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Everyone makes a mistake at work, but rarely do they end up reshaping an entire industry...
It's a well-known story, but hey, (a) it's almost ski season and (b) who doesn't love a cautionary tale of the costs of administrative errors?
It's The One Where Vail Steals Park City
It's a well-known story, but hey, (a) it's almost ski season and (b) who doesn't love a cautionary tale of the costs of administrative errors?
It's The One Where Vail Steals Park City
Park City is famous now for its skiing, but that's a recent development
It was a silver mining town for most of its life, so dependent on the industry that it was actually classified as a ghost town following the 1950's crash
The city was barely 1,300 people by the decade's end
It was a silver mining town for most of its life, so dependent on the industry that it was actually classified as a ghost town following the 1950's crash
The city was barely 1,300 people by the decade's end
Skiing started as miners would ski jump on the old Creole mine dump (sounds lit)
Park City Consolidated Mines officially began the ski business in 1963 on "Treasure Mountain"
A mine train took them THROUGH the mountain to an elevator climbing up 1,750 ft (again, also sorta lit)
Park City Consolidated Mines officially began the ski business in 1963 on "Treasure Mountain"
A mine train took them THROUGH the mountain to an elevator climbing up 1,750 ft (again, also sorta lit)
In 1970s, Park City Ski Area leased the terrain from United Park City Mines in a lease of only $155k a year (extendable until 2051)
This would become Park City Mountain Resort, 1 of 3 resorts in the immediate area (alongside skiier-only Deer Valley and third-place Canyons)
This would become Park City Mountain Resort, 1 of 3 resorts in the immediate area (alongside skiier-only Deer Valley and third-place Canyons)
In 1994, PCMR was acquired by Powdr Corp., a new company started by John Cumming
John was in his early 20s and had already created the Mountain Hardwear brand (later acquired by Columbia Sportswear in '03)
John was in his early 20s and had already created the Mountain Hardwear brand (later acquired by Columbia Sportswear in '03)
Powdr quickly grew into one of the largest ski resort operators in the country, with PCMR as its crown jewel (status further boosted by the '02 Olympics)
The company ran a decentralized, town-friendly model and reportedly had less than 40 corporate employees
The company ran a decentralized, town-friendly model and reportedly had less than 40 corporate employees
The success wasn't entirely unprecedented
Powdr had the backing of John's father, Ian, who founded Leucadia (now merged with Jefferies)
Described as “smaller Berkshire Hathway – but with a better track record”, Leucadia was valued at nearly $7B when Ian retired in 2013
Powdr had the backing of John's father, Ian, who founded Leucadia (now merged with Jefferies)
Described as “smaller Berkshire Hathway – but with a better track record”, Leucadia was valued at nearly $7B when Ian retired in 2013
Meanwhile, PC's ugly stepsister, Canyons languished compared to its neighboring resorts
Despite a larger area, underinvestment, a nonsensical layout, limited lodging, and a revolving door of owners left it with maybe 400k skiiers a year (vs. 1M+ at PCMR)
Despite a larger area, underinvestment, a nonsensical layout, limited lodging, and a revolving door of owners left it with maybe 400k skiiers a year (vs. 1M+ at PCMR)
A Canadian real estate company, Talisker Land Holdings, would acquire Canyons in 2007 (beating out rising Colorado powerhouse Vail Resorts)
They'd invest in new upgrades, including North America's first heated chairlift, and even planned a connection to nearby Solitude
They'd invest in new upgrades, including North America's first heated chairlift, and even planned a connection to nearby Solitude
Entering 2011, things were going well for PCMR, including a contemplated ambitious remaking of the base area
Powdr was expanding well, with a growing portfolio across ski resorts, adventure sports content, and experiences like heli-skiing and white-water rafting
Powdr was expanding well, with a growing portfolio across ski resorts, adventure sports content, and experiences like heli-skiing and white-water rafting
Relations with neighboring Talisker seemed friendly, with discussions on property and infrastructure investments, including a potential lift connection between the resorts
Talisker was even landlord for PCMR's upper mountain, having inherited the long-term lease from UPCM
Talisker was even landlord for PCMR's upper mountain, having inherited the long-term lease from UPCM
PCMR's lease required written renewal every 20 years... a deadline that no one at Powdr was assigned to monitor
While Powdr sent its letter 2 days late, things seemed fine, paying their fee and investing $7M in upgrades
Clearly, it seemed, Talisker didn't mind the slight miss
While Powdr sent its letter 2 days late, things seemed fine, paying their fee and investing $7M in upgrades
Clearly, it seemed, Talisker didn't mind the slight miss
Not so fast...
At the end of 2011, Talisker advised PCMR's right to use the mountain under the sweetheart lease had expired
They would need to vacate the premises unless rent was increased to $7.7M annually and PCMR's base facilities were turned over at end of lease
At the end of 2011, Talisker advised PCMR's right to use the mountain under the sweetheart lease had expired
They would need to vacate the premises unless rent was increased to $7.7M annually and PCMR's base facilities were turned over at end of lease
Powdr was, in so many words, pissed
They filed suit against Talisker, thinking they could return to the previous deal
Even if Talisker had rights to the upper mountain, what could they do without the base (which Powdr owned)?
They filed suit against Talisker, thinking they could return to the previous deal
Even if Talisker had rights to the upper mountain, what could they do without the base (which Powdr owned)?
They didn't wait to find out
After a year, Talisker leased Canyons (and the upper mountain) to Vail Resorts, who assumed the legal battle
The combined, monster lease would total $25M in annual fixed payment + 42% of EBITDA over $35M
After a year, Talisker leased Canyons (and the upper mountain) to Vail Resorts, who assumed the legal battle
The combined, monster lease would total $25M in annual fixed payment + 42% of EBITDA over $35M
The opportunity for reconciliation was gone. The gloves were off
Vail, you'll recall, had lost Canyons to Talisker in '07 and had come back for the full enchilada
Vail, you'll recall, had lost Canyons to Talisker in '07 and had come back for the full enchilada
Led by CEO Rob Katz, Vail was a known, growing powerhouse in CO and CA.
They were beginning an ascent few truly appreciated was coming.
Park City was the first entree.
They were beginning an ascent few truly appreciated was coming.
Park City was the first entree.
The $305 million deal was 20x the estimated $15M EBITDA Canyons would bring in
The deal would only make sense if Vail got Park City as well
The deal would only make sense if Vail got Park City as well
John Cumming and Powdr fought valiantly, but Utah laws are decidedly landlord-friendly
The well-publicized fight saw threats from John to tear down upper mountain lifts and install a winter ski park at the bottom of the hill
The well-publicized fight saw threats from John to tear down upper mountain lifts and install a winter ski park at the bottom of the hill
Alas, it was for naught
Despite pledges to post a bond and fight, in 2014, Powdr sold the base to Vail for $183M (~5x the incremental $35M EBITDA)
Vail, after connecting the resorts, had the largest ski resort in the United States, racking a combined 1.5M ski visits annually
Despite pledges to post a bond and fight, in 2014, Powdr sold the base to Vail for $183M (~5x the incremental $35M EBITDA)
Vail, after connecting the resorts, had the largest ski resort in the United States, racking a combined 1.5M ski visits annually
It would be a huge first salvo in an industry-defining acquisition spree (including the 2016 mega purchase of Whistler-Blackcomb for $1.1B and 2019 acquisition of 17 resorts from Peak Resorts)
Their scale surpasses anything previously seen in the industry
Their scale surpasses anything previously seen in the industry
Vail's success has been vilified within the industry, who see a corporate overlord "turning ski hills into theme parks"
Powder Magazine hilarious joked Vail had acquired "the rights to all North American snowfall" https://www.powder.com/stories/vail-biggest-purchase-yet/
Powder Magazine hilarious joked Vail had acquired "the rights to all North American snowfall" https://www.powder.com/stories/vail-biggest-purchase-yet/
However, they've enabled a renaissance of sort
The company-wide Epic Pass (alongside increasing scale) has flipped skiing's business model on its head, from an add-on to real estate, to operations first
It's worth a deeper dive (not today) on how tech + opportunity combined
The company-wide Epic Pass (alongside increasing scale) has flipped skiing's business model on its head, from an add-on to real estate, to operations first
It's worth a deeper dive (not today) on how tech + opportunity combined
Meanwhile, Powdr has moved on from the debacle
They remain a major, adventure/sports-oriented resort operator, with Copper, Snowbird and Killington as premier destinations
Powdr even returned to Park City in 2019 via a new Woodward sports camp (looks lit)
They remain a major, adventure/sports-oriented resort operator, with Copper, Snowbird and Killington as premier destinations
Powdr even returned to Park City in 2019 via a new Woodward sports camp (looks lit)
Talisker... well, they're not doing so hot
After leasing to Vail, they hit rocky times with creditors and eventually faced foreclosure in 2015
It's likely their shaky financial situation that precipitated the mess in the first place https://www.snocountry.com/news/entry/talisker-slides-aside-corp-pulls-out-of-canyons-
After leasing to Vail, they hit rocky times with creditors and eventually faced foreclosure in 2015
It's likely their shaky financial situation that precipitated the mess in the first place https://www.snocountry.com/news/entry/talisker-slides-aside-corp-pulls-out-of-canyons-
What might have been, though...
There'd been talks about connecting the major SLC-area resorts in a European style village-to-village arrangement with 80 lifts and 18,000 skiable acres
Those plans, already facing locals' concerns, died entirely when Vail moved in
There'd been talks about connecting the major SLC-area resorts in a European style village-to-village arrangement with 80 lifts and 18,000 skiable acres
Those plans, already facing locals' concerns, died entirely when Vail moved in
So, yeah, that was a long thread on a topic you might already know
We don't do lessons here, but... I guess attention to detail matters!
If you like this kinda stuff, Ski Inc. is a great read on the industry (may do a thread on that one day) https://www.amazon.com/SKI-INC-ski-resort-entrepreneurs-mega-companies-ebook/dp/B01N2X7K6J
We don't do lessons here, but... I guess attention to detail matters!
If you like this kinda stuff, Ski Inc. is a great read on the industry (may do a thread on that one day) https://www.amazon.com/SKI-INC-ski-resort-entrepreneurs-mega-companies-ebook/dp/B01N2X7K6J
Also, yet another clear reminder that landlords are not to be trusted, as @NickatFP has espoused
OH
If you liked this “harmless mistake with major business ramifications” story,
You HAVE to read one of the best @matt_levine stories: https://www.bloomberg.com/opinion/articles/2019-03-15/don-t-forget-to-do-your-merger
If you liked this “harmless mistake with major business ramifications” story,
You HAVE to read one of the best @matt_levine stories: https://www.bloomberg.com/opinion/articles/2019-03-15/don-t-forget-to-do-your-merger
