When Vail Resorts spelled out its suspension of operations in mid-March, the shutdown was hoped to last only a week. Fifty days later, all 37 resorts remain shuttered and the company has borrowed more than a billion dollars to weather a possible extended recession.
Almost immediately, Vail Resorts postponed discretionary capital improvement projects including seven new chairlifts. Vail is just one of numerous operators of lifts facing epic challenges due to COVID-19. The impacts trickle down to suppliers, particularly global suppliers of large machinery like the Leitner Group and Doppelmayr. While the two major lift manufacturers are of similar size and structure, their customers are incredibly diverse, from mom and pop outfits to governments, NGOs and Fortune 100 companies.
As regular readers of this blog know, the lift business is not the same as the ski business. Leitner-Poma, Skytrac and Doppelmayr USA have all completed projects for non-ski venues recently such as theme parks, zoos, stadiums and cruise ports. Not only are these projects making up an increasing share of contracts, they tend to be large in scope and often include lucrative operation and maintenance deals. Some of these non-traditional customers are in even worse shape than the ski business, more dependent on high guest densities and air travel. Put another way, there is little chance the Walt Disney Company, Carnival Corporation or the Miami Dolphins would have signed to build their recent lift projects in today’s environment. So-called “point of interest” projects may disappear entirely for a few years.
One bright spot could be urban transport. The Portland Aerial Tram and Roosevelt Island Tramway have both remained operational throughout the pandemic, albeit at reduced capacity (the Portland Tram carries health care workers to three different hospitals and is about as essential as it gets.) Large aerial tramways have been ceding market share to monocable, 2S and 3S gondolas, a trend which will probably accelerate with new personal space concerns. With gondolas, each person or family can take their own cabin unlike on trains or buses. There are lots of great concepts for urban gondolas in North America and infrastructure spending programs could finally get one or two off the ground. Mexico already has a large urban gondola system in operation with two more under construction.
The ski industry is probably going to be as important as ever to the lift companies during the recovery. Social distancing may be a thing for years to come and outdoor recreation will play a big role. Next winter, chairlifts will be even better than gondolas, designed to spread people out at an even pace with a constant stream of fresh air. But economic uncertainty means the four biggest North American ski operators – Vail, Alterra, Boyne and Powdr – are installing a grand total of zero lifts this year.
Even without the big four, nearly 70 percent of announced 2020 projects are still on the books. In Colorado, Arapahoe Basin will replace two of its six chairlifts in one go, just as its neighbors postponed smaller projects as a percentage of revenue. Independent resorts such as Aspen Snowmass, Sun Peaks, and Sun Valley are also proceeding with multi-million dollar lift projects. An entrepreneur from Indiana announced $10 million worth of chairlifts for the rebirth of a closed West Virginia ski resort the same day the last North American resort shut down due to the pandemic in late March. One Idaho nonprofit running a place called the Little Ski Hill is going ahead with a modern lift to replace a 1970 T-Bar. If these guys can afford to press on in the midst of a pandemic, surely others can and will in 2021 and 2022.
As shown above, US lift construction fell between 25 and 35 percent in both of the last two recessions. Following the September 11th attacks and associated downturn, skier visits and lift construction bounced back to 2000 levels within just two years. The Great Recession was a different story. Skier visits still recovered quickly but the stock market took four years to come back. The unemployment rate took seven years to reach pre-2008 levels. It was lift construction that took the longest to recover – a whopping nine years to regain the lost 35 percent.
Which type of recovery will follow Coronavirus? No one knows but I have a few thoughts. The aging lift problem isn’t going away. 650 operating ropeways in North America were built prior to 1980, many by manufacturers no longer in business. Another 540 date from 1980 to 1990 including many first generation detachable quads. Just as governments look to focus on infrastructure, ski resorts which can afford to should too. Even if a new lift isn’t in the cards, there are lots of productive upgrades such as new control systems which can make older lifts more reliable. Vail says it will proceed with the vast majority of its maintenance capital in 2020.
Another good thing for the lift suppliers: some customers already made significant payments on postponed 2020 lifts. Boyne confirmed its big ticket projects will go next year while Alterra and Vail haven’t explicitly said. It’s possible next year becomes a double whammy of postponed projects plus new ones. By 2022, things could be back to normal with expansions like Sugarloaf’s West Mountain, Squaw’s California Express and Tremblant’s Timber safer to undertake.
Skiers and snowboarders are a passionate bunch and if history is any indication, most of them will be back on the slopes as soon as health and personal finance allow. If the lift companies can weather a down year or two, construction contracts should follow the skiers.