In an interview with Forbes last year, Vail Resorts Chief Executive Rob Katz identified two holes in his globe-circling strategy to offer hardcore buyers of Vail's Epic Pass season access to resorts in all the major markets: Japan and the East Coast.
Katz just filled the second hole, agreeing to buy Stowe Mountain Resort in Vermont from a unit of AIG. The $50 million acquisition is tiny compared to Vail's $1.1 billion purchase of Whistler Blackcomb in Canada, the most popular ski resort in North America, last year. But it gives Vail a foothold in the huge East Coast market, where skiers will likely snap up the opportunity to buy an Epic Pass, giving access to all of Vail's resorts plus a handful of high-profile destinations in Europe for less than $1,000. A season pass to Stowe alone this year cost $1,860.
Vail estimates Stowe will generate $5 million in earnings before interest, depreciation and taxes in the 2018 ski season, meaning Katz is paying around 10 times expected earnings. Vail is only buying the ski operations; AIG will retain ownership of Stowe Mountain lodge and other amenities.
The purchase, rumored for weeks in Vermont, is subject to review by state authorities. It fits with Katz's strategy of focusing on ski operations instead of real estate, which long was the motivating factor for many ski resort investors. Vail's shares have soared over the past decade, despite a flat to declining overall ski market, due to a close focus on increasing skier visits with casino-style marketing that tracks skier tastes and habits.
Vail has made some unusual moves, including buying tiny resorts in Wisconsin and Minnesota and one in Australia, to funnel customers to its flagship hills and generate customers for the Epic Pass.
Stowe is located on Mt. Mansfield in Vermont and has been a ski destination at least since 1914, when Dartmouth librarian Nathaniel Goodrich skied down the slopes for the first known time. Former AIG Chairman Cornelius Starr started visiting the resort in 1943 and later invested in building chair lifts, with AIG ultimately buying control of Stowe. The double-black diamond Starr run is named after him.
