Update: on February 21 Vail announced it would be buying Stowe Mountain Resort. See Vail Buys Stowe
For the past few weeks, we’ve been hearing talk of a deal between Vail Resorts, Inc. and AIG, which owns the Mt. Mansfield Ski Company, which owns Stowe Mountain Resort. So why would Vail want Stowe?
1. Location, Location
For years, there have been murmurs that Vail Resorts, Inc. would buy a Vermont resort so it could have access to the Northeast’s huge population centers and cross-market its 13 resorts. For those who like to speculate, Stratton was on the short list. That rumor heated up last fall when helicopters began mysteriously circling that southern Vermont ski resort.
Jay Peak and Burke also appeared to be prime prospects, especially if the resorts (currently under receivership following an SEC investigation for EB-5 fraud), were for sale at what might be a bargain price.
For Vail Resorts, a foothold in the East simply makes sense: 80 million people live within a five-hour drive of anywhere in the state. Vermont, historically, has had the third highest number of skier/rider visits in the nation; with Colorado and California leading the pack and Utah challenging Vermont. And in 2015, with 4.7 million visits, it beat out a snow-starved California.
While Stratton is closer to the U.S. major urban areas and Jay Peak is closer to Montreal, Stowe is an easy weekend away from Montreal, Boston, Albany and New York City. With Stowe Aviation operating the expanding local airport and Tradewind Aviation offering flights from Westchester, Stowe is increasingly accessible by commercial and private plane.
2. Lock In Pass Holders, Compete with The Mountain Collective
Vail likes to lock in customers across its properties by offering low rates for its season “Epic” pass (just $809 last year). For the 2016/17 season, the Epic Pass was good at Vail’s 13 areas, including Colorado properties (Vail, Beaver Creek, Breckenridge, Keystone and Arapahoe Basin); Park City, Utah; California resorts Heavenly, Kirkwood and Northstar-at-Tahoe), its Midwest ski areas (Wilmot, Afton Alps, Mt. Brighton) and Perisher (in Australia). It was also valid for 5 days at the newly-acquired Whistler/Blackcomb. Whistler/Blackcomb has also been part of the Mountain Collective Pass (the prime competitor to Vail’s Epic Pass). So was Stowe. For 2016/17, both passes are being honored at Whistler.
3. AIG is Divesting
In January 2016, American Insurance Group (which has fully owned Stowe since 1988), announced it was starting to divest its non-core assets. AIG has been involved in the resort ever since 1943 when its chairman Cornelius V. Starr and his wife visited Stowe. According to a Burlington Free Press article by historian Brian Linder, the couple were bummed out at having to wait in long lift lines for the single chair and offered to put up 51 percent of the funds for another lift in 1943. Starr owned the Mt. Mansfield ski company until 1970 when he sold it to AIG. Starr also passed on leadership of the insurance giant to Maurice “Hank” Greenberg, who became equally enamored of skiing and Stowe and built a home here.
In 2008, when the financial crisis hit, Greenberg, who had left AIG, considered buying the resort from his former employer, Greenberg told Forbes in 2008. In January 2016, AIG began selling off 50 percent of its hedge funds and other assets in an effort to recoup some of its losses from the 2008 bailout and announced it was going to focus on its core businesses. It’s safe to say, skiing was not one.
4. Vail Thinks Big—and Small
On August 8, 2016 Vail Resorts paid $1.06 billion for Whistler/Blackcomb, which was a 43 percent premium on its stock price. In January, it bought Wilmot Mountain, in Wisconsin. So why would Vail buy a tiny Midwest resort you never heard of, and then offer to invest $13 million in it? One reason: it’s just 60 miles north of Chicago and again, provides access to a large population of potential skiers.
5. Vail is Feeling Rich, and Could Get Richer
When Vail Resorts announced it would buy Whistler/Blackcomb, its stock soared by 8 percent in one day. In 2016, Vail Resorts’ stock has risen by a whopping 27 percent in 2016 and up 300 percent over the past five years. Vail has also been on a buying spree, purchasing Utah’s Park City in 2014 and Lake Tahoe’s Kirkwood in 2012.
6. It’s Not (Just) About the Mountain
Stowe is one of the few ski towns that, historically, is busier in the summer than the winter. With the new Stowe Rocks rock climbing gym at the Adventure Center, the ZipTour zipline and ropes course at the base of Mt. Mansfield, the 18-hole golf course and the Spruce Peak Performing Arts Center, Stowe Mountain Resort has plenty to keep people busy year-round. And last summer the mountain began scouting mountain bike trails. “In summer, Whistler is absolutely a leader in North America, and we feel that adding that to Vail Resorts certainly helps our summer revenue and profitability,” Vail Chief Executive Rob Katz told Reuters last August.
7. There is Still More Real Estate to Develop
It is possible that Vail would only buy the mountain operations (and AIG would retain ownership of the real estate). This past summer, Spruce Peak at Stowe completed the most recent phase of its $90 million development: the Adventure Center and Alpine Club building. On Dec. 20, 2016, Spruce Peak, the development arm of Stowe, announced $70 million in closed and newly-signed contracts in 2016. “When we started this project, we saw the East Coast real estate market was missing a family-oriented luxury solution for second home buyers near Vermont’s most coveted ski destination,” said Spruce Peak at Stowe’s Vice President & Director of Real Estate, Sam Gaines.
For Vail this could be a sweet real estate deal. The 18 new Village Townhomes are selling for $1.5 to $2 million. There’s room for another 12 and there are plans for an aquatic center and three more larger buildings. Another opportunity at Stowe might be to build a new base area near the Toll House chair. That could mean replacing the Toll House chair with a faster chair, building new townhomes, renovating the current Inn at the Mountain or putting in another hotel.
8. And Then There’s Smuggs…
The one downside to Stowe is that there’s limited developable land. Already, parking has been a problem on the Mt. Mansfield side, and Spruce Peak has only limited developable acres. So if you want to increase skier and rider visits, where do you put the people? Just a short skin away from the top of Spruce Peak’s highest lift is an entire resort, Smugglers’ Notch, which has been named the best family ski area in the nation multiple times by Ski Magazine readers. While Vail Resorts is out shopping might we suggest Smuggs as well?
Independently-owned, Smuggs could be a nice addition and, during the summer, easily accessed by Route 108 through the Notch. Smuggs (and its sweet sidecountry Birthday Bowls) could well become Stowe’s “back bowls.” With a focus on kids, a new 26,000 sq. ft. Fun Zone going in this March and closer access to Montreal and Burlington, Smuggs could be to Stowe what Blackcomb is to Whistler: the other side of the mountain.
Of course, until we get an official word (and efforts to reach Stowe and Vail have not been fruitful), all of this is conjecture. And it’s not the first time that such rumors have swirled. Stay tuned.