Well That Was Unexpected - What Alterra's Purchase of Sugarbush Means

A little less than four months after Vail dropped an atom bomb on the East Coast ski scene with its purchase of all 17 Peak Resorts, Alterra answered with the acquisition of Sugarbush, swallowing the largest remaining independent mountain in the region and adding a 15th resort to its portfolio.

This is Alterra’s first acquisition since scooping up former Boyne Resorts property Crystal Mountain more than a year ago. It brings Sugarbush, a onetime American Skiing Company property, back under a multi-resort umbrella. And it potentially makes the East a slightly fairer fight in the Vail versus Alterra showdown-for-pass-dollars, if the conglomerate makes good use of the mountain and doesn’t tuck it into some exclusive access category like they’ve done with Deer Valley.

This out-of-nowhere, cusp-of-the-season announcement very likely explains Alterra CEO Rusty Gregory’s appearance in Manhattan last week, as he was likely finalizing financing for what I’m guessing was not a bargain purchase. There are few mountains better maintained than Sugarbush, and without any obvious signs of financial dysfunction or distress, it likely commanded top dollar.

Here are some initial thoughts on what this deal portends for Sugarbush and everyone who loves it.

What this means for Sugarbush

Probably not a lot. You could not have asked for a better steward of this place than Win Smith over the past 18 years, and he will stay on as Sugarbush president and COO indefinitely. Whatever potential capital improvements he’d already dreamed up, this acquisition just means he will likely have more money to do them with.

Alterra would be foolish to do anything other than say, “Keep doing what you’re doing, Win. Here’s some more money.” And their record so far of buying independent resorts and letting them keep doing whatever it is that makes them special – see Squaw or Mammoth staying open into summer – indicates that they understand this.

What this means for Ikon Pass holders

For this season, nothing. Which is a little lame. I’m not sure what the point of announcing this purchase just before the drop-dead date for Ikon Pass sales was if it wasn’t going to help sell more Ikon Passes. Then again, these things are complicated and they probably just announced it when all the financial and regulatory obstacles were cleared.

Long term, I really hope Alterra doesn’t try to treat Sugarbush like Deer Valley East, or even like Stratton. Vail is already crushing Alterra from a value perspective in the Northeast. Sugarbush needs to be unlimited with blackouts on the base pass and unlimited on the full pass, or what was the point of this? Stowe is right down the road, the full Epic and Epic Local Passes remain significantly cheaper than the Ikon Pass, and the mountain is not exclusive enough (like Deer Valley) or close enough to population centers (like Stratton) to justify bottling up access on either tier.

If Alterra wants to seriously compete with Vail in this lucrative region, they need to ramp up access in a way that matches what the Epic Pass offers. That means more Stratton for base passholders to match the unlimited no-blackout Mt. Snow and Okemo access Epic Local passholders get, and unlimited Sugarbush access that rivals what skiers on similar tiers get at Stowe.

What this means for Sugarbush season pass holders

It’s too soon to say. If Alterra opens up Ikon Pass access next year, it likely means more skiers on the hill, especially during peak times. However, with five large Vermont mountains now on a multi-pass, the concentration of bargain skiers ought to theoretically disperse itself a bit more evenly among them.

It also likely means that an Ikon Pass is now your season pass, meaning that it will come with access to Killington, Stratton, Tremblant, Loon, Sunday River and Sugarloaf – not to mention everything out west and overseas – for about what you were paying for your pass before. Personally, I wouldn’t mind this tradeoff of more weekend traffic for expanded access.

The good news is that not even Alterra can move Sugarbush any closer to civilization. It will never be overwhelmingly busy on weekdays. This is a mountain that has been doing almost everything right for two decades, and it’s built to absorb crowds and move them around.

What this means for Jay Peak

For Ikon passholders pining for unlimited Jay Peak access, this is likely not good news. Alterra’s existing partnership with Sugarbush likely meant that there was more marketing value in adding Jay – with its three-ring circus of waterparks and baseball diamonds and hotels – than officially folding Sugarbush into its portfolio, especially since there is no immediate added value to Ikon Passholders.

In other words, if Jay was an option, I think Alterra would have used its capital to buy it. Sugarbush likely cost north of $100 million, and Jay has been valued in that same neighborhood. Alterra would have to sell a hell of a lot of breakfast burritos to fund two purchases of that magnitude close together, and considering the large capital projects that they’ve already announced throughout their portfolio, it’s hard to see where the cash to buy another East Coast monster comes from.

That’s not to say that Ikon Passholders may not end up with Jay access in the end. Alterra only owns 15 of the Ikon Pass mountains – the rest are partners. Whoever buys Jay will very likely at least talk to Alterra about opening up five- or seven-day access. An unlimited partnership is also not out of the question: Copper and Eldora are both unlimited on the Ikon Pass, despite being owned by Powdr Corp. Colorado, however, is a very different pass market, and I would say unlimited Jay is highly unlikely if Alterra is not the buyer.

What this means for large indies

They’re toast. Unless Jeff Bezos decides to start buying ski resorts, it’s hard to see who can afford these things. In his Win’s Word blog post today, Win Smith pointed to the challenges of climate change and increased cost of regulation – especially in Vermont – as central to his decision to hand over the keys. Add in the astronomical cost of snowmaking and snowmaking technology, lift infrastructure, liability insurance, and labor, as well as the ever-present possibility of a down snow year crushing your bottom line, and it’s increasingly obvious that only large, well-capitalized companies with geographically distributed operations have the resources to sustainably run huge complicated resorts in the way that modern skiers expect them to be run.

Don’t expect the rest of the remaining large Indys in the East – Jay or Smuggs – to hang on a lot longer. Not when there are four hungry monsters out there (Boyne has said it won’t buy any more resorts in the near term, but you never know, and Powdr recently bought Snowbird), hunting for their next meal. There is too much upside to joining a team and too much existential risk in not doing so.

And don’t expect to see many more generations of large indies out west. The remaining big boys – Alta, Jackson Hole, Taos, Telluride – are so huge and complex, and such attractive targets for Vail or Alterra, that it’s difficult to see who outbids them for what would be a Whistler-style crown jewel – especially Jackson or Telluride – for whoever wins them.

That said, I think smaller indies will hang on for the foreseeable future. It’s easier to please the crowd at a place like Black Mountain, New Hampshire, where you have a built-in base of loyal customers who don’t come there expecting a high-speed Oktuple chairlift and 100 percent snowmaking. They come to you for different things, and as long as you continue to provide those things – mostly atmosphere and affordability – you are going to last as long as the snow keeps falling.


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Check out previous podcasts: Killington GM Mike Solimano | Plattekill owners Danielle and Laszlo Vajtay| New England Lost Ski Areas Project Founder Jeremy Davis | Magic Mountain President Geoff Hatheway