchases proof of
profitability in the ski industry
MAMMOTH LAKES, Calif. – In the 1970s, Mammoth Mountain led North America in skier days, despite being 350 miles from Los Angeles and with not much of an airport.
After that, it got bumped by Vail Mountain and then Breckenridge. Now, backed by the investment capital of Starwood, Mammoth is flexing its muscle again, purchasing Bear Mountain and Snow Summit. The two are located about 100 miles east of Los Angeles.
But why would anybody want to buy ski areas after drought in three of the last four years and a warming climate? The Los Angeles Times explored that angle, noting that skier visits at California resorts dropped as much as 45 percent last winter as compared to the previous season.
Bob Roberts, who runs the California Ski Industry Association, notes that drought is not new in California, with 17 of them since record-keeping began in the 19th century. But the profile of those droughts is becoming more jagged, and the changing climate is likely to make winter more uncertain.
But Roberts also pointed to new power given to the Forest Service to allow summer recreation on ski hills. And consolidated operations are allowing operators to retool their products.
Roberts didn’t mention Vail Resorts, but Rusty Gregory, the chief executive of Mammoth, did. He told The Sheet, a newspaper in Mammoth Lakes, that this addition of two new ski areas allows Mammoth to better compete with Vail Resorts for customers from Southern California. The company also aims to draw destination skiers from elsewhere in the world, he said.
Now, one bundled ski pass of $689 provides access to the three ski mountains plus June Mountain, Mammoth’s kid sister. The pass is cleverly being marketed as a “Cali4nia” pass.
Vail’s Epic Pass, which costs $749, offers skiing privileges at five ski areas in Colorado, two in Utah and two in California plus smaller ski areas in the Midwest and a few days in Europe.
Gregory spoke of “exciting new development and expansion plans” for each of the four ski areas, but did not elaborate. The four ski areas currently have altogether about 2 million skier days per winter, about 60 percent of those at Mammoth and June Mountain.
Mammoth, meanwhile, continues to expand its airline program, with the newest twist being a flight from Denver this coming winter, improving connections from the Midwest
Michael Berry, director of the National Ski Areas Association, said he sees the California consolidation as further evidence of the profitability of ski area operations and another step in the ski industry’s vertical integration.“Most of the 470 or so ski areas are more profitable now than they have ever been before,” he told Mountain Town News. He cited an industry average of 21 to 22 percent EBIT (earnings before interest & tax), a measure of profitability.
Berry further tells MTN that he expects the vertical integration of the ski industry of the last 10 to 15 years to continue. “The players might change. The companies might change. But the industry has been ripe and will continue to be ripe for consolidation,” he said.
He said the most attractive ski areas for purchase will be those medium-sized ski areas, some of them family owned, near major population centers or with strong transportation connections. With their proximity to the 18 million people in the LA metropolitan area, Mammoth’s two new acquisitions certainly fit that profile.
As for summer activities, “They are not a huge factor, but rather an important factor” in reducing the need to borrow money during the slow months of summer and fall, Berry said.
Vail Resorts has also downplayed summer activities. Blaise Carrig, the president of the company’s mountain division, told MTN last year that winter revenues are “dramatically greater for our company, and they always will be.” Vail, he said, hopes to lower the losses during summer and fall or possibly produce a profit while having more opportunities for year-round employment.
Record resort revenue for Vail Resorts last year
BROOMFIELD, Colo. – Vail Resort had record revenue from resort operations in the last fiscal year, company officers told financial analysts last week. All revenue streams increased over 2013, and even skier numbers increased 10 percent, despite the drought that caused visits to Tahoe resorts to flag by 15 percent, notes the Vail Daily which sat in on the conference call.
The revenue per available room at company hotels increased by more than 12 percent, and a “modest” improvement was noted in real estate sales.