 Poster: A snowHead
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Shares in Fortress Investment Group, which acquired Canadian ski resort developer Intrawest in 2006, have slumped from $31 to $1.34 over the past two years.
Intrawest has masterminded developments at Arc 1950, numerous resorts in Colorado, and major projects in Whistler including the 'Peak to Peak' gondola, which has the longest unsupported span in the world and opened earlier this winter.
Here is a detailed assessment of the past, present and prospects for Fortress and its CEO Wesley Edens, from Bloomberg.com
Fortress has also acquired interests in Michael Jackson's Neverland Ranch in California with its amusement park, and is currently involved in the Olympic village for the 2010 Winter Olympics at Vancouver (which will stage skiing events at Whistler).
Any comments on the future for Fortress and Intrawest, and the story to date?
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Obviously A snowHead isn't a real person
Obviously A snowHead isn't a real person
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| Quote: |
| Houssian helped change the ski industry into what it is today -- a real estate business with ski areas attached |
I've rambled on about this before on Snowheads. Much as I love North American skiing, I believe that many resorts over there are based on very shaky economic foundations. The basic business principle is to acquire land, develop and operate a ski resort on wafer-thin margins, and then take profit as the development value of the land shoots up. This model only works when a resort is growing; it isn't capable of sustaining any level of investment in mountain operations in a downturn.
Please forgive me while I don an accountant's hat for a few moments. Conveniently, Intrawest no longer publishes accounts (can anyone enlighten me how private US companies escape this requirement?) but its 2006 results show a disturbingly unbalanced operation. EBITDA (earnings before interest, tax, depreciation and amortisation) was as follows:
- Resort operations (see note): $88m
- Management services: $37m
- Real-estate development: $175m
Of the resort operations, only 30% of turnover came from mountain activities; the rest came from shopes, restaurants, ski schools, travel operations, etc. With EBITDA in this sector of the business at a 'disappointing' 9.7% of turnover, it's entirely possible that mountain operations (running lifts and grooming pistes) were loss making in 2006.
The picture is worse if you consider profit after depreciation, amortisation and interest - a total of $151m across all operations. Resort operations are by far the most capital intensive part of the business, and most of these costs need to be deducted from the miserable $88m earnings contributed by those operations.
So, in 2006 when the economy was booming, Intrawest used its loss-making mountain activities as a means to leverage value from its massively profitable real-estate business. Now that real-estate is dead, I wouldn't be confident that all the ski resorts it owns - especially smaller hills like Copper and Panorama - can survive.
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Well, the person's real but it's just a made up name, see?
Well, the person's real but it's just a made up name, see?
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| Jonny Jones wrote: |
| only 30% of turnover came from mountain activities |
Which is quite shocking given the astronomical prices of lift passes in North America when compared to Europe.
Intrawest (Fortress) have been up a brown, smelly creek for quite a while. It is certainly noticeable this year (as opposed to the last couple), how Fortress have started trying to squeeze every penny out of visitors to Whistler - some of the prices are going up weekly as their financial standing gets worse and worse. I was not impressed with how the resort was being run this year. On a shoestring, with a huge price tag, just about sums it up.
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| skisimon wrote: |
| Jonny Jones wrote: |
| only 30% of turnover came from mountain activities |
Which is quite shocking given the astronomical prices of lift passes in North America when compared to Europe. |
It's actually 30% of their mountain activities turnover. Other mountain activities include ski hire, ski school, restaurants, etc. As mountain activies are only 29% of their total activities (split by profit), lift passes are only 10% of Intrawest's business.
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Anyway, snowHeads is much more fun if you do.
Anyway, snowHeads is much more fun if you do.
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So can anyone put this into the context of how it might effect Les Arcs 1950. They do not own the lifts, or at least i do not think so. That is the Compagnie des Alpes. What effect could all this have on how 1950 will or will not work. Any ideas anyone?
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| skisimon wrote: |
| Jonny Jones wrote: |
| only 30% of turnover came from mountain activities |
Which is quite shocking given the astronomical prices of lift passes in North America when compared to Europe. |
Yeah but have you seen how many people they employ to get you on one single lift ?
Last Season in Aspen I counted at least 8 people at the base of one chair lift !
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