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Why did ASC fail financially?

post #1 of 7
Thread Starter 
We are doing a research report on the American Skiing Company and are trying to analyse why basically died. What led to their financial downfall. Its a hell of a lot more interesting to do a report on that than say, Kmart!

I'm especially looking at them compared to say the evil empire, Intrawest and Vail Resorts who have also acquired resorts, built loads of real estate, but done financially reasonably well.

Anyone with any info/insight would be greatly appreciated.
post #2 of 7
ASC failed because it was financed incorrectly. Their business model(use the ski resort to sell real estate) has worked for Intrawest and others. But ASC financed the whole thing through a combination of mortgage debt and publicly traded stock. The publicly traded equity markets (stock) want to see continuous growth. Commercial real estate (especially vacation real estate) is far more volatile than most other industries. Add to that the use of mortgage debt to acquire more assets (like Steamboat). Debt creates an interest expense which most be covered every month regardless of the current revenue of the business. With a couple of poor weather years, combined with a downturn in real estate, the stock looks like a pretty poor investment, and it tanks.

Very few real estate businesses are financed through the public equity markets. A more commmon way to finance real estate businesses is through a Real Estate Investment Trust. These can trade publicly, but the expectation for continuous positive cash flow and growth is different than for the common stock market. I don't know about Intrawest, but the successful ski area operators I know a little about (Hunter, Roundtop/Liberty/Windham/Whitetail, MRG, Hickory)are privately held, and are thought to carry very little debt. Their owners do not need to answer to stockholders in lean years, and they don't worry about missing a mortgage payment.

post #3 of 7
My thought is, they got to big to fast, took all the profits from the east and used them to build the Canyons. Have you skied Sugarbush before they sold it? what a dump, ASC took all the money away, look at Killington, it's not customer friendly. ASC appears not to put any $$$ back into there hills. Poor Pico ask any of the long time skiers there. They were better off before ASC. Ask Sugarloaf skiers they will tell you the same. ASC doesn't care about the skier.
post #4 of 7
read Downhill Slide by Cliffton
post #5 of 7
I was very suprised that,after they went public, they acquired a couple more resorts (Steamboat and Heavenly,I think). I'd have thought they'd have used the income to pay down some of their debt and improve their profitability.
post #6 of 7
Some great points made above! ASC started off with some great cash cows in the barn: Sunday River, Mt Snow and Killington. I'm sure that ASC could have made some money off of these areas, but they continued to buy some areas that are great to ski but don't generate much revenue like Sugarbush, Pico and Sugar Loaf. They got further extended and bought the western areas burying themselves under debt.

The product they sell at the cash cows is sub optimal at a fairly steep weekend price of $72 (K'ton & Mt Sneaux). The infrastructure is depreciating quickly: ratty grooming equipment, scruffy lifts and run down lodges. The lodge food is insipid and over priced.

This is a shame because because there is enough revenue from Sunday River, Mt Snow and Killington to be profit centers and be shining resorts. There is money to be made at ski resorts, but not by ASC.
post #7 of 7
How long will it be before Okemo owns Killington?

They just closed on Crested Butte on Monday.

Dear Staff,

We are extremely pleased and excited to announce that the purchase of
Crested Butte Mountain Resort in Colorado is now final. The closing was
finalized on March 1, 2004, with the transfer of funds, at which time we
took over the complete ownership and operation of the resort.

When we took over the ownership of Okemo in 1982 and the operation of Mount
Sunapee in 1998, we recognized the incredible potential at each resort and
placed guest service and the overall quality of the recreational experience
as our top priority. Our vision for the future of Crested Butte is the
very same -- to build upon the attributes of the mountain with a Master
Plan of improvements and to work hand-in-hand with the community to
reinforce its reputation for excellence.

Improvements will take place over time and will be in keeping with
responsible, planned growth and development that remain consistent with our
standards of environmental responsibility and commitment

Triple Peaks, LLC is the parent company for Okemo, Mount Sunapee and
Crested Butte. The two of us, along with our children Ethan and Erica, are
the owners of the company and will maintain control of all aspects of
operational decision making at all three resorts. Ethan is in the process
of relocating to Crested Butte. We will be dividing our time between the
three resorts. As we transition to running mountains in the east and west,
we will develop a schedule to make planning easier for all of us.

We all know that Okemo and Mount Sunapee are both special places because of
their natural beauty and the effort that all of you have contributed to
creating the best mountain resort experiences in Vermont and New
Hampshire. Crested Butte is also a special place and hopefully you will
find your way there to experience the "best of the west" and support them
in their efforts to improve and grow as we have at Mount Sunapee and Okemo.

Crested Butte is located in southwest Colorado in the town of Mt. Crested
Butte and is best known for its historic town and some of the best extreme
skiing in the world. The resort has 85 trails spread over 1,058 acres,
with 14 lifts and receives over 240 inches of natural snow each season. To
learn more about your new mountain out west go to skicb.com.

Here's to an exciting future together!

Tim & Diane Mueller
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