No Business Like Snow Business
By Chris Palmeri
• Checking Out -- and Into -- Condo Hotels
• Should You Own a Hotel Room?
• No Business Like Snow Business
• Slide Show: Rooms with a View -- and Lots More
It used to be that if a ski-resort owner wanted to give his business a lift, he bought a snow machine. These days, there's another option: condo sales.
Vail Resorts (MTN ), owner of Vail, Beaver Creek, and three other ski resorts, sold 67 condos in one day in January, 2005, grossing $226 million. Units at the Arrabelle, a condo hotel in Vail, sold for an average of $3.3 million each -- an eye-popping $1,150 per square foot. "Saying they sold out in a day is an exaggeration," quips Vail Chairman and CEO Adam Aron, who says it didn't take anywhere near that long. "We pulled names out of a hat."
Other ski-resort operators are also taking advantage of the hot real estate market. American Skiing has developed condos near its Canyons resort in Park City and Mount Snow in Vermont. Intrawest (ITR ), which operates 10 ski resorts, including Whistler Blackhomb, near Vancouver, and Stratton, Vt., likes the business so much it's even developing condos in warm-weather Orlando and Maui (see slide show).
Vail Resorts has more projects in the works. In June, it announced the 108-unit Ritz-Carlton Residences development in Vail. The two- and three-bedroom units will include balconies, fireplaces, and hotel amenities such as a ski concierge, fitness center, and owners' lounge. Those condos will go on sale in 2006. In August, the company paid $10 million for 1.8 acres in the LionsHead section of Vail. That property will likely involve more condo development.
Aron figures the condo sales are a big part of why Vail Resorts' stock has more than doubled in the past two years, to a recent $36 per share. "People are realizing the real estate holdings are extraordinarily valuable," he says. "The profit is dramatic and significant." On Oct. 5, Vail Resorts reported fiscal year 2005 profits of $23 million on revenues of $810 million. Last year in lost $6 million.
LET IT SNOW!
Aron says the real estate boom is being driven by simple demographics. "There's a tidal wave of baby boomers entering their 50s and 60s," he says. "That's when they have disposable income and buy second homes."
Of course, that's no substitute for good snowfall. Fortunately, Vail opened on Nov. 17 with four feet of powder, the second-best opening-day conditions in a decade. That's enough to make those condo buyers happy about their investments.
Palmeri is Los Angeles correspondent for BusinessWeek