Vail company buys Heavenly Ski Resort
Vail Resorts announced Tuesday it will buy Heavenly Ski Resort from American Skiing Company for $102 million in cash and liabilities.
The ski resort operator based in Vail, Colo., owns Vail, Keystone, Beaver Creek and Breckenridge ski areas. The transaction is expected to close in 30 to 90 days.
Vail plans to put $40 million in improvements into Heavenly over the next five years. Areas of improvements include lift and food-service operations as well as employee housing, which Vail wants to lease. Heavenly operates 29 lifts, seven eateries and has some employee housing units.
Adam Aron, chairman and chief executive officer of Vail Resorts, said his company looks for underpriced blue chip resorts, investing $225 million in acquisitions over the past year.
“Heavenly certainly fits that bill. We think we got a fabulous resort at an attractive price,” Aron said, characterizing the resort as “undermanaged, undermarketed and undercapitalized.”
In the last year, American Skiing has tried to unload ski resorts — including the default Steamboat sale reported Monday and Sugarbush transaction — to improve its cash-flow standings. American Skiing lost $223 million in the last three quarters.
The acquisition fits neatly into a three-year-old growth strategy. In the past 12 months Vail’s $225 million in acquisitions include:
— Heavenly for $102 million.
— The $49 million Marriott’s Mountain Resort & Vail.
— The $70 million Rock Resorts luxury hotel management company.
Aron ranked Heavenly high in terms of mountain terrain and service. He rated the facilities “pretty low.”
“We think the whole lift network needs to be looked at. We’re going to put lifts in you’d never dream of,” Aron said. “We believe Heavenly can be a much better ski resort. We’re asking the management team and the employee team to step up and help bring it up to its world-class standard.”
Aron said Vail Resorts traditionally grows through acquisition, embracing the local management and staff. At its peak, Heavenly employees number 1,600 people.
“Our preliminary indications are we’re going to have a two-way conversation,” Heavenly President Dennis Harmon said. “I think it’s going to be very positive for us.”
Harmon, who’s lived and worked in Colorado for 14 years, likes the idea that Vail comes to his resort with a good track record and a well-financed operation.
“We’re looking forward to it,” he said.
The Vail transition management, who are scheduled to visit town today, also focused on what Heavenly has to offer.
“In adding Heavenly, we’re adding a ski resort in a different weather pattern,” Aron said. Since snow varies in different regions of the country, buying properties across the United States helps “double up the bet,” he added.
Aron said Vail Resorts is also looking forward to taking over the $25 million Heavenly Gondola, a key component to South Lake Tahoe redevelopment. Vail expects to add another 75,000 passengers in the upcoming years to the 100,000 riders the gondola already accommodates during the summer months.
And the prospects of both skier visits and sightseeing tickets are expected to grow when the Marriott hotel projects open in November, Aron added.
The contract calls for a complete turnover of the gondola, which was refinanced with another party when American Skiing restructured its finances 10 months ago.
Vail Resorts doesn’t anticipate establishing part of the ski area as a commercial lodging alternative, instead choosing to piggyback off the 20,000 bed-base in South Lake Tahoe.
Locals may benefit from Vail Resorts’ two-tiered ski-pass pricing structure. Aron said in-state visitors pay about half of what the out-of-state guests pay, adding Vail intends “to be competitive in the Lake Tahoe market.”
Vail Resorts may also explore selling a five-resort “buddy” pass that lumps Heavenly with its Colorado ski areas. Aron hopes the addition will boost skier visits at his other resorts. Heavenly’s skier visits amounted to 846,000 last year.
Aron said Vail Resorts was eyeing Heavenly for about five years, with the buzz of a possible transaction emerging in recent weeks.
Vail Resorts and American Skiing both went public in 1997, when ASC bought Heavenly for $288.3 million. Since then, American Skiing’s stock plummeted from $18 to 29 cents before the New York Stock Exchange delisted the company almost two weeks ago. Vail’s offering price was $22 a share; today it trades at $21 a share.
— Steve Wood of the Vail Daily contributed to this report.
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