Climate change, corporate investment part of new era of ski business at Tahoe
Special to the Sierra Sun
Lake Tahoe Ski Area timeline
2002: Vail Resorts purchases Heavenly Mountain Resort. The mountain recreation corporation announced major upgrades, including construction of the Gondola and high-speed detachable lifts.
2006: JMA Ventures, a Bay Area development company, buys Homewood Ski Resort. JMA is poised to pour as much as $500 million into a redevelopment project, but a lawsuit is delaying its ability to secure financing.
2010: Vail Resorts secures a triple-net lease to operate Northstar-at-Tahoe (renamed to Northstar California). Northstar had been owned by Booth Creek. Vail announced plans to pour $30 million into upgrades, including to chairlift infrastructure.
2010: KSL Capital Partners, a private equity firm headquartered in Colorado, purchases Squaw Valley. KSL was co-founded by Michael Shannon in 1992. Shannon is former president of Vail Resorts. The group appoints Andy Wirth as CEO of Squaw Valley and announces $50 million in capital investments.
2011: Squaw Valley Ski Holdings is formed after KSL announces Squaw Valley will merge with Alpine Meadows. The combination means roughly 6,000 acres of skiable terrain are under the same ownership umbrella, making it the largest ski resort in the United States.
2011: Squaw announces 101.5-acre redevelopment plan for its village and surrounding area.
2012: Vail Resorts purchases Kirkwood Mountain Resort. Unlike Heavenly and Northstar, the company did not announce plans for a significant upgrade.
2013: Sugar Bowl announces it would invest about $20 million in a new ski lift opening new terrain and other projects.
2013: Squaw Valley announces scaled-back village expansion to 94 overall acres, dropping bedrooms from 2,184 to 1,493, and lodging units from 1,093 to 750.
2015: Squaw Valley purchases private land known as “White Wolf,” located between Squaw and Alpine Meadows, and announces plan to create gondola to aerially connect the two mountains. The proposal is expected later in 2015.
California had the warmest winter on record in 2014-15, according to the National Oceanic and Atmospheric Administration.
The average daily temperature exceeded the previous record by 1.5 degrees Farenheit. That record dates all back to last year, 2013-14.
“To have two record warm winters back to back is unprecedented,” said Jake Crouch, a NOAA climate scientist who works at the agency’s National Climatic Data Center.
Crouch also said the 1.5-degree increase represents more of a jump than an incremental spike.
“It is quite a large jump,” he said. “The 2013-14 winter was more than a full degree warmer than the previous and then this last winter was another 1.5 degrees warmer.
“It’s like two giant leaps forward.”
It was the fourth driest winter on record for the Golden State. It was also the first time in the history of records dating back to the 20th century that San Francisco didn’t receive precipitation in January.
“You have two separate phenomena causing this,” Crouch said.
First, there are very warm sea surface temperatures just off the coast of California, Crouch said, and the rising in temperature causes a high-pressure system to establish above Northern California, which deflects storm systems to the north and south.
Second, the lack of water in the ground means the sun’s energy is less taken up with the evaporation process, he said, and instead heats the ground.
Crouch said the phenomena intersect and compound the drought problem.
“It’s like a feedback loop almost,” he said. “The drought causes it to be hotter, and then when it gets hotter, it causes more drought.”
When Gov. Jerry Brown visited Echo Summit near Lake Tahoe’s South Shore this year to take the annual snowpack measurement there was no snow on the ground.
The unprecedented event is the lowest recorded snowpack ever, beating the 1977 measurement when the snowpack was 25 percent of average.
The drought hasn’t been restricted to California, as officials in Oregon, Washington and the northern Rockies have expressed consternation over varying degrees of water problems as the dry and warm winter afflicted most parts of the American West.
LAKE TAHOE, Calif. — When Andy Wirth became the CEO of Squaw Valley Ski Resort in November 2010, he did so amid a precipitation-laden winter that saw enormous snow loads give skiers at Lake Tahoe plenty of coveted powder days.
“That July 4 (2011), Squaw Valley had five chairlifts open,” Wirth said.
Fast forward about half a year, and on Dec. 28, 2011, during a crucial holiday weekend for ski business revenue, the site of the 1960 Olympics had a paltry two chairlifts spinning.
The anecdote extends to the entire Lake Tahoe ski industry as two vectors have collided in the past four years.
The first is that well-heeled corporations like Vail Resorts and KSL Capital Partners have invested considerable amounts of capital into purchasing and upgrading some of the region’s most iconic ski resorts.
The second is that a prolonged four-year drought — which some weather experts have characterized as the most severe in a millennium — has rendered getting a solid return on investment in the near term difficult.
“Sure our business has been adversely impacted this year,” Wirth said.
But he and other industry leaders point to a diversification in product offerings that has allowed resorts that have traditionally relied on skier counts to determine their revenue to weather a lack of snow.
“If you looked at our capital structure and results, people would be surprised, if not shocked, to see how we’ve been able to withstand the lack of snow,” Wirth said.
SKIING IN SUMMER?
When Wirth and KSL formed Squaw Valley Ski Holdings after Squaw Valley merged with Alpine Meadows in 2011, the company pledged to invest $50 million in various upgrades.
Part of those investments were allocated to snowmaking infrastructure, which has meant the resort is able to blow more snow than previously and not rely as heavily on the benevolence of mother nature.
Secondly, Squaw and other resorts strive to make their resorts into year-round destinations that offer a more diverse and robust portfolio of recreational opportunities.
On the South Shore, Heavenly Mountain Resort, the first property to be purchased by Vail in 2002 (Vail has since acquired Kirkwood Mountain Resort and Northstar California), has expanded its offerings beyond skiing by introducing the Epic Discovery Summer Mountain Adventure package.
The mix, which is also available at Colorado Vail-owned resorts Vail and Breckingridge, offer a ropes course, mountain biking trails, hiking and informative tours
“Our overarching goal has been to utilize the existing infrastructure to allow guests the opportunity to engage more in the National Forest when they are up here,” said Sally Gunter, spokesperson for Heavenly. “Expanding our summer activities has been in the works for a long time.”
Resorts like Heavenly, which operate through a permit managed by the U.S. Forest Service, were able to expand offerings mainly due to a piece of legislation called the Ski Area Recreational Opportunity Enhancement Act of 2011.
For the first time, the act allowed mountain resorts on National Forest land to introduce activities such as zip lines, mountain bike terrain parks, disc golf courses, ropes courses and interpretive hikes.
‘A CHANGING BUSINESS MODEL’
At Tahoe-Truckee, where the summer season attracts as many, if not more, tourists as the winter season, the legislation was key to spur investment in summer actives and unwittingly helped resorts diversify heading into an era of snow-scarce winters.
Bob Roberts, executive director of the California Ski Industry Association, held up the example of Woodward Tahoe, a year-round camp at Boreal Mountain Resort that offers visitors training on trampolines for various aerial pursuits from snowboarding to cheerleading, as an example of how resorts can diversify beyond just downhill winter sports.
“You are seeing a changing business model,” Roberts said. “Now, it’s all around mountain recreation, of which winter skiing is just a part.”
Even for businesses still concerned predominantly with skiing, there are innovative products that help enterprises cope with Mother Nature.
For example, Wirth said creativity with season pass packages allows resorts to be more nimble in reaction to the fluctuations in winter precipitation.
The Mountain Collective Pass allows passholders to choose among various North American resorts, including Squaw, Jackson Hole, Snowbird, Mammoth, Whistler, Aspen and Lake Louise.
“It gives people an ability to choose,” Wirth said. “It also allows resorts to the ability to withstand some of these challenges.”
Roberts said the prospect of climate change, a warming planet and unprecedented swings in weather patterns present significant challenges, but the industry as a whole is well positioned to adapt.
“Change is endemic to us,” he said. “When we first started out, skiing was exclusively a sport. Then it became a family recreational activity and then snowboard brought a whole new dimension to it. The Millenials represent a whole different group of folks.
“Finally, you have climate change and that presents a real challenge moving forward.”
ABOUT CLIMATE CHANGE
The scientific community is officially ambivalent about the relationship between California’s drought and climate change.
While some argue the protracted dry weather is worsened by the rising temperatures and alterations in atmospheric conditions that diminish rainfall, other experts note that drought is a feature of California weather and has been so for thousands of years.
While scientists and policy makers are noncommittal, the ski industry is sure.
“We recognize that climate change is real and based on good science,” said Art Chapman, founder of JMA Ventures, which owns Homewood Mountain Resort on Lake Tahoe’s West Shore. “I think the weather patterns of the past four years are attributable to climate change.”
Chapman, much like his other contemporaries managing resorts at Lake Tahoe, points to the fact the lake is as much of a summer destination to mitigate concerns over the impacts of climate change on the business, but he and others are also advocating for policy measures aimed at curtailing carbon emissions.
“When California introduced Assembly Bill 32, the California Carbon Sequestration Bill, we were the first business group to offer our support,” said Roberts. “Largely, this is an issue we understand.”
‘A SERIOUS TOPIC’
While CSIA has been urging lawmakers to create policy capable of curtailing the appetite for fossil fuels for more than 15 years, the recent spate of cloudless skies and a disappearing winter is unprecedented.
“I’ve been skiing for 40 years,” said Roberts. “I ran Mt. Shasta in the ‘70s, and we would receive 50 feet of snow. But this is the first time in my memory that we’ve had four dry winters like this in a row.”
The prognosticators of doom say get ready for more, but Wirth said dry winters and prolonged drought are not the natural corollary of climate change. Rather, it’s increased volatility in weather patterns.
“The body of work is so immense and climate scientists have collected so many data points that I don’t see there’s anything that offers a logical person a reason to disbelieve in climate science,” he said. “You have to be careful though — when the Donald Trumps of the world tell you to look outside the window to see how climate change is progressing, that is a ludicrous approach to a serious topic.”
What many scientists assert about climate change is that there will be violent swings. In California, it will likely manifest itself through periods of drought followed by periods of heavy precipitation, Wirth said.
The challenge will be how to appropriately manage it.
Matthew Renda is a former reporter for the Sierra Sun and North Lake Tahoe Bonanza and currently is a Santa Cruz-based writer. He may be reached for comment at firstname.lastname@example.org.