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Yet Gillett is on financing's bunny hill compared with Leon Black, founder of Apollo Ski Partners, an investment fund that is Vail Resorts' largest shareholder. Black, who was Milken's right-hand man at Drexel, scooped Vail out of bankruptcy and then acquired Breckenridge and Keystone from Ralcorp Holdings to create an industry giant. With the stock market rising, Black took Vail Resorts public last February, raising $266 million--$64 million of it going to Apollo Ski Partners. Vail Resorts is currently valued at $900 million, and its stock, which went public at $22.50, has been trading in the mid-20s.
Gillett didn't stay buried for long. Black kept him around to run Vail for $1.5 million annually plus stock options that ultimately yielded $32 million. That was seed money for Gillett to start a second empire, this time by forming Booth Creek.
The top four resort operators, with Vail and Booth Creek among them, control 31% of the ski business at the country's 507 resorts, and these operators are still buying. "It's an easy time for financing," observes Leslie Otten, fresh from an acquisition binge that netted his Maine-based American Skiing (estimated revenues: $350 million) major properties in Colorado (Steamboat), Utah (the Canyons) and California (Heavenly). With nine resorts and 4.92 million skier visits annually, onetime lift mechanic Otten lays claim to being the country's top alpine-resort operator. "The industry has learned how to get into the high-yield bond market and take advantage of initial public offerings," he says.
And how. Vancouver-based Intrawest raised $88 million in a stock offering last March to move ahead with real estate development at 10 Canadian and U.S. resorts. Last month Intrawest boosted its ownership of Mammoth Mountain in California to 51%. And the company isn't finished either. "We are definitely on the hunt," says executive vice president Daniel Jarvis.
The resort operators are convinced that despite stagnant growth for the past 10 years, the ski industry is poised for a period of grand new development. They cite the coming of age of a giant crop of potential new skiers, the children of the baby boomers. These three-to-20-year-olds, the echo boomers, total 72 million, 60% more than the number of Generation Xers, and many are avid snowboarders.
The boomers, as they push into their 50s, are becoming prime prospects for an emerging adjunct of the ski-resort business: sales of year-round second homes and condos. "There's a realization that you can't live on lift tickets alone," says Michael Berry, president of the National Ski Areas Association. "Today's ski company needs to be retailer, hotelier and developer to maximize revenues per skier visit."
Toward that end, Vail has bought two hotels and is adding nine new restaurants as it embarks on a string of renovations and additions. Many of them, like a dance club, an expanded ice rink and a performing-arts center at nearby Beaver Creek, are directed as much at nonskiers as skiers. "Increasing our share of mountain business is an easy area of opportunity," says Vail Resorts CEO Adam Aron, who notes that nonski revenues are growing twice as fast as those from lift tickets and now exceed them. "There are other ways to win than skiing."