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Ski Operators Resorting to Retail

Recreation: As their industry consolidates, they appeal to a new generation by offering new services.


DENVER — Adam Aron figures he doesn't need an oversize mouse with big ears to lure vacationers to his playground.

What he does need is a way to convince harried Americans that they can find a better respite on his mountaintops of waist-deep snow and towering pines than at theme parks or other vacation areas.

"What we're competing against is a beach in Hawaii or a ship in the Caribbean or some other use of the discretionary dollar," said Aron, who heads Vail Resorts Inc. "As a result of that, we have to offer at our resorts the kinds of alternatives and options that consumers are getting in other places."

A former cruise line executive, Aron has set Vail Resorts on a course to meet that challenge by adding new amenities and by acquiring four resorts and raising $266 million in an initial stock offering.

The changes at Vail Resorts are part of an ongoing consolidation in the ski industry designed to bolster growth and make resorts less dependent on weather and more attractive to a new generation of sports enthusiasts.

"Consolidation is just a fact of business life today," said Michael Berry, president of the National Ski Areas Assn. "The ski industry is no different than any other business in this country today, whether it's the grocery store or the auto dealership."

For decades, the ski industry enjoyed healthy growth, thanks to baby boomers who embraced the sport. All a resort had to do was provide skis, a lift to the top of a mountain and nourishment.

In the late 1970s, artificial snow making arrived, revolutionizing the industry.

"It became obvious that snow making was fundamental. . . . It also required resorts to make a significant capital investment. That really caused the demise of the mom-and-pop ski area," Berry said.


But as resorts began pouring capital into the technology, the number of skiers began to decline. Baby boomers, estimated at 78 million, were replaced by Generation Xers, who number only about 44 million, Berry said.

"When, in fact, the Generation Xers were in their late teens and early 20s, the industry struggled with that," Berry said. They didn't know why the number of skiers diminished.

To survive, the resorts began to consolidate and diversify.

"The historical model for ski companies was based on just selling the lift ticket and a burger," Berry said. Today, the companies sell everything from T-shirts to real estate, which has helped boost annual industry revenue from $1 billion to $1.5 billion a decade ago to $2.5 billion this year, he said.

And the number of resorts has dwindled from 709 in the 1985-86 season to 519 in 1995-96, the NSAA stated. About a dozen companies own the top 50 or 60 resorts in the United States.

Skier visits--the industry measure that represents one person visiting a ski area for any part of a day--averaged 50 million in the '80s but increased to 54 million last year, NSAA said.

The reason for the increase: It's more fun to ski now.

"You've got better food. You can ski more in probably six hours, or four hours, even, than you skied in 1978," said Bob Wilbanks, who publishes the National Ski Club Newsletter.

Today, Vail charges $52 for a lift ticket for a day of skiing across 4,100 acres of terrain accessible by a network of high-speed chairlifts. The company also owns nearby Beaver Creek, which offers 1,530 acres of ski terrain.

In addition to the sleek slopes and steep drop-offs, the mountains offer everything from an ice rink to upscale restaurants and a business center.

Like many other mountain resorts, Vail has added summer activities, including golf courses, hot-air ballooning and mountain biking.

About the time Aron became its chief executive officer last summer, the company agreed to purchase Breckenridge, Keystone and Arapahoe Basin from Ralcorp Holdings for $310 million, creating the world's largest ski company. All the resorts are within 45 miles of each other. The Justice Department has approved the merger on condition that Vail sell Arapahoe Basin to comply with antitrust laws.

Aron moved into the ski industry after working in marketing with United Airlines and Hyatt Hotels and then as CEO of Norwegian Cruise Line Ltd. He plans to borrow on that knowledge to broaden Vail's lure.

"It used to be that ski resorts were concepted solely around lifts and trails. Now ski resorts are focused around the minute the first phone call is made from a potential vacationer," Aron said.

Over the next five years, the company plans to boost development of the retail areas at the base of the mountains, he said. An expansion is planned to add 1,633 acres to Vail Mountain's terrain.

There will also be joint marketing programs with other attractions in the area and possibly rewards for frequent visitors, similar to frequent-flier programs offered by airlines, he said.

In the next five years, Berry of the ski areas association predicted there will be more consolidation as the industry continues to adapt.

"I would expect that we'll see these companies looking to acquire more premium resorts, yes. At some point, we may have the consolidators consolidating the consolidation," he said.

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