BC Business
B.C. ski resorts are aren't crumbling under unfavourable conditions.
B.C. ski resorts are aren’t crumbling under unfavourable conditions.
What are they thinking at Ken Fowler Enterprises? In September 2006, the St. Catharines, Ontario-based private-equity firm bought Fairmont Hot Springs Resort Ltd., including the small ski hill south of Invermere, from the Wilder family, and they aren’t planning on turning it into the next Whistler. While most ski-hill conglomerates are rushing to gobble up tiny mom-and-pop hills and turn them into huge four-season resorts, bragging about the deepest snow, longest vertical and steepest terrain, Ken Fowler Enterprises has no intention of interfering with Fairmont’s low-key, family-friendly ski hill. They’re even planning a modest expansion of beginner and intermediate runs.
Take a glance at the state of the snow-sport industry and any investment in the ski industry looks crazy. Ridership on B.C. ski lifts peaked in the winter of 2001-2002 at 6.2 million and has bounced around at or below six million ever since. Thirty years from now, according to the United Nations Environment Programme, only areas above 1,500 metres will receive consistent snow thanks to global warming. Fairmont tops out at 1,584 metres, and even Whistler Blackcomb’s top lift, one of the highest in B.C., peaks at only 2,182 metres. And baby boomers, the generation that advanced skiing to its pinnacle, are getting older and skiing less. The Canadian Ski Council says skiers tend to hang up their poles for good after 50.
On the surface, things look as ugly as a snowless run in mid-winter, but buried under all the bad news is the opening of Revelstoke Mountain Resort, B.C.’s newest mega-hill, and the promise of three new resort developments and four major expansions that are pending various levels of approvals and zoning (see “Great Expansions). In fact, millions are spent every year at almost all of the 12 major ski hills in B.C. on infrastructure expansions and real-estate developments. In short, B.C.’s ski industry is laughing in the face of a Bermuda triangle: aging baby boomers, global warming and flat skier numbers. So Ken Fowler Enterprises doesn’t look to be so far out in the backcountry. But still, what are these developers thinking? And how sustainable is this development bonanza?
Ask Oberto Oberti, a man with toeholds in three major B.C. projects, and he says there’s no end to the upside in skiing. “There are 3,000 major ski resorts in the Alps and only 50 in all of North America,” he says. That’s nothing when size and population are considered. “There is definitely potential for growth here, and the best location for more ski hills is in B.C.; B.C. could have five more Whistlers.”
Oberti, a lifelong skier, could be wearing rose-tinted goggles. His company, Oberto Oberti Architecture and Urban Design Inc., helped develop real estate in Whistler, drew up plans at Kicking Horse Mountain Resort, worked on the nearly approved Jumbo Glacier Resort for more than 15 years, is now helping Crystal Mountain near Kelowna plan a major expansion, and is in the early stages of developing a brand-new ski hill. He’s deeply invested in the future of B.C. skiing and says a big reason for that is the Commercial Alpine Ski Policy, developed by the province in the mid-’80s.
Lift ticket: A chopper at Revelstoke Mountain Resort transports heli-skiers to the mountain peak.
The ski industry grew up with the baby boomers. Fuelled by their rising wealth in the 1970s and early ’80s, the sector saw huge growth in skiing in the U.S. and Europe. B.C.’s industry was younger and slower to bloom, which gave the province a chance to learn from mistakes being made south of the border: resorts forgetting to plan employee housing and developers ditching ski hills and leaving town after making a mint on real estate. In 1985 the province spelled out a policy governing the development of mountain resorts. Requirements for any development included environmental and wildlife considerations, conditions for buying Crown land and a plan protecting homeowners should a ski hill go bankrupt. But the most important section was likely the performance-reward clause for infrastructure and real-estate development, which allowed the province to sell land to new ski hills at a minimum of $5,000 an acre or 100 per cent of unimproved assessed value for the first 10 years. After the first 10 years, the land price would be based on a sliding scale related to a percentage of assessed value, but was still a steal. [pagebreak]“Since most of these places are in the boonies, the value of an acre of land isn’t high,” says Psyche Brown, a ski-resort specialist with the province’s Resort Development Branch. “It’s an added incentive for them to develop.” In return for cheap property that the developer could sit on, sell or develop, according to the 1985 policy, the owner had to match real-estate developments with on-hill infrastructure developments – lifts and trails. “It’s phased development. They need to balance condos, townhouses and homesites with on-hill capacity,” says Brown. “It reduced the risk on the province.” If a hill goes bankrupt or the owners walk away, the province’s policy requires them to step in and run the hill until a buyer can be found.
The policy governed every ski hill in the province except a couple in provincial parks or on private land. At the time, the business of ski-hill development was to sell lift tickets, but things were about to change – no doubt thanks to cheap land.
By the ’90s, skiing usage had levelled off in the U.S. and growth was slowing in B.C. Led by Intrawest ULC, the ski industry developed a strategy to compete with cruise ships and packaged resorts such as Disneyland for the attention of winter travellers. “They are safe, comfortable places for tourists where every possible way to entertain them, and for the company to make money, has been thought of,” says Hal Clifford, author of Downhill Slide: Why the Corporate Ski Industry Is Bad for Skiing, Ski Towns, and the Environment. “Intrawest realized they could create the same environment in a ski village.”
Intrawest created Whistler, merging Disneyland with the European ski village – a place where the whole family, skiers and non-skiers, can come for a week, everyone can be entertained and no one ever has to leave the village. The company developed the village to suit the resort’s plan and controlled commercial tenants in the village – whose leases helped line the company vault – right down to how stores looked and what they sold, says Clifford. Thanks to Whistler’s growing reputation for great skiing and even better après-ski, it became the place to go. But to maintain the hype, Whistler Blackcomb had to continue pushing the boundaries, adding new lifts, improving infrastructure, making the experience better and bigger. A major announcement about bigger and better lifts or expanded inbounds terrain is expected every year. The bottom line, says Clifford, is that “Intrawest is not a ski company. It’s a baby-boomer-entertainment company.”
The model was wildly successful. Other ski resorts in the U.S. and Canada took notice and started an arms race of new lifts, trails and attractions to establish market share. Resorts had to fund the buildup; in Canada the ticket to expansion came from $5,000-an-acre land and baby boomers’ seemingly endless appetite for recreational property. “No one would build resorts if they couldn’t help pay for them with real estate,” Brown says. “It would take a long time to get return on investment from lift tickets. The province recognizes that.” With its $5,000-an-acre land policy, the province seemed to have a clairvoyant view of what was to come. When the industry shifted to a real-estate focus, B.C. resorts were armed to capitalize. They ditched the lift-ticket model and focused on real-estate sales using the hype of new on-hill attractions to sell more condos.
Every year all the successful bigger resorts announce millions of dollars in improvements on and off the ski hill and real-estate developments to pay for them. “We could sell real estate by itself,” says Richard Howarth, VP of development for Ken Fowler Enterprises in Fairmont, “but the ski hill helps. It’s a big part of the attraction.” Once-quiet base areas across the province are bustling with construction workers raising condos, townhouses and homesites as fast as they can. Fairmont has plenty of development planned as well. Wealthy baby boomers prepping for retirement, from Europe, Australia, the U.S. and Canada, are snapping them up. Before construction had even started on the lifts at Revelstoke Mountain Resort, two unbuilt condo buildings sold out in three hours, with 24 per cent of buyers from Europe, 36 per cent from the U.S. and 40 per cent from Canada.
Sure the real estate is selling now, says Clifford, but what happens when the baby-boomer generation trades long underwear for Bermuda shorts? Is this development boom sustainable, or will the mountains of B.C. one day be scattered with overgrown ski runs and ghost towns? Clifford warns that what is a feasible ski resort today may not be in 20 years when there are even greater demands on people’s time, worse snow conditions and fewer baby boomers skiing.
“It’s a classic boom-town phenomenon,” he says. “What happens when these resorts reach build-out? What happens when the baby boomers move on? These companies have to show income growth for the shareholders and owners. What happens when they don’t anymore? I’m guessing they move on to something else.” Intrawest’s recent investments in Florida and Arizona are the writing in the snow, he says. “Back in the 1800s, there were all these big hotels in New England,” he continues, drawing a parallel. “They were the ski villages of the day, and now they are all gone. The market changed, demand changed and it can happen again.” His déjà vu fodder: a third of North American ski hills open in 1977 are now closed.
The province is more optimistic. In 2004 the Commercial Alpine Ski Policy was updated and built into the All Seasons Resort Policy, part of a government plan to increase the number of resorts in the province and double the number of tourists by 2015. The Resort Development Branch was removed from Land and Water B.C. Inc. and integrated into one office in Kamloops under the Ministry of Tourism, Sports and the Arts. The idea, says Brown, was to centralize and streamline the sluggish and expensive approval process. Since then four expansions and one new resort proposal have started down the approval path.[pagebreak]Who will ski them? Jimmie Spencer’s educated guess is that three million more skiers will visit Alberta and B.C. in the next five years, bringing the total skier usage up from nine million today (about six million in B.C.) to 12 million. That’s enough to support two new ski hills and all the expansions on the books without stealing visitors from existing resorts, says the president and CEO of the Canada West Ski Area Association. But where does that leave the other resort proposal and other resorts’ future expansion plans? The province says it will leave it up to the industry and market forces to figure out a ski-hill carrying capacity for B.C.
All the ski-hill proponents BCBusiness talked to say the market and climate trends look good for continued expansion. And most are confident Spencer’s numbers are conservative. Their arguments are extensive.
Advances in ski and boarding technology, more emphasis on grooming, increased awareness of fitness and the expansion of the “winter experience” – shopping and other activities at ski destinations – mean baby boomers are hanging out at the ski hill longer than their parents did, Oberto Oberti says. Plus, infrastructure improvements such as the Kelowna airport expansion will allow direct flights from Europe, and the straightening of the Trans-Canada Highway near Golden will ease travel to once-remote ski areas.
“Baby boomers don’t want hard core and wilderness; they want milderness,” Ken Fowler Enterprises’ Howarth says. Steep and deep used to be the selling point, but proposed expansions at Mount Baldy, Crystal Mountain and Fairmont are aimed at the family crowd. “A lot of people are tired of hard skiing,” Howarth says. “This will be carefree, easy skiing in beautiful weather. It’s what a lot of people are looking for.” As for who will buy in when the baby boomers are gone, Howarth points out that their money won’t disappear. “There may be less people but their wealth will continue to grow,” he says.
When it comes to global warming, there is definitely a case of “show me the rain” among proponents. None seems worried about its consequences except Jumbo Glacier Resort, one of whose biggest selling points is that it will be the highest in Canada, safe from even the most dire of warming predictions. Elsewhere, faith in improved snow-making technology and predictions that climate change will actually bring more snow are keeping any fears on ice. The province is a little more cautious, strongly encouraging resorts to go for a four-season model, which would help mitigate the effects of poor-snow winters and staff retention, a serious problem in the seasonal, labour-intensive industry.
As for weak growth in skier numbers, Oberti says it’s a matter of optics. “If you look at the trend over 10, 20, 30 years, growth is strong,” he says. He says the finer details of the levelling off show that the bigger village-style destination resorts did well while smaller community ski hills suffered. “You can’t compare the two,” he says. “They are different products.” Adding to his optimism is North America’s opportunity to benefit from worsening snow conditions in Europe. For years skiing quality has suffered across the pond, culminating in 2006-2007, when snow didn’t fall in the Alps until February. The Olympic wave will help to tap markets that haven’t been exposed to the B.C. ski machine in the past, Oberti says, pointing to Big White’s solid growth in skier visits in the last few years thanks to a successful marketing push in Australia and New Zealand.
And the cherry on top is the spin-off benefit of all that growth. New developments, new lifts and new hills will draw more skiers to B.C. without stealing skiers from other resorts, Oberti says. After Kicking Horse Mountain Resort opened in 2002, skier numbers actually increased down the road at Panorama Mountain Village and stayed level at nearby Sunshine Village Ski Resort and Lake Louise Mountain Resort in Alberta.
But to make it all happen and keep B.C.’s ski industry healthy, Oberti says, the ski model has to continue on the path it is now on. “Some B.C. ski areas will go down because they don’t have a future as a quality resort with character, real estate, terrain and snow,” he says. “Our client is changing. People would put up with discomfort 20 years ago, but they won’t now. What worked in skiing 20 years ago doesn’t work anymore.”
Click here for Great Expansions — Take a look at what’s coming down the pipe in B.C.’s expanding ski industry.