American Skiing Company History

Address:

Sunday River Access Road
Bethel, Maine 04217
U.S.A.

Telephone: (207) 824-8100
Fax: (207) 824-5158

Public Company
Incorporated: 1994 as LBO Resort Enterprises Corp.
Employees: 7,826
Sales: $ 340.42 million (1998)
Stock Exchanges: New York
Ticker Symbol: SKI
NAIC: 721110 Ski Lodges & Resorts with Accommodations; 713920 Ski Lift & Tow Operators

Company Perspectives:

Great snow, fast lifts, a wide range of terrain and outstanding services--these things skiers and riders demand. So we create these dynamic attractions that drive market share and increase revenues across all our businesses.

Company History:

Bethel, Maine-based American Skiing Company (ASC) is a holding company that operates through various subsidiaries in two business segments: ski resorts and real estate. As the largest operator of alpine resorts in the United States, ASC owns and operates nine resort facilities, including two of the five largest resorts in the United States and at least one resort in each major skiing market. These resorts include: Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; Killington, Mount Snow/Haystack, and Sugarbush in Vermont; The Canyons, adjacent to Park City, Utah; Steamboat in Colorado; and Heavenly, near Lake Tahoe, California. In addition to offering skiing at its alpine resorts, ASC develops mountainside real estate that complements the expansion of its on-mountain operations. The company also owns and manages six Grand Summit Resort Hotels: two at Sunday River and one hotel each at Attitash, Mount Snow, Sugarloaf/USA, Killington, The Canyons, and Steamboat. Furthermore, ASC operates golf courses and conducts other off-season activities, including a program of Grand Summer Vacations in New England, and the Trail 66 Mountain Bike Race Series and Festival. These activities accounted for about 9.5 percent of the company's resort revenues for fiscal 1998. During the 1997--98 season, skier visits to ASC resorts increased 8.1 percent, compared to the industry average of 2.5 percent.

The Early Years: 1980--93

The founder of American Skiing Company, Leslie B. Otten, was the son of a successful steel magnate in prewar Germany. After the Nazi government seized the elder Otten's business in 1937, he immigrated to Canada and then moved to New Jersey where he started Albot Industries, a scrap-steel business. Leslie, Otten's only child, fell in love with skiing during his first ski trip. While a business student at Ithaca College, Otten worked as a part-time ski instructor at nearby Greek Peak and, as a class project, planned the creation of a small local ski area on Danby Mountain near Ithaca, New York. Meanwhile, his father was schooling him "in the basics of business every night at the dinner table," according to Bill Meyers in USA TODAY. In that article, Otten remarked that his father taught him "to think long term. And everything we've done in the company is for long-term gain'."

A ski industry consultant convinced Otten that Danby was too steep to support a successful ski area, but he got an "A" for the class. After graduation, Otten joined the Management Training Program at Vermont's Killington ski resort, owned by Sherburne Corporation. In 1972 Otten was sent to Bethel, Maine, to work at Sunday River Resort, another Sherburne-owned ski resort. Several bad-snow years, an energy crisis, and the acquisition of the Mount Snow resort led Sherburne to focus its capital resources on its Vermont areas, stall development of the Sunday River Resort, and then put it up for sale. In October 1980, Otten borrowed $840,000 from Sherburne and bought the resort.

The early years were not easy for the young entrepreneur. At the time of purchase, run-down Sunday River's fixed assets included one double chairlift, four surface lifts, and a small lodge at the base of the mountain. There were about 70 acres of trails, approximately one-third of which were covered by machine-made snow. To support his family and raise capital for Sunday River, Otten sold scrap, copper wire, and old bulldozer blades. The year-round staff of four became jacks of all trades, painting lifts, mowing the trails, and welding snowmaking pipe. "And to attract skiers," according to the USA TODAY story, "Otten sent a truck down to Boston, where it dumped mountains of snow on the Common. The message: 'The skiing is great at Sunday River, so come on up'."

Well schooled in business in his youth by his father, Otten knew that investment in flashy lodges and high-end hotels would tie up his limited capital; he based his plan for growing the company on snow quality and enhanced opportunities for skiing. Since Sunday River could easily access an exceptional amount of water, Otten made the resort River into a testing ground for snowmaking technology. Thus began the manufacture of what became known as "guaranteed quality snow." In order to increase sleeping quarters on the mountain, Otten built and sold more than 600 simple, cozy, and attractively priced condominium units. A 50 percent pre-construction sales policy (a permanent operating policy) ensured that the company would not be trapped in a quick economic downturn after the real estate boom of the mid-1980s. Innovative marketing and original programs increased sales and drew skiers to the resort; concomitantly came the creation of more trails and construction of additional lifts and lodging.

For the fiscal year ending July 1, 1980, the resort posted a $235,000 loss against total sales of $541,000. From 1980--90, the Sunday River Resort developed and introduced many ski programs that remained in use throughout the winter season and were expanded over the years. For instance, in 1985 the Edge Card was created for the nation's first-ever frequent skier program, and in 1990 the Perfect Turn Skier Development Program blended state-of-the-art ski techniques with leading-edge learning theory. In 1989 Inc. magazine, citing the success of Sunday River, recognized Leslie B. Otten as "Turnaround Entrepreneur of the Year." In 1992 Sunday River opened its first Grand Summit Resort Hotel. "Sunday River shot from being a torpid backwater with 40,000 skier visits in 1980--81, to the Northeast's second most popular resort, boasting more than 500,000 visits in 1997--98. After delivering goods, Otten focused on services. Here, his inspiration was enticing middle-class families to participate in 'quartershare' condos enclosed in Grand Summit Hotels near the base lodges," wrote Paul McHugh in the December 17, 1998 issue of the San Francisco Chronicle.

After more than a decade of continuing prosperity, for the fiscal year ending July 31, 1994, the company posted sales of $33.23 million and net income of $4.87 million. Otten thought the time had come to create the area's--and the nation's--largest operating company of ski resorts: "I'm in a business where I happen to be able to combine my avocation and my vocation. My office covers an expanse of 15,000 skiing acres, 1,000 trails and 176 lifts," he would later comment in a 1998 interview with USA TODAY.

Multi-State Expansion: 1994--98

In 1994 Otten formed LBO Resort Enterprises Corp. as a holding company of his resorts. In that same year he acquired Attitash Bear Peak Resort, located in New Hampshire's Mount Washington Valley, and began to expand onto the neighboring property of Bear Peak by creating long, wide, cruising terrain; by increasing snowmaking power; and by installing new chairlifts, such as the Abenaki quad and the Flying Bear high-speed quad which became operative in 1995. The Attitash Adventure Center housed the Discovery Center for beginning skiers and riders, provided space for all children's programs, adaptive programs, and snowboarders. Consequently, Attitash was recognized as a family-oriented resort and benefited from its location in the heart of New Hampshire ski country and its proximity to the Mount Washington Valley tourist area. In 1997 the second Grand Summit Resort Hotel opened at Attitash Bear Peak.

In April 1995, Otten completed the purchase of Sugarbush Resort in Warren, Vermont, and began to revitalize the 38-year-old resort. Because of its abundant natural snowfall and challenging terrain, Sugarbush was considered the best natural skiing mountain in New England. By early 1996, Sugarbush had seven new lifts, 300 percent more snowmaking, a 63-million-gallon snowmaking pond, newly expanded and redesigned base facilities, and the connection of its two areas (North and South) with the longest and fastest high-speed quad in the world. Sugarbush remained one of the few New England ski resorts to have kept its original-trail layout mostly intact. One of the most challenging trails was that of Castlerock, where experienced skiers ran head-on into deep powder, gnarly bumps, elevator shaft-like steeps, and more twists and turns than they could count. By year-end 1995, LBO also owned the two New Hampshire ski resorts known as Waterville Valley and Mount Cranmore.

In 1996, when LBO wanted to purchase S-K-I Ltd., the Department of Justice ruled that the company--at that time already the largest ski-resort operator in the region--had to sell its New Hampshire resorts at Waterville Valley and Mount Cranmore in order to preserve competition in New England. LBO agreed to do so and paid $137 million for the following S-K-I-owned resorts: Killington and Mount Snow/Haystack in Vermont; Sugarloaf/USA in Maine, and Waterville Valley in New Hampshire. LBO changed its name to American Skiing Company (ASC). The company then introduced its Edge card program as the industry's first multi-resort, frequent-skier program, and the Magnificent 7 card, which allowed guests to obtain lift tickets at a reduced rate when they purchased a seven-day package for skiing or riding. Later, these cards could be linked to all major credit cards accepted by ASC.

By year-end 1998, Killington was the largest ski resort in the northeast and the fifth largest in the United States, with over one million skier visits in the 1997--98 season. Killington was well-known for its diverse seven-mountain terrain which included the steepest mogul trail in the East, "Outer Limits," as well as the East's longest trail, the ten-mile "Juggernaut" slope. Killington cleared and opened the first novice Snowshed Slope, and later developed the "Graduated Length Method" of learning to ski. Early on, the resort endorsed shaped skis and adopted the "Perfect Turn" Learn-to-Ski and Snowboard Programs. Of Killington's three halfpipes--the K-Pipe, the Peace Pipe, and the Pico Pipe--the most famous was the K-Pipe, frequently featured in major snowboard and lifestyle magazines, such as Eastern Edge and Transworld Snowboarding. The resort maintained the second largest snowboard coaching staff in this country.

Mount Snow/Haystack Resort, located in West Dover, Vermont, at the time of its purchase operated five separate mountain faces as well as nearby Haystack Mountain. After the 1992 opening of "Un Blanco Gulch," the East's first snowboard park, Mount Snow became a mecca for riders from around the country. Mount Snow raised the bar for the fastest-growing winter sport in North America: snowboarding. The resort featured the 460-foot long halfpipe (dubbed The Gut) served by its own surface lift, while "Belly Up" became a site of major professional halfpipe events throughout the winter. Mount Snow also served as headquarters of the ASC-owned "Original Golf School," which operated an 18-hole golf course and eight golf schools throughout the East Coast. At the close of the 1998 fiscal year, ASC had invested $15 million in capital improvements to the resort, including the installation of two high-speed chairlifts to make Mount Snow/Haystack the second largest ski resort in the Northeast.

Sugarloaf/USA (the Loaf), located in the heart of Carrabassett Valley in Maine's Western Mountains, was ranked as the number one overall ski resort in the East by the September 1997 Snow Country magazine. The mountain was famous for its Snowfields, beneath which lay terrain for skiers of all ability levels. Furthermore, each lift at the Loaf serviced a part of the mountain having its own special character and variety of terrain. For instance, the Timberline Quad, the only lift servicing "above tree-line" skiing and riding in the East, whisked skiers and riders up to the Snowfields at the summit of the mountain; the King Pine Quad brought skiers to the top of the King Pine Bowl where they could choose trails such as the Ripsaw Trail--maintained in its natural state--or the steep fall-line pitches of the Choker, Widowmaker, or Flume trails favored by the U.S. Ski Team as downhill training runs. Sugarloaf/USA operated a year-round conference center, a cross-country ski facility, and an 18-hole championship golf course (designed by Robert Trent Jones, Jr.) rated as one of the top 25 resort courses in the United States.

Expansion to the West: 1997--98

In July 1997, ASC made its first move westward with the purchase of Wolf Mountain Resort, an undeveloped ski resort located near Park City, Utah, in the heart of the Rocky Mountains. Otten, impressed by the area's seven canyons and 14 mountain peaks, perceived great potential for future operational and real estate development. Changing the resort's name to The Canyons, he dreamed of transforming it into one of the largest and most complete winter resorts in North America. Within less than two years ASC invested more than $30 million in improvements and expansion to make The Canyons the largest ski resort in Utah. Plans were made for construction of a Grand Summit Resort Hotel and Conference Center, and of The Sundial Lodge (a condominium hotel), both projects to be completed by 2002 in the heart of The Canyons Vacation Village--in time for the Olympic Winter Games in Salt Lake City. The Canyons continued to be a haven for snowboarders and to offer a free-season pass to all honor-roll students in Utah, thereby assuring the loyalty of future ski and snowboard enthusiasts. The Utah Winter Sports Park, located immediately adjacent to the resort, was scheduled to serve as the venue for the ski jumping, bobsled, and luge events in the 2002 Winter Olympic Games.

For the fiscal year ending July 27, 1997, ASC posted sales of $175.39 million and a net income loss of $5.48 million, compared to sales of $73.42 million and a net income loss of $2.34 million for fiscal 1996.

In November 1997, ASC acquired two additional ski resorts from Kamori International Limited: Steamboat Ski Resort in northwest Colorado (close to the Continental Divide) and Heavenly Ski Resort, which straddled the California/Nevada state line near Lake Tahoe. As a result of these purchases, the company's Edge Card became the industry's first debit, direct-to-lift, frequent skier, and value-added card. Both the Edge and the Magnificent 7 card were now valid at ASC resorts from Maine to California.

Steamboat Ski Resort, covering a complete mountain range rising 10,568 feet up into the Colorado Rockies, earned the title of "Ski Town USA" for Steamboat Springs and its small ranching community. In keeping with Steamboat's western heritage there were many reminders of the Old West. For example, trails known as The Quickdraw, Buckshot, and Tomahawk were in the saddle of High Noon, near the Rendezvous Saddle Food Court; a coffee shop on the first floor of the Silver Bullet Gondola Building served hot cappuccino; and there were chairlifts with the colorful names of Tenderfoot, Colt, Rough Rider, and Bar UE. Steamboat's trail network consisted of 140 trails serviced by 22 lifts. More than one million skiers visited Steamboat each year of the 1991--97 seasons. During the summer of 1998, Steamboat built the new Pony Express quad detachable chairlift in Pioneer Ridge. Although Steamboat averaged annual snowfalls of 330 inches, ASC extended a snowmaking system to the mountain's summit, thereby insuring quality snow from the top of the mountain to its base.

Heavenly Ski Resort, situated at Tahoe's highest elevation on the south shore of Lake Tahoe, made it possible for skiers and riders to glide between California and Nevada on a mountain descent more than five miles long and, at every turn, glimpse the waters of Lake Tahoe. The resort operated two base lodges in Nevada, one lodge in California, four on-mountain lodges, and a full-service Monument Peak Restaurant located at the top of the tram and open to non-skiers and sightseers. When one of the Sierras' notorious snowstorms--known to dump up to seven feet of snow in 24 hours--ruled out a day on the slopes, guests could saunter through the brand-name outlets and quaint boutiques of the area's shopping plazas, visit some of the casinos, and decide at which of Lake Tahoe's 150+ south-shore restaurants they would dine. ASC's summer 1998 capital program included $7.8 million in proposed improvements at Heavenly, including two quad high-speed chairlifts, known as "Gunbarrel Express" and "Stagecoach Express," and a fixed-grip three passenger chairlift known as the "Perfect Ride."

By November 6, 1997, the forsaken Sunday River Resort that Chairman, President, and CEO Leslie B. Otten bought in 1980 emerged as the flagship resort and home base of the American Skiing Company, the largest resort operator in North America. On that date ASC, with SKI as its ticker, began trading as a public company on the New York Stock Exchange at $18 a share.

Toward the 21st Century: 1998 and Beyond

Much of ASC's success had been generated from its commitment to the refinement and development of the snowmaking technology that, under the holding company's aegis, turned snowmaking into an art. "Snowmaking has been the single most important component in our success," said Otten in a 1998 interview for Smithsonian magazine. Indeed, by 1998 Sunday River operated New England's largest and most powerful snowmaking technology in a computer-driven system that turned on compressors and pumps capable of driving 65,000 cubic feet of air and 9,000 gallons of water per minute through 72 miles of steel pipe to produce snow. This system, developed in-house, was the world's largest high-pressured snowmaking system and was used exclusively at ASC's resorts.

The company's interval ownership product, the Grand Summit Resort Hotels, complemented the expansion of ASC's ski and snowboard operations. Otten shrewdly sold quartershare interval interest in these hotels, but ASC retained ownership of core hotel and commercial properties. Typically, the initial sale of quartershare units generated a high-profit margin; the company derived a continuing revenue stream from operating the hotel's retail, restaurant, and conference facilities as well as from renting quartershare interval interests when they were not in use by their owners. In prime locations within most of its resorts, ASC also developed Alpine Resort Villages designed to complement each resort's special characteristics.

During 1996--98, ASC quadrupled in size. For fiscal 1998, ASC's net revenue jumped to $340.42 million, and the company posted a $6.95 million income loss from operations, compared to fiscal 1997 revenue of $175.39 million and a loss from operations of $5.48 million. For two-and-one-half years, Otten laid out about $400 million to buy six additional ski resorts and "left American Skiing with $416 million in debt," according to Meyers in USA TODAY. Industry opinion was divided about whether or not Otten's decision was wise.

Otten did have some staunch supporters. USA Today's Meyers expressed the confidence Chad Gifford, chairman of BankBoston, had in Otten: "Les has bitten off a lot," said Gifford, "but he'll see it through and see it through successfully." Although in an analysis of ASC's financial condition, Mark Thompson wrote in MSN Money Central that "Moody's Investors Service raised a cautionary note" in its analysis of ASC's latest bond and did not expect the company to have the cash flow in 1999 to cover its fixed costs and capital expenses," Moody's added that the risks were "mitigated by a number of strengths." Owner of New England's six leading resorts and of three leading resorts in the West, ASC was, according to Moody's, "the most geographically diversified resort operator. The large number of presales of condominiums, which could be highly profitable by 2000, also bodes well for the future. And the company has surpassed its rivals in drawing skiers to the slopes, with an 8.5 percent increase last year, compared with a slight dip in skier visits to Vail."

Industry analyst Bill Meyers was of the same mind as Moody's: "If demographics are destiny," he wrote, "then American Skiing is in the right place at the right time. The company's mountains are a mecca for consumers age 40 to 59 and 10 to 24--two of the largest population segments in the USA." On the threshold of the 21st century, Meyers and others of like mind suggested that Otten had astutely positioned the American Skiing Company to glide into continuing prosperity.

Principal Subsidiaries: American Skiing Company Resort Properties, Inc,; ASC East, Inc.; ASC Leasing, Inc.; ASC Transportation; ASC West, Inc., ASC Utah, Inc.; Blunder Bay Development, Inc.; Killington, Ltd.; Killington West Ltd.; Mount Snow, Ltd.; Orlando Resort Corporation; Pico Ski Area Management Company; SKI Insurance Company; Steamboat Ski and Resort Corporation; Sugarloaf Mountain Corporation; Resorts Software Services, Inc.

American Skiing Company History

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