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THE VIABILITY OF A PRIVATE FOUR-SEASON RESORT IN NORTHERN NEW ENGLAND by William D. Adams B.A., Political Science, 1987 Lehigh University & Shawn M. Hurley B.A., Architecture, 1994 Washington University Submitted to the Department of Urban Studies and Planning in partial fulfillment of the requirements for the Degree of Master of Science in Real Estate Development at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY September 1999 © 1999 William D. Adams and Shawn M. Hurley. All rights reserved. The authors hereby grant to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part. Signature of Author: D rtmentof n uanng Signature of Author: "epartrneni%6f Urb aO ies n ing J , 1999 Certified by: Blake Eagle Chairman, Center for Real Estate Thesis Advisor Accepted by: William C. Wheaton FMASSACHUSETTS INSTITU Chairman, Interdepartmental Degree Program in Real Estate Development OF TECHINOLOGY OCT 2 5 1999 LIBRARI=.Q THE VIABILITY OF A PRIVATE FOUR-SEASON RESORT IN NORTHERN NEW ENGLAND by William D. Adams & Shawn M. Hurley Submitted to the Department of Urban Studies and Planning on July 30, 1999 in partial fulfillment of the requirements for the degree of Master of Science in Real Estate Development. at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY ABSTRACT The avid New England skier is having increasing difficulty enjoying their sport. In the age of consolidation and rising costs, the New England ski industry is becoming overcrowded and less fun for the consumer. The ski industry throughout the country and particularly in New England has realized little growth over the past ten years. As a consequence small, marginal mountains have been forced to shut down with expectations of further closures in the near future. As a result, the major ski areas have expanded to accommodate as many skiers as possible, forcing thousands of New England skiers traveling north every weekend to the same overcrowded locations. Ticket lines, lift lines and cafeteria lines have grown to such uncontrollable lengths that it is unreasonable to expect more than a handful of full mountain runs on a holiday weekend at New England's larger resort areas. This thesis will study the potential for a private four-season resort in Northern New England featuring alpine skiing. This model will also incorporate other amenities such as cross-country skiing, a championship golf course, a full spa, fishing, hiking and biking trails, swimming, and tennis. High-quality second homes on the development site would also be an integral element to the club. The study will include trends in today's resorts and country clubs and will detail the cost of the development and operating expenses of this type of project. Finally, the report will present a case study of a location that may fit the needs of this club and discuss the aspects of the development at this site. Thesis Advisor: Blake Eagle Title: Chairman, Center for Real Estate TABLE OF CONTENTS CHAPTER ONE - INTRODUCTION ---------------------------------------------------- 6 1.1 The Private Club ----------------------------------------------------------------- 7 1.2 The Target Skier--------------------------------------------------------------- 8 1.3 The Yellowstone Club ---------------------------------------------------------- 15 CHAPTER TWO - TRENDS IN THE RESORT INDUSTRY ---------------------------------- 17 2.1 Trends--------------------------------------------------------------------- 17 2.2 Amenities ------------------------------------------------------------------ 19 2.3 Criteria:Lifestyle & Ski Area Density----------------------------------------------21 CHAPTER THREE - DEVELOPMENT COSTS ------------------------------------------- 24 3.1 Ski Area------------------------------------------------------------------- 24 3.3 Golf Course-----------------------------------------------------------------28 3.4 Spa and Fitness Center---------------------------------------------------------30 3.5 CapitalImprovement Costs and the Membership Initiation Fee----------------------------31 CHAPTER FOUR - OPERATING EXPENSES -------------------------------------------- 33 4.1 Ski Area ------------------------------------------------------------------- 33 4.2 The Golf Course ------------------------------------------------------------- 36 4.3 Spa and other Club facilities ----------------------------------------------------- 38 4.4 OperatingExpenses and the Membership Annual Dues--------------------------------- 39 CHAPTER FIVE - PRIVATE FOUR-SEASON RESORT MODEL ----------------------------- 41 5.1 Membership--------------------------------------------------------------41 5.2 Development Costs and OperatingExpenses ----------------------------------------- 42 5.3 Amenities ------------------------------------------------------------------ 43 5.4 Management and Operations of the Club--------------------------------------------44 5.5 Membership Costs------------------------------------------------------------46 CHAPTER SIX - CONCLUSION ------------------------------------------------------- 49 6.1 Location and GeographicLayout ------------------------------------------------- 50 6.2 Case Study ------------------------------------------------------------------ 52 6.3 FurtherResearch-------------------------------------------------------------56 6.4 Conclusion ----------------------------------------------------------------- 58 APPENDIX ----------------------------------------------------------------------- 59 Appendix A --------------------------------------------------------------------------------------------------------------------- 59 Appendix B ------------------------------------------------------------------------------------------------------------------- 62 Appendix C ------------------------------------------------------------------------------------------------------------------- 63 BIBLIOGRAPHY----------------------------------------------------------------------------------------------------------------64 TABLE OF EXHIBITS Exhibit I - 1: 1990 Population Report ----------------------------------------------------- 9 Exhibit I - 2: Potential Target Market --------------------------------------------------- 10 Exhibit I - 3: Estimated U.S. Ski Industry Skier/Snowboarder Visits (MM) By Regions, 1979 - 1999 (Extrapolated Data)-------------------------------------------------------------12 Exhibit I - 4: Ski Areas per State-------------------------------------------------------14 Exhibit II - 1: Ski Area Characteristics -------------------------------------------------- 22 Exhibit III - 1: Ski Area Development Costs ----------------------------------------------- 25 Exhibit III - 2: Average Golf Course Development Costs -------------------------------------- 28 Exhibit III - 3: Total Development Costs-------------------------------------------------32 Exhibit IV - 1: Ski Area Characteristics (1997/98) ------------------------------------------ 34 Exhibit IV - 2: Ski Area Expenditures --------------------------------------------------- 35 Exhibit IV - 3: Golf Course Operating Expenses--------------------------------------------37 Exhibit IV - 4: Estimated Operating Expenses and Annual Dues -------------------------------- 39 Exhibit VI - 1: Total Capital Costs------------------------------------------------------54 CHAPTER ONE - INTRODUCTION The New England ski industry is associated with cold, icy weather, high costs, and extremely overcrowded mountains. Despite the difficult conditions, millions of people visit the Northeast ski areas each winter and hit the slopes. While other sport enthusiasts benefit from the comforts of private clubs and exclusive resorts, avid wealthy skiers have little means available to increase their enjoyment of the sport. Private clubs feature golf, tennis and racquet sports, yachting, sailing and other sport and social activities. This thesis will analyze the potential and viability of creating a private four-season resort featuring alpine skiing. Assuming that the demand exists for a private four-season resort in Northern New England, the first stage of this study is to explore the criteria and amenities most likely required for such a resort to succeed. The second stage will examine the financial aspects of the development and annual operations of a hypothetical resort and will incorporate this information into a model to establish a functional paradigm. The third and final phase of this paper will be to provide a case study of an existing location where this model may be developed. Many people have questioned the viability of the private resort concept. A continual cry from critics is that skiing is a zero growth industry and that the operating costs for a New England ski area are too great for a private club to support with annual dues. Accordingly, the number of skier visits to New England Ski Areas over the last decade has remained relatively flat. The projected 1998-1999 season northeast skier visits declined approximately 1.9% from the previous season.' Thus, the question becomes how can a private ski resort work in an industry that has limited growth prospects? The answer is simple; the four-season country club concept does not require growth to be viable and sustainable. The concept merely requires enough wealthy ski enthusiasts who would pay for the privilege to ski in privacy with out massive crowds diluting their space. 1.1 The Private Club The private club concept offers wealthy people the opportunity to enjoy many sports in