Stowe, other ski resorts, warily watch AIG's troubles
Wall Street tremors rumbled onto the Mountain Road Tuesday as the future of Stowe Mountain Resort - and its millions of dollars in real estate holdings - came into question amidst the potential collapse of its parent company, American International Group, Inc.
AIG may sell off assets to raise the $75 billion in capital it needs to avert bankruptcy, according to media reports. State and local business leaders are watching closely to see whether Stowe Mountain Resort - among AIG's holdings - is affected by the historic breakdown of America's largest insurance company.
"There's no question AIG's assets are up in the air," says economist Thomas Kavet, a paid advisor to the Vermont Legislature. "They're desperate for cash, and the way to get cash is to sell anything that's worth something."
Bill Stenger, president of Jay Peak Resort, says the resort is likely a moneymaker for the troubled insurance giant. He says the area has earned national renown as one of the premier ski destinations in the East and will likely retain that label whether it remains under the auspices of AIG or not.
"I suspect that Stowe Mountain Resort has been a positive investment for the company and it's something I know historically that the leadership of AIG has appreciated and respected," Stenger says. "Does it have the staying power to continue as a building block and foundation of Vermont industry? Absolutely."
Stowe isn't the only ski company that could be impacted by AIG's troubles, according to Stenger. He says the company provides liability insurance to 70 percent of ski areas in the United States, including Jay Peak.
"The stability and success of their reorganization, whatever form it takes, is a very important thing not only to Stowe Mountain Resort and the village of Stowe, but also to the ski industry nationally," Stenger says.
AIG policy holders elsewhere in the state also are watching to see how AIG weathers its recent travails. The Vermont-NEA has endorsed AIG's auto and home insurance policies for its 11,500 members. Darren Allen, a spokesman for the teachers union, says his organization is closely monitoring the situation.
"The situation is very serious and we are monitoring developments as they occur," Allen says. "We have been assured there are sufficient assets to pay any claims that are out there, and there's really no reason for policy holders to panic. But make no mistake - this is very serious and we are keeping very close tabs on it."
Industry experts say that turmoil at AIG doesn't necessarily signal trouble for Stowe, or the dozens of tourist-based businesses within village limits. Dan Oberlander, managing director at Topnotch Resort and Spa, says the Stowe ski resort is about halfway through a $400 million base-lodge expansion that includes high-end hotels and slope-side condominiums. Those amenities will retain their value whether they belong to AIG or not, he says. And mountain operations will continue to fuel the local tourism economy.
"The mountain isn't going to go away. And the $200 million or so they've already invested isn't going to go away," Oberlander says.
Oberlander says an ownership change at Stowe could cause short-term instability.
"Would it be disruptive? Of course it would," he says. "But in the long term, anyone reaching out to buy that asset would probably be in a position to carry it through."
Bruce Hyde, commissioner of the Vermont Department of Tourism, calls AIG's financial woes an "important development" as it relates to the future of Stowe. He says, however, that AIG has already poured hundreds of millions of dollars of capital into the company and that the investment will yield returns to Vermont tourism whatever the outcome of the AIG debacle.
"Regardless of who the owner is, there's always going to be a Mt. Mansfield ski area and that development is going to continue to be productive," Hyde says. "I'd be far more concerned if this happened three or four years ago, when they were first starting on their major project. At this point ... they're actually on to phase two."
Dick Marron, chair of the Stowe Selectboard, says he's more concerned about AIG's plummeting stock value than its ownership of Stowe Mountain Resort.
"I have a lot of people I know in Stowe who have significant shares of stock in AIG and lost their shirts in the last couple months," Marron says.
From a municipal perspective, according to Marron, AIG's property tax payments amount to a "footnote" in the town ledger, since most of the new development has already been sold to private investors or second-home owners. While he's keeping close tabs on the resort, he says, he believes the operation will remain financially sound however the AIG reorganization plays out.
"The asset is in really good condition right now. They finished the new base lodge, the lifts have been upgraded, snowmaking has been upgraded," he says. "Because of AIG, it's a much better resort than it was 10 years ago, so I think Stowe Mountain Resort will continue to be probably the best ski area in the East, and somewhat competitive with what I've seen in the West."
Officials at Stowe Mountain Resort referred media inquiries to an AIG office in New York City. Two messages left at the headquarters were not returned.
It is unclear exactly how much the resort is worth. Estimates from economists and business owners ranged from $50 million to hundreds of millions of dollars. Either way, selling the resort won't solve AIG's $75 billion dilemma.
"It does bear close watching because it's a major Vermont development," Kavet says.MORE IN News
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