Is the ski resort model dead?

Topics of a general nature regarding snowsports, which don't easily fit into one of our other Liftlines categories. This is also the place to post Letters to the Editor.

Is the ski resort model dead?

Postby Admin » Fri Oct 08, 2010 7:57 pm

When I wrote a recent article about soulskier's Mountain Rider's Alliance (http://www.firsttracksonline.com/News/2 ... s-are-Run/) I started out by commenting on the difference between a "ski area" and a "ski resort." To me a ski area, as opposed to a ski resort reflects a greater alpine purity of experience. Frankly, I don't want to leave an urban home to be transplanted to an urban core set in a mountain environment, and I suspect I'm not alone. Sure, there are flatlanders who take one ski vacation a year and want the whole package when they arrive, but are they truly in a majority? Personally I want a mountain, I want snow and I want a lift...and perhaps a hot tub draped in snow. Oh, and did I mention snow? In the end couldn't give a rat's hind end about nightlife, haute cuisine, an indoor pool, zip lines, or gold-plated shower fixtures. I can find all of that elsewhere.

Tonight I stumbled across an excellent article in Canadian Business about the rise and fall of the ski resort model based on real estate development, and in particular its execution at Whistler Blackcomb:

http://www.canadianbusiness.com/managin ... 020&page=1

I really think that the author, Michael McCullough, nailed it.

Now, whether or not soulskier's group has got the solution that will work has yet to be seen. As the article points out, any investor needs to determine "how you turn an asset long subsidized by lucrative real estate sales into a pure-play resort operator and make money at it." Does MRA have the solution to that? I don't know, but it's a fascinating question.
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Re: Is the ski resort model dead?

Postby Patrick » Fri Oct 08, 2010 8:26 pm

Admin wrote:Personally I want a mountain, I want snow and I want a lift...and perhaps a hot tub draped in snow. Oh, and did I mention snow? In the end couldn't give a rat's hind end about nightlife, haute cuisine, an indoor pool, zip lines, or gold-plated shower fixtures.


Bingo...many of us are searching for this. Also one of the reason why some places in the Andes have much appeal to me, minimal infrastructure, mountain and challenging terrain and snow. Many of the places I've seen in North America (you don't necessarily need to go to certain resorts to know that they are resorts.

Many have gone the way of the "Model" and Jay seem to be heading down that road. Lucky that a few places like MRG carved up a niche for themselves, but hoping that soulskier and some others join in with similar goals and bring soul back to the sport where skiing is the only important feature.
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Re: Is the ski resort model dead?

Postby Admin » Fri Oct 08, 2010 8:33 pm

The question though, Patrick, is whether or not MRA has the wherewithal to make it work. Right now I see a project motivated by idealism -- that's admirable, but unless it's backed by a solution to make a pure ski operation profitable it will not succeed. In my conversations with soulskier, both here on the forums and backchannel I have yet to hear that solution. A ski area needs lifts that work, and with age lifts need to be replaced and even fixed grips are expensive. Snowmaking is a significant ongoing capital drain, but in many parts of the world it's essential to a ski area's viability. Without the real estate cash cow giving any milk, how do these capital expenditures get funded? We already know from American Skiing Co. (RIP) and Intrawest that debt service isn't the answer.

Reading that article has given me food for thought for an opinion piece. This thread, quite frankly, is allowing the gears in my head to churn for article ideas. I've already sent a couple of emails out tonight seeking comment by some of the players involved in what you've termed "The Model" and some that aren't. And some that have given "The Model" a unique twist in the nuts.
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Re: Is the ski resort model dead?

Postby Patrick » Fri Oct 08, 2010 8:55 pm

Agree on most of your comments.

Admin wrote:Without the real estate cash cow giving any milk, how do these capital expenditures get funded?


The problem with this is turning everything into high class resorts à la Intrawest. Tremblant is a prime example, it's turned the country into a city, building new phases to milk itself. The urban sprawl is alive and well now, but what will happen in 25 years down the road when all the lifts and building will need heavy maintenance or replacements? You would be able to continue to build condos to fund this? What is the saturation point? It's already starting, people are buying new while those from the originals phase might be having a harder time to sell if they wish to do so. Remember Canada wasn't hit as hard as the US in the market crisis.

And if you enter the changing climate and demographic where the boomers won't be skiing anymore and the next generation don't have the skiers numbers to replace them. You need to get back to the grass roots, make it simple and make skiing accessible again. Financially for newcomers to be attracted to the sport, not only caters to the richest in society. The industry needs to expand it's market and find new skiers, not steal skiers from other ski resorts.
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Re: Is the ski resort model dead?

Postby Admin » Fri Oct 08, 2010 9:08 pm

Patrick wrote:And if you enter the changing climate and demographic where the boomers won't be skiing anymore and the next generation don't have the skiers numbers to replace them.


That's long been an industry goal. The ski industry has been scratching its collective heads for decades now trying to figure out how to attract newcomers. Honestly, snowboarding breathed new life into skiing, first by putting scores of new customers on lifts, especially as the learning curve was easier, and later by making skiing "cool" again in its new school form which of course was born from snowboarding.

Patrick wrote:You need to get back to the grass roots, make it simple and make skiing accessible again. Financially for newcomers to be attracted to the sport, not only caters to the richest in society.


If only that were the case. Skiing has never been accessible, it's always been a rich person's sport. A $12 lift ticket in 1970 still represented a lot of money back then. In the early days, it wasn't Vermonters skiing in Vermont, but wealthy city folk riding snow trains. Roland Palmedo and Cornelius Vanderbilt Starr weren't exactly paupers. Not only now, but throughout the 60s, 70s, 80s and 90s skiing was a sport for out-of-staters, not financially strapped Vermonters. Gear has always been expensive, lift tickets have always been expensive, and clothing has always been expensive, relatively speaking. Vermonters learned to skate, not ski, on the frozen pond out behind the barn. Even here in Utah, skiing is by and large an out-of-stater's sport, either those who travel here to vacation or those like yours truly who moved here because of the skiing.

Patrick wrote:The industry needs to expand it's market and find new skiers, not steal skiers from other ski resorts.


That's a whole different animal, but I agree. The reality is that this market cannibalization has been occurring for decades and has resulted in the closure of many ski areas around the world. Those that could debt finance capital expenditures, or finance them through real estate would develop powerful snowmaking systems and build high-speed lifts. Those who couldn't afford to do so lost their clientele and closed their doors. But now we're seeing many who could sold at fire sale prices due to debt load and/or losing their funding source because they're not selling real estate. So, what's next for them? How do they remain profitable as a pure skiing operation? That's the big question.
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Re: Is the ski resort model dead?

Postby Patrick » Fri Oct 08, 2010 9:32 pm

Admin wrote:If only that were the case. Skiing has never been accessible, it's always been a rich person's sport. A $12 lift ticket in 1970 still represented a lot of money back then. In the early days, it wasn't Vermonters skiing in Vermont, but wealthy city folk riding snow trains. (...) Vermonters learned to skate, not ski, on the frozen pond out behind the barn. Gear has always been expensive, lift tickets have always been expensive, and clothing has always been expensive, relatively speaking.


Agree. The same was also happening in the Laurentians. My mom was born and lived within 16 miles from the old Mont Tremblant Lodge and maybe 9 miles from Gray Rocks. However it wasn't until she moved to Montreal at 18 that she started skiing. That being said, the 50s has brought a greater and easier access to skiing to the working class which my family and my parents family were. Skiing was also practiced in the urban areas (well for cities like Montreal where there was topography and snow) with tows and helped introduced a whole generations to the sport. That doesn't exist anymore, who want to pay to maintain a lift that has a vertical of less than 60 feet? There are fewer cheap options now than 40 years ago, sure the big resort were probably as expansive back then than now, but the small locally or family run places have mostly disappeared from the landscape. As you mentioned above, you couldn't give a rat-ass about spas, haute cuisine, etc etc. You had the cost of high tech lifts, grooming and snowmaking and you need much more revenue through other source which lift tickets is one of them. The simple example of this is the arrival of the Cloudspinner Gondola at Whiteface which brought a 38% increase in liftticket prices in one season a few years ago.

Admin wrote:
Patrick wrote:The industry needs to expand it's market and find new skiers, not steal skiers from other ski resorts.


That's a whole different animal, but I agree. The reality is that this market cannibalization has been occurring for decades and has resulted in the closure of many ski areas around the world. Those that could debt finance capital expenditures, or finance them through real estate would develop powerful snowmaking systems and build high-speed lifts. Those who couldn't afford to do so lost their clientele and closed their doors. But now we're seeing many who could sold at fire sale prices due to debt load and/or losing their funding source because they're not selling real estate. So, what's next for them?


Exactly, we should have a talk over this at a bar somewhere (if my daughter is racing, odds are that I'll be skiing local).
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Re: Is the ski resort model dead?

Postby soulskier » Fri Oct 08, 2010 9:36 pm

Really great thread, thanks for starting.

MRA believes that by selling shares to the global ski community and thus having a members mountain (guests will be allowed with members, kinda like being sponsored at a bar in Utah) will drastically reduce overhead. Some examples are; insurance costs (members/owners will be much less likely to sue their own business), sweat equity shares to reduce start up costs (we currently have lawyers, ski area planners, other ski are owners, etc giving their time in exchange for investment shares), and far reaching marketing (proud shareholders will talk up their product, not too mention the media will report on it).

Additionally, MRA ski areas will have minimal infrastructure. As Mr G astutely pointed out, many of us skiers don't care about on mountain amenities, just give us a lift, reliable snow, and great terrain. I think the extreme case is Canyon's decision to install a heated chair lift. I can think of many other improvements that would benefit us skiers and riders more than having a warm behind on the short chairlift ride.

Also, MRA will only be located in reliable snow belts and not need to have snowmaking, a huge expenditure.

Energy overheard will also be greatly reduced by creating clean energy. Jiminy Peak is a great example of this. MRA's goal is too create more energy than it consumes, making an additional revenue stream not currently used in the ski industry.

Please keep the dialog going.
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Re: Is the ski resort model dead?

Postby Admin » Fri Oct 08, 2010 9:45 pm

I damn near Crockered and accidentally edited your post instead of replying to it. Fortunately I realized my error before it was too late.

Patrick wrote:You had the cost of high tech lifts, grooming and snowmaking and you need much more revenue through other source which lift tickets is one of them.


True. But you can take that too far. Vail Mountain and Beaver Creek, for example, are charging a seven-day advance purchase rate of $99 this year for holiday period. I can't imagine what their walk-up rate will be.

However, as I said earlier snowmaking is all but essential to ensure the viability of ski areas in many regions. In others, it simply removes the ambiguity and uncertainty of fickle weather. If you can't open, you're not making any money and customers no matter who they are expect lifts to be spinning and trails white.

High-speed lifts are slightly different. They're not essential, but for the past decade and a half they've become the expectation.

Admin wrote:we should have a talk over this at a bar somewhere (if my daughter is racing, odds are that I'll be skiing local).


At Edelweiss? Fat chance! :lol:
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Re: Is the ski resort model dead?

Postby Patrick » Fri Oct 08, 2010 10:10 pm

we should have a talk over this at a bar somewhere (if my daughter is racing, odds are that I'll be skiing local).


At Edelweiss? Fat chance! :lol:


I'm sure you would be saying a different tunes if you wanted to drink alcohol in a bar at 18. :lol:

Soul is right about heated chair, WTF!!! Highspeed chairs are good in some cases, but I can live without them, anyway I rarely ski a whole day when it's only lift served via HS Quad and I'm not only talking Edelweiss here.
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Re: Is the ski resort model dead?

Postby Tony Crocker » Sat Oct 09, 2010 3:09 am

A few random thoughts:
Patrick wrote:And if you enter the changing climate and demographic where the boomers won't be skiing anymore and the next generation don't have the skiers numbers to replace them.

I'm questioning the demographic doom and gloom after last year's Kottke report of 2nd highest U.S. skier visit numbers. With a bad economy AND a below average snow year how can this be? In general the skier visit trend is slightly increasing after two flat decades. So there must be more incoming younger skiers/riders replacing the aging boomers. This trend should be supportive to soulskier's objective because the growing demographic is more focused upon the basics admin mentioned than the frills important to some of the aging/shrinking demographic.

With regard to Whistler, I still think it's a great destination. It has all of admin's requirements along with the other stuff.
Michael McCullough wrote:Whistler and Blackcomb mountains, together the largest ski resort by every measure — skier visits, resort beds, lifts, terrain and vertical drop — outside of the Alps. The mountains are physically so large, encompassing so many microclimates, they are almost immune to that bane of ski resorts, poor winters. They always have good snow somewhere...Skier visits peaked in 2003 at 2.3 million. Last winter — due in part to the Olympics — they were down to 1.8 million.

With a baseline of 2 million skier visits, that's a valuable property even if it's stable and not growing. There's an equity value on those visits and associated revenue less maintenance costs, even without growth, that an astute investor will eventually pay. If Fortress or somebody else borrowed more than that, that was their dumb decision and they deserve to take the hit for it. Many people questioned whether spending $54 million on the Peak-to-Peak would add enough revenue to justify that cost. No matter, the next owner will pay the realistic price for it.

We've been here before. When the Japanese were awash in cash in the 1980's they overpaid for Aspen, Pebble Beach and built a bunch of high-end resorts in Hawaii that needed $600/night rooms to justify their lavish costs. The Hawaii hotels are still there, under new ownership often charging the $200/night that the traffic will bear, while the original developers had to sell with huge losses.

admin wrote:However, as I said earlier snowmaking is all but essential to ensure the viability of ski areas in many regions. In others, it simply removes the ambiguity and uncertainty of fickle weather. If you can't open, you're not making any money and customers no matter who they are expect lifts to be spinning and trails white.

Patrick wrote:the small locally or family run places have mostly disappeared from the landscape.

Unfortunately it is those local, convenient places for which the snowmaking is a necessity.

soulskier wrote:Also, MRA will only be located in reliable snow belts and not need to have snowmaking, a huge expenditure.

This is a very limiting criterion, based upon the data I've collected over the years. Even in some of the better places for snow, like Whistler or Mammoth, some snowmaking is needed for extreme seasons or for runs near the base facilities that don't get as much snow as most of the terrain. If an area is affordable but has a great snow record, it's likely to be in a remote location. It's not an accident that Shames was the first area that caught soulskier's eye.

soulskier wrote:Energy overheard will also be greatly reduced by creating clean energy. Jiminy Peak is a great example of this.

I would be interested in seeing some numbers on this. I think it will be coincidental and not that common that a ski area will have the potential for cost effective renewable energy production on site. Whistler's Fitzsimmons Creek hydro is I suspect the largest scale such application. Wind is generally not viewed as desirable by the skiing public, so I wonder how many ski areas are actually situated where wind is consistent enough to be economically viable. By personal experience I nominate Mammoth:
1) No question about consistent wind. Or let's just say if Mammoth's wind isn't consistent enough for energy production I wonder what ski area is. Las Lenas, maybe?
2) Mammoth's electricity comes from Southern California Edison and is not cheap. Thus substituting wind power saves many more $ than it would somewhere in Utah or Colorado.
3) California has renewable mandates with utility rebates/subsidies available to achieve those goals. Enough to pay half the cost of the solar panels I put on my roof in June 2009. I would be very surprised if the state or Southern California Edison would not have to contribute to the capital cost of a Mammoth wind tower.

Of course we can expect the environmental wackjobs to oppose a Mammoth wind tower as despoiling the Sierra views.
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Re: Is the ski resort model dead?

Postby riverc0il » Sat Oct 09, 2010 6:11 am

Doesn't the very nature of a fire sale (i.e. market correcting for overly inflated prices) make it more easily to sustainably operate profitably? That should reduce the debt load on the incoming ownership compared to the past ownership. One would think that hopefully the market corrected the selling price enough that it accommodated for slowing to non-existent future base development.

Unpopular as it might be to say around the NELSAP forum, ski areas closing and consolidating as boomers get out of the industry may be helpful. Unfortunately, it creates some tough situations if you have real estate at a mountain going belly up (see Ascutney and Tenney, both having trouble again in New England) and some folks may be bummed that their favorite mountain is closing. But I don't think we have ever seen a resort with reasonable bed base shut down permanently (at least in New England?). Limiting the competition would be bad for consumers but good for businesses.

But what about the model? Resorts closing just redistributes the skiers, it does not change the model. Well, what models work? Feeder areas close to metro areas seem to work (at least, they have worked in New England once the consolidation happened and most areas went belly up, see above point). So feeder areas close to metro areas operate profitably. But that is a different model than the big resort. So what can a resort do?

Much as I love to rag on it, Sugarbush's "cat skiing" is innovative and brings the focus back to skiing. Shell out a bunch of extra money, and you can have a unique experience (which I will admit, would be killer and almost even worth the price on a powder day for a few untracked runs with no competition). These types of programs can be very profitable and shift the focus to skiing.

I think the "backcountry experience for the resort exclusive skier" is also a great option. Cannon generated a lot of buzz last year by "opening" Mittersill as a "backcountry" area. Tthough of course, a lift is now going it. But no snow making and no grooming means very very minimal expense excepting running one more lift and paying two more employees while that lift is running. Sugarloaf is expanding to Burnt as a slackcountry area. I recently wrote about this trend on thesnowway.com. Bush promotes its Slidebrook. Jay used to promote Big Jay. Stowe has the Mansfield ridgeline. Etc. All stuff with minimal investment that offers something different, especially for those that fashion themselves backcountry type skiers but either really or never actually do BC.

Jay is going after the lifestyle dollars. Stowe and Bush did the same thing. Toss up a spa, fancy restaurants, apres stuff. These places also focused on mountain bed base as well. Captive audience and get the bookings on the mountain instead of off. Bed base instead of real estate seems like a winner. You can't keep building condos but you can build a hotel and steal from the existing off mountain bed base. That creates another microeconomic problem for local off mountain inns, but that is just the way that thing goes.

I don't think skiing itself can be profitable. MRG makes it work because it is a successful Coop with dedicated and passionate skiers that are committed to their mountain. Wildcat is another ski only mountain and is on the chopping block (just sold to Peaks if you believe the rumors on AZ). And how about former skiers mountains that sold out to the resort side of things? Saddleback. Burke. They couldn't make the area work completely no frills without resortification. Or at least letting another ownership foot the bill and loose money (Burke).

That to me only leaves innovating with new products and new offerings at the mountain's themselves. You can only do so much with terrain before it is maxed out. The current build out in the east is finishing up the glading process between most trails at most ski areas (at least those that can support gladed skiing). Expansions are happening where permitting has allowed it to happen, but that is quickly reaching the max out point too. And the expansions are just moving skiers between resorts rather than increasing dollars spent to make the areas more profitable overall.

I think the answer is more captive audience, more stuff to do at the mountain, more high end things that folks are willing to pay for but only if it is a quality product, more "experiences", etc. These innovations may involve the skiing itself (e.g. Bush's "Cat Skiing") but they don't have to. It needs to be stuff that is high margin, low cost, minimal investment. And when I figure out exactly what those things will be, I will be putting in my resume for pres of a ski company. :)
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Re: Is the ski resort model dead?

Postby rfarren » Sat Oct 09, 2010 9:38 am

I think it's very easy for Admin to say what he wants (to live in an Urban environment near mountains) and say that's what most people who ski want. Certainly, a lot of people on this forum like that and would prefer that to their own personal situations. Yet, one must remember that many resorts close to urban areas are subsidized by vacationers who really do want an urban environment nestled in the mountains. Hence, why there are so many more visits to Park City than LCC, even though the skiing is obviously not as good as what is found 30 minutes away at LCC (I would imagine that local skier visits are much higher at LLC than at PCR).

The resort model works better for those who vacation to ski, which I would imagine makes up the majority of paying skier visits any given year. For example: My wife, who enjoys skiing, is going to enjoy Park City, Aspen, Whistler, and Vail, a whole lot better than Snowbird. Her priorities are to ski some, and party/eat/shop and relax in a winter mountain environment. Granted, this is based on personal experience and not on empirical evidence, but I would imagine that there are a whole lot more of people like this than people who move to places like SLC for the skiing.

Certainly, in times of recession when people are tightening their belts the resort model will suffer. However, the economy will recover, and discretionary spending will increase. The real estate development model has taken a hit, but will recover too. For those who are saying the ski resort is dead, I caution them to put their biases aside, and wait to see what happens.
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Re: Is the ski resort model dead?

Postby Tony Crocker » Sat Oct 09, 2010 12:44 pm

in general I agree with all rfarren said above. I would add a caution based upon my earlier demographic comments. The baby boom generation temporarily bulged/is still bulging the skier age distribution upwards. 50+ year old skiers in general have more $ to spend and are more willing to pay for the luxury amenities than 20-40 year old skiers. So perhaps some of the recent developments have been skewed in that direction. I'm spending 2-3x as many ski $ as 20 years ago, although in my case the extra is going for snowcat skiing and exotic travel. But that's not the norm. Skibum4ever and her husband are around my age, also retired, but they own condos in Mammoth and Keystone. They ski more days than I do, but mostly at their own places (which are modest and not trophy homes) and also pull in some rental income when they are not there. I suspect there are a lot more 50+ skiers doing it their way than my way.

Riverc0il wrote:Bed base instead of real estate seems like a winner.

Absolutely. Rusty Gregory at Mammoth told us this at my first NASJA meeting in 1999. Smart developers want "hot beds," that are usually in the rental pool. Cheap places (Harvey 44, etc.) are only used by their owners. Ironically this is true also of the trophy homes, which are owned by the superrich for display, investment diversification etc.

As I mentioned before, I see future skier demand increasing, but skewed more towards the basics and less towards the luxury end.
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Re: Is the ski resort model dead?

Postby Admin » Sat Oct 09, 2010 12:55 pm

rfarren wrote:I think it's very easy for Admin to say what he wants (to live in an Urban environment near mountains) and say that's what most people who ski want.


I didn't say that at all, I asked a question:

Admin wrote:Sure, there are flatlanders who take one ski vacation a year and want the whole package when they arrive, but are they truly in a majority? Personally I want...


rfarren wrote:Yet, one must remember that many resorts close to urban areas are subsidized by vacationers who really do want an urban environment nestled in the mountains.


Note above, I said that, too.

rfarren wrote:However, the economy will recover, and discretionary spending will increase. The real estate development model has taken a hit, but will recover too. For those who are saying the ski resort is dead, I caution them to put their biases aside, and wait to see what happens.


You're going to be waiting a while. As noted above, we're now heading into our third year of the current situation and most analysts agree that it will take a decade or more to recover to anything that looks like previous levels. You also need to remember that once things do start to recover inflation will most assuredly kick in. This has nothing to do with biases, and everything to do with a realistic appraisal of the situation we're in and asking questions as to how a ski resort that has depended upon real estate sales to drive revenue streams (just look at the Vail Resorts annual report, for one example) will survive for a decade or more of lackluster income from that source.
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Re: Is the ski resort model dead?

Postby rfarren » Sat Oct 09, 2010 2:47 pm

Admin wrote:
rfarren wrote:I think it's very easy for Admin to say what he wants (to live in an Urban environment near mountains) and say that's what most people who ski want.


I didn't say that at all, I asked a question:


Admin wrote:Sure, there are flatlanders who take one ski vacation a year and want the whole package when they arrive, but are they truly in a majority? Personally I want...


rfarren wrote:Yet, one must remember that many resorts close to urban areas are subsidized by vacationers who really do want an urban environment nestled in the mountains.


Note above, I said that, too.
[/quote]

I'm sorry, I didn't mean to offend. I understand you were asking a question, however, I thought your wording betrayed biases.
Admin wrote:
You're going to be waiting a while. As noted above, we're now heading into our third year of the current situation and most analysts agree that it will take a decade or more to recover to anything that looks like previous levels. You also need to remember that once things do start to recover inflation will most assuredly kick in. This has nothing to do with biases, and everything to do with a realistic appraisal of the situation we're in and asking questions as to how a ski resort that has depended upon real estate sales to drive revenue streams (just look at the Vail Resorts annual report, for one example) will survive for a decade or more of lackluster income from that source.


I think it easy to say that we are going to be waiting a while and what analyst predict. History often tells a different story. In 80,92, and 99 many analysts predicted that those recessions would take 10 years from which to recover. I don't know how realistic an appraisal can be when speaking about a recession while in it. Emotion plays a large part in how the public reacts to a recession and spending habits, if they begin to feel better, based on even modest gains in employment a recovery could rapidly pick up speed. As of now, the news has been less than great economically. Yet, if history can teach us anything, it would foolhardy to imply that we will be economically stagnant two years from now. Therefore, I think a more realistic approach would be to say, that the resort model has taken a hit for the time being, but as the economy recovers so too will the resort model.
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