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Vail Resorts Acquisition of Heavenly Ski Resort
on Lake Tahoe Two Years Ago for $99.2 million Proves to be a Windfall
By Jason Blevins, The Denver Post
Knight Ridder/Tribune Business News 

Mar. 14, 2004 - SOUTH LAKE TAHOE, Calif. -- Vail Resorts hit the jackpot when it acquired the Heavenly Ski Resort on the casino-studded shores of Lake Tahoe two years ago this month. 

Like a row of lucky 7s in a slot machine window, Vail lined up a bargain-basement price of $99.2 million for a 4,800-acre ski area that included a new $23 million gondola. 

Today, skier visits are at a record level. Revenues are, too. The resort has helped Vail Resorts, based in Avon, mitigate its first annual loss in a decade. 

Vail, which owns four Colorado ski areas, took a gamble on Heavenly. The wager has proven that ski resort operators can prosper without peddling $600-a-night hotel rooms and million-dollar homesites. The only dollars Vail reaps from Heavenly come from lift tickets, ski lessons and on-mountain dining. 

That's a rarity in today's ski-resort industry, dominated by publicly held companies such as Vail and British Columbia-based Intrawest. To shore up flat ski revenues, the companies develop and sell high-end real estate to attract wealthy visitors and buyers. 

Vail's recent high-end lodging purchases -- which have yet to return expected gains -- include the luxury RockResorts chain, the former Ritz-Carlton in Palm Springs, Calif., and the Vail Marriott. 

But in Heavenly, business is just about skiers on the mountain. Heavenly's earnings before interest, taxes, depreciation and amortization are expected to top $21 million for the fiscal year ending July 31. That compares with $16 million gleaned by previous owners in 2001. 

"There is enormous potential here in resort revenue," says Blaise Carrig, Heavenly's crew-cut chief operating officer. "We are taking Heavenly to another level." 

Vail's windfall comes at the expense of American Skiing Co. 

Park City, Utah-based American bought Heavenly and Steamboat ski area in 1997 for $288.3 million, one of the highest prices ever paid for ski resorts. 

The company poured tens of millions into the development of a slopeside village, which it sold to Marriott in 1999 before it could build or sell any units, delivering yet another company the fruit of its labor. 

In March 2001, debt-saddled American was poised to sell its Steamboat ski area, and Vermont resort developer Tim Mueller was ready to buy. 

Mueller was in a New York skyscraper waiting to pay $91.4 million for Steamboat when American chose instead to sell Heavenly to Vail Resorts. 

That day, American officials said the company's lenders deemed Steamboat too valuable to sell and opted to jettison Heavenly alone. 

If American had gone through with both sales, it would have logged a nearly $100 million loss on Heavenly and Steamboat. 

Mueller, who recently acquired the Crested Butte ski area, is suing to force the sale of Steamboat. The case is pending in Routt County. 

At the time of Heavenly's sale, the ski area was in bad shape. American had shuttered aging lifts to save money, closing off entire portions of the mountain. There were no high-speed lifts. Restaurants remained untouched for 40 years. 

"American had pretty much stripped Heavenly and bled it dry," says Bob Roberts, executive director of the California Ski Industry Association, the trade group that markets California's ski resorts, 13 of which line Lake Tahoe. "Vail's been playing catch-up. They took over a laggard, and they've been doing some good work." 

Vail has pumped about $15 million into Heavenly, including remodeled on-mountain eateries, new bathrooms and a new chairlift. Carrig, Heavenly's COO, installed a new ski school at the top of the gondola, giving Heavenly three learning centers and an additional source of revenue. In all, Vail expects to inject about $30 million into Heavenly by 2006. 

Vail's investment in the mountain has pushed Heavenly into the Tahoe area's lead-dog position. The mountain had languished behind Squaw Valley as the region's premier destination, thanks in part to a new village built by Vail's rival Intrawest. In Colorado, Intrawest is developing Copper Mountain and Winter Park. Now the ski titans are battling in California. 

"We have a very simple vision for Heavenly," says Vail chief executive Adam Aron. "We decided when we bought it that we would bring Colorado-style quality to Lake Tahoe and set a whole new standard for the Lake Tahoe ski industry. The acquisition has been a home run for us." The four-mountain ski area that straddles the California-Nevada border provided Vail $59.1 million in revenue in fiscal 2003. That same year, the company as a whole posted an $8.5 million loss, compared with a $7.1 million gain in fiscal 2002. 

The resort attracted a record 937,000 skier visits, up from its long-time average of 830,000. Carrig says Heavenly could hit the 1 million visitor mark this season. 

"I attribute Heavenly's success to a reasonable purchase price combined with Vail's strong marketing efforts and shrewd capital-spending decisions and investment," said Will Marks, a leisure industry analyst who watches Vail Resorts for San Francisco-based JMP Securities. 

The gondola planned and built by American has been the key to Heavenly's success. 

The gondola links the ski area with a new village that is anchored by 400 high-end time-share units built and operated by Marriott. Another 400 units are planned. 

Developing the master plan for the village took 15 years and involved 23 agencies in California and Nevada. American shepherded the resort through the final stages of approval. Vail reaped the rewards. 

"The gondola has created the village," says Duane Wallace, chief executive of the South Lake Tahoe Chamber of Commerce. "Those used to be old hotels and businesses that just weren't making it. They were kind of frozen in time from the 1960s." 

The village, which includes an ice rink and movie theater under construction, is one block from the 5,000-room mini-Las Vegas in Stateline, Nev. 

Several casinos, including Caesars, Harrah's and Harvey's, are the major draws for the South Lake Tahoe region. They also differentiate Heavenly from any other North American ski area. Heavenly is the only ski area in the nation that can boast $100 blackjack as an après-ski draw. 

Carrig has rekindled a cooperative relationship with casino executives, ending years of animosity. The casinos, working to boost visitor numbers during a nationwide proliferation of gambling halls, are targeting gamblers with a penchant for skiing. 

"It's funny, for the first time, we are seeing ads for Harrah's pushing skiing and Heavenly ads pushing the off-slope party," says Bill Chernock, executive director of the Lake Tahoe Visitors Authority, which markets South Lake Tahoe as a year-round destination. 

-----To see more of The Denver Post, or to subscribe to the newspaper, go to 

(c) 2004, The Denver Post. Distributed by Knight Ridder/Tribune Business News. MTN, IDR, AESK, MAR, CZR, HET, 


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