TAHOE CITY, CALIF. — Colorado Sun reporter Jason Blevins sat down recently with Alterra Mountain Co. CEO Jared Smith at the annual Mountain Travel Symposium at the base of the company’s Palisades Tahoe ski area in California.
The April 17 conversation for the 800-attendee gathering of resort and tourism industry leaders covered a lot of ground. Smith, who came to Alterra in 2021 after nearly 20 years at e-commerce giant Ticketmaster, talked about the challenges and opportunities facing the resort industry in perhaps its most robust era ever, the acquisition of Arapahoe Basin, the differences between Alterra and Vail Resorts, and when his company might go public.
The Colorado Sun: You spent 17 years at Ticketmaster, including a year as global chairman. What are some of the lessons you learned at one of the world’s largest e-commerce companies that can transfer over to the decidedly slow-to-tech resort industry?
Jared Smith: I continually find myself, you know, finding applications for a lot of what we did in sports and entertainment to the ski industry at large. The ski industry is as complex a business that, I think, exists on Earth. The physicality of it, the conditions of it, the variability of it, the seasonality, the things you can’t control are way outnumbered by the things that you can. Just the sheer amount of manpower that it takes to open a mountain every day. It is a tough, tough business. The business runs because there are qualified people who have been doing this for a career. And that knowledge — that institutional knowledge of everything from ski patrol to people who do grooming and everything in between — it still amazes me.
Sun: And the passion of your employees and users are probably pretty similar between Ticketmaster and skiing, right?
Smith: A hundred percent. I say to our team all the time, there’s two products in the world that I’m aware of that people will refer to in a possessive. It is my mountain. Palisades is my mountain. Deer Valley is my mountain. Or it’s their sports team. They are my Hawkeyes. They’re my sports team just like they are my mountain.
Sun: I would argue that the resort industry right now has never been healthier. Seeing record visitation, record participation, which is even more important with new people coming into the sport. You’re seeing record investment back into mountains. What is Alterra at in the first five, six years now? Over $1.5 billion?
Smith: Yeah, somewhere around 1.5.
Sun: That’s incredible. The industry has never seen that level of investment. What are some opportunities with these strong revenues? What do you see as some obstacles ahead? And how can the industry kind of use this moment? Because if you look at the cycle of the resort industry, this will not last and there will be a downturn at some point. And things will get hard again and what can you do right now to prepare the resort industry and mountain communities for that next slowdown?
Smith: Just to put it into context, the seasonality of all this. We had a terrible start to this season. It was universal across all of North America. We basically missed Christmas. I’d say 90% of resorts were open largely on snowmaking. In a normal business, you have a bad month to start the year you have 11 more months to make up that revenue. In the ski business you’ve got three months … which is really, really hard to do. Thankfully the last three months have been fantastic from a weather perspective and a snowfall perspective. So we caught up. Look at it over decades and you’ve got those drought years and you’ve got some really good years. It’s all weather dependent. So we are doing two things. We are trying to get massive investment into the mountains in terms of more efficient use of water for snowmaking … so we can use less water at higher temperatures to keep our experience and the season length there. And that’s insulating us a little bit from the weather volatility. We want to take this money, invest in things on the mountain, invest in things around the mountain to make sure you have a compelling value proposition for travelers who are coming in, regardless of the conditions.
Sun: Talking about the cyclicality of mountain investment and its weather dependence, in many ways your competitor Vail Resorts has forged year-round revenue flow that has opened up financial markets that are now much more willing than ever to lend operators large and small the money needed for upgrades and new lifts. As the industry travels down a path created by Vail Resorts, where do you see opportunities for enhancements and improvements on the model that can really set Alterra apart and prioritize mountain communities?
Smith: I have a lot of respect and empathy for both Rob (Katz) and (current president) Kirsten Lynch. I know what it’s like to run the only publicly traded company in your industry and one that’s easy to hate. I know what that’s like. It isn’t easy. You get forced to make some short-term decisions in ways that make some other things harder. But they have redefined the industry … and they invented the model of the multi-mountain pass in a way that has never existed before. Those multi-mountain passes are the reasons why banks will lend money now. You’ve got 25% to 30% of the year’s total revenue in your bank before any snow falls. That allows you to make two- or three-year bets in a way that you could not before and that is 100% Vail Resorts. Now, aside from that, we don’t do very much else that is similar to Vail Resorts. There are several ways to run large companies and the way they run theirs is very rational. And it works really, really well for them. They are big on the top-down model and they run it all from Denver. So the retailers in Whistler and the retailers in Vail, they report to Denver. That’s a really efficient way to do it. Maybe they are smarter than us, because the way we do it is that we push decision-making as far down and as close to the guests and employees as possible. We just believe that the locality of those decisions is going to be better. Less efficient, no doubt about it. In many cases, it costs us more to do it this way. But we think we’re going to make better decisions. And it’s going to lead to more authenticity in the guest experience and it’s going to lead to more differentiation.
Sun: Talk a little bit about pass pricing. Your Ikon Pass is at $1,250 for next season, which is about $270 more than the Epic Pass.
Smith: We’re more expensive because we think the product is worthy of being more expensive than the other products on the market. But also because we are trying to limit the number of passes. We don’t want to sell an unlimited number of passes.
Sun: Do you have a cap?
Smith: No. But we’re trying to balance that. We’re trying to figure out how much pre-committed revenue is enough to solidify and insulate us. But how do we stratify the product to make sure that we’re not overcrowded? Steamboat is a great example. So Steamboat has had record visitation … up probably 20% since the inception of the Ikon Pass. But we’ve also added 600 acres there, and we’ve added two terrain pods and we’ve added snowmaking and we’ve done three different lifts. So our responsibility is to make sure that we’re balancing the sales with the experience and the capacity and modulating those in such a way that the experience continues to be good.
Sun: Let’s talk a bit about your acquisition of Arapahoe Basin. That resort has long been the king of independent ski areas. The longtime manager there, Alan Henceroth, spent nearly 20 years dancing with Vail Resort before moving over to your camp. Talk about where you see Arapahoe Basin fitting into the Alterra business plan and more importantly, will you continue to keep the five-day or seven-day cap on Ikon Pass access?
Smith: A Basin is just an amazing mountain. You want to talk about authentic and unique. Alan Henceroth has done an incredible job there. If you ask 99 out of 100 people, they will tell you that they can’t believe that a big corporation is going to buy A Basin. Meanwhile, they’ve been owned for 20 years by a publicly traded real estate investment trust out of Canada. A Basin is a great example of ‘It’s not the ownership. It’s the operator. It’s the approach.’ It was Alan who said this is what our people who come to the Basin want. Will you allow us to do this? And it turns out, it’s pretty good business to understand what people want, and to give it to him. So people keep asking us, what are you going to do with A Basin and we’re going to do what we’ve always done at A Basin: We’re going to let Alan run the mountain. And it was a big part of our decision to make the acquisition was whether Alan was willing to stick around to continue to lead it and, and he is, and he’s excited about it.
So it’s just a good example of a couple of different things. Number one, our approach and just kind of our thought process is that we’re looking for mountains that will solidify the pass, that are unique experiences that fit into our portfolio. Our pass is kind of built on big mountain skiing and destination places, but also a combination of making sure we have enough product for locals. So we think about families, think about Palisades, think about Steamboat, think about Winter Park, and A Basin just fits in all of those categories. But it’s a very different experience. So we’re always looking strategically at how we have a good mix in our portfolio that services different populations of skiers and how do we complement that?
As it relates to the pass, everyone has this hangover from when they were on the Epic Pass and they just got overrun with an inordinate amount of guests. Now they have more terrain, but we are not going to overrun the place again. We are going to be very thoughtful and pragmatic. Alan will tell you he’s got the longest season in Colorado and he needs way more visitation in the early season and in the late season. They really want more visitation there but not when they don’t need it. We’re trying to figure out what’s the middle ground there. Maybe some sort of hybrid pass.
Sun: Let’s talk a bit about Alterra’s Forward Stance, the company’s annual impact report.
Smith: This year’s report comes out in two weeks. We are making good progress. Forward Stance is our corporate responsibility platform that we launched last year with commitments around sustainability, energy efficiency, carbon neutrality, diversity, inclusivity and more. We make some big aggressive bets. And we will achieve those because we have to achieve those to be credible in our market. But truthfully, we could be carbon neutral tomorrow at every one of our mountains and it wouldn’t matter at all. We have to do those things because it’s the right thing to do to give us credibility and to go advocate for commonsense legislation and regulation around climate change writ large, which is really what is going to save the environment. We in the outdoor industry and the travel industry, we need to advocate in a different way. And Forward Stance, it’s the tip of the speak to be able to go advocate for some larger change that is really going to make a difference.
Sun: And that’s where a centralized operation can play a strong role, right?
Smith: Yes, that is the point. An individual mountain can do their part but they are going to be limited with how much investment they can make and limited by the realities in the cyclical business. But we as Alterra can make bigger commitments and bigger investments. We can negotiate a contract with an active energy management platform that will put smart thermostats in every one of our buildings in a single year. You have to be big and have money to do those types of transformative things.
Sun: Taking a page from the Aspen Skiing Co. playbook on that policy advocacy front.
Smith: They are the leaders in that space, along with Protect Our Winters. But this needs to be all of us. It can’t be just one mountain and it can’t be just Alterra. This needs to be the entire industry and broader than even the ski industry.
Sun: Back to some participation numbers. The outdoor recreation economy recently tipped the scale with 53% of Americans going outside to recreate and now the outdoor recreation industry is challenged to keep those people outside. You mentioned that skiing has never been cheaper but if you do not plan ahead and buy early, you can be punished for walking up to a window and buying a lift ticket. Lots of big resorts hit $300 for a day ticket this season, which is a challenge to recruiting newcomers to the sport. How can you better retain new skiers who are coming into the sport?
Smith: I think it’s one of the biggest challenges that faces our industry. We’ve reached, in my opinion, a tipping point. It is ungodly expensive and hard to bring a family of four skiing right now. And then once you’re willing to actually give us the money, then we make it nearly impossible for you to actually book. Right now 60% of our non-pass visitation is still booked on the phone. Sixty percent. When was the last time you bought anything on the phone?
Sun: When was the last time Ticketmaster sold tickets over the phone?
Smith: And those are people who are mad. And they are really, really mad. This is from someone who spent 20 years in one of the largest e-commerce businesses in the world: Booking a ski vacation is maybe the most complex e-commerce transaction in any industry. You have multiple people, multiple ages, legal invoices, sizes, activities, things you don’t maybe totally understand. So they call. And it’s still hard. We have a new initiative going into next year that we just kicked off where every one of our mountains has to develop strategies for newcomers. It might be all-in packages. It might be concierge services. It might be to take a lesson and we’ll give you three lift tickets for free to try to get you back. We have to find ways to get people to the hill, into a lesson with an instructor who can help them enjoy the mountain in a way that encourages them to come back. In the meantime, you probably won’t see us raise daily lift ticket prices much anymore.
Sun: I think skiers as a community need to do a better job of welcoming the first-timers and recognizing their role in sustaining this sport for future generations.
Smith: We need to do a better job of getting people to understand the economics of this business. I mean, let me just give you some stats. We’ve got 230 chairlifts across our company. The average cost of a chairlift 10 years ago to replace, the average cost, would have been somewhere in that $8 million range. Today, that’s $15 million to $16 million. The average age of our 230 chairlifts is somewhere around 30 years. And we have a young fleet. So this business, it just eats capital, for breakfast, for lunch. The cost of operating these places is really, really high. The people who love these places, they need to better understand what it takes to put this on.
Sun: Speaking of improving your education, what exactly is “a single asset continuation vehicle?” A few weeks ago your majority owner, KSL Capital, said it had secured $3 billion in investment for a single asset continuation vehicle for Alterra. I think there’s been a little bit of confusion around that. You don’t have an extra $3 billion in your bank account, right?
Smith: A lot of confusion. I wish I had three billion extra dollars on my balance sheet. I’d go buy some chairlifts. OK, so our ownership group is 60% owned by a private equity firm out of Denver called KSL Capital, one of the leaders in the hospitality industry. We’re 40% owned by the Crown family and the Henry Crown Company out of Chicago. Most private equity investors … when they make investments they say they want that money back with a return in, generally, the 5- to 7-year time frame. So KSL made an investment — the largest investment they’ve ever made — in Alterra in 2017. So when investors want their money back with a little bit of interest the options are: A, to take the company public and take the proceeds from the public market and pay the investors back. Or B, you can sell the company to another private company. Or C, and this is a newer strategy, is a single asset continuation vehicle where you don’t want to sell the business but you go out and say we believe this business has more upside and find new investors who can help pay off the original investors back. It was an opportunity to bring in some new blood. So it was an opportunity for KSL to get liquid without them having to sell the business because they believe in the upside, too, and they want to hold on to it for longer. It was, by far, the best outcome.
Sun: So will there be an IPO later?
Smith: It’s certainly an outcome. This ownership group is committed to the long-term investment in the company. They believe that by continuing to invest the capital that we’re investing in, that these assets will be worth more five, 10, 15 years from now. We’re trying to grow the asset value of our resorts. And it takes a lot of capital and public markets don’t love that much capital going into the business. So for where we are right now, this was the best outcome for us with consistency of ownership, consistency of strategy, consistency in investment. It was a home run. An IPO subjects you to Wall Street, which wants more short-term outcomes, and probably wants to invest less in the business at this time. So, for us, this gives us the runway to continue to operate the way we’ve been operating with consistency. And we love that. At some point, the new investors will go, ‘Hey, it’s been five to seven years, I’d like to get a return on that too.’ And at that point, my guess is the company is big enough that the amount of people that could buy it is probably smaller. So you could do another asset continuation vehicle, but that is harder to do because the company is even larger. Or you can go public. And that would be a fine outcome for us.
Sun: As a reporter, I would love to see you go public so I can finally see what’s going on at Alterra.
Smith, laughing: As the CEO, I would love to continue to be able to see Vail’s numbers and not show ours.