KING OF THE HILL

For some skiers, the midday meal is a modest repast--say, a brown-bag lunch, some watery cocoa or a bowl of expensive chili eaten elbow-to-elbow in a drafty mountainside cafeteria. But those skiers don't dine at the Game Creek Club atop Vail Mountain, where members pay a $50,000 initiation fee to feast, as they did on a recent Friday, on a buffet of seafood and roasted quail. At a table near the center of the room sat New York Mayor Michael Bloomberg, with another billionaire, buyout maven Thomas H. Lee, nearby. At a window, enjoying the scenery--outside and in--was Vail Resorts chairman and CEO Adam Aron. There was lots to like: the view was better than a Rocky Mountain postcard.

And these high-priced lunches were only going to enhance the corporate bottom line.

The Game Creek Club--one of several intimate members-only eateries that Aron has opened at Vail of late--is just an example of how the ski industry is learning new tricks. For years it was a no-growth washout: for most of the '80s and '90s, the industry's count of annual skier-visits was flatter than a bunny slope. That forced resort operators to find different ways to grow. Aron and his team are among the leaders in that effort. They've developed new pricing strategies to boost revenue, they've used database marketing to enhance customer loyalty and, most important, they've diversified by attempting to make their company less dependent on skiing. "Vail was a bit of a pioneer in being in multiple businesses," says Nolan Rosall of RRC Associates, a market-research firm. Today Vail Resorts owns not just five ski areas--Vail, Beaver Creek, Breckenridge, Keystone (all in Colorado) and Heavenly (in California)--but 18 hotels, six golf courses and more than 100 restaurants and shops. While the company suffered along with the rest of the travel industry from 9/11 and the Iraq war, business has improved lately. Vail's stock price has doubled since its low point in 2003. "We're on a roll," Aron says.

For the 50-year-old Aron, that's not an unfamiliar sensation. A Philadelphia native who graduated from Harvard in three years and then picked up a Harvard M.B.A., he spent the first 15 years of his professional life ascending through jobs at Pan Am, United and Hyatt hotels, earning a reputation as a smart marketer with special expertise in frequent-flier programs. At 38, he became president and CEO of Norwegian Cruise Lines. After turning its ship around, in 1996 he moved on to Vail.

Aron's arrival was an indication that the ski industry was moving away from its history of stand-alone, undercapitalized resorts run by mom-and-pop operators (sidebar). Ski areas had already begun buying each other to form chains, and soon after Aron's arrival Vail became one of three ski companies to do IPOs (the other two were Intrawest and American Skiing Co.). Despite its expansion, when Aron arrived Vail was just a fifth the size of Norwegian Cruise Lines, and some observers figured he'd quickly job-hop to a bigger company. They were mistaken: he's nearing his ninth anniversary at Vail, and revenue has quintupled on his watch, hitting $722 million last year.

One reason he stays, Aron says, is that he enjoys schmoozing with the celebrities and politicians who visit. "I have lunch or dinner four times a week with the most fascinating people in the country," he says. But there's also the challenge of growing a business that's more complex than its scale suggests. "It's a remarkably intricate little company--we have so many different profit centers," he says.

Aron's enthusiasm for his collection of assets is apparent on a walk around the resort, during which he highlights what he's done at Vail and what he intends to do next. Walking around the remodeled luxury hotels, he's constantly ducking into bathrooms to show off the fancy tile and stonework; at the newly renovated Vail Mountain Marriott, he boasts of personally picking out the Euro-style shower doors. Strolling through the village at the base of the mountain, he points out the buildings he's tearing down and the model for a $226 million retail and restaurant complex. The development will include 67 condos with an average price tag topping $2 million. That proved no deterrent: when Vail began taking deposits last month, more than 500 buyers applied, forcing Aron to conduct a lottery.

Aron's fascination with the resort's real estate--at times he sounds like Donald Trump in a ski sweater--is a reflection of how his industry's focus has changed in the past decade. "If you run a destination resort --company like Vail, you're actually programming a whole town," Aron says. "The vacation experience is not just the skiing on the mountain the five hours you're there, it's the totality of the experience." That means the cuisine to the spa offerings, which, of course, produce more revenue. His goal is for Vail to be more like Disneyland--or a cruise ship, capturing nearly every dollar a guest spends on lodging, food, massages and souvenir T shirts. Before Aron came to Vail, lift-ticket sales constituted 55 percent of revenue; today he's grown so many ancillary businesses that lift tickets account for just 30 percent. "Not having lift-ticket revenue be the be-all and end-all of our company--that's my thing," he says.

Some rivals have gone even further. Intrawest now makes more money selling condos than lift tickets. Still, there's no general agreement on how much diversification is too much. In 2001 Vail spent $7.5 million to buy Rock Resorts, a chain of 10 upscale hotels that includes the Equinox in Vermont, Cheeca Lodge in the Florida Keys and Snake River Lodge in Jackson Hole, Wyo. Aron touts it as a great deal, and analysts say the hotels have risen sharply in value and should deliver windfalls if Aron sells them. But detractors--including one large Vail shareholder--say the non-ski-related hotels have been a distraction that's delivered little cash flow. Aron's naysayers also point out that despite Vail stock's recent run-up, the share price languished so badly from 1999 to 2003 that it's barely higher than when Aron took the company public in 1997.

Some local critics have been even harsher. They consider Aron an outsider who doesn't care enough about skiing. They've mocked his weight (something he's struggled with his whole life, he says) and his skills on the slope (he's a self-described intermediate skier surrounded by folks who thread through moguls like Olympians).

Aron disputes the idea that diversification has led him to neglect the core skiing business. Riding up Eagle Bahn Gondola, he cites his five resorts' rising scores in the influential Ski Magazine readers' poll. Then, exiting the gondola, he climbs aboard a snowmobile to lead a tour across the mountain- tops, showing off new trails, lifts, grooming operations and yet another new lodge.

Skiing here is decidedly pricey: a daily lift ticket at Vail costs $77, the highest in the country. Some observers argue that Aron could charge even more. Three quarters of the skiers at Vail and Beaver Creek have annual household incomes above $250,000, most fly in from out of state and they're more likely to scrutinize their vacation's bigger costs, like lodging. While Aron has raised the "window" ticket price from $48 to $77 over eight years, he's also hired a director of pricing to find more subtle ways to boost revenue. They've tinkered with blackout dates, boosted less-conspicuous group prices and tried to use some of the "yield management" techniques airlines use to boost the average ticket price.

Vail has also inadvertently revolutionized the practice of selling season passes. When rivals Winter Park and Copper Mountain launched a price war in 1998, Aron reluctantly cut season-pass prices at Keystone and Breckenridge from $800 to $199. The result: sales jumped 1,200 percent. But since the passholders paid less, they skied less than they did when they paid the higher price, alleviating concerns that the mountains would become mobbed. Since resorts' costs are mostly fixed (no matter how many tickets you sell, there's little change in the cost of running the lifts and grooming the trails), the higher volumes turned into a windfall for Vail. Season passes have grown from 5 to 25 percent of lift-ticket revenue, providing predictability and early-season cash flow.

There are still traditionalists who say ski areas should remain privately held, undiversified and run by diehard skiers. As proof, they point to the struggles of one of Vail's chief competitors, American Skiing Co., which has defaulted on bond payments and whose stock trades below $1. Aron attributes that rival's woes partly to the fact that ASC owns too many New England ski areas, such as Killington and Sunday River, where icy conditions limit visitors and drive down margins (due partly to huge snow-making costs). "They just chose to be a strong player in the wrong ski market," Aron says. "We've been offered ski resorts in the Northeast to buy over the last eight years, and we've resisted."

For now, the payoffs for Vail look poised to continue: last winter brought the best financial performance in Vail's history, and so far this year looks even better. There are no guarantees, of course. Aron admits another terrorist attack could kill his company's comeback. But if relative domestic tranquillity continues, he believes his company has room to run. As the slopes empty and the sun starts its late-afternoon fade, Aron stands at the bottom of the mountain, cell-phoning his office to learn that an analyst has just predicted a 20 percent rise in Vail stock. Smiling broadly, he leads a visitor to a nearby plot of land where he'll soon break ground on 13 new town homes, each with 4,400 square feet and price tags of $9 million. Then he's off to have drinks with a billionaire and a late dinner with a U.S. senator. God isn't making any more places like Vail, so Adam Aron will keep dreaming up new ways to lure America's moneyed class and send them home happy--and just slightly less rich.