The Steamboat Ski Area will not get the green light to build major capital improvements such as new chairlifts and restaurants until American Skiing Co. resorts improve their fiscal performance as a group.
Steamboat Ski and Resort Corp. President Chris Diamond said this week the ski area's ability to make $10 million to $20 million in on-mountain improvements proposed in a new amendment to its U.S. Forest Service master plan is governed by ASC's contracts with key lenders.
"It's a function of our performance and ASC's performance," Diamond said. "The loan agreements on the resort side provide for minimum capital access that amounts to maintenance."
Beyond the minimum capital investment needed to protect all of the different resorts' assets, ASC is required by its lenders meet set cash-flow thresholds before it can access additional capital. When that happens, ASC's senior seam will be allowed to entertain bigger projects.
"At that point, we have the opportunity to spend half of incremental (earnings over the thresholds) and put it into growth capital," Diamond said. He declined to quantify the cash-flow thresholds.
Even if ASC is successful in pushing cash flow through the thresholds, there are no assur-
ances on how much of the additional capital will flow to Steamboat.
"The dog that runs the fastest gets the bone," Diamond said, meaning the resorts already showing a good return likely are to win the race for investment capital.
If significant capital becomes available to the resorts, the senior team (comprising four ASC executives based in Park City, Utah, plus six ski area presidents, Diamond among them) will meet to decide how the money would best be spent. The team would be obligated to invest wisely in projects that will produce new revenues, Diamond said.
In addition to Steamboat and The Canyons at Park City, ASC's ski areas include Pico and Mount Snow in Vermont, Sugarloaf and Sunday River in Maine and Attitash/Bear Peak in New Hampshire.
"We'll have to determine what are the impactful changes so we can get ourselves out of that cycle of under-performing," Diamond said of the choices facing the senior team.
Diamond pointed out that after a strong start in ski season 2002-03, Steamboat under-performed.
Diamond is optimistic that a six-year trend that saw the number of destination skiers decline by 16 percent is over. He thinks the decline has bottomed out and that demographic trends are signaling a rebound that would allow the resorts access to more capital. Specifically, Diamond points to the fact that national skier visits have surpassed expectations, particularly on the East and West coasts. Young skiers and snowboarders driving that trend will mature into destination skiers who bring their families on vacation, Diamond said.
Those trends should, eventually, improve ASC's overall fiscal health and provide Steamboat with investment capital to spend on some of the projects listed in its master plan amendment.
"We would not have invested $100,000 in this (master) plan if we didn't believe it was going to happen," Diamond said. "We just don't know when it's going to happen."
Doug Allen, the Ski Corp.'s senior director of operations, said that the lead time needed to get on-mountain improvements approved by the U.S. Forest Service means Steamboat must plan to be prepared to meet increasing demand if destination skier visits rebound.
The master plan anticipates a wide variety of on-mountain projects that could take place in the next five to seven years. However, the fact that projects are contained in the plan doesn't necessarily mean they will be undertaken.
Allen points to the replacement of the Sunshine chairlift with a high-speed quad detachable lift, as an example. The new lift was added to the plan in 1992-93 and listed again in 1996-97, the last time the plan was amended. However, it was never funded and is listed again in the 2004 update.
Allen sees positive signs that new skiers and riders are coming into the sport from the fact that Steamboat's ski school facilities are maxed out during peak periods.
Jim Schneider, Steamboat's vice president of skier services, said a significant portion of the amended master plan is devoted to creating more room for ski school lessons.
The replacement of three or four existing chairlifts at the very bottom of the mountain with a six-seat chairlift would open up space on the Headwall and South Face trails currently taken up by rows of chairlift towers, Schneider said.
The ski area also would like to re-grade trails near the base area to achieve a more consistent grade for beginner skiers and eliminate a double fall line that reduces the usability of the lower runs.
The development of the Bashor Terrain Park has displaced ski school classes; the master plan calls for creating a new teaching area nearby. A new lift and slope would be created where a patch of trees stands between Giggle Gulch and Eagles Nest.
Plans also call for the Bashor chairlift to run farther up the mountain to allow skiers and riders to get off the lift and connect with the Thunderhead Express.
In a related improvement, Main Drag and Boulevard, two parallel trails that lead from the Christie Summit to Thunderhead Express, would be merged to create a wider trail.
Getting the bulk of the projects completed is dependent on ASC's resorts improving their aggregate cash flow.
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