Season’s Pass Holders Show Confidence But Experts Doubtful Area Can Support Destination Resort

The dream of elevating Schweitzer Mountain Resort into a destination ski area caught an edge this week when the family-owned empire that runs the ski hill fell into receivership.

Saddled with $27 million in debt and a resort that has bled red ink for years, Sandpoint’s Brown family handed over control of its corporate assets to stave off bankruptcy.

Financial infirmity at Schweitzer and its competitor, Silver Mountain Resort in Kellogg, raises questions about whether North Idaho ever will be home to a destination resort. Experts say it’s doubtful. But skiers more interested in fresh snow than either ski hill’s long-term financial health eagerly bought up lift tickets Saturday.

At the season pass holder party Saturday at Schweitzer’s Day Lodge, spirits were boosted by the two feet of snow already covering the ski runs.

Spokane’s Gary Wolf and his family own a condominium here and enjoy the family atmosphere. They’ve watched three management changes at the resort in the last three years, but don’t worry about long-term success.

“There’s always going to be someone running the ski resort,” said Wolf, who plans to build a retirement home on the mountain. “The bank realizes that if it wants its money back, the resort has to run. Otherwise the land isn’t worth anything.”

As hard as it may be for tourism boosters to admit, the Inland Northwest simply may not be able to sustain a destination ski resort, said John D. Hunt, head of the University of Idaho Resource Recreation and Tourism Department in Moscow.

“I just think the strengths of the Panhandle at this time as well as the development we have don’t seem to lend themselves well to destination-type status,” said Hunt, whose comments in the past have drawn the ire of local tourism officials.

“It should in no way take away from the attractiveness of the region, and the Panhandle still generates more economic impact from tourism than any other region in the state.”

Silver Mountain’s original investors, Swiss ski lift manufacturer Von Roll AG, swallowed nearly $17 million in bond debt when it sold the fledgling ski resort to Eagle Crest Partners in May.

Schweitzer and Silver have some of the amenities enjoyed at established destination resorts. Schweitzer even has hundreds of premium condominiums bunched around its base - but few skiers stay long.

Ski consultants say pricey lodging is the crucial ingredient that keeps skiers for weeks at a time. Sun Valley skiers stay more than a week on its slopes, spending far more than Schweitzer’s day and overnight skiers, Hunt said.

“It’s very tough to generate the big bucks if they’re only staying a day or two,” Hunt said. “It’s a tough sell for North Idaho.”

The vision at Schweitzer and Silver Mountain may have been too ambitious, and the execution for both resorts left something to be desired, said Doug Campbell of the Pacific Northwest Ski Area Association in Seattle.

“I don’t think either one of them has done a particularly good job on marketing,” Campbell said. “Part of it has to do with having or building the infrastructure at the base. Certainly for the local market there’s only so many bodies to draw from in your area.”

When Schweitzer’s management sculpted an Alpine Village master plan in 1989, the regional ski business looked a lot different: Schweitzer was king.

Silver Mountain was a gleam in Kellogg’s eye. Sandpoint’s potential as a resort town seemed boundless.

The 10-year plan called for $100 million in investment for shops, restaurants and high-rent condos spread down the mountainside. They were to be ringed by haughty vacation homes.

But attracting commercial developers to locate businesses up the mountain’s winding access road proved tougher than expected. Plenty of ambitious residential developments have sprung up at Schweitzer, but real success hinges on creating the ski-in, ski-out village.

Schweitzer’s owner - Pack River Ltd., controlled by Sandpoint’s Brown family - got a $21 million loan from U.S. Bank to pay for the Great Escape detachable quad lift, the Green Gables Lodge and much of the engineering to provide water, sewer and other services for the ski hill of tomorrow. New development and business growth, however, didn’t keep pace to pay off the debt.

Having marginal snow the last four of five years didn’t help matters. Neither did the cracks in the Great Escape’s grips that required a $1 million retrofit.

The ski resort, separate of Pack River Ltd.’s land holdings, wasn’t the sole cause of the money problems, but “certainly exacerbated the situation,” said Shaun Cross, a Pack River attorney who helped set up the receivership.

U.S. Bank had no interest in owning a ski resort. Working with Pack River, it refinanced the debt several times.

Lawsuits against the Schweitzer empire began to stack up. In March, longtime chief executive of Pack River Bobbie Huguenin stepped down in favor of Brad Mead, an investment banker from Connecticut. Mead recently left the position, Cross said, which, from the bank’s perspective, put the family in default on the loan.

As Schweitzer struggles to show up its master plan, skiers like the Wolf family of Spokane figure the ski hill will somehow pull through.

“To me, this isn’t a destination ski resort, and I don’t think it will ever be,” Gary Wolf said. “There’s a lot of potential up here, but I think it will always be a local ski hill.”

, DataTimes MEMO: This sidebar appeared with the story: Schweitzer’s receivership Pack River Ltd.’s lawyers say Schweitzer Mountain Resort’s receivership has big advantages over bankruptcy: Management stays the same. Under certain chapters of bankruptcy law, Schweitzer’s management would have been replaced by a trustee. Sandpoint attorney Ford Elsaesser will be the receiver, but Schweitzer management stays in place. Sales of property with liens can occur under receivership and some forms of bankruptcy. Pack River needs to sell some of its property to get out of debt. Under bankruptcy, creditors that believe they won’t get paid can petition the judge to lift the protection. Under receivership, Schweitzer has a full year and perhaps more to solve its problems without fearing anxious creditors. Compared with bankruptcy, the receivership should cost Pack River far less in fees and be far less cumbersome than working through bankruptcy court. Unlike other receiverships, the relationship between the bank and the company is not adverse. U.S. Bank provided much-needed cash for the upcoming ski season and solved short-term cash problems.