ON TOPIC: I know this is painful, and I'm not trying to second guess anyone or complain about anything, but predicating this years' budget on last years near record breaking snow year seems like a budget doomed to fail. I'm painfully aware that business interest could've been the compulsion for using such lofty benchmarks, but if you ever show me a graph of an investment that grows that way, I'll show you what it looks like right before the bubble bursts.
Which reminds me of the root cause of this situation. When did Starwood buy Mammoth from Dave McCoy? Right at the top of the real estate bubble. And they based revenue projections then on the 2004-05 and 2005-06 seasons, both of which were huge and 2004-05 had full coverage of the mountain in late October. So learning that this year's projection was based on last year has a deja vu ring to me.
Of course Starwood's top-of-the-market purchase was financed with debt. In the
http://www.sierrawave.net/10665/mmsa-ceo-responds/ link, Rusty notes that there was $35 million a year in debt service. Fortunately Rusty was proactive and got that refinanced during one of the good years or else this debacle would have happened sooner or been much more severe.
I dunno ... TonyC can chime in here, because I'm sure there is a relatively simple way to come up with a mean and variance for the expected value of MMSA's profits year to year. But I don't think it's directly correlated to how much snow they get
I'm sure it's quite correlated to how much snow they get. A few years ago there was a hot debate about Taos skier visits declining because of the snowboard ban. The 10-12 years of skier visit data posted correlated 73% with Taos snowfall. I suspect a correlation to November + December snow might work even better, as we all know that Christmas is a big revenue producer plus the psychology of casual skiers writing off the whole season when there is bad publicity at the start, an issue Rusty has mentioned repeatedly this winter.
The "too much snow" for Mammoth issue is mainly about incidence. The classic comparison for Mammoth was 1981-82 vs. 1982-83. The latter season had more snow but fewer skier visits. The reason was that it snowed every weekend from Jan. 15 to May 15 in 1983, while 1981-82 got most of its snow in 3 massive storm cycles and most of the weekends had nice weather. But both of those were fine seasons with full operation by Thanksgiving and closings in July.
With regard to means and variances we have that info for snowfall and perhaps someone can provide that for skier visits. I believe skier visits at a weekend drive up resort like Mammoth (SoCal is still 90% of Mammoth's clientele) will be
more sensitive to snowfall numbers than at destination resorts where people have shelled out for airfare and lodging 6 months ahead and are reluctant to pay cancellation penalties. I was telling destination visitors on other Forums to pull the plug on scheduled trips to the Sierra or Front Range Colorado in January or go instead to Canada which had plenty of snow. Only one person (with whom I had skied personally here at Mammoth on spring break 2006) heeded that advice.
Sierra snowfall is historically volatile. We had a run of several crappy seasons in the late 1980's and early 1990's. Dave McCoy had taken on debt to buy and upgrade June Mt. in 1986, precisely before that run of bad seasons. 1991 was the straw that broke the camel's back and resulted in the Black Monday layoffs. So I'm not that sympathetic to Mammoth's current financial position being that vulnerable to ONE bad snow year. It was entirely predictable that this would happen sometime, and while Rusty did get that debt service reduced, there are some businesses that are inherently volatile and should not be highly leveraged.
smiley in effort to lighten the mood a bit.
