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July 27, 2007

Brian Head Condo Projects and the Interconnect

I keep waiting for the stange voice that says "If you build it, they will come" to be listed as the motivating factor in Brian Head's expansion. But who will come? The new Lofts at Brian Head, the Black Diamond at Brian Head, the White Bear Condos, and Sojorn at Brian Head are already building. The lofts is almost a year behind schedule on phase one. The story gets worse for phase two. Do the new improvements enhance the resort enough to generate additional interest in owning condos at Brian Head? Maybe some. I don't see buyers tripping over themselves to rush to Brian Head. Vegas, LA, and Phoenix as well as the new housing market are just dead right now. Because of the housing market slump, many of the condo projects will not begin their phase two's of their projects and some may struggle to sell their phase one's. At least until the housing slump reverses. Current owners of smaller, cheaper condos will still have a market, but that is decidedly slower than it has been.

Does the resort gain some additional daytrip visits from Vegas? Probably. It really helps that market. It may help the rental market. But Demographic growth in Riverside, CA, Clark County, NV, and Maricopa County, AZ, will do that anyway. Does it allow the resort to charge $55 or $60 for a lift ticket? Yep. Expect that for certain.

Long lines have never been an issue. There is plenty of uphill capacity so in that sense the new lifts aren't needed for uphill. Does an interconnect improve things that much? I don't think so. Navajo is a kids and beginner's mountain anyway. It has longer lift lines but that is because it really only has one lift. Maybe this improves that piece, but for me who skis off of Dunes, Roulette, and the top of Giant Steps, this is just a mid-mountain lift and has no impact. And to enthusiasts who actually enjoy skiing and are not casual occasional skiers, they won't notice it either. The lack of vertical and lack of advanced terrain hurts because the major ski publications have no interest in a family resort with 1400 feet of lift served vertical, under 1000 acres, and no real challenging runs.

In 2005-06, the last year stats were available, I have a table of skier visits for Brian Head and the rest of Utah. Brian Head had 135k skier visits. The best year in the last decade was 2001-02 with 212k visits. A 155k visit year is a good year. A very good year as in would be the best year in the last decade that didn't involve the Olympics being held in Utah. And we might see that this year. There is some serious buzz and that would be a 15-20% improvement over last season. Heck, we could see it spike to say 170k visits. That would be monumental.

Net is that local businesses will see some tangible benefit because a bunch more daytrippers will come up and there will probably be a spike in condo renters. Condo owners and new condo projects will still see a slow market and have a tough time moving their places because of a nationwide housing slump. It allows higher lift ticket prices (and it better yield either more skier visits or more revenue from existing ones in order to pay for an $8M expansion). But I still don't see how this benefits the resort enough to repay their $8M off of new business. Maybe, MAYBE, it increases the value of the resort's real estate holdings (1700 acres) but that increase is only realized as they sell the holdings and there have to be buyers. And future condo complexes or homes are not going to immediately flock to Brian Head and start a bidding war over the resort's land.

So what is the real business motivation to make an $8M improvement to a resort that gets 140k visits per year and has had stagnant growth despite the fact that Utah as a whole is growing as a ski destination? How do you get return on investment? I think the real question is does it finally allow the current owner of the resort to sell Brian Head to a ski corporation (ala Intrawest or someone of that nature)? That has to be what they are banking on. There is no other explanation. Either that or the resort manager needs shot for convincing the owners to invest $8M.

Posted by Justin at July 27, 2007 08:20 PM