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There have been some significant moves coming from Alterra Mountain Company in the last 6 months and along with their Ikon Pass and they are poised to take over ski industry leadership status from Vail Resorts should they continue to execute their strategy effectively.

The news started last last September when Alterra announced that they would merge Deer Valley with the yet-to-be built Mayflower resort next door, creating North America's 4th largest resort with 5,726 acres of terrain and 37 lifts. A massive $3.2 billion of investments are planned, though Alterra is leaving the base village and real estate entirely to Extell Development Co., a New York City real estate developer who started the project in 2014. Likely less than 30% of the full cost of the expansion will come from Alterra and will be spread over 3 or more years. To put the size of this investment into context, Vail Resorts paid $1.1 billion for the 8,171 acre Whistler Blackcomb in 2016.

The Deer Valley expansion will result in 5,726 acres of total terrain, the majority of which will debut in the 2025/2026 ski season.
The Deer Valley expansion will result in 5,726 acres of total terrain, the majority of which will debut in the 2025/2026 ski season.

Near the end of January we got word that KSL Capital Partners, Alterra's majority shareholder, closed over $3 billion in a single-asset continuation vehicle for Alterra Mountain Company. This confused many who wrote about this and whom I spoke with, even a week later, and much of this confusion may have come from an early Ski Area Management Magazine article where there was significant speculation about what a potential cash infusion could be used for. In reality this was simply a way for some early investors to cash in their chips for a profit while new investors bought in. This 'vehicle' could have allowed them to raise additional capital for use by Alterra but there's no indication this happened, and there are other signs that it didn't which I will share below.

Then this Monday as the ink was still drying on on the continuation vehicle transaction we learned that Alterra will buy Ikon Pass partner Arapahoe Basin for an undisclosed amount which I would estimate to be somewhere between $125 million and $150 million based on multiples of their publicly disclosed $11.1 million EBITDA and the announcement of $110 million in profits from the sale by the current owner.

This is likely just the early stages of a new round of growth and consolidation in the ski industry that might result in Alterra surpassing Vail Resorts for market leadership within the next few years.

Who Is Alterra Mountain Company?

In April of 2017 KSL Capital Partners, a Denver-based private equity firm specializing in travel and leisure, and Aspen Skiing Company, a division of Henry Crown & Company and owners of Aspen Mountain, Aspen Highlands, Buttermilk, Snowmass, joined forces to buy struggling ski operator Intrawest, the then owners of Steamboat, Winter Park, Stratton, Snowshoe, Tremblant, Blue Mountain (Ontario), and CMH Heli-Skiing. The price was $1.5 billion plus the assumption of about $600 million in debt. At the same time it was announced that KSL's Squaw Valley/Alpine Meadows (now Palisades Tahoe) would also become part of the new entity. Just two days later they announced that Mammoth Resorts, owners of Mammoth Mountain, June Mountain, Snow Summit and Bear Mountain, was also being purchased by the new entity. In just a matter of 48 hours a new ski conglomerate comprised of 11 resorts and one heli-skiing operation had been created. The consolidation continued in August of that year with the purchase of Deer Valley.

Alterra Mountain Company was announced in January of 2018 as the name of the new venture and they also announced the Ikon Pass as a successor to the M.A.X Pass starting the following season. Later that same year they continued their buying spree by purchasing Crystal Mountain and Solitude, and in 2019 came Sugarbush. Acquisitions were paused after the pandemic started, but in 2023 they resumed with Schweitzer and now Arapahoe Basin bringing the total to 18 ski operations.

Alterra's current holdings sans the pending Arapahoe Basin purchase as appears on their website.
Alterra's current holdings sans the pending Arapahoe Basin purchase as appears on their website.

Rusty Gregory, who worked his way up from a liftie at Mammoth Mountain to its CEO, became Alterra's first CEO in 2018. Gregory retired in 2022 and was succeeded by Alterra's President, Jared Smith. Smith came from Ticketmaster where he worked for 17 years and last served as their president and chairman.

KSL Capital Partners is the majority owner in this venture. They are a private equity firm which seeks investments from public and private sources to fund ventures, grow their value, and return profits to the investors. The company's roots go back to 1992 when Wall Street investment firm Kohlberg Kravis Roberts & Co. entered a partnership with Vail and Beaver Creek executives Michael Shannon and Larry Lichliter to establish KSL Recreation Corporation. "KSL" stands for Kravis, Shannon, and Lichliter. Their company was eventually sold in 2004 to to CNL Hospitality for $1.4 billion, and subsequently the new entity of KSL Resorts was founded by Michael Shannon, Eric Resnick, and Scott Dalecio who is its current president and CEO.

KSL Capital Partners, not to be confused with KSL Resorts, was founded in 2005 by Michael Shannon and and Eric Resnick. Shannon serves as their chairman, and Resnick serves as their CEO. Today KSL Capital Partners manages $21 billion in assets and has invested in over 165 different businesses with Alterra Mountain Company being the largest by far. KSL Resorts, an affiliated entity who specializes in hotel and resort management, purchased Camelback in 2019 and Blue Mountain (Pennsylvania) in 2021, and starting this season both resorts were added as limited partners on the Ikon Pass offering either 5 or 7 days of access to each.

KSL Capital Partners' founders came from the ski industry. Michael Shannon was CEO of Vail Associates, owners of Vail Mountain and Beaver Creek, from 1986-1992. Eric Resnick was VP of Strategic Planning for Vail Resorts in their early days from 1996-2001.

Alterra's destiny is surely to become a publicly traded company. That's how KSL Capital Partners' investors in Alterra will realize gains on their investments. A few years ago at an annual company meeting Alterra's leadership indicated that they would not be going public for at least 5 more years and the recent continuation vehicle is a sign that it will likely be at least several more. If they put their cash to good use and maintain a strong growth trajectory, they could well see a valuation in excess of that of Vail Resorts when that happens and it is possible their implied value is already close to Vail Resorts' $8.4 billion market capitalization.

So far in their short 6 year history Alterra's execution from the bird's eye view has been nearly flawless and the stock market loves both growth combined with premium offerings, but they want to continue to build even more value before the current investors cash out and that would come by completing projects like the Deer Valley expansion and continued acquisitions. Popular opinion seems to be that a public offering will happen near the end of this decade.

Alterra and Vail Resorts By the Numbers

Since Alterra is a non-public entity there is far less information available regarding their finances, revenues, earnings, pass sales, etc., however they are large enough that they must rely on the bond markets to raise money which requires them to make disclosures so that ratings agencies can estimate their creditworthiness.

Jason Blevins of the Colorado Sun dug through the prior periodic review from Moody's when it was announced that Alterra would take over the Mayflower Resort's ski operations last summer and provided contrast with Vail Resorts in order to put this into perspective.

Moody’s Investors Service, which rates debt for bond investors, in May reported that Alterra generated $1.7 billion in revenue between January 2022 and January 2023. Moody’s reported Alterra had $1.1 billion in cash in January 2023 and the new loans would bump that to $1.3 billion with access to the $500 million loan due in 2028.

For comparison, Vail Resorts, the largest resort operator in North America with 37 ski areas, reported $2.5 billion in net revenue for its fiscal year 2022. In April, Vail Resorts reported $896 million in cash and access to about $630 million in debt.

At that time Alterra owned 16 ski operations vs. Vail Resort's 40 but managed to reach almost 70% of their revenue. The difference is that Alterra owns primarily destination resorts while about half of the ski areas in Vail Resorts' portfolio are quite small, located in the Midwest and Northeast, receive less than 250,000 skier visits per season and in many cases significantly less, and contribute far less per skier visit to their bottom line than destination market skiers and riders. These ski areas do help sell Epic Passes and boost other metrics while increasing perceived value for that product, however many of these 'eastern feeders' lack the same degree of ancillary revenue opportunities as destinations and attract skiers from their surrounding area who do not spend as much as those who travel long distances to take vacations. It's a different approach to the industry and driven by volume, discounting, and control of regional markets connected to urban centers, and it has proven to be a difficult strategy for them to manage. While both strategies on paper have significant potential, thus far the more destination-focused approach of Alterra that values quality over quantity and is priced at a premium to their competition seems to be more successful in practice, though in all fairness that's speculative due to a lack of visibility into Alterra's full financial results.

Vail Resorts properties across the globe as shown on their website.
Vail Resorts properties across the globe as shown on their website.

Moody's provided an update on Alterra's credit rating just this last Monday when the company secured an additional $200 million on one of their loans, likely associated with the purchase of Arapahoe Basin. Let me pause here for a moment. If the continuation fund provided additional working capital, it wouldn't make a lot of sense for them to increase their borrowing just a week later. KSL Capital Partners' own press release clearly stated specifically that the continuation vehicle was offered in order to "return capital to limited partners". So it's fair to assume the continuation vehicle provided no additional working capital to Alterra.

In the credit rating update Moody's indicated that Alterra's debt-to-EBITDA ratio had increased to over 6x which Moody's indicated was primarily due to a short-term change in management compensation associated with exits, and they also described Alterra's financial policy as "aggressive under its private equity ownership with frequent debt add-ons to fund acquisitions, capital spending, and sizable cash outflows for management incentive plans over the next few years." Alterra in fact maintains over twice the debt-to-EBITDA of Vail Resorts, but the company is on a rapid growth trajectory, investing sizeably into their operations, and they likely still have more cash on hand at this time than Vail Resorts, though Vail Resorts could likely borrow significant amounts of capital without issue if they needed it.