ARTICLES Intrawest finally gets a reputation Financial Post / Nov 2000 John Schreiner DAN JARVIS OF INTRAWEST: "We want to be the maestro, the creator." VANCOUVER - After a decade of growth by acquisition, resort operator Intrawest Corp. is switching strategies. The new focus will be finding ways to get as much cash as possible from the resorts it owns. Dan Jarvis, the company's executive vice-president and chief financial officer, makes the point by comparing the performance of two of Intrawest's leading ski hills. The company's premier resort, Whistler/Blackcomb north of Vancouver, had 2.2 million skier visits last year, while Mammoth Mountain in central California, 58% owned by Intrawest and once a bigger resort than Whistler, had 929,000 visits. The difference? Whistler Village, with shops, restaurants and what Mr. Jarvis calls "really great nightlife," attracts big-spending destination skiers who stay several days. Mammoth, though it draws on Los Angeles for skiers, doesn't have a village yet (construction starts next spring). Nor are there well-developed villages at the other eight mountain resorts controlled by Intrawest. That is why the company's acquisition strategy now is being replaced by a build-out strategy. The villages, Mr. Jarvis said, are "the engines that drive the train. With the villages, you build a more diversified income stream throughout the season." The strategy of the past decade propelled the company to revenues of US$815.3-million in the year ended June 30, 2000, from $118.9-million in the 12 months ended Sept. 30, 1990. Intrawest now is North America's largest owner of village-centred resorts and has a small but significant foothold in Europe with a 16.5% interest in Compagnie des Alpes and a recently announced village project in the French Alps. "We are now coming out of a period of heavy capital spending and into one of heavy cash generation," Joseph Houssian, Intrawest chief executive, wrote in the company's annual report. "This is a dynamic shift for the company and one that opens up future downstream possibilities as our business rapidly strengthens." Intrawest was a small regional real estate developer in 1986 when it acquired Blackcomb Mountain at Whistler. After five years learning the resort business, it bought Tremblant near Montreal, launching a string of resort acquisitions and shedding non-resort real estate to focus entirely on its new interests. Today, in addition to its 10 ski resorts, Intrawest owns a golf and beach resort in Florida and 45% of a helicopter skiing company in British Columbia, and has projects to build villages in five resorts it does not own. One of these is on a private lake near Las Vegas. Mr. Jarvis believes that Intrawest's track record now enables it to develop and manage projects owned by other investors. The template, he says, is Four Seasons Hotels Inc. "The world is coming to their door," he said. The same thing has begun to happen at Intrawest with, for example, a ski resort in Spain recently having approached the Vancouver company with a partnership feeler. "We want to be the maestro, the creator, but only put in a limited amount of our own investment," Mr. Jarvis said. "That's where we are headed. We couldn't have done that five years ago because we didn't have the reputation." The village strategy is providing Intrawest with two basic sources of cash: one from the buyers of housing units, including time-share, and a second from what the village residents spend in the resorts where they own property. In the year ended June 30, the company sold 1,300 housing units (two-thirds in U.S. locations) for US$341.5-million. By the end of August, the company, which does not build units without hefty downpayments in hand, had pre-sold almost 1,200 units for US$390-million. The units include a mix of condominium hotels, townhouses and single-family residences. "Having this place in the country has become a very big deal to this Boomer generation," Mr. Jarvis said. The housing developments provide resorts with a base of permanent residents and "destination" visitors, as Intrawest calls those who book multiple-day stays at resorts. At Whistler/Blackcomb, where housing is extensive, 80% of the guests are destination visitors, rather than day skiers. The destination visitors spend considerably more money on all of the other services that Intrawest sells. "You are much more likely to sign up for the ski school if you are at a resort for three or four days," Mr. Jarvis said. Intrawest generated US$26-million last year from its ski schools alone, along with US$73-million from its retail and rental shops and US$60-million from the food and beverage services it operates. Within the past year, Intrawest has begun tying its resort network together with powerful sales tools. These include dedicated sales people based in Chicago, Los Angeles and Toronto as well as Internet sites for the resorts that enable clients to book complete vacations. These sites also allow Intrawest to capture "rich profiles" of its customers which can be turned into major marketing tools for all of its resorts. "We have this great network of resorts and customers," Mr. Jarvis said. "Now we have to take advantage of it."