Steve Rice

America’s Top Ski Resort Executive Speaks

Orlando, FL – America’s most powerful ski resort executive isn’t employed by Powdr Corp. or Intrawest, or even Vail Resorts. Strictly in terms of the number of ski resorts under his umbrella, it’s Steve Rice.

Operating largely behind the scenes as Managing Director of CNL Lifestyle Properties, Rice manages the real estate investment trust’s (REIT) extensive ski resort portfolio, now including 14 owned resorts, several ski resort villages and three resorts where the Orlando, Fla.-based company holds senior debt. Those include: Mountain High, Northstar-at-Tahoe, Sierra-at-Tahoe and the Village at Mammoth Mountain, Calif.; Crested Butte and the Village at Copper Mountain, Colo.; Sugarloaf and Sunday River in Maine; Jiminy Peak, Mass.; Loon Mountain and Mount Sunapee, N.H.; Gatlinburg Sky Lift, Tenn.; Brighton, Utah; Okemo and the Village at Stratton, Vt.; Stevens Pass, Wash.; the Village at Snowshoe, W.V.; and Cypress Mountain, the Village at Blue Mountain and Whistler Creekside in Canada. The company also owns: 49 golf properties; 28 leisure attractions, commercial developments and hotels, including the Omni Mount Washington Hotel at Bretton Woods, N.H.; as well as numerous senior housing projects and 17 marinas.

Steve Rice
Steve Rice

We had the opportunity to sit own with Rice to explore a wide variety of topics from resort acquisition to ski area management, snowmaking to HR, and everything in between.

Q: Steve, can share can you tell us a little bit about the path you took to head up the ski operations at CNL Lifestyle Properties.

Steve Rice:  Sure.  It’s a path that took some pretty sharp turns and twists but there’s a common denominator in the trajectory of the mountain resort industries.  I went to high school in Stowe, Vt., was a ski patroller there in high school and the early years of college, before I headed out west to finish school.  I worked in the mountain industry right out of college.  First for the U.S. Forest Service for a short while, and then I ended up heading up Northern New England operations for the Appalachian Mountain Club, based out of Pinkham Notch, N.H.  The AMC provides  well over a hundred thousand annual overnights through the famous AMC Hut System in the White Mountains of New Hampshire. There are over four hundred miles of hiking trails maintained by the Club.  We provided thousands of experiences each year from guided hikes, to outdoor education workshops, to canoeing and lake-based recreation. It was a conservation organization with a very heavy recreational bent, and of course, skiing was part of that, at the famous Tuckerman Ravine on Mount Washington.

Tuckerman Ravine is just two and a half miles up from Pinkham Notch and so very much a part of the AMC’s offerings.  From there I went to the ski industry directly as a marketing director for a ski resort in New Hampshire called Mount Cranmore, and from there I was asked to join the cabinet of Governor Judd Greg as the Commissioner of Resources and Economic Development – a post that included two ski areas, Cannon Mountain and Mount Sunapee, in addition to state parks and state forests. And then on the other side I oversaw the tourism agency, economic development and the foreign trade office.  So, it was a diverse assignment.  A heck of a lot of fun.  I learned a great deal, and I  continued to feed my ski addiction well through that assignment.

I ran a resort in Pennsylvania for four years, a ski area called Whitetail.  Built in 1990, it’s still the newest significant ski resort built in the country.  The resort has enormous snow-making fire power and is only an hour and a half outside of Washington D.C.  I oversaw the construction of real estate there and a golf course.

I then joined Intrawest for nearly a ten-year assignment, just prior to my joining CNL. Eventually, at Intrawest I oversaw Intrawest’s eastern operations, including three resorts in Canada, most notably Mont Tremblant, which is the perennial number one ski resort in the east in SKI Magazine surveys over the last 20 years  On the U.S. side, I oversaw Stratton, Mountain Creek, and Snowshoe ski resorts.

Prior to that regional role for Intrawest, I was the general manager at Snowshoe in West Virginia for a couple of years, which is the “purest” destination ski resort in the country. That may come as a surprise to most people, but it is so remote in the mountains of West Virginia that virtually all of the visits are overnight destinations with an average length of stay of about three nights.  It was a very interesting assignment at a very successful resort, one that was and continues as the dominant resort in Atlantic Southeast and one that’s also been recognized for environmental achievement in the industry.So after ten years of that regional role, I segued to CNL in ‘07 and was asked to oversee its ski mountain and mountain lifestyle portfolio of ski resorts and mountain commercial villages.  I was very much involved in the acquisition of ski resorts over that period of time, to the point where CNL Lifestyle Properties now own seventeen ski resorts and is the largest owner of ski resorts in North America.

I’ve gotten a great deal of satisfaction out of being a part of the evolution of CNL Lifestyle Properties. Many people have talked about creating a portfolio of resorts that would be geographically diverse and therefore resistant to the inevitable weather fluctuations that occur around the country, but only one entity’s ever achieved that, and it’s been CNL Lifestyle Properties.

CNL Lifestyle Properties’ ski assets include nine resorts in the west, eight in the east – nearly perfectly balanced.  And in the west CNL Lifestyle Properties has resorts in Southern California, the Tahoe region, the Pacific Northwest, Colorado, the Northern Rockies…with the remaining eight in the Northeast  So even within the east and west groupings, there is great diversity.

Q: We’ll talk a little more about CNL in a second.  But I also thought that while we’re on the subject of career paths I’d follow up with you about how you see those paths within the industry. It seems that there are two main paths for those who wish to work for a ski resort.  On one hand you can starting up at the bottom as a liftie or ski instructor and work your way up inside the organization. Alternatively, you can go a more traditional business, or in your case, government and business, route and then transfer into the industry.  What type of advice would you give to people, particularly young people, recent college graduates or those considering a career in the industry who perhaps don’t want to “ski bum” but would like to land, eventually, in a role similar to yours in a management or a front office position within the ski industry?

Steve Rice: Well, I would say that both routes are very viable. I see them as either coming up through the industry and working at ski resorts and assuming increasing levels or leadership and responsibility, or having a strong connection to the industry. Often you see someone who has worked for a period in the industry and then gained experience in assignments outside the industry proper, but perhaps somehow related.  That path seems to be a good one because when that you reappear and throw your hat in the ring for a more senior assignment at a resort you can cite experience that would be pertinent and helpful in your capacity at the resort, but which is difficult to gain by simply going up the ranks at the resort.  As I say, both options are viable.

You look around the industry and you’ll find people in the highest levels that have landed there through both routes. The last thing I would say is that education is always a factor and having a foundation of college work that is pertinent to the industry in some fashion is useful to have under your belt as well.  An MBA is helpful, but not necessary in a management role coming up through the industry.  But I’d say keep your eye on trying to shape your experiences in a way that makes sense.  If you owned a resort and were looking for a strong team of people to make you a top competitor, what are the skills you’d need to draw upon?  If you approach it that way, I think it’s helpful in making the choices that you are presented with as you shape your career.

Q: Switching gears slightly to draw upon your experience, what do you see, besides the obvious challenges of the weather and the economy, as the biggest challenge of running a successful ski resort today?

Steve Rice: Well, I think one of the challenges, and it relates directly to what we were just discussing, is complexity of the business and how many skills you need to be able to apply, from a human resources point of view, to be successful.  If you think about a ski resort, you understand how many business areas exist under that umbrella definition.  You have food and beverage – the restaurant business –  and certainly the core businesses of the ski school and ski patrol, which are very different but obviously related.  The retail world is represented both in ski shops as well as the rental of snowboards and skis.  That is a very important part of each resort’s business model.  Additionally another discipline that may not be revenue units but are also essential is upkeep and maintenance. You have to have good mechanics and a staff that can actually run a ski resort.  You need heavy equipment operators.  You need very sophisticated marketing and sales staff in order to cast an appealing net far and wide as we depend on destination visitors in many of our resorts.

And so if we look at that diversity and then look at the reality of what it costs to operate a resort, you simply can’t plug a specific one-dimensional talent into each one of those places and not cause a real flaw in your business model, translating into higher costs.  You’ve got to have people that have diverse skills and abilities, are able to work hard and long — it’s a very concentrated ski season. While summer revenues are growing very quickly, the majority of revenues are earned in the winter, of course. The days are long, and it takes great teamwork by people who can work well with others.  The human resource talent to make that work and is essential.

I think another challenge is access to capital.  This is a very capital intensive industry. Especially since the outset of the great recession in 2007, it’s been very, very difficult for ski resorts to access capital through traditional means. It’s very tough, not only for funding capital expansion, but for even seasonal lines of credit, which for a while were very difficult to maintain. Thankfully, there’s been some easing of that as the economy’s improved, but on the whole the banking relationship has been a challenge.  In order to keep pace with the essential investments and new technology, snowmaking being a particular one, resorts have simply got to have access to capital.  You can generate that on your own if you’re a mature resort without much debt and a strong business model.  Those resorts have the luxury of funding capital out of net operating income, but often you need to borrow, and you do that through investors. They can be institutional or in some cases individuals or banks, but with banks being difficult, the challenge is for resorts to find the sources of capital that will keep the action of growth going.

I would just say our model, our CNL Lifestyle Properties model, has provided an answer for that. We have invested well over $150 million dollars in capital expansion projects at our resorts over the last four to five years and an equal amount in capital maintenance – extending the useful life of existing capital improvements.  Not every resort has the discipline and the access to capital to be able to make those investments. I can say with pride on behalf of the company, that CNL Lifestyle Properties’ resorts are in significantly better condition than when we acquired them, because we provide that access to capital.

Q: CNL Lifestyle Properties has resorts spread all across the country.  How do you find the differing state regulatory and statutory schemes affect your operations?  For example, CNL Lifestyle Properties owns resorts in Massachusetts, California and Vermont, three states which, generally speaking, are considered to have high levels of regulation.  But you also own resorts in states that are traditionally considered more business friendly, like Montana or Colorado or even Tennessee.  Do you find the overlay of state laws and regulations and your interaction with state government more broadly have a substantial effect on what you can and cannot do in operating a particular resort?

Steve Rice: Yes, differing state and local laws are very much a factor.  Traditionally, the regulatory climate does vary around the country, but it also varies between being situated on federal land, being a permittee on state land, or being on private land. Those distinctions probably have as much to say as anything about the ability and speed of being able to move forward with master plan projects.

But aside from that basic land ownership classification, the regulatory environments do vary by state, as you point out. They mean that significantly more or less time and resources need to be devoted toward planning and permitting exercises in order to get to the point where you can pull the trigger on a capital improvement.  So at a place like Snoqualmie Summit in the State of Washington, because it’s in a National Forest, the better part of five years went into securing an approval of the resort master plan.  There was a lot of involvement from individuals and environmental groups from the Puget Sound area that care very deeply about activity in the Forest and it took a lot of compromise. It was a lot of meetings at night, a lot of interaction between the resort staff, the Forest Service and public and eventually you get there.

So we did win Master Plan approval without a major controversy involved, but with significant compromise and communication and time, adding redrafts and adjustments to projects in order to reflect the views that were being expressed by the public and the Forest Service.  So it does vary.  You have to start a lot sooner on a project if you’re in a highly regulated environment than you do if you’re on private land in a less regulated environment.

But I will say this because it’s really important.  I believe I can speak for the industry on this: the regulatory environment has little impact on the objectives of the resort to build an environmentally friendly, responsible expansion that lays lightly on the landscape.  Our business is about outdoor recreation in some of the most beautiful settings in the United States.  For us to spoil the environment we’re attracting people to, to cause a visual scar, to pollute a stream, or to cause erosion, is the absolute most short-sighted and irresponsible thing we could do whether we were being regulated or not. The industry has developed its own recognition programs that the National Ski Area Association administers in order to encourage, celebrate, and call attention to state of the art, environmentally friendly projects and approaches that, as I say, allow us to lay lightly on the landscape. This will remain a long-term industry commitment.

But to address your original question, the regulatory environment simply has more to say about time and cost of the process to get to a resort improvement than it does about the ultimate quality of it.

Q: To follow up on a comment you made earlier, a lot of people enjoy the amenities, the infrastructure improvements, the snowmaking, the new lifts that you put in place, but don’t necessarily appreciate how long it takes to get from point A to point B.  Maybe you can very briefly just sort of walk us through your steps from when you acquire a mountain that you think has some potential but may be under-utilized or underdeveloped.  What are the steps you go through, from a 30,000-foot level, in turning that resort into a destination resort?

Steve Rice: Right.  Well, let me rephrase your question slightly. I’ll go through steps we go through to turn it into a more profitable and successful resort because we like the day resort category very much and own several day resorts.

First, through the acquisition process we look very deeply into the financial history of the resort and compare it to similar resorts operating in that region, as well as our own body of information that comes from our own large group of resorts. This produces clarity in terms of their operating performance.  We can see areas in the annual profit/loss statements that point to opportunities and also point to strengths.  If there weren’t a lot of strengths, we probably wouldn’t be acquiring the resort and we wouldn’t be acquiring the resort if we didn’t see opportunities for growth.  And that growth is looking at the way the resort compares to its peers and then adding what I would call our “street smarts” that come from just being experienced in the ski industry.  Our team has a lot of years in the industry collectively.  We spend considerable time at the resort analyzing it, and getting to know its culture and place in the community.  We add our financial review and identify ways that the resort can grow.

We then look at the state of the master plan that the resort operates under.  Does it need updating?  Are there some projects that are ready to go or have already been conceived that make sense?  What we’ll do is put those projects through a return on investment model that we developed, one which incidentally we put all our capital investments through. Once we’re satisfied that incremental business will more than offset the investment costs, then we will seek approval through our own investment committee and internal process. We’ll develop a project priority list for the resort, which would be multi-year with the highest priorities generally tackled in year one or two.

We like to implement a key expansion to demonstrate to everyone – the employees, the community, the skiers in general – that there’s more gas in the tank at this resort now and that we’re going forward and going to grow.  That’s always a positive statement to help improve the business. So, that’s basically the process, which obviously works quite well for us generally.

One more thing – we view the resort staff that are at the resort already as a “partner.”  We see them as a resource and we draw on their experience.  We do a lot of listening and ask a lot of questions. To be from out of town with a briefcase is to be an expert all too often. No matter how well one might think he or she knows the industry, there are nuances that are specific to an individual resort. A resort that may be only 50 miles or less from a neighbor can have a quite different business model. If you don’t understand those neighbors, you run the risk of making some very costly errors in your new management and ownership role.

Q: We’ve recently seen a lot of mergers and acquisitions and even strategic partnerships within the industry.  Vail continues to gobble up mountains, CNL Lifestyle Properties obviously continues to look to acquire properties, but the trend continues even on a smaller scale with individual mountains. For instance Jay Peak purchased nearby Burke Mountain, or even Mad River Glen and Sugarbush are now offering combined season pass deals.  Many resorts are partnering with even far flung resorts. For example, Mammoth and Valle Nevado offering combined season pass deals.  Do you see this sort of partnership and heightened merger and acquisition activities continuing within the industry, consolidating the sort of bigger resorts in the hands of a few operators or do you see it as a trend that was brought on by the bad economic times?

Steve Rice: Well, I think there will be more of this activity but I’d make a distinction.  First, many of these partnerships are separate resorts under unique ownership groups or individual ownership binding together voluntarily to offer products that help to maintain a competitive edge in that particular resort group.  I think you have to give Vail credit for writing the next chapter in a multi-resort pass.  It’s been a game changer for Vail and its resorts, and I think it’s forced resorts to take a look at that. The appeal of a pass that works as the Epic Pass does to offer similar products and the  resort linkages that Vail has put together has heightened the interest in owning groups of resorts that balance experience and offer greater diversity to passholders. These passes increase the value proposition that a skier or snowboarder has in looking at what set of resorts that he or she wants to visit and will be loyal to.

I think the other thing that will drive continued acquisition activity and merger activity in the industry is the point I made earlier which relates to capital.  You must invest in this industry to keep pace, and it’s expensive to maintain and replace existing lifts. There’s going to be significant impact in the industry because the first generation of detachable ski lifts that were built in the 1980s early ‘90s are aging.

While to a degree a lift is similar to aircraft in that you can replace moving parts and surface wearing parts and operate a lift for decades.  At some point, however, a manufacturer stops servicing a lift.  It’s harder to find parts and it’s simply time to replace the lift.  So there’s going to be a bill coming due around the industry and those lift replacements don’t necessarily increase business volume.  It can simply be a one-for-one replacement.  And if the resort has not been a careful steward of its capital and looked around the corner to understand when those bills will come due, it could prompt a search for capital.

That could mean a decision that, “Gee, we ought to merge with another entity, build our economic base and seek investment in the process in order to take keep pace with these reinvestment requirements and grow.” So, I think those trends are aligned well, and I also think they’re good for the industry.  I think that the value that a skier or snowboarder has before them today is enormous.  To be able to ski a group of resorts in Colorado or Tahoe for $500 versus a single resort ten years ago for $1,200 for a season pass demonstrates the power of more sophisticated pricing and group offerings when it comes to the pass products that are available today.

Q.: What effects are you seeing the recently-enacted Ski Area Recreational Opportunity Enhancement Act having on the industry and on CNL Lifestyle Properties’ summer offerings?

Steve Rice: Well, specifically we own more resorts that operate under a Special Use Permit on a national forest than any other company — seven resorts.  Each one of them has the potential to offer summer activities.  Summer activities are the fastest growing portion of the ski resort’s business model if you look at it from a national perspective.  The Denver Post ran an article just a couple of weeks ago, I believe in early December, that noted that summer spending is growing faster than winter spending at Colorado resort towns as they measure tax revenue that helps track of that spending.

And that’s just a measure of all the spending.  It’s not just what happens at the resort, but it’s the restaurants and retailers located in mountain resort communities.  But what’s happening at the resorts are that, you know, people have woken up to the fact that resorts are great spots to get away to in the summer. They’re cooler and they offer tremendous scenery.  They’re in the forest and the water and the beauty of the forested mountainous natural surrounding appeals to people.

Increasingly, they touch down at a resort for some of the soft adventure opportunities that we can provide.  Everything from the zip lines and canopy tours to mountain coasters. Downhill mountain biking, of course, remains popular and a growing number of activities that you can pursue from a ski resort that also happens to have the uphill capacity, the parking, the bathrooms, the food and beverage facilities, the infrastructure to support increased levels of activity.

So the national legislation, which directs the Forest Service to work with the ski industry and local communities to identify these opportunities and to support them, I think is great for the industry.  It’ll make resorts more resilient and hopefully more profitable.  It’ll allow resorts to keep talented staff on an increasingly year-round basis.  There’s always a core group of staff that are year-round, but this will offer a chance to keep that important human resource talent I was emphasizing earlier. Any employee at that resort now has greater opportunities for employment.

So, we’re excited about the trend.  We think it makes a lot of sense.  The summer activities lay very lightly on the landscape.  We’re utilizing in most cases, just existing assets, and we’re excited about it.  We’re definitely heavily in it, particularly in New England.

Q: Just one last question – we wanted to ask what role you see the revolution in snowmaking technology playing in how the industry operates.  When we spoke briefly before the interview you were talking a little about the advance of low-E guns and how people think of them as “green” but really should look at them as white.  If you would, please talk just very briefly about how you see this as a game changer.

Steve Rice: Yes, absolutely.  Recent advances in snowmaking are nothing short of profound as it relates to the future of the industry.  Snowmaking has been around for 40 years.  Over that period it has achieved several plateaus of efficiency and performance as the engineering that supports the design of snowmaking equipment has advanced. But what has occurred in the last several years truly is game-changing for resorts. What I’m referring to is the ability to make snow using advanced nozzle technology with snow guns that utilize far less compressed air than former designs.  Compressed air is the most expensive portion of snowmaking aside from labor itself, due to the heavy power demands industrial air compressors require to run snowmaking systems.  For example, as of early December 2012, one of our resorts in Maine, Sunday River, has pumped five times the water over the previous year for only two times the power cost– that’s after a large investment in these low-energy, high-efficiency snow guns we made this past last year.    That’s an enormous cost savings and increase in efficiency.

Now, from a cost point of view that’s very, very significant as you can imagine, but there’s a bigger story here. That story is that the arrival of low energy guns with high efficiency nozzles allows resorts to make more snow than ever before because these new guns  are efficient at higher temperatures.  You can now justify making (snow) at 27, 28 degrees wet-bulb .  Wet-bulb is a measure of ambient air temperature and humidity — a wet-bulb temperature of 28 degrees is a window of snowmaking opportunity you now want to grab, you want to take full advantage of it in the early season, whereas with the older gun technology you’d sit on the sidelines.  And so you’re making snow in warmer windows of opportunity, which are representative of what resorts often encounter the early part of the season as the winter is arriving. Because you are able to use this efficient approach, you’re able to pump more water.

At the end of the day, it’s all about the physics of converting water to snow, so it’s all about gallons pumped, and that’s what’s exciting.

Sugarloaf, another of our resorts in Maine which has also made major snowmaking investments in recent years, had 14 trails open by December 5th, 2012—the most by this date in its history.  And the snowmaking windows prior to that point were good but not great.  They were fairly normal, and yet it had way more terrain open than ever before.  And when it was pumping all this water, over 8,000 gallons per minute, it was shutting off a couple of compressors.  So there’s game-changing illustration.

Q: Do you foresee more western resorts installing snowmaking as a hedge against snowless winters like we saw last winter?

Steve Rice: In the West, resorts have been able to rely on the promise of greater average snowfall and have not made the investments by and large that the East has made, but that is rapidly changing.  One of our Tahoe resorts, Northstar, has the largest snowmaking plant in the Tahoe region, thanks to our many million dollars of investment.  Last year, the Tahoe region did not have any natural snowfall until just after Martin Luther King Jr. Day.  Northstar had by far the most terrain open, and certainly it was effective.  It wasn’t a motivating environment to get skiers up out of the Bay Area to go skiing when all they saw on the news was brown slopes, but Northstar stood out as an exception and was able to grab market share and skier visits. They were able to be open prior to Christmas and offer a very credible product that allowed them to stand out.  That example was not lost on the competitors nearby nor in other regions  of the industry.

We’re investing in snowmaking at Brighton in Utah, which is arguably the cradle of some of the best snow in the United States in the Wasatch range. Well, we made a snowmaking investment there last summer, and the year before as well.  And while we don’t plan to cover the whole mountain, that’s not necessary in a wonderful location like that, but you want to be open early in the season so you do have a product by Thanksgiving. Then you offer locals a reason to come up and buy a season pass and it helps to get momentum going for the all-important Christmas season.

Q: I really appreciate you taking the time to talk with us today. I’m not sure if there’s anything that we didn’t cover that maybe you’d like to add as well, but I think we did sort of a whirlwind tour of the industry!

Interviewer David B. Cronheim, Esq. is the Chief Legal Correspondent for First Tracks!! Online, an attorney at Norris, McLaughlin & Marcus, PA in Bridgewater, N.J., and author of the ski law blog Ski, Esq. Please feel free to contact the interviewer at DBCronheim@nmmlaw.com.

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