April 21, 2018

Vail now owns Whistler/Blackcomb and Stowe in addition to its Colorado, Utah, California, Europe and Australia properties.

The Intrawest resorts are now owned by a partnership which includes the Crown Family, the owners of Aspen, and KSL, the Owner/Operator of Squaw and Alpine in California. Note that until now Crown and KSL had geographically limited holdings in Aspen or in North Lake Tahoe. This partnership also has Mammoth and the two areas in Big Bear Lake that Mammoth bought from Dick Kuhn. Industry analysts that have a basis for their analysis now believe these two operators, Alterra & Vail, will be statistically equal in skier visits.

What’s the Mover of this Consolidation?

The most profound event taking place is the season pass competition. Vail has its EPIC PASS which is comparatively inexpensive and gives access to the multitude of Vail Resorts across North America, in Europe and Australia. About two years ago, Bill Jensen, then with Intrawest, came up with a plan to compete with Vail for “pass oriented guests” by facilitating the creation of the MAX PASS. The MAX PASS (which what grew to 44 ski area participants) offered a pass that gave the purchaser five days skiing at the member resorts. Bill found willing cooperation from the operators of the CNL Portfolio, Intrawest, Powder Corp and some other operators who wanted to compete with Vail’s pass program. Bill is now a principal at Telluride. Telluride is now a member of the EPIC PASS and MAX PASS is gone, with some members now part of the EPIC PASS, IKON PASS from Alterra, the MOUNTAIN COLLECTIVE or IKON. The only multi owner/operator not in the pass mix is Peak Resorts. Peak Resorts runs its own program as they have areas in the Midwest, Pennsylvania, Ohio, Missouri, New Hampshire, VT and NY.

One specific aspect of the pass consolidation programs is of note. Initially, only owned resorts were included in the respective passes. If an operator wanted to include an area not owned by that operator in its pass offering, the operator would try to acquire the area/resort and then add it to the pass offering. That is no longer the case. Telluride, led by Bill Jensen, found a way to join the EPIC PASS without Telluride being acquired by Vail Resorts. Since that initial event, multiple other areas have joined with the EPIC or IKON passes without being acquired by either Vail or Alterra. This impacts both the market share competition that these passes create and the value of ski areas in the market place. The leading acquirers of areas, which were capable of paying a premium over average market multiples to acquire areas that fit their market penetration goals, no longer have to buy the area(s). The acquirer is able to buy the skier (only) from the target area via the pass affiliation not purchase the resort itself. With Vail and Alterra apparently limiting their acquisition of resorts and areas, the valuation of areas or resorts for sale now reverts to industry valuation multiples that are in line with historic valuations. These are in the 5 to 6 times EBITDA range, rather than the 10 to 11 multiples that were seen in recent Vail and Alterra acquisitions.

The New Order

Let’s focus for a minute on the new order in the ski business. We have Vail, Peak and Alterra. We have EPR, the REIT that has provided funding to Peak, OCH ZIFF and Pacific Group. EPR is publicly traded. EPR bought the CNL Portfolio and did a simultaneous close on all but one of the assets in the CNL Portfolio, selling the bulk of the portfolio to Och Ziff. EPR has provided acquisition financing to Och-Ziff, for a five-year term. Boyne, the lessee of nine of the leased properties owned by Och-Ziff has arranged for funding through Wells Fargo to acquire the leased properties from Och Ziff. Other lessees are thought to be looking into ways to acquire the areas/resorts that they now lease from Och Ziff.

OCH Ziff is believed to have paid in the range of a 6+ multiple of current EBITDA for the CNL Portfolio. Vail’s acquisition of Whistler/Blackcomb was over $1 billion and the reported price for KSL/Aspen‘s acquisition of Intrawest is $1.5 billion. These two transactions appear to reach an eleven multiple and Vail is believed to have paid a ten multiple for Stowe.

With Alterra and Vail likely becoming very selective, more so than they already were, EBITDA multiples will likely settle into the five times EBITDA to perhaps as high as a high six times multiple depending upon condition of the infrastructure of a given area, its location and position in its given market.

That’s what I see. Tell me what you see.


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