American Skiing Company: Debt and Promises

Editorials / Apr. 5, 2001 12:00am EDT

American Skiing Company: Debt and Promises

Les Otten, who resigned last week as head of American Skiing Co., brought a burst of energy, charm, and ambition to New England skiing during the last decade. He also brought, however, a penchant for giantism and debt acquisition, and a fecklessness that, in the end, poorly served the Vermont ski industry. His exit has left three of the state’s biggest ski areas struggling for financial survival.

Market investors noticed the defects in American Skiing Co. years ago, even as it became the largest ski company in America. Its stock dropped from $18 a share to $1.50, as analysts realized that for all the optimistic talk, this was a company in trouble and no easy way out.

It’s easy to blame the last two winters for the poor financial performance, but ski areas endure poor snow seasons all the time. Killington, in fact, had previously made poor weather a virtue, as its superior snowmaking assured it of customers even when other resorts struggled. American Skiing’s problems have much more to do with enormous debt and over-building. In other words, Otten’s fabled optimism was part of the problem, not the solution.

Twice he led smaller companies in gobbling up larger ones. Otten’s first resort—which made his reputation—was Sunday River in Maine, which purchased the larger Sugarbush in 1995. And the fledgling American Skiing Co. was much smaller than Ski, Ltd., (Killington), the behemoth of the East, when ASC purchased Ski, Ltd. the following year. ASC’s empire eventually expanded to nine ski areas in seven states.

Otten and his admirers justified this expansionism by explaining that only a consolidated industry could step up the national promotion needed for skiing to compete against Caribbean cruises, Disney World, and other vacation alternatives. Always, the benefits of the mergers were said to be on the way; but they never came. Instead, ASC never had a profitable year. Cash disappeared down a black hole, despite an infusion of $150 million in 1999 by a Boston firm, in return for 47% ownership in the company.

The markets saw through the happy talk quickly, but the reality is now becoming clear to all. It’s not a pretty sight. Killington is Vermont’s biggest resort, a key to the financial health of the struggling Rutland region. Sugarbush and Mt. Snow are two more of Vermont’s best ski areas. All must be considered in trouble. The best Vermonters can hope for is that these areas can find an operating structure, perhaps together, perhaps separately, with a reasonable debt load and prudent management, as far away as possible from the rest of the un-jolly giant that American Skiing Co. created out of debt and promises.

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