10/15 Killington Board of Selectmen Meeting

[SkiDork]

But from a 10K foot point of view, the question remains - why are all the other ASC resort buyers able to increase value to the customer yet the Killington buyer is generally decreasing value?

[millerm277]

The 2006 SEC filing for ASC shows Killingotn(including Pico) with 795,000 skier visits. At one time that was 1,100,000 to 1.200,000. That's a loss of 3-400,000 skiers, and with revenues of $60 per skier, that's a loss of $20,000,000 in revenues.

Correct, but...nothing they've done is going to boost visits, and while it may increase income short-term, over the long run it will reduce skier visits even further, unless they make some serious investments in the area to justify the cost. (Such as new lifts, long season...etc).

ASC lost about $40,000,000 in 2006. That includes all expenses, depreciation and interest.

Sounds about right, I'll have to look, but were they losing money when you don't count the payments they had to make on their debt?

Lots of people say that Killington was profitable. But often those people are talking about revenues, less operating expenses, not including depreciation and interest expense(EBITDA).

I am fairly certain that somewhere in those SEC filings (I don't have the time to sift through them right now), detailed numbers for Killington were disclosed, I believe Highway Star may know where to find that, and it was profitable.

If you look at some of the infromation available to the public such as number of lodges to service the number of skiers, number of lifts to servcie the number of skiers, it sure looks like Killington was an expensive area to run.

That's definitely true, however...with the skier numbers it traditionally pulled in, the number of skiers was about right for their facilities. They need to get back to 1m visits, and nothing that is being done right now will do anything but scare away more visitors.

And that's not even discussing the cost of snowmaking, particularly making it over and over on the same terrain between November 1 and Christmas.

Correct, but they could make it much cheaper to do if they bought better equipment, and they also pull in large numbers of skiers early season (ever tried to ski a Thanksgiving at Killington? It's insane).

Does it make sense to pay $80,000,000 for a resort, then "bet the farm" that the weather will be great?

In my opinion at least, if they aren't willing to gamble with that sort of thing, typically multiple times a year, they are in the wrong industry...

Would any smart business person want to take the same risk that Otten took? What happened to him?? He sunk millions into this and other resorts and then the weather turned against him.

Yup, he bought too many resorts, far too quickly. His investments here, mostly paid off I believe.

I'm not saying mistakes we're made, but if he had taken a more conservative approach to start with, maybe we would have a resort village now and maybe there would be an interconnect.

I agree.

Use some common sense. We may not like the impact of some of the tough minded busienss decisions that Powdr is making, but it's not our money, is it? And maybe they'll be around to invest some capital next year. Otten sure isn't.

Reading through this gives a bit of a different perspective on what happened. http://pressherald.mainetoday.com/story ... PHbiz&pg=1

Again, communication has not been good. And, arguably, some of the decisions have hurt some people. But there is time to work through some of those decisions to see if we can do something or get some further information to understand the thinking beghind them.

If they'd have be open, and honest with us, it would probably have been a lot easier.

[laseranimal]

my guess is that all the other resorts have significantly less depreciation of the physical plant, plus lower operational costs

[Tin Woodsman]

The 2006 SEC filing for ASC shows Killingotn(including Pico) with 795,000 skier visits. At one time that was 1,100,000 to 1.200,000. That's a loss of 3-400,000 skiers, and with revenues of $60 per skier, that's a loss of $20,000,000 in revenues.

And even still, K-Mart was quite profitable on an EBITDA basis.

ASC lost about $40,000,000 in 2006. That includes all expenses, depreciation and interest.

Lots of people say that Killington was profitable. But often those people are talking about revenues, less operating expenses, not including depreciation and interest expense(EBITDA).

Very little of ASC's mountain of debt was a function of their purchase of SKI Ltd. or subsequent investments at Killington. In fact, I'm fairly certain you can trace most of the problems right back to Otten's decision to dump the proceeds of ASC's IPO right into buying Steamboat and Heavenly, followed by massive investments at The Canyons. K-Mart has long had a possitive cash flow and little need to lever up its balance sheet. Moreover, as Nyberg himself admitted, there is a tremendous amount of "deferred maintenance" at the mountain, leading one to conclude the their D&A expense isn't that large in relation to the size of their business. Quite simply, everything is old and already paid for/fully depreciated. The logical conclusion of these observations is that the actual earnings component of the EBITDA figures is probably a lot higher than you think.

If you look at some of the infromation available to the public such as number of lodges to service the number of skiers, number of lifts to servcie the number of skiers, it sure looks like Killington was an expensive area to run. And that's not even discussing the cost of snowmaking, particularly making it over and over on the same terrain between November 1 and Christmas.

Of this there can be no doubt. Killington was and is extremely poorly designed from an efficiency standpoint. Much more forethought should have been used decades ago, with a single lower lodge/base area to service SS/RH and an upper lodge to serve the Basin trails. Bear Mtn was a natural place for a lodge/base area in a world in which Parker's Gore was on the horizon. Now, not so much, but you need a presence on the south end of the mountain. As for Skyeship Base - that's the price you pay to be in the game. You want to crow about 3000' vertical feet in central VT? Fine, but you gotta pay for it.

Last year, Killington was close to closing at Christmas. Does anyone think the resort was profitable then???? Does it make sense to pay $80,000,000 for a resort, then "bet the farm" that the weather will be great?

Would any smart business person want to take the same risk that Otten took? What happened to him?? He sunk millions into this and other resorts and then the weather turned against him. I'm not saying mistakes we're made, but if he had taken a more conservative approach to start with, maybe we would have a resort village now and maybe there would be an interconnect.

Two things here. First, lousy weather in the early season, hell - all season, is a simple reality of the northeastern skiing business. I will guarantee that closing close to X-Mas will happen again in the next decade. If they weren't prepared for that, then they shouldn't be in the game.

Second, and what really puts a bug in my shorts, is this straw man that POWDR defenders seem to be ubiquitously referencing. Namely, that the only choices for POWDR were either continued under-investment or massive spending up front (ala what ASC did at Sugarbush) with no in-between. sh*t.

sh*t. sh*t. sh*t. That is 100% a false choice. As other recently divested ASC mountains have illustrated, there are many shades of gray here. Look at Sugarbush, in their first year or two of owning the hill, Summit Ventures replaced the Castlerock lift (granted they had no choice - POWDR would probably use it as an excuse to close the pod), installed the GMX high-speed quad from base to mid-mountain at North, completely revamped the offerings at North to make it more attractive to locals, committed to having one of the longer seasons in the East, and invested heavily in low-e guns. SB had lost in % terms about the same number of skier visits as Killington has from its peak, yet they didn't come in and lay everyone off and generally piss off the key stakeholders in their success. They invested appropriate sums for critical needs and they assiduously courted both locals and long-time customers with a fresh attitude and actions that didn't take any money (or a rocket scientist) to implement. They laid out a clear plan for their new base village, and communicated appropriately when plans had to be adjusted to changing circumstances. When the time was right, they threw down a big check to finance that. Guess that though? Everyone was already on board b/c Win and Co. had already proven their commitment and operating chops. SP/POWDR's focus on real estate INSTEAD OF the mountain is so transparent, I'm not sure how they can be taken seriously.

Peaks down at Mt. Snow has done a masterful job articulating what they want to be, and investing a reasonable sum of up-front capital to help realize that vision. By all accounts, Boyne/CNL is getting rave reviews from most locals at SR and the Loaf. Same for Intrawest at Steamboat and for Vail at Heavenly. Why is it that Killington is the exception?

Do they have to make Killington more efficient to run? Unquestionably. But they've been swearing up and down that they need time to evaluate the operations of the resort before making any major changes or investments. It's interesting that this is their attitude on the investment side, but they apparently have all the data they need to make swift decisions on the expense side of the equation. I suspect that are wrong on one or both counts.

[JerseyGuy]

The 2006 SEC filing for ASC shows Killingotn(including Pico) with 795,000 skier visits. At one time that was 1,100,000 to 1.200,000. That's a loss of 3-400,000 skiers, and with revenues of $60 per skier, that's a loss of $20,000,000 in revenues.

ASC lost about $40,000,000 in 2006. That includes all expenses, depreciation and interest.

Lots of people say that Killington was profitable. But often those people are talking about revenues, less operating expenses, not including depreciation and interest expense(EBITDA).

If you look at some of the infromation available to the public such as number of lodges to service the number of skiers, number of lifts to servcie the number of skiers, it sure looks like Killington was an expensive area to run. And that's not even discussing the cost of snowmaking, particularly making it over and over on the same terrain between November 1 and Christmas.

Last year, Killington was close to closing at Christmas. Does anyone think the resort was profitable then???? Does it make sense to pay $80,000,000 for a resort, then "bet the farm" that the weather will be great?

Would any smart business person want to take the same risk that Otten took? What happened to him?? He sunk millions into this and other resorts and then the weather turned against him. I'm not saying mistakes we're made, but if he had taken a more conservative approach to start with, maybe we would have a resort village now and maybe there would be an interconnect.

Use some common sense. We may not like the impact of some of the tough minded busienss decisions that Powdr is making, but it's not our money, is it? And maybe they'll be around to invest some capital next year. Otten sure isn't.

Again, communication has not been good. And, arguably, some of the decisions have hurt some people. But there is time to work through some of those decisions to see if we can do something or get some further information to understand the thinking beghind them.

So what, exactly, is your point? This is what I'm reading from your post -- please correct me if I'm wrong:

Killington's really expensive to run, so the new owners shouldn't be expected to run Killington the way it used to be run, and they sure as hell shouldn't run it like Otten did, so they should start running LESS of it in order not to spend so much gosh-darn money, and it's not YOUR money, anyway, so who the hell are you to complain?

"Arguably, some of their decisions have hurt some people"? Are you kidding me? I know that the Chair of the local selectboard (and an independent CPA, at that) is likely fighting the likes of Royal Barnard for prime position at the front Powdr teat, but that one single statement makes it nearly impossible for me to read the rest of your post without rolling my eyes. Well, that and your inane statement about "betting the farm" on the weather. Guess what -- this is Eastern skiing. Every resort owner, big or small, is held hostage by the weather. Sometimes Mother Nature treats her hostages very well, and sometimes it's a season of waterboarding... even for the really good resort owners, like the Muellers down the road. If that's a risk a resort owner can't stomach, they're in the wrong line of business. To quote a Great American: use some common sense.

Speaking of which... how's that secession movement going?

[JerseyGuy]

Second, and what really puts a big in my shorts, is this straw man that POWDR defenders seem to be ubiquitously referencing. Namely, that the only choices for POWDR were either continued under-investment or massive spending up front (ala what ASC did at Sugarbush) with no in-between. sh*t.

sh*t. sh*t. sh*t. That is 100% a false choice. As other recently divested ASC mountains have illustrated, there are many shades of gray here. Look at Sugarbush, in their first year or two of owning the hill, Summit Ventures replaced the Castlerock lift (granted they had no choice - POWDR would probably use it as an excuse to close the pod), installed the GMX high-speed quad from base to mid-mountain at North, completely revamped the offerings at North to make it more attractive to locals, committed to having one of the longer seasons in the East, and invested heavily in low-e guns. SB had lost in % terms about the same number of skier visits as Killington has from its peak, yet they didn't come in and lay everyone off and generally piss off the key stakeholders in their success. they laid out a clear plan for their new base village, and communicated appropriately when plans had to be adjusted to changing circumstances.

Peaks down at Mt. Snow has done a masterful job articulating what they want to be, and investing a reasonable sum of up-front capital to help realize that vision. By all accounts, Boyne/CNL is getting rave reviews from most locals at SR and the Loaf. Same for Intrawest at Steamboat and for Vail at Heavenly. Why is it that Killington is the exception?

Excellent, and dead on target. Couldn't have said it better myself.

[Mister Moose]

Two things here. First, lousy weather in the early season, hell - all season, is a simple reality of the northeastern skiing business. I will guarantee that closing close to X-Mas will happen again in the next decade. If they weren't prepared for that, then they shouldn't be in the game.

I see the Tin Woodsman still has his brain.

The weather risk aspect is something I've been meaning to point out as well. But my point is

1) You can't buy a New England area without taking the good season/bad season swings into account. They have always happened.

2) Areas/owners that don't have extremely deep pockets therefore cannot take on very much debt, as they have to be able to weather several bad seasons in a row to survive. This has killed many areas/owners in the past.

3) (And this is why I highlighted TW's last sentence) If you have to make very large cutbacks in the lousy weather seasons during one of your critical weeks like Christmas just because you can't afford the snowmaking due to your debt load, then you paid too much for the resort. Some areas have sold for more than they are worth, given the lousy winters that can befall us. Buying on a multiple of the last year or two's EBITDA is foolish if last year was a good year. You have to look at a 10 -20 year time frame to include some kind of averaging of the lean years, otherwise you are the one getting hosed when the lean years strike.

[Tin Woodsman]

I see the Tin Woodsman still has his brain.

Touche'

3) (And this is why I highlighted TW's last sentence) If you have to make very large cutbacks in the lousy weather seasons during one of your critical weeks like Christmas just because you can't afford the snowmaking due to your debt load, then you paid too much for the resort. Some areas have sold for more than they are worth, given the lousy winters that can befall us. Buying on a multiple of the last year or two's EBITDA is foolish if last year was a good year. You have to look at a 10 -20 year time frame to include some kind of averaging of the lean years, otherwise you are the one getting hosed when the lean years strike.

EXACTLY. The need to finance sufficient cap ex for an asset base as rundown as Killington's should have been factored into the purchase price. The need to possibly invest a lot of money in making snow in the early season and see it wash down into the Ottauquechee River should have been factored into the purchase price. If you don't have the stomach to weather the vicissitudes of New England weather, then get the hell out of the game.

[Dr. NO]

my guess is that all the other resorts have significantly less depreciation of the physical plant, plus lower operational costs

Peaks at Mt. Snow gutted the lodges and are rebuilding them because they needed it. They are revamping the entire snowmaking system, including building a pond for more water (because the aholes up on the backside would not allow access to the lake). AND, they promised lower prices on food and beverages such as BEER! If blow didn't suck so bad, I would ski down there just for the lower prices.

So, rather than cut back on services and increase prices, they have invested into the mountain, promised better service with reasonable pricing. What part of this is POWDR not seeing?

And Boyne is doing similar things to all of its mountains in Maine and NH including attempting to open Sugarloaf in October if the weather cooperates. Go figure, more for the same while we get Less for More.

[4-mile]

The 2006 SEC filing for ASC shows Killingotn(including Pico) with 795,000 skier visits. At one time that was 1,100,000 to 1.200,000. That's a loss of 3-400,000 skiers, and with revenues of $60 per skier, that's a loss of $20,000,000 in revenues.

This isn't actually true. ASC changed the method used for counting skier visits. In reality the old numbers were artificially inflated. There are some old threads covering this buried deep on this board somewhere.

Lots of people say that Killington was profitable. But often those people are talking about revenues, less operating expenses, not including depreciation and interest expense(EBITDA).

Would any smart business person want to take the same risk that Otten took? What happened to him?? He sunk millions into this and other resorts and then the weather turned against him.

Actually it was high-interest loans for major real estate investments that did him in, not the weather. And that is the source of the excessive interest expense you mention that made ASC not profitable. If you remove those unnecessary loans from the equation, Killington was still profitable for the season. Sure, they probably lost money Christmas week, but the Presidents weekend and school breaks coincided with a major snowfall. The season needs to be evaluated as a whole, not in small segments.

Use some common sense. We may not like the impact of some of the tough minded busienss decisions that Powdr is making, but it's not our money, is it? And maybe they'll be around to invest some capital next year. Otten sure isn't.

Well, yes, it is their money, but they need our money to have money to make their decisions. The other purchased areas have shown what should be expected in this industry that relies on it's customers to survive.

[ncholcomb]

The reality is that some of us have to try to work through some of these issues, in person.

Some really good thoughts presented...but there is no way that Powdr will reconsider its actions in a majority of the areas. We can agrue about whether they're right or not, but my belief is they will stick to their guns.
So where does that leave us? Other than just not sking at Killington, you "posters" must have some suggestions!

Is our only action uis that we hope that the result of the actions taken will be that profits will increase, and will be reinvested. Will we know if there are profits to be reinvested? Only ancedotally... unless we require some sharing of information....an interesting thought.

But if they do not reinvest, what kind of community action will result?
Logically, unless there are some commitments to giving the community(the skiing community and the local community) something to be excited about, nobody is going to be very excited about real estate development proposals.

Who in their right mind would recommend real estate development in a ski area where the operator has not been willing to find ways to attract new skiers? The real estate would not be very saleable, would it?

So Zoners, what do you recommend????

[b-5]

The reality is that some of us have to try to work through some of these issues, in person.

Some really good thoughts presented...but there is no way that Powdr will reconsider its actions in a majority of the areas. We can agrue about whether they're right or not, but my belief is they will stick to their guns.
So where does that leave us? Other than just not sking at Killington, you "posters" must have some suggestions!

Is our only action uis that we hope that the result of the actions taken will be that profits will increase, and will be reinvested. Will we know if there are profits to be reinvested? Only ancedotally... unless we require some sharing of information....an interesting thought.

But if they do not reinvest, what kind of community action will result?
Logically, unless there are some commitments to giving the community(the skiing community and the local community) something to be excited about, nobody is going to be very excited about real estate development proposals.

Who in their right mind would recommend real estate development in a ski area where the operator has not been willing to find ways to attract new skiers? The real estate would not be very saleable, would it?

So Zoners, what do you recommend????

"But if they do not reinvest, what kind of community action will result? "


oooooh, ooooooh i know, a giant sucking sound.

[Dr. NO]

POWDR moved in like a corporate take over. Dump the full time positions to cut costs (screw the locals). Raise prices to get bigger profits (lower skier visits and dedicated Killington Skiers). No more Bond passes (we don't believe in honoring past promises). No more Mendon and Rutland school passes (again, past promises). We eat what we kill (they are killing the economy on the access road and mountain). We want to create a better skier experience (yep, dump, fire, terminate or just make those that love the mountain and people leave (Roy) ). We need to utilize the system we have (shut down PICO and the stage one gondi 2 to 3 days / week).

Why not just shut the place down, make like Bear Creek Mountain Club and start a private area. I'm sure POWDR and SR can manage to sell it off and just rid themselves of the true skiers, locals and day trippers.

Oops, don't give em ideas.

[Knut]

The reality is that some of us have to try to work through some of these issues, in person.

Some really good thoughts presented...but there is no way that Powdr will reconsider its actions in a majority of the areas. We can agrue about whether they're right or not, but my belief is they will stick to their guns.
So where does that leave us? Other than just not sking at Killington, you "posters" must have some suggestions!

Is our only action uis that we hope that the result of the actions taken will be that profits will increase, and will be reinvested. Will we know if there are profits to be reinvested? Only ancedotally... unless we require some sharing of information....an interesting thought.

But if they do not reinvest, what kind of community action will result?
Logically, unless there are some commitments to giving the community(the skiing community and the local community) something to be excited about, nobody is going to be very excited about real estate development proposals.

Who in their right mind would recommend real estate development in a ski area where the operator has not been willing to find ways to attract new skiers? The real estate would not be very saleable, would it?

So Zoners, what do you recommend????

I have nothing to recommend. Other than GORE is two hours less driving , half KMARTS price, Longer season , Expanding terain , ect.

How is KMART going to get me and others back when we leave?

AM I GLAD IM A SEASONAL RENTER AND NOT AN OWNER

[Mister Moose]

The reality is that some of us have to try to work through some of these issues, in person.

Some really good thoughts presented...but there is no way that Powdr will reconsider its actions in a majority of the areas. We can agrue about whether they're right or not, but my belief is they will stick to their guns.
So where does that leave us? Other than just not sking at Killington, you "posters" must have some suggestions!

Is our only action uis that we hope that the result of the actions taken will be that profits will increase, and will be reinvested. Will we know if there are profits to be reinvested? Only ancedotally... unless we require some sharing of information....an interesting thought.

But if they do not reinvest, what kind of community action will result?
Logically, unless there are some commitments to giving the community(the skiing community and the local community) something to be excited about, nobody is going to be very excited about real estate development proposals.

Who in their right mind would recommend real estate development in a ski area where the operator has not been willing to find ways to attract new skiers? The real estate would not be very saleable, would it?

So Zoners, what do you recommend????

First, read the lease from the State of Vermont. The State has the right to buy out the lease (on certain anniversaries if memory serves) if the lessee does not perform, and that is exactly what we are talking about. Shuttering a lift that services "ski in" homes in my view is an example of grounds to take to the state.

Second, talk to your legislators. They authorized this firestorm when they agreed to transfer the lease. They can bring some pressure to bear.

Third, make the town's viewpoint and concerns known. Ask for regular meetings with Selbo and Nyberg if you don't already.

Fourth, have all the business owners in town to a meeting a few times during this season. Take their temperature and get their concerns heard.

The reality is that this is a 'company town'. Killington the ski area has no need or obligation to share financial data with Killington the town. Get past the POWDR-SPeak and realize they will invest where they want, when they want, and it may have nothing to do with what they have eaten lately. Area businesses all live or die by the wisdom of the resort's choices. This is not a democracy. In the past, the good fortunes of the mountain brought good fortunes to the access road. The Village may change that if it changes where the bulk of the traffic goes.

You know that application is coming. Prepare for it. You are the custodians of the town. Go out and talk to other towns in New England (and Quebec) that have resort villages. Find out what mistakes were made, what worked, what didn't . What the effects were on the rest of the local economy. Use the telephone for more distant villages. Educate yourselves, you have a very large responsibility coming. I posted before about the town finding knowledgeable consultants to help them through the Village approval process. This is not a time for amateur town board members to take on this application alone.

Think about how small stores evolved into strip malls of little stores, into indoor malls with large anchor stores, to outdoor malls with more streetscape exposure. The same thing is true of ski resorts. The 'Village' will not be the last "Next big thing", and KSRP will not be the last owners. Keep perspective.

Work from a position that KSRP deserves to make a healthy profit, and they deserve to run their own business. Ask them to keep the town healthy as well, and strive for designs and plans that do so. Listen carefully to the homeowners and business owners. They have the most to lose (and gain, it should be pointed out), so their opinions are both valuable and have merit.

Sounds like a lot of work, but anything worthwhile is.