On Friday, November 21, 2014, Peak Resorts, Inc. debuted on the Nasdaq, trading under the symbol SKIS.
This company caught my interest particularly because I live and work within the ski industry and watch resort markets worldwide.
Peak Resorts operates 13 resorts in Missouri, New Hampshire, Indiana, Ohio, and Vermont. This puts the company among the top five in the U.S. in terms of skier visit volume, with recent averages of 1.75 million skier visits a year.
Peak has growing revenues and touts its “strong management” team as a key contributor. I believe having the leadership, experience, and all of these resorts under one umbrella is helpful.
Still, competition in this space is cutthroat, so in order to keep people’s interest year round, Peak Resorts has added summer activities such as mountain biking.
But my concerns run deep with this offering.
Although it is a top-five resort company, Peak Resorts has a total of 1,650,000 acres of skiable terrain — a very low number for the ski industry.
The gap between its acreage and that of companies like Vail Resorts and Powdr Corp. is like comparing a high school ballpark to Yankee Stadium.
Let’s take Vail Resorts for starters. Its investment in the Park City resort this year will allow a connection between Park City and Canyons Resort. Both are owned and operated by Vail, and the two will become one full resort in 2015 with a probable 9,000 skiable acres.
The total investment in the two mountains, including land, leases, restaurants, expansion, and snowmaking, is expected to exceed $700 million. And this is just one arrow in Vail’s quiver!
Profits are Important
Although it has seen increased revenue in recent years, Peak Resorts has not demonstrated an ability to show a profit.
Raising $100 million through an IPO may not change that — especially when you’re talking about funding for 13 resorts.
How can $7 to $8 million per resort change anything in an arena dominated by resort companies generating millions of skier visits?
How can Peak Resorts compete with Vail Colorado or Vail Utah or Vail Tahoe… or, for that matter, smaller operators such as Snowbird or Breckenridge that singlehandedly have more terrain and similar skier visits in one resort with less need to make snow?
The answer is simple: It can’t.
Today’s market is too competitive.
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The billionaire owners or massive traded companies that have shown domination will control this market well into the next several decades, and the small family mountains will continue to struggle to offer a comparable experience.
In addition to all of this, water is our most precious commodity, meaning the resorts that require the most snowmaking will see a further strain in costs and continued allowed use.
It’s a shame for those who live in these areas and desire the family resort product.
However, Deer Valley Resort in Utah seems to be an exception to this rule.
It’s not a large resort in comparison to many West Coast mega-mountains. But Deer Valley is consistently ranked a number one resort.
The company created cash flow from many ski neighborhoods and “lifestyle living,” and the real estate revenue is why Deer Valley is what it is today.
It’s rarely about ski operations these days — it’s about creating value in the real estate. And this is where Peak Resorts falls short.
Until next time,
Paul Benson
