Vail Resorts leases Canyons Resort in Utah
May 30, 2013
BROOMFIELD — Vail Resorts' Epic Pass is starting to function like a roll of duct tape: What you can do with one is limited only by your imagination.
Vail Resorts president and CEO Rob Katz announced Wednesday that the company had signed a long-term lease deal to operate the Canyons Resort, near Park City, Utah. The original lease between Vail Resorts and the Toronto-based Talisker Corp., which owns the roughly 4,000 acres of skiable terrain, is for 50 years, with an option for six 50-year extensions. Katz said the value of the original lease is approximately $310 million.
Anyone holding a Vail Resorts Epic Pass will be able to ski at Canyons this coming ski season. The Epic Pass' unlimited skiing and riding with no blackout dates is now good at 12 resorts: Vail, Beaver Creek, Breckenridge, Keystone, Heavenly, Northstar, Kirkwood, Canyons, Afton Alps, Mt. Brighton, Arapahoe Basin, and Eldora.
The Epic Pass will replace the Canyons Season Pass and cost less. Katz said the Canyons pass is more than $800, compared to $689 for the unlimited Epic Pass.
Vail Resorts' lease is for a resort that's received about $75 million in capital improvements over the past few years, including a new quad lift with bubble-covered chairs, a redesigned gondola, new terrain and a new zipline.
Vail Resorts will be responsible for any future capital improvement projects, Katz said.
The deal with Talisker will open up new markets for Epic Pass sales, including Utah and Southern California, areas the company hasn't put much marketing attention into, Katz said.
The deal leaves the resort's developable real estate — about 4 million square feet — in Talisker's hands. But Katz said Talisker's real estate development has "significant potential" to boost revenue at the ski resort.
While Vail Resorts is staying out of the real estate development business at Canyons, it is taking over a lawsuit that has the potential to greatly expand the skiable terrain there.
Talisker and Park City Mountain Resort, the company that runs the Park City ski area, are involved in a lawsuit over a lease for 3,700 acres on the upper reaches of the Park City ski mountain.
According to a March, 2012 story in the Deseret News, Park City has spent $100 million in lifts, lodges and other improvements on that terrain. According to the same story, the dispute centers on whether Park City has an option to continue its lease for the property to 2051.
If Vail Resorts prevails in the suit, Katz said the company will have access to the Park City ski area property, which is much of the terrain at that resort.
"That land is underneath one of the great ski resorts and it's connected to Canyons," Katz said.
Vail Resorts tried to buy Canyons in 2006, which led to a legal dispute with Talisker. Katz said there are no current disputes between the parties.
Canyons has also received millions in improvements since then, with the result that the "resort is in a far, far better position than when we were looking," Katz said.
With Vail Resorts taking over Canyons, the clear expectation is to grow skier numbers at the resort. Canyons last year recorded about 450,000 skier days, a level at which profitability is "tough," Katz said.
"We believe this transaction allows growth," Katz said. That growth could be comparable to Northstar at Tahoe Resort, he added.
Where that growth will come from is pass sales.
Jerry Jones, a longtime ski industry executive based in Avon, said his view is that Vail Resorts is making a transition to a model in which a larger share of company revenue comes from resort operations instead of real estate. Jones said Intrawest, another big player in the North American ski market, is making a similar move.
The Epic Pass is the centerpiece of that strategy, Jones said.
"They've done a tremendous job of integrating the whole package — passes, retail, reservations," Jones said. And, he added, no other resort company can do what Vail Resorts can with its Epic products.
"The deal is just too good," he said.
Katz said Canyons will provide better value to Epic Pass buyers.
Responding to a question from Barclays analyst Felicia Hendrix during a Wednesday conference call, Katz said the company believes "Canyons is on a relatively high growth trajectory."
Responding to another question, this one from Alec Bear of Penn Capital Management, Katz said company officials believe the Canyon deal was a "very strategic opportunity."
"We felt very good that this was the right transaction and the right opportunity for us," Katz said.
Vail Daily Business Editor Scott Miller can be reached at 970-748-2939 or at email@example.com.