Killington masters the bumps, some say at expense of localsBruce Edwards
Staff Writer | July 13,2008
Correction: This story was updated to list the correct price of Stratton Mountain Resort's no black out season pass .t pass price is $979..
KILLINGTON — If the end justifies the means, then count Killington/Pico's first season under new ownership a success.
Under Powdr Corp. the resort made a tidy profit with combined skier visits at both ski areas topping 640,000.
Getting to that point, however, wasn't easy and some in the Killington community, including businesses whose fortunes are joined at the hip to the resort, are still adjusting to a different management style.
When Powdr Corp., a Utah-based ski resort company, and SP Land, a Dallas-based real estate development company, purchased Killington and Pico resorts from American Skiing Co. in May 2007 for $84.5 million, the changes were immediate and not always well received.
Among the changes: Powdr scaled back the length of the ski season, raised season ticket prices, shortened Pico's week from seven to five days, shut down the Skye Peak gondola two days a week, laid off a number of workers and served notice that it would no longer honor so-called lifetime season passes.
Relaxing over a cup of coffee at the resort's golf course clubhouse recently, Killington president and general manager Chris Nyberg acknowledged that the changes, while painful, were necessary to get the ski resort back on sound financial ground following years under financially strapped American Skiing Co.
"In order to put our new business model in place a lot of changes were necessary in order to make that all happen," Nyberg said. "Any time you make change, particularly when you make the types of changes we made that affects people's lives, that's very disconcerting, not only to the individuals that it affects but also the employees that we have and the community in general."
But as a believer in change, Nyberg said those changes should be made as quickly as possible rather than piecemeal, or as he put it, "death by a thousand cuts."
Looking back on the way he rolled out the company's business model, Nyberg said he would have sought the community's input a lot earlier.
"Probably the overriding thing that I could see would have been a better thing to do early on was involve different elements within the community and our skiing population and riding population in our focus groups that we started," said Nyberg, who has more than 30 years experience in the ski business, including a decade years at the company's Mount Bachelor resort in Oregon.
He said those changes were necessary to improve the skiing and snowboarding experience to ensure that those same customers return to Killington.
One significant move that's proved to be a public relations mess for Killington's new owners was the decision to terminate the 1,243 existing "lifetime" season passes. The passes were issued as a way to entice investment in the then-fledgling ski area, which opened in 1958. Some of the investor passes could be sold or transferred only once while others have been sold repeatedly over the years.
Powdr's position is that the investor passes were only valid for as long as Sherburne Corp., Killington Ltd. and its successor corporate entities existed. Because Powdr purchased the resort's assets and not the company, the passes expired along with the company when the resort was sold last year. The resort is now run by a new corporate entity, Killington/Pico Ski Resort Partners.
Powdr's rationale didn't convince the lifetime pass holders, some of whom spent thousands of dollars to buy passes on the open market. Four pass holders are suing the resort's current and former owners. The lawsuit is pending in federal court with the plaintiffs seeking to certify the lawsuit as a class action on behalf of other pass holders.
Asked how much honoring the investor passes would have cost the company, Nyberg declined to comment, citing the ongoing litigation. Powdr points out that it continues to honor lifetime passes issued to former Killington employees.
The company's restructuring of the resort also included layoffs last year. Although the company wouldn't comment on the number of layoffs, a couple of workers who received pink slips put the number of layoffs at between 30 and 90. A Killington spokesman said many of those workers were rehired, some in different positions, or reclassified as part-time seasonal workers.
Killington/Pico employs 300 year-round workers and 1,800 workers during the peak ski season.
The treatment of the investor pass holders mirrors the company's effort to right-size the business and make it more manageable. Nyberg said the fruits of that effort were evident in the bottom line at the end of the recent season.
"Our earnings are up significantly and we're very pleased with that," he said.
Powdr, a privately held company with seven resorts, doesn't release skier visit numbers. But Nyberg said those numbers "significantly passed" the 640,000 skier visits reported by rival Okemo Mountain Resort in Ludlow.
Even Pico, operating just five-days a week, was profitable.
"I'm pleased to say Pico made money on a standalone basis and that's the first time in a long time that's happened," Nyberg said.
When Nyberg announced last year that Pico would close two days a week, he encountered some criticism, especially from locals. But he said closing the resort on days when there were few skiers was one reason Pico was profitable.
One business directly affected by Pico's shorter week is the Inn at Long Trail – directly across Route 4 from the resort.
"I'm sure it had some effect. I don't think it was a huge effect," said inn co-owner Patty McGrath. "Would we like to see Pico open seven days a week? Absolutely."
But McGrath also said she understood Powdr's decision, saying that if the skier numbers weren't there it made sense to close Pico on Tuesdays and Wednesdays.
Although Killington was profitable under Powdr's first season, the number of skiers coming to the resort in recent years has declined precipitously.
Under founder Preston Leete Smith and his company, skier visits topped 1 million a year at Killington alone in the 1980s but declined to a low of 400,000 to 500,000 skier visits a year under former owner American Skiing Company, according to a recently released draft of the Killington Master Plan Review.
The number of skier visits is the traditional industry yardstick for measuring success. For example, Vermont reported 4.3 million skier visits for the 2007-2008 season, breaking the 10-year average of 4.1 million skier visits and a significant improvement over the 3.8 million skier visits the previous season.
Skier visits translate into dollars for the resorts and the state's economy. Vermont's ski industry generates $750 million in direct spending and another $705 million in indirect spending each year, according to the Vermont Ski Areas Association.
But for Powdr, skier visits alone don't tell the whole story. The company bases its success on customer satisfaction surveys and how that translates into a profit at the end of the season. Nyberg said that profit is what allows Killington to invest money back into the resort.
"We're spending $8.4 million in capital (improvements) and that's the result of earnings we were able to achieve from last winter," he said.
Powdr pumped $3.3 million in improvements at Killington and Pico last season, including upgrades to the Pico sports center.
Of the $8.4 million planned for this summer, $5 million is earmarked for a detachable quad lift at Skye Peak and related trail improvements. Pending Act 250 approval, Killington also will build a new snowboard park called The Stash – only the fourth snowboard park of its kind in the world.
Burton Snowboards founder Jake Burton came up with the idea for the park which has 34 features made from all natural materials, wood, rocks and natural terrain. It will be accessible off the new Skye Peak Express chair.
On the environmental front, starting last month the resort offset all of its annual electric usage, 26,199,909 kilowatt hours, through the purchase of renewable energy credits from Renewable Choice Energy. The offsets will eliminate more than 17,800 tons of carbon dioxide emissions each year.
While Powdr Corp. runs the ski resort, SP Land's interest and financial stake is developing a ski village at the base of the mountain.
SP Land's investment in the resort's real estate predates Powdr's arrival on the scene.
The concept of a ski village has been kicking around in one form or another since the 1960s. With its shops, restaurants and other amenities, Powdr sees the ski village as an anchor to compete with other resorts in Vermont and around North America.
Killington is the largest resort in the East with 150 trails and 27 lifts but it lacks a village center. Those amenities – inns, restaurants, shops, nightclubs — are located along Killington Road, a five-mile stretch from Route 4 to the base of the resort.
The village, however, is on hold indefinitely. SP Land announced earlier this year that it would delay its plans until the town completed a master plan review and economic study that would include the effect a ski village would have on local businesses. SP Land's decision came after the town Planning Commission told the company that it needed to submit revised plans for its village.
"It stems from a situation where everybody needs to get caught up on new plans and changes that people perceive," said SP Land President Steve Selbo, whose company owns more than 1,000 acres at Killington and Pico.
Both Selbo and Nyberg said there's no question the town wants to see the ski village go forward; it's a matter of when and how the village would take shape. Selbo said the slump in the real estate market and the economy played no role in the decision to put the project on hold.
Fully developed over 20 to 25 years, a village at the base of what is now the Snowshed and Ramshead base lodges would be a self-contained commercial center on 408 acres with a single base lodge that would straddle Killington Road, 50,000 to 60,000 square feet of shops, restaurants, entertainment and 500 housing units. That's a potential concern for Killington Road business owners, who for the first time could face significant retail competition from the ski area.
"We'll wait and see what the consultants say, but we can't see an example where building a village is a detriment to the community," said Selbo, just prior to the draft report being released last month.
The draft Town of Killington Master Plan presented to the Town Planning Commission in June concluded that the economic impact of the village on town businesses would depend on the commercial makeup.
The report, prepared by LandWorks in Middlebury and Economic Policy Resources in Williston, said that how much competition the 70 local businesses would face "will only be possible once the details of the retail and commercial establishment offerings associated with the proposed development are known and who will be operating those establishments. Until that point, we have to assume that at least some of the new retail-commercial development associated with the proposed development will in fact be competing with existing town businesses."
Selbo said the goal is make Killington more of a four-season resort. "If we can get it up to nine-and-a-half to 10 months of activity here, everybody will benefit," he said.
Tied to the village, Nyberg said, is construction of the long-awaited interconnect between Killington and Pico. He said, however, that won't happen until the village is built, which in turn will attract enough skiers to justify connecting the two ski areas.
When Powdr and SP Land took over the resort last May, the town and businesses along Killington Road were forced to adjust to — as one person put it at a meeting earlier this year on the town's future — to the "800-pound gorilla in the room."
Over the nearly 50 years since Smith opened the ski area, shops, restaurants, nightclubs and inns have sprung up along the road leading to the resort. The livelihoods of those businesses and the tax base of the town are tethered to the resort.
If measured by the bountiful snowfall and the number of skier visits, the 2007-2008 should have been a highly profitable one for the dozens of businesses along Killington Road. While the resort itself said it was pleased with the bottom line, the same can't be said for a number of businesses in town.
The most often heard complaint was that closing earlier than the accustomed late May date hurt business. Killington was scheduled to close April 13 but the resort extended the season an additional week. That was a case of good news, bad news for businesses because there was little advance notice the ski area would remain open until April 20.
Phil Black of the Lookout Bar and Grill said he had a great year until April 1, but gave back much of that business after that date for several reasons, including the fact that Easter fell in March, the weather was less than stellar and many skiers thought Killington would close by a date certain.
"I think the perception Killington was going to be closed on April 13 and people made plans by the time they extended the season," Black said.
The changes that the ski area implemented weren't always well received but Black said he understood many of those decisions made business sense, including raising season ticket prices. He said under American Skiing Co. skiers at Killington were spoiled by the relatively cheap prices for season passes. Under ASC, those passes were also valid at other ASC resorts in the East.
For next season, a Killington/Pico adult season pass with no blackout dates costs $1,199, if purchased by Oct. 15. A season pass at Stratton Mountain Resort, one of Killington's closest competitors, is priced at $979.
"I think season passes need to be $1,000," Black said, adding that unlike western resorts Killington and other eastern resorts go to considerable expense to make snow. "We don't get free skiing like they do out West."
But Black also expressed concern about other decisions like the hefty price increase for children's ski and snowboard lessons that could drive families to other resorts.
"They (Killington) took a beating on kids and that was the No. 1 thing that I constantly heard from people that had been coming here for years," Black said. "They can't afford to ski here as families."
At the time the kids' lesson prices were released, resort officials responded to the criticism pointing out that they improved the instruction by limiting the size of each class.
Aspen East owner Lee Quaglia said business this season turned out to be a little better than the year before. He said it could have been even better if Killington had more terrain open early in the season. "I think we lost a lot of clientele that could have come in early season because they didn't have enough novice and intermediate terrain open in the beginning of the season that other ski areas did have open," Quaglia said.
Over the years, Killington gained a reputation for being the first ski resort to open and last to close in the East – staying open until late May and often the first of June. The skiing is always extremely limited at that time of year but the resort was able to get some publicity out of it. Nyberg, however, said the cost involved in keeping the resort open that late into the season couldn't continue.
"The shoulders of the season is where you have to manage the business closely," he said. "So the beginning of the season when it opens and the end of the season when it closes are critical to your overall ability to retain those earnings that you achieved during the peak portion of the season."
Nyberg agreed with Quaglia that one mistake Killington made was not opening more terrain in the week prior to the Thanksgiving holiday. He said the ski area remains flexible in the opening and closing dates, noting that given the skiing conditions and business levels, the resort stayed open a week later (April 20) than scheduled.
On the KillingtonZone.com message board, comments posted were mixed about the season with some bemoaning the shortened season.
"Aside from the early closing, I found this year to be better than the previous," one skier wrote.
Another skier was less kind in their comments.
"You should add bond pass cancellation, midweek lodge closings, midweek Pico closing, midweek lift closings, absurd children's program pricing, spotty trail resurfacing, increased ticket prices, no hiking policy and decreased access road business. Now tell me about all the positives," said the post.
Owned by John Cumming and his family, Powdr's way of doing business has also raised concerns among locals at its resort in Oregon. The problems at Mount Bachelor in Bend, Ore., led to the recent firings of four key executives. To right the operation, Powdr dispatched Killington/Pico marketing manager Dave Rathbun to turn things around in Bend as president and general manager.
Killington Select Board Chairman Norman Holcomb said while the changes Powdr made upset some in the community, the resort enjoyed a very profitable year and that helps put the ski area on sound financial footing for the future.
"Certainly there were some decisions they made during the year that were very difficult and perceived by many people as being negative or didn't seem like the business was being operated in the same way," Holcomb said.
For businesses dependent on the ski resort, Holcomb said he's gotten mixed reports on the season with some doing just as well or better than a year ago under American Skiing Co. while others didn't fare as well.
Another longtime Killington businessperson remains hopeful Powdr will be able to turn the resort around. Like others interviewed, Steve Durkee said Powdr's decisions were "rough on a lot of people."
But Durkee said Powdr inherited a resort that had its profits siphoned off by debt-laden American Skiing Co., profits that should have been used to enhance and market the resort.
Durkee also acknowledged that Powdr's decision to operate a shorter season hurt some businesses in town. "The shoulder parts of the season are important to people like us but at the same time there just isn't any growth in the ski industry and at this point there are larger economic forces at work," said Durkee, who has run a number of businesses in town over the past 30 years.
Chris Karr, president of the Killington Chamber of Commerce, agreed that Powdr came in and made some hard-and-fast decisions that caught many in the community by surprise. But Karr, who owns the Pickle Barrel nightclub, said as the season wore on Powdr adjusted the way it did business and got better at communicating.
"I think they made some adjustments in their operations later in the year once they got more of the public feedback," he said.
As an example, Karr said one adjustment resort management made was to reverse course and operate the Skyeship gondola seven days a week for the 2008-2009 season.
Karr credited Powdr with excellent snow quality and fixing up the resort after several years of deferred maintenance under American Skiing Co..
Given the abundant snowfall this season, some businesses were disappointed with their bottom line and pointed a finger at Powdr for alienating customers. Karr, who said his own business was close to being on par with a year ago, said there was bound to be some pain as Powdr made changes in the way the resort is run.
With the reality that Powdr will operate a shorter season, the town is starting to focus its attention on four-season tourism. Tied to that, will be an estimated $673,000 a year generated from the recently approved 1 percent local option tax that's earmarked solely for economic development. It's a tax that the resort fought to have defeated on Town Meeting Day in March. In lieu of the tax on rooms, meals, retail sales and alcohol, the resort proposed a cash payment of $250,000, with the prospect of future annual payments. Future payments would be made if at least 30 percent of the businesses subject to the state rooms, meals and alcohol tax agreed to a voluntary 1 percent surcharge.
Killington/Pico has grown over the last half century to a sprawling and complex resort with 200 trails and more than 30 lifts. But what worked in the past to attract skiers is not quite working any more, Nyberg said, pointing out the steady decline in the number of skiers coming to Killington.
"We've got to make it more it efficient but without taking too much away from the overall experience," he said.
For next season Killington will refine its marketing strategy, a key component of which is its Web site. But Nyberg said print and radio advertising will play a significant role as well with ads in such well-known publications as Ski and Skiing magazines.
Even with extensive snowmaking operations, resorts often remain at the mercy of the weather. But coming into next season the dark clouds of the current economic slump coupled with ever-rising gas and home heating oil prices are a wild card. Will skiers cut back on the number of trips to the slopes?
Nyberg, like others in the tourism industry in the state, believes that when it comes to higher fuel prices Vermont is better positioned than resorts in the West.
"I think the fly-to destination resorts are probably going to be impacted more than we are as drive-to resorts here in the East," Nyberg said.
Because of its extensive snowmaking system, Nyberg said even poor weather conditions can work to Killington's advantage, guaranteeing adequate snow cover even.
But what Killington has in terrain and snow cover, it lacks in amenities offered by many other major resorts throughout North America. According to the recently released master plan, Powdr and SP Land expect skier visits to increase 5 percent a year and up to 10 percent a year "once the village has been developed."
Nyberg said the resort has to make improvements if it's going to regain its competitive edge. If the resort continues operating as it has the past 10 years, riding on Killington's legendary name alone, the rate of growth will be minimal at best.
"The expectations and the competition on all sides of us, our guests and the competitors that are out there, it will be marginal," he said. "We can't continue to operate on the virtues of what we currently have."
Contact Bruce Edwards at email@example.com.MORE IN Wire News
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