Wednesday, December 20, 2006
The announcement Tuesday that Intrawest ULC plans to acquire the Steamboat Ski Area from American Skiing Co. on the surface seems to be good news for Steamboat Ski & Resort Corp. as well as the broader community.
First, the sales price of $265 million demonstrates the value the management team at Ski Corp. has built in the ski area despite serious obstacles such as the crippling debt that has weighed down ASC. And it also shows how strongly Intrawest and its parent, Fortress Investment Group LLC, believe in Steamboat's future.
When ASC announced it was selling Steamboat last summer, we said the worst scenario would be for an under-capitalized company to overpay for the ski area and find itself saddled with debt worse than ASC's. We said the best would be for a company with deep pockets and a proven track record in the ski industry to become the buyer.
The Intrawest deal appears much closer to the latter than the former. Intrawest is a renowned resort operator and developer with a proven track record at resorts such as British Columbia's Whistler-Blackcomb, Colorado's Copper Mountain, West Virginia's Snowshoe Mountain and Stratton, Vt. Intrawest also is involved in ventures at destination golf and beach resorts like Destin, Fla., and Honua Kai, Hawaii.
Fortress would seem to fit the deep pockets bill. It is a New York-based private equity firm that manages some $26 billion in assets. It says something about the company that it is going public, exposing it to greater scrutiny from the Securities and Exchange Commission. No other equity firm its size has taken such a step.
Fortress acquired Intrawest in October in a $2.8 billion deal and seems poised to be a serious player in the ski resort industry.
Still, expectations must be tempered. First, Intrawest and ASC simply have an agreement right now. The deal won't be consummated until the end of March, and as we saw in 2002, anything can happen between now and then.
For Ski Corp. employees, it's difficult to predict the changes they will experience. But it's hard to imagine that Intrawest is going to swoop in and raise salaries, add staff and improve health insurance benefits. Similarly, residents are dreaming if they think Intrawest is going invest millions in on-mountain improvements while simultaneously slashing lift ticket and season pass prices.
Finally, it should be noted that Intrawest is an even bigger corporate entity than ASC. This is not a "mom and pop" operation where residents are going to run across the owners in the grocery store.
Still, Intrawest can have a huge impact here for the better. The base area has long been identified as Steamboat's Achilles heel, and there is no bigger name in base area development than Intrawest.
Steamboat is coming off a strong year with good snow and skier numbers. There is significant private investment going into the area around the base with One Steamboat Place, the Highmark and Wildhorse Meadows. The Urban Renewal Authority provides a source of funds for public infrastructure. Steamboat's airline program is the envy of many in the industry, and Yampa Valley Regional Airport is undergoing significant improvements and expansion while adding more and more flights each season.
The sale of the ski area gives those investors - public and private - a true partner in their efforts to revitalize the area around the ski mountain.
The ski area remains the most critical component of our resort economy. Its success has a direct impact on jobs, wages, retail and residential growth and tax revenues and an indirect impact on everyone who calls this community home.
As we said earlier, the deal announced Tuesday isn't likely to lead to lower season pass prices. But it has the potential to seriously strengthen our economy, and that, it seems, is far more important.