How Purgatory Is Climbing Out Of Hell

Here's how not to be Big Resort on Campus: Jack up students' season lift tickets 40%, to $475, as Colorado's Purgatory Resort did in 1993 when it couldn't make ends meet.

Students at Fort Lewis College in Durango, 25 miles away, were quick to retaliate. Led by Keith M. McCann, vice-president of the student body, they boycotted the resort and bad-mouthed it to anyone who would listen. The hottest T-shirt in the cafeteria read: "Purgatory Sucks."

Oh, what a difference two years make. These days, McCann, the resort's only year-round sales representative, might be expected to say: "Purgatory's doing everything right." But that's not just sales talk. Student ticket sales last winter were 40% ahead of the previous year's, and skier visits, off 1.5% statewide, were up 27%, to 382,000. After nine money-losing winters, Purgatory "is literally being brought back from the brink of bankruptcy," says Gerald F. Groswold, president of rival Winter Park Resort. Revenues rose 20% last year, to $14 million, and operating income hit almost $1 million, compared with a $600,000 loss for the 1993-94 season. Purgatory projects operating income will be up at least 10% this winter.

Although one season doesn't make a turnaround, results so far are encouraging--not just for Purgatory but for other midsize ski areas across the West that are worried about being snowed under by the mega-resorts. "Purgatory has found its niche. That's what smaller areas have to do," says John Frew, president of Colorado Ski Country USA, an industry group.

Purgatory's problem was classic: It lost sight of its market. A small area with a good mountain but few amenities and little nightlife, it tried to compete with Vail and Aspen. When that didn't work, Purgatory billed itself as a cheap skiing alternative, attracting tight-fisted skiers for short stays. "That bottom-fishing campaign was absolutely the worst plan for the business, and it was perfectly executed," says Vernon A. Greco, former CEO of Steamboat Ski & Resort Corp., who was hired two years ago as chief executive of Durango Ski Corp., Purgatory's privately held owner.

Purgatory's bank threatened to cancel its line of credit. And Continental Airlines Inc., Durango's major carrier, announced it was pulling out, eliminating the resort's most profitable business, since skiers traveling long distances stay longer and spend more.

Instead of backpedaling further, Greco got aggressive. He upped the marketing budget 35%, to $1.3 million; brought in Kendall Stone, a St. Louis specialist in relaunching troubled consumer products, as vice-president for marketing; and cut a risky deal with American Airlines.

QUICK SHAVE. These days, Purgatory is pushing high value. For its $39 lift ticket price, one of the lowest in Colorado, skiers have access to as much terrain as Steamboat, short lift lines, and free skiing for kids. The resort is easy to reach, and lodging in Durango is inexpensive. Troubleshooters now deal with complaints immediately, replacing lost tickets or paying to clean jackets smudged on the lift. Greco personally enforces an appearance code for his once-scruffy workforce. In fact, he skis with a battery-powered razor so forgetful employees can shave on the spot.

Stone has introduced four-day lift tickets that let skiers trade one or more days for a visit to Mesa Verde National Park, a gambling excursion to the Southern Ute Indian reservation, or a trip on the the Durango-Silverton narrow-gauge train. And he has arranged marketing tie-ins with consumer products such as Fresca and Michelob. Room reservations this winter are running 29% ahead of a year ago.

Turning the corner at Purgatory, however, remains a work in progress. Greco had to guarantee revenue of more than $2 million to lure American Airlines to Durango. And even though he persuaded local merchants to underwrite up to $350,000 of the risk, the deal cost Purgatory over $500,000 last year. Still, American flew in 6,200 skiers, who accounted for more than 25,000 skier days and spent lavishly. Tax receipts in Durango were up 25% over the previous winter.

The one variable Greco can't control is the weather, but it's already begun storming in the San Juan mountains. With a good snowy winter, Purgatory could begin to see a little bit of heaven.

Before it's here, it's on the Bloomberg Terminal.