Steamboat Pilot & Today

Steamboat Springs — When American Skiing Co. merges with MeriStar Hotels and Resorts to become Doral International Inc. early next year, the focus won't change. Selling down existing real estate inventory in Steamboat Springs and The Canyons near Park City, Utah, will remain of primary importance to the new company.

"The focus will be on reducing quickly our existing real estate inventory," new Chief Executive Officer Paul Whetsell said Monday. "Development will slow considerably."

The terms of the merger announced this week reflect that a portion of American Skiing's outstanding $450 million in debt will be restructured. The existing senior "credit facilities" of both companies will be replaced by a new $285 million bank loan consisting of a "$120 million revolver and $165 million in term loans."

American Skiing Chairman Les Otten, who will hold the same title with the new company, agreed that American Skiing had become overly dependent on debt.

"Leverage has increasingly become an issue," Otten said, as late deliveries of hotels, including the Steamboat Grand, cost the company a winter season of selling quartershare ownership and robbed it of a chance to capitalize on its investment in resort properties.

Whetsell, who serves as chairman and CEO of MeriStar, said he'll also be aiming to convert Doral International's combined debt to lower interest rate loans. Presently, the combined debt of the two merging companies averages an interest rate of 13 percent, Whetsell said. Reducing that amount to a real-world rate of about 10 percent could represent a savings up to $15 million of recurring annual benefit for the company, Whetsell said.

Undeveloped land at its existing ski resorts will provide Doral International with an inventory of potential projects that could stretch out over more than a decade, Whetsell said. But the emphasis will be on selling project sites to third parties so that they end up financing expansion of the bed base at the resorts.

Prior to the announcement of the merger, Otten had transferred American Skiing Co.'s Senior Vice President of Real Estate Scott Oldakowski to Steamboat to concentrate on reviving quartershare sales.

During a conference call in October, Otten said the company would attempt to de-leverage real estate debt by about $40 million in 2001 through sales of townhomes, quartershares of hotel units and other real estate parcels. That would be accomplished by selling existing real estate at The Canyons in Utah and at the Steamboat Grand. At the time, Otten said 70 percent of the Steamboat Grand remained to be sold.

John Emery, chief financial officer for the new company, said the estimated value of the company's unsold real estate holdings will be about $175 million, with 80 percent of that tied up in the Steamboat Grand and another grand hotel at The Canyons. Another $22 million in unsold real estate is available at the company's New England ski areas, Emery said.

Otten added that presales for a grand hotel yet to be built at Heavenly Valley, Calif., have reached $96 million against a potential of $134 million. And Emery would advocate undertaking another major project, Whisper Ridge at The Canyons, if he thinks similar success in presales can be achieved.

Oldakowski outlined for the Steamboat Pilot earlier this month his strategy for selling down remaining quartershares at the Steamboat Grand as part of the company's overall plan to "de-leverage" its real estate holdings.

Otten said before reaching any conclusions about the effectiveness of the renewed efforts to sell remaining Steamboat Grand quartershares, he would prefer to wait 30 to 45 days after the holiday ski crowds arrive in Steamboat.

Oldakowski agreed with his boss, observing a similar amount of time after the Grand Hotel at The Canyons opened last February, a significant spike in sales activity took place. So, sometime about Feb. 12, 2001, ASC executives should have a good idea how their hopes for Steamboat Grand sales are progressing.

The reason for their prediction lies in the fact that once the Steamboat ski season is in full swing, with good snow conditions, the company will be able to to market to existing customers who are virtually on site, even if they are staying at another property, Oldakowski said.

Steamboat Ski Area Vice President of Marketing Andy Wirth offered assurances that skiers vacationing in Steamboat this winter won't be subjected to a high-pressure timeshare sales pitch.

"It's not intrusive," Wirth said. "It will be done through a ubiquitous merchandising program and daily wine and cheese receptions at the base of the mountain. We don't have a sales technique where we're chasing people down."

Oldakowski said his sales staff would focus on three primary markets.

The first would include in-house hotel guests, perhaps as many as 600 to 800 people at any given time during the ski season, if the Steamboat Grand is full.

They represent a strong market for quartershare purchases because "they're already paying a significant amount of money to stay in that property," Oldakowski said.

A second significant market is represented by people who visited the ski area in the past two years and while they registered in the Steamboat Grand sales office didn't elect to purchase a quartershare at that time. Oldakowski said he definitely does not interpret their reluctance to buy at first glance as a sign they would never purchase.

"We have literally thousands of those people," Oldakowski said. "They may be people who are not as risk-tolerant as the visionary people who got in early. Now, there's an opportunity to really touch and feel" the product, he said.

Finally, Oldakowski said he would rely on owner referrals to tap into sales prospects.

"We have north of 300 owners already," Oldakowski said, and their word-of-mouth, perhaps even inviting friends to stay with them in Steamboat, represents a strong opportunity. A number of existing owners have recently expressed interest in purchasing additional quartershares, Oldakowski said.