On February 2, 2016

Okemo at 60: The ups and downs of success, part II

By Karen D. Lorentz

Editor’s Note: In honor of Okemo’s upcoming 60th anniversary, this is part II of a series on the area’s growth to one of the nation’s top 15 ski resorts. On Saturday, Jan. 30, at 1 pm at the Clock Tower Base area, the resort will celebrate with the Muellers at a birthday cake cutting . Okemo will also be hosting the NASTAR Eastern Championships Jan. 30 and 31 with race clinics on the 29th with NASTAR Pacesetter and Olympian A.J. Kitt.

With its late-ski season debut on February 1, 1956 (due to early season warm weather and rain) and then abundant snowfall the rest of the winter, Okemo garnered about 3,000 skier visits and held its first Easter parade before closing on April 21, after 67 days of operations. With only a small operating loss, plans were made to add an additional trail and slope for the next season.

The second season saw almost 12,000 skiers in a 91-day operating season. Improvements included the new Chief trail, wider “open novice” slopes on the lower mountain and a racing program.

Okemo doubled the size of its base lodge for its third year, which proved a profitable one with 25,300 visits in a 114-day season.

With a third lift installed in 1958 and a new ski school slope, the area was on a roll with over 30,000 visits, and profits shot up as well, causing the directors to declare a 2-percent cash dividend in 1959.

The successful season put Okemo “within the top six major ski areas” in Vermont in terms of gross business and number of skiers using the area, according to the annual report. An ambitious five-year plan was developed to take the area into the booming Sixties, and, as they say, Okemo was on a roll as it continued to grow in size and popularity.

Okemo courts vacation-home owners, novice skiers

The 1960 decision to sell house lots on the mountain’s own land for vacation homes was part of a vision to create a year-round family resort, and it made Okemo one of the first ski areas in the U.S. to promote trailside homes. The first five homes were built in 1961 and development and sale of more “Alpine Villages” followed throughout the 1960s. Additionally, private interests built the Okemo Mountain Lodge, the first motel-styled ski lodge, near the lifts in 1964.

Another pioneering move was the adoption of the Natur Teknik teaching method by the ski school in 1963. It was a highly controversial way to teach parallel skiing from the start on the long skis of the day, but it had some great results at Okemo.

Okemo also added 12 acres of snowmaking in 1964, making it among the first to embrace the new technology. The area even had the first “ski school marm” in the state in ski school director Sybil Leary in 1964, foreshadowing the many female managers who would be employed in years to come.

Okemo was also at the forefront of ski industry efforts to go to year-round status with its first attempt at summer season activities and events, offered in 1969. Okemo hosted NASTAR races from their inception in 1968 and was one of just three Vermont ski areas to be offering them in 1970.

Okemo achieves fiscal solidity

Against this backdrop, Okemo’s track record of careful management, profitability, and dividends to investors was impressive and unique. In 1966, Barron’s financial magazine singled out Okemo for being “profitable in a risky business.” Stressing that the ski industry was “fraught with financial risks,” the article warned against investing in public areas. “Except for a few of the sturdiest, their financial footing appears just as treacherous in the years ahead as it’s proven to be in the past. . . . rarer still, the record shows, is the resort operator who, season after season, can break even.”

The ski area became so popular that the oft-expanded base lodge/warming hut needed to be replaced, but the $400,000 cost was prohibitive. The directors worked out a unique sale of land to a group of supporters who raised the funds to build the lodge and leased it back to Okemo with an option to buy, which they eventually did.

Challenging times: 1970-1982

By 1970, Okemo had grown to nine lifts (two chairs, six Pomas, one Mitey Mite tow), 13 major trails with numerous cutoffs/connectors and four slopes, and it now featured residential Alpine Villages, a state- of-the-art base lodge, an innovative ski school, and a popular competitions program. The area had hit highs of 132,170 visits in a 124-day season and was on its way to offering a “second season” with summer business increasing in 1970.

While Okemo had met various challenges in the 1960s, the 1970s threw numerous curve balls. The Okemo Mountain Lodge burned down in March 1970, the Vermont Flood of 1973 undermined some lifts, and the oil crisis brought gasoline shortages, which threatened skier visits. A weak economy, inflation, and rising interest rates hurt all ski areas in the “no-snow” seasons of 1973 and 1974.

Adding insult to injury, there was more competition from the new Western “destination ski resorts,” which was affecting ski-week business, and new Act 250 constraints and land-gains taxes hit about the same time. (Act 250 was Vermont’s pioneering land-use law, which slowed construction in the 1970s.)

But, unlike many ski areas that succumbed to money problems during these trying years—many Vermont areas experienced bankruptcy and all but five changed ownership between 1970 and 1982—Okemo managed to surmount its challenges and continue under the same small corporation, which had occasionally sold more stock to fund expansion. The company survived a 1979 takeover attempt, refusing an offer from Bromley’s owner, who saw potential synergies and efficiencies of two close-by areas operating under one owner.

Lifts undermined by the flood were rebuilt, snowmaking was expanded, and another chair was installed. The continued development and sale of building lots brought in additional revenues and fostered the family loyalty that was propelling the area’s increasing popularity in a good snow season. In an ingenious move, the general manager obtained a source for gasoline and put in pumps so Okemo could guarantee skiers gas to get home!

Snowmaking was expanded in 1972, 1977, and 1981. After enduring the winter of 1980 when the upper mountain could only be skied on four days due to lack of natural snow and another poor weather season for 1981, the area put in snowmaking to the top in 1981. Very few areas had this capability, but while giving the area a competitive edge, it also meant using funds needed to replace the aging Red Poma. Then, in a cruel blow, the bank pulled Okemo’s line of credit, effectively curtailing the ability to replace the Red Poma with a chairlift.

Okemo had grown to 175,000 skier visits in a good year, but with the devastating no-snow 1979-80 season, attendance was down to 88,800. Despite that decrease, Okemo was recognized as the nation’s top NASTAR promoter for the season with participation up 34 percent. The 1980-81 snow season was only slightly better, garnering 95,500 visits.

Okemo bounced back to 146,000 visits with a good snow/weather season for 1981-82. In 1981, Okemo had hired Sno-Engineering, a nationally renowned resort planner, to develop a new master plan for the mountain. The plan clearly noted Okemo’s potential to become a “major destination resort” but also spelled out deficits and the need for $8 million in improvements.

Selling more stock to raise that kind of capital would effectively give majority control to a new owner. If it did nothing, the area would fall behind its competitors at a time when skiers wanted modern chairlifts, not aging Pomalifts. Stymied, the board of directors faced the challenge: whether to stand still and lose Okemo’s competitive edge or move forward with a new owner with the means to make the necessary changes.

To go from a shareholder-owned and controlled ski area to a private one was seen by the majority of shareholders as a necessary sacrifice to move the mountain forward and to successfully compete in a ski industry that had changed drastically in the 27 years of Okemo’s existence.

Enter the Muellers

When Tim and Diane Mueller acquired a majority ownership of Okemo in August 1982, they felt confident that they could be successful. As Tim noted, they saw “the potential for Okemo to be a major New England destination resort” per the Sno-Engineering master plan, and in talks with their engineers, “they convinced us that Okemo was a diamond-in-the-rough.”

Intrigued by that potential, the couple was undaunted by the $8 million in needed improvements, a hefty sum for a pair of thirty-two-year-olds who didn’t own a golden goose and had never been in the ski business.

In a 1996 interview, George Nostrand, counsel for Okemo and the Muellers, recalled being impressed (and worried) by the fact that Okemo “was a tough deal that might not fly . . . I asked how much money do you have? He said $350,000, and I told him it wasn’t enough. He said he could mortgage their house in Chester, and I told him he could lose everything . . . Tim said that he was ‘young and able and could always start over.’ It was what I wanted to hear. We began our meetings.

“They used every conceivable nickel and it was all at risk. The mountain had a $1.7 million debt . . . they mortgaged their land and house, and borrowed from every bank that would loan them money . . . It was a struggle and monumental risk . . . I told Tim that I personally wouldn’t have had the stomach to take this kind of risk. He said to me, ‘Well George, that’s the difference between an entrepreneur and a lawyer.’”

“We were willing to take the risk because the potential was so great here,” Tim related, noting: “it wasn’t as if we were wildly entering some field blindly.”

So the Muellers and their two young children returned to Vermont from St. Thomas, where they had been expanding and operating a beach resort for Diane’s parents.

Part III will conclude with how that experience gave the Muellers a jump on the modern ski resort industry and enabled them to grow Okemo to today’s success story.

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