Ski resort on upward fiscal trend

Don't spend what you don't have. That's a concept that Whitefish Mountain Resort president Dan Graves speaks markedly about, and one he's been dead-set on instilling in a company that has buried itself in a load of debt over the past decade.

To date, that philosophy seems to be working out for the best. In the midst of the current recession, where one major Western ski resort collapsed and others are on the tipping point, WMR is making significant strides toward the black.

Using earnings before interest, taxes, depreciation and amortization as a measuring stick — net income, basically — 2010 marked the third consecutive year WMR has made positive gains in the checkbook. Graves is even more thrilled that over the past three years, the resort has cut its $8 million of debt in half.

"Doing the basics is what has improved our bottom line so much," Graves told the Pilot. "Really watching your dollar and expense spending. The other thing is, if you don't have it in your checkbook, you don't spend it. And while that may sound pretty simple, I think a lot of businesses today fail because they don't manage within their means. I'm a believer that you have to manage within your means."

That fiscally-cautious approach has helped put a once wavering business back on track.

"We're not looking for bailouts," Graves noted. "We have to bail out ourselves."

The bubble

Ski resort real estate is like a gold mining venture. The getting's good when slope-side condos and mountain-view lots are flying off the shelf. But what happens when that last nugget is picked — or the market dries up like a worm on hot pavement?

Cyclical debt happens. Money has to be borrowed to pay off the money that's already been borrowed. If a resort isn't making money on ticket sales and operations to begin with — such as Tamarack Resort — bankruptcy happens.

Graves became CEO in 2007 when WMR was mostly reliant on property sales to cash flow the company. Ticket sales and basic operations weren't enough to keep the lifts running, but real estate was moving and loans were easier to secure. Then, almost on cue with Graves' hiring, the national real-estate bubble popped like a balloon in a needle factory.

The last lot sold in the WMR's Northern Lights development near Elk Highlands was in December 2007. Graves focused on putting basic operations back into the driver's seat. The resort needed to be able to survive — and thrive — as a ski hill.

"I've had the benefit of being at other resorts when real estate was a big driver in 1990s and early 2000s," he said. "Real estate was such a key component within the ski industry that I think people forgot their way. At some point, you have to get back to your resort operations."

The company has to make sure their goods and services are delivered on a consistent basis, day in and day out, Graves noted.

"That's been our mantra for the last three years," he said. "Survey scores show that we're getting better. As a result, with real estate in the tank, the resort operations have been successful on its own."

When real estate does bounce back, the resort can use the revenue to pay off debt.

"Or put it in the bankbook, if the debt is paid off," Graves said, smiling.

And that's the goal, he said — get off of real-estate dependency to cash flow the business.

Skier volume

A big part of getting operations to stand on its own has been the resort's commitment to amping up skier traffic. Paid skier-visits by out-of-town visitors have gone from about 108,000 averaged over the past decade, to 116,000. Last year, the number reached 122,000, just below the 2008 record of 136,000 during a great powder season.

"If you're not growing, you're going backward," Graves said. "We can't stay flat."

The ski resort business is all volume, he explained. Running chairlifts costs the same whether there are four people on the mountain or 4,000.

"Everybody you can add, you leverage that cost structure," Graves said. "It's key that we grow the business. Does that mean we will get large like Breckenridge? I doubt it. I don't think any of us want to be greedy and say, 'Hey, we want a million skiers here.' But at the same time, we do need to continue to grow."

The goal is to climb up to 140,000 skier visits a year.

"I think if we can inch our way toward that, it will help us keep this place in the black," Graves said.

He credits much of the growth in skier traffic to the simple marketing decision to change the resort's name to Whitefish Mountain Resort — a no-brainer from a business perspective.

"Our success has been to get the word out to the region that Whitefish Mountain Resort is a great skiing mountain that also has great services and people to deliver them," Graves said. "I think that gets back to why we had to change our name. Let me be clear, we still ski on Big Mountain. But getting the Whitefish name out there has been incredibly important."

Summer time

"Resort operations, traditionally in the last eight years, have lost anywhere from $2 million to $3 million in the summer," Graves said. "So before you even get a flake of snowfall on the ground and your first customer in the door, you're already behind."

To counter that loss, the resort has committed to building up its summer offerings and giving some of the nearly two million annual visitors to Glacier National Park a reason to drive up Big Mountain Road for an afternoon.

The installation of zip lines and an alpine slide last season is already paying off. Those two attractions alone reduced the resort's summer losses by 22 percent, and the $700,000 investment could be paid off this month.

"Which is pretty astounding," Graves said. "Anytime you can pay back an investment in less than three years is great. The summer has changed tremendously. It's put us in a place where we don't lose near the money. If we can enter the winter $700,000 better than previously years, that's huge."

Graves said WMR is making progress in cutting its summer losses in half.

Improvements

Keeping up with the Joneses is a constant battle in an industry where bigger is always touted as better. But it's a temptation that Graves wants to shelve until cash flow dictates otherwise.

"I don't get caught up in other ski resorts that are expanding," Graves said. "Except for a few improvements, this is a great ski mountain. There're a couple of lift changes I'd like to see happen, but I'm willing to be patient."

Every season, almost without fail, Graves takes a lift ride with a fellow skier who suggests exotic improvements, like installing a quad lift from the Base Lodge to the summit.

"That's a $5.5 million lift," he said. "That will take 137,000 additional skier visits to pay off. It's not going to happen. We have to be smart so that when we invest it gets us to a desired outcome."

Improvements that are on the horizon include a new fixed-grip quad lift from the Base Lodge to above Russ' Street between Bad Rock and Middle Fork, which will help ease congestion on busy days. But even that decision was made cautiously.

"We bought a used lift and will upgrade it and paint it," Graves said. "A new high-speed would have cost $4.5 million."

The lift is being trucked here in July, and installation will happen next summer. Further out on the horizon, WMR would like to see Chair 5 moved to the East Rim area, and extend Chair 4 to the top of Inspiration.

The relocated Chair 5 would run from near the bottom of MoeMentum up and over the East Rim to near the bottom of Ant Hill. The project is estimated to cost about $700,000, far below the price tag of a new lift.

Ski-hill improvements aren't all that's come from WMR's upward financial trend. Graves says the community has felt the wake, too.

"I'm really proud to say that in the last two years of the economic downturn, we've been able to do things and maintain things that other businesses haven't been able to do," Graves said. "We've given raises every year, maintained our 401K contribution, and our employment base has stayed consistent."

As the resort opens a new fiscal year, Graves hopes to inch closer to being debt-free and looks to raise the bar on the resort's quality of product.

"We're always looking for improvement," he said. "I'm not one to sit on my laurels and say, 'Enough is enough, we're there.' There's always something to improve upon. At same time though, I'm really proud of where we've come."