Vail Resorts, Inc.

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Vail Resorts, Inc.

P.O. Box 7
Vail, Colorado 81658
U.S.A.
Telephone: (970) 845-2500
Web site:http://www.vailresorts.com

Public Company
Incorporated: 1997
Employees: 12,000 peak season, 7,500 year-round
Operating Revenues: $553.1 million (2000)
NAIC: 71399 Amusement and Recreation; 53139 Real Estate Agents and Managers; 72111 Hotels and Motels; 72211 Eating Places; 72241 Drinking Places

Vail Resorts, Inc. (formerly Vail Associates, Inc.), is the owner of Vail Mountain, the largest and most popular ski area in the United States, and the owner of Vail Resorts Development Company, their real estate and vacation property division. The company headquarters are at the base of the Vail Mountain resort, some 8,200 feet above sea level in the Colorado Rockies. In addition to Vail, the company also owns Breckenridge Ski Resort, Beaver Creek, and Keystone, three nearby ski resorts, as well as land, lodges, restaurants, golf courses, and other property in the Vail Valley. In 1999, Vail Resorts acquired the Grand Teton Lodge Company in Wyoming, its first resort property outside of Colorado.

Before the 1960s: Making of a Mountain

The Vail Valley, also known as Gore Creek Valley, lies in west-central Colorado near the Continental Divide. Cut off at one end by a pass of 10,600 feet, and at the other end by a canyon about the width of a horse, the valley long maintained an obscure presence in Colorado. For generations it was a place where Native American Utes would come to escape the summer heat. After the Civil War, white settlers pushed into the valley, among the first of whom were miners searching for gold and silver, as well as map surveyors, who charted its canyons, cliffs, and other features. The land was settled by a small number of ranchers, but the steep terrain and cold climate eventually drove most of them away, leaving the area to sheepherders, who used the valley as pastureland during the spring and summer.

During World War II, the U.S. Army set up a training center, Camp Hale, in another isolated valley about 23 miles from Vail. There, the army trained ski troopers of the Tenth Mountain Division, who were later sent to fight in the Apennine mountains of northern Italy. Pete Seibert, one of these troopers, was lucky to have made it through the war alive. Hit by small-arms fire and two mortar shells, Seibert was badly wounded, and one of the shells blew off his right kneecap. Doctors told him he would never again be able to ski. However, a few years later, Seibert was working as a ski instructor at Aspen, the famous Colorado resort, and in 1950 he made the U.S. Ski Team, though torn ligaments kept him from competing. During the next few years he studied at a hotel school in Lausanne, Switzerland.

Like many others in Colorado during the 1950s, Seibert dreamed of a way to establish his own resort, though perhaps with a bit more zeal than the others. “I had first started thinking of running a resort when I was 12 years old,” Seibert explained in his book about Vail, noting, “there was nothing I wanted more in my life than to start a ski area.” In this endeavor, Siebert would have considerable help from Earl Eaton, another Camp Hale veteran. Born not far from the present Vail resort, Eaton had become a uranium prospector. One day, while searching for uranium in Gore Creek Valley, he arrived at the ridge of an unnamed mountain. Looking south his eyes fell upon a vast expanse of treeless slopes, later called the “back bowls,” some of the most famous ski terrain in the United States. In March 1957, Eaton took Seibert to the mountain, and they both trudged seven hours through deep snow up to the ridge. When they arrived, Seibert, too, was stunned by the back bowls, as well as by the view of the towering peaks of the Gore Range.

Their first step was buying land. Although unable to purchase the mountain itself, which was owned by the U.S. Forest Service, they were able to purchase a 500-acre ranch at the base for $55,000 in 1957. Funded by six partners (mostly from Denver), Siebert and Eaton bought the land under the guise of a new company, Transmontane Rod and Gun Club, a name they used to keep their plans a secret from the local residents. During this time, they also searched for a name for their new resort. One suggestion was Shining Mountains, the Ute phrase for the western Colorado region. However, “when mountains shine,” Seibert pointed out, “it means they’re icy.” So they settled on Vail, the name of the pass at the eastern end of the valley, named for Charles D. Vail, a former chief engineer of the Colorado Highway Department.

Late 1950s and early 1960s: Beginnings of a Ski Slope

Next, Siebert and Eaton applied for a “Conditional Special Use Permit.” However, the U.S. Forest Service turned them down, claiming there were already enough ski resorts in the White River National Forest. Undeterred, the group appealed the decision and, a year later, they received the permit, allowing them to attract 21 new investors, some from as far away as Texas and New York, and to found a new company, Vail Corp., which was used to raise additional funds. In 1960, again through Transmontane Rod and Gun Club, the group purchased an adjacent property, also of 500 acres. Finally, in 1961, after the group brought in 100 limited partners (each putting up $10,000), Vail Associates, Inc. was born.

Vail Associates got the go-ahead from the U.S. Forest Service in December 1961, and the company wasted no time in developing the foundations of the resort. Ski lifts were ordered, bulldozers pushed the snow out of the way to make room for construction, and trails on the mountain were cut. The mountain’s front side was ideal for the kind of gentle, tree-lined, slopes appropriate for beginners and intermediates, while the back bowls were the draw for advanced and expert skiers. Some of the trail names emerged from the early ski experiences of the Vail Associates group. The “Forever” trail in the back bowls, for example, was named one spring day when snow conditions were so perfect that a number of people skied down the back of the mountain; without a ski lift, the walk back up the mountain seemed to last forever.

With about $2 million slated for development, the group was able to cut the necessary trails and construct a nearly two-mile gondola (including a building at its base), two double-chair lifts (holding two persons per chair), a beginners surface lift, a lodge at mid-mountain (”Mid-Vail”), a ski patrol shack at the top, and a bridge across Gore Creek. Bob Parker, also from the Tenth Mountain Division and a former editor of Skiing Magazine, became the marketing director of Vail Associates, and his contributions included organizing numerous crowd-gathering events. Especially important was an agreement by the U.S. Ski Team to hold an Olympic training camp at Vail, an event that began on December 23, 1961, just eight days after the resort opened.

1960s: Establishing a Ski Resort

Opening day was hardly indicative of the resort’s future greatness. With no snow at the base and snow only about ankle deep at the top, the resort sold a small number of $5 lift tickets, only a few of which actually went to skiers. Most of the tickets were purchased by area residents who wanted to experience the novelty of riding the lifts up and down the mountain. Three weeks later, on January 10, 1963, the resort managed to draw just 12 skiers, bringing in a total of $60 from lift tickets.

However, the resort’s fortunes soon improved. Its large amount of gentle terrain attracted families, and its more fearsome back bowls became legendary among experienced skiers. Vail, closer to Denver than its soon-to-be archrival Aspen, began to draw tourists. More importantly, however, Vail also benefited from a tremendous increase in the popularity of skiing during the 1960s and 1970s. The 1960 Winter Olympics, held at Squaw Valley, California, encouraged many Americans to try skiing, as did the new Head metal skis, which made the sport easier. Other important developments included safer ski bindings; “stretch” ski pants, which were more fashionable than the traditional bulky skiwear; heavy promotions by airlines, which saw in skiing a new market for their services; and legal changes that made condominium ownership more practical and appealing.

As a result, Vail took off, growing faster than even the most optimistic hopes of its founders. By 1964, the company had developed enough new terrain to triple skier capacity, and trails and lifts continued to spread east and west across the mountain. Its Golden Peak and Lionshead ski areas opened in 1967 and 1969, respectively. For the base area, the company followed its master plan, which called for an Austrian-style village, complete with winding lanes, footbridges, arcades, and a clock tower, while avoiding such distractions as neon lights. Each building in the town offered unique features, while conforming to the general style. In 1966, however, the town of Vail was incorporated and the company was no longer able to control the town’s development.

1960s and 1970s: Expansion and Development

During the late 1960s, Vail continued new resort development projects on both sides of the valley. To help pay for the development, costing some $13 million by 1969, the company sold part of its land in the valley as commercial and residential lots. In 1966, it began to offer its stock over the counter, a move that left Seibert as chairperson while effectively reducing his power. In 1971, the company also spent $4.4 million to purchase 2,200 acres of land ten miles down the road, which would later become the site of its Beaver Creek resort. By 1973, Vail Mountain had some 800 acres of skiable terrain, two gondolas, nine chairlifts, and four restaurants (two on the top of the mountain and two at the bottom). Total revenues were about $7 million.

Company Perspectives:

Vail Resorts is the premier mountain resort operator in North America, with five distinctive mountain resorts. The company and our employees are committed to providing excellence for our customers, sensitivity to our surrounding communities and environment, and profitable growth for our shareholders.

Even more attention was focused on Vail in 1974, when Gerald Ford took over the U.S. presidency from the resigning Richard Nixon. Ford, in addition to being the first “skiing president,” frequently took vacations at Vail and owned a three-bedroom condominium in the center of town. His first Vail ski vacation while president took place in December 1974, but for security reasons he rented out the home of Harry W. Bass, a Texas multimillionaire and Vail board member. Some began to dub this rented home the “Western White House.”

Mid-1970s: Tragedy Strikes

Vail’s next major source of publicity was the result of a tragic accident. On March 26, 1976, a frayed cable on the Lionshead gondola got caught in one of the lift towers, causing the passing cars to bounce and shake. Two cars then fell off, plummeting 125 feet to the ground, while the rest of the lift came to a halt. Although the ski patrol was able to rescue those trapped in the stalled lift, four people died and eight others were injured. At the time, this was the worst accident at a U.S. ski resort.

The tragedy was bad publicity for Vail and, worse, prompted a wave of lawsuits totaling more than $50 million. Fearing its liability in the accident, the board decided to sell the company, and, in late 1976, Harry Bass was able to gain controlling interest in Vail Associates for $13 million. Soon afterward, Seibert was forced out of the company, reportedly because of a personality clash with Bass. Ironically, Vail Associates eventually settled all the lawsuits out of court for only a fraction of the total claim.

1976-85: New Site Improves Image

During this time, the company’s Beaver Creek site was chosen to host the downhill event for the Winter Olympics, scheduled to take place in Colorado in 1976. However, the Olympic offer was turned down by Colorado voters and, instead, the games were held at Innsbruck, Austria. Initially seen as a setback, the loss of the Olympic games gave the company more time to plan Beaver Creek; in fact, the planning alone would take seven years and cost $50 million.

Ultimately, Beaver Creek became not merely a ski resort but an elegant, truly luxurious, all-season resort area, which included facilities for conventions and conferences. Opened on December 14, 1980, Beaver Creek initially offered 450 acres of skiable terrain, boosted to some 1,000 acres by the decade’s end. During this period, Vail Associates was also marketing the valley as a summer vacation area, where people could hike, raft, ride the gondola, shop at the more than 200 stores, or golf at one of the four 18-hole courses.

By 1982, Vail Associates had assets of nearly $100 million and revenues of $43.7 million—$31 million from its ski resorts and another $12 million from real estate operations. Vail Mountain was without a doubt one of the country’s premier ski resorts, and Beaver Creek, though small, had built a reputation for opulence. All boded well for the company save two developments. First, the popularity of skiing in the United States had declined dramatically, and secondly, sales of the Beaver Creek properties were dismal. By the mid-1980s, real estate prices in the valley had collapsed, causing the near failure of Vail Associates. Problems for the company were further complicated in 1984 by a confrontation between Bass and his children, whose trust, established by Bass, owned enough Vail stock to oust him from the chairmanship.

Key Dates:

1957:: Pete Seibert and Earl Eaton, co-founders of Vail Associates, Inc., first climb the future Vail Mountain.
1961:: The U.S. Forest Service issues final approvals and permits to begin building Vail Mountain ski area.
1962:: Vail Mountain opens for skiing with two chairlifts, one gondola, and a $5 lift ticket.
1972:: Vail Associates purchases 2,200 acres of Beaver Creek property.
1980:: Beaver Creek ski area officially opens with 4 chairlifts, 28 runs, and 425 skiable acres.
1985:: George Gillett purchases Vail Associates as a subsidiary of Gillett Holdings, Inc.
1989:: The World Alpine Ski Championships are held at Vail Mountain and Beaver Creek.
1992:: Apollo Ski Partners of New York acquires Vail Associates.
1993:: Vail Associates buys Arrowhead’s undeveloped real estate and mountain properties near Beaver Creek.
1997:: Ralcorp Holdings and resort operations, are merged with Vail Associates, creating Vail Resorts, Inc.; Vail Resorts, Inc. undergoes IPO that raises $213 million.
1998:: Vail Resorts purchases the Inn at Keystone; the Village at Breckenridge, a collection of hotel, restaurant, and other properties; arson fires in protest of the company’s controversial Category III expansion cause more than $12 million in damages.
1999:: World Alpine Ski Championships are held at Vail and Beaver Creek; Vail Resorts acquires the Grand Teton Lodge Company in Grand Teton National Park, Wyoming; purchases VailNet and InterNetWorks, two local technology companies.
2000:: Category III expansion, now named Blue Sky Basin, is completed. Vail Mountain regains SKI Magazine’s title as the #1 ski resort in North America; Vail Resorts acquires a 51 percent stake in Renaissance Resort and Spa in Jackson Hole, Wyoming; the property is renovated and renamed Snake River Lodge and Spa.

1985-90: New Owner Invests in Improvements and Expansion

In the summer of 1985, Vail Associates was purchased for $115 million by George Gillett, head of Gillett Holdings Inc., which at the time owned nine television stations, 21 newspapers, two radio stations, and a meatpacking plant. George Gillett had been a customer at Vail since 1963 and was an enthusiastic skier prepared to make large capital investments. However, his appraisal of the resort’s recent past was harsh. He noted that Vail was not making money and that it had over six years of condominium inventory in Beaver Creek. Gillett also criticized the company for maintaining an entire department devoted to real estate development when there was no demand. Employee attitudes towards the customers were cited as poor, and the people who owned many of the businesses in town viewed skiers as intruders on their peaceful lifestyle.

Gillett set out to change this environment, emphasizing the simple principle that “the customer is king.” One of the first areas he focused on was training. Gillett personally led every employee-training program at the Vail resort, as well as additional training programs for city employees, restaurant workers, bus drivers, and cab companies. He arranged to have television crews follow several families on a Vail vacation—from the moment they made their reservations until they left the resort for home—and then showed a film of these trips to Vail’s management. Among the problems they discovered was the lack of a central reservations system; the high incidence of lost baggage at the airport; long lines at ticket windows and lifts; and the lack of children’s activities after skiing.

From 1985 to 1989, the company invested $60 million in capital improvements. Part of this sum went to the China Bowl expansion, which opened up an immense new area of advanced terrain on the back side of the mountain, in the process doubling the resort’s skiable terrain to 3,787 acres. With the addition of China Bowl, Vail became the country’s largest ski resort, surpassing the former leader, Mammoth Mountain in California. By 1989, it had also installed six high-speed quad lifts (with four-person chairs), which, though costing several million dollars each, considerably reduced lift lines. For children, the company opened a kids-only hill, which included Ft. Whippersnapper, an adventure park with mock hunting camps, and an Indian village. Remarkably, by 1989, all the condominiums in Beaver Creek were occupied.

The readers’ poll of SKI Magazine rated Vail Mountain the top resort in North America three years in a row—1989, 1990, and 1991—and the company also set attendance records, with over 1.5 million “skier visits” each year at Vail Mountain and more than 400,000 at Beaver Creek. Capital improvements continued as Vail constructed a public bobsled course in 1990 and installed its tenth high-speed quad in 1992. By 1993, it had 4,020 acres of skiable terrain and a total of 25 lifts. Vail was also the host of the 1989 World Alpine Ski Championships, an event that hadn’t been held in the United States since 1950. The event gave Vail extensive international press coverage, which Vail Associates hoped would encourage skiers from other countries to visit the resort.

However, while Vail thrived, its parent, Gillett Holdings, was collapsing under the weight of failed junk bonds (high-risk, high-yielding debt certificates), issued in the 1980s to finance its acquisitions. The holding company filed for bankruptcy on June 25, 1991, and its eventual reorganization transferred the ownership of Vail Associates to Apollo Advisors, L.P. of New York, a company headed by Leon Black, a former Drexel Burnham banker. Nevertheless, George Gillett continued to serve as chairman of Vail Associates.

1990s: Business Booms and Expansion Accelerates Amid Controversy and IPO

Despite the financial complications of its parent company, the day-to-day operations of Vail Associates remained profitable, and the company continued to make ambitious expansion plans. In 1993, Vail sought approval from the U.S. Forest Service to develop a giant, north-facing bowl, which would again almost double the resort’s already huge amount of skiable terrain. Further west, the company had purchased Arrowhead, a new, small ski resort next to Beaver Creek, and plans were underway to connect the two resorts with a chair lift. However, the many projects taken on by Vail Associates were also reflected in the price of Vail Mountain’s daily lift ticket, which increased from $30 in 1986 to $46 in 1994.

Vail Associates was not alone in its plans for expanding terrain and upgrading facilities, nor in its raising of lift ticket prices. Many other resort owners—noting that Americans were increasingly going to the biggest and best-equipped ski areas—were also investing in expansion projects, while small ski areas, unable to compete, were failing at a rapid rate. Vail Mountain had managed to remain at the top of North American ski resorts, though not without competition. Nearby Aspen, for example, with its four separate ski mountains, continued to benefit from its reputation as a more “authentic,” culturally sophisticated town. Moreover, several Utah resorts offered drier snow and steeper terrain. Farther north, Whistler and Blackcomb, contiguous resorts in British Columbia, Canada, both had a much larger vertical drop (the difference in elevation between the base and the summit) and, when viewed as a single ski area, a greater amount of skiable terrain.

In 1996, Vail Associates signed a deal with Ralcorp Holdings, Inc., purchasing nearby Breckenridge and Keystone resorts and establishing Vail Resorts, Inc. Now skiers had access to four ski resorts and the Arapaho Basin. That year, the company also invested $30 million in improvements at Vail, including more ski lifts, a 12-passenger gondola, and a new base lodge that catered to a variety of customers.

The popularity of snowboarding meant Vail had to expand not only in a geographic sense but also in a business sense. Snowboarders were typically a different demographic than the affluent skiers of Vail’s majority; the company also recognized the need to establish Vail as not just a place to ski but also a place to vacation. Adventure Ridge, a winter-amusement park, soon opened at the top of the Lionshead gondola. The park included four new restaurants, bars featuring live music, extreme snowboarding movies, and an upscale restaurant, primarily geared toward a younger crowd. By 1997, new CEO Adam Aron had tripled sales of season passes and planned to spend another $74 million in added improvements and expansion efforts.

In February 1997, Vail Resorts became the first North American ski resort to go public. The initial public offering raised $213 million, a welcome contribution to Vail’s expansion efforts. Investor Ronald Baron, Ralcorp Holdings, and Apollo Advisors together controlled about 75 percent of the company’s stock.

However, continued expansion proved to be challenging. Vail Resort’s plans for an 885-acre Category III project in the Vail Mountain back bowls met with opposition from the townspeople and from environmental groups. Locals and animal rights activists protested vehemently in March 1998, objecting to what they viewed as the project’s reckless encroachment on the habitats of elk and the Canada lynx. Although lawsuits were filed against the development, the project was ultimately approved by the U.S. Forest Service and by the Eagle County Commission. In October, on the day construction was to commence, fire broke out, damaging four chair lifts and destroying the $5 million Two Elk Lodge and ski patrol headquarters. Damage totaled $12 million. Members of the activist group Earth Liberation Front (ELF) claimed responsibility.

Ironically, the fire invoked local sympathy for Vail and the expansion continued as planned. By 1999 Vail Mountain had repaired the fire damage and, along with Beaver Creek, hosted the 1999 World Alpine Skiing Championships, making them the only North American venues to twice host the event. In 2000, the Category III expansion, now named Blue Sky Basin, was completed and opened for business.

Also in 1999, Vail Resorts finalized acquisition of the Grand Teton Lodge Company in Grand Teton National Park, Wyoming, its first resort property outside of Colorado. In 2000, the company acquired a 51 percent stake in, and assumed management of, the Renaissance Resort and Spa in Jackson Hole, Wyoming, near Grand Teton National Park. The property was renovated and renamed Snake River Lodge and Spa. Also in 2000, Vail Mountain was voted the number one ski resort in North America by readers of SKI Magazine for the third time since 1996 and for the tenth time since the poll began in 1987. Vail Resorts’ other Colorado ski properties—Breckenridge, Keystone, and Bear Creek—all earned high ratings in the poll.

Into the New Millennium: Technology, Quality Experiences, and Profits

The 2000-2001 season set a new attendance record of 4.9 million skiers at Vail Resorts’ four Colorado properties, and the company entered the new millennium employing handheld computers to register ski students, check in rental equipment, and verify ski passes at the lift. Moving forward, their goals are to maintain the “best resort” rating, continue improving the resort experiences of a broad base of clientele, sustain strategic expansions and acquisitions, leverage new Internet technologies to provide areas of growth and benefit core business, and increase profits and stock prices for investors.