I had 10 days to get out of my house," George Gillett is explaining about his downhill run into bankruptcy. "I had to buy back my clothes. I had to buy back my dogs." Don't waste any sympathy on Gillett--he certainly doesn't expect any. Because Gillett is king of the hill again. Actually, 11 of them. His Booth Creek Ski Holdings Inc. has acquired 11 ski resorts in just over a year, the latest being Loon Mountain in New Hampshire. He's part of a trend in which four big companies--Vail Resorts, American Skiing, Intrawest and Booth Creek--are rapidly buying up ski areas. The four are banking on snowboarding youngsters and their two-planking boomer parents to create a new era of accelerating growth for a ski industry that has gone nowhere for a decade.
These companies are pouring record sums into capital improvements, adding fast chair lifts and such amusements as skating rinks and snow-tubing shoots to attract more nonskiing vacationers or at least divert them while their partners, spouses and children are on the slopes. The resorts aren't just competing against one another. Leisure dollars are also coveted by the cruise industry, which has spent billions upgrading its capacity, as well as by theme parks and other family destinations.
Gillett's riches-to-rags-to-riches story is a perfect proxy for the way capital has snowballed down Wall Street in the past two decades--and by the way, don't expect a moral to this tale. In the 1980s Gillett was busy building a billion-dollar empire based on the odd combination of meatpacking and television stations, much of it financed by the junk bonds of Drexel Burnham Lambert, led by the now infamous Michael Milken. Drexel pumped out high-risk securities the way snowmaking machines create instant winter. Gillett, a Wisconsin boy, loved to ski, and he loved to ski at Vail, a powdery paradise in the Colorado Rockies. So he bought the joint in 1985.
The whole mess came crashing down in 1991, when Gillett, having overpaid for yet another television station, found himself looking at interest rates for his junk bonds that had spiked above 17%. "When the notes came due, we were dead," he says.
Fast-forward to 1997, when the ski industry, not to mention the junk-bond industry, has come full circle. Gillett the Bankrupt has had "little" difficulty raising $162.5 million in investment capital, and he is assembling another empire, this one built around medium-size properties near big cities to capture the day trippers and weekenders who account for nearly half the ski business. He bought back his old meatpacking operation in 1994 and added adornments such as a barge business in the Pacific Northwest and a group of golf courses in Montana. Have the bankers lost their marbles again? Yes and no. Sure, Gillett went bust by taking on too much debt, but he was a proven operator who increased Vail's yearly profits from $5 million in 1985 to more than $45 million in 1991--still not enough to avert catastrophe.