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Cardrona seeks ComCom permission to merge with Treble Cone

It’s official, Cardrona are seeking Commerce Commission (ComCom) approval to acquire the assets of Treble Cone.

ComCom have put out a press release and also released a redacted document of Cardronas application.  

It’s worth a read if you’re interested in the ski area business (see the full copy here), but here’s a few key points if you want the brief version!

Acquisition Background

  1. Assuming they get the go ahead, they would still only be the third largest operator, behind NZSki and Ruapehu.
  2. Average skiers per day, Cardrona 2,700, TC 1,100 . But then the season is longer at Cardies, so total skiers is close more than three times TC.
  3.  “By 2029, Cardrona Alpine Resort will be easily accessed from the Cardrona Valley floor and integrated into the Cardrona township” . Sounds like the much discussed gondola from the valley floor might be a thing?  

Rational for Acquisition

  1. Cardrona expects to attract new skiers from overseas or from domestic skiers currently skiing at NZ Ski or Ruapehu Alpine Lifts as well as other New Zealand fields.” Interesting statement ;-)
  2. What the acquisition provides Cardrona is the ability to offer a dual mountain offer with more variety than either NZ Ski or Ruapehu Alpine Lifts for a lower cost to consumers”. So this is a signal that Cardrona will maintain a lower price point than NZSki. Interesting. 
  3. "Cardrona also believes that it will be able to derive considerable efficiencies by operating the two fields together. For example, removing a layer of duplicated cost will allow Cardrona to offer improved services at lower prices to skiers." We like that, everyone wants lower prices. 
  4. On average, skiers ski for three days …” And then there’s considerable justification of why Cardies/TC need a 3 day pass, because they can’t complete with NZSki/RAL as separate entities. That makes sense, when one partner is charging a premium. It helps even the field against the competition over the hill. But then .. how many will really ski both? 
  5. The sale to Cardrona will secure the long-term sustainability of Treble Cone”. This is clearly a good thing.
  6. Treble Cone’s customer base is not growing as Treble Cone has struggled to secure additional skiers. Indeed, as the New Zealand skiing market has grown, Treble Cone’s patronage has remained relatively static.” We’re not entirely sure that market has grown. More skier days, but grown (in terms of new skiers), we're less sure about.

And there’s a ton more talking about the competitive environment.

Here’s a few of our thoughts and musings …

  1. Cardrona has a capacity issue. They sit in the sweet spot of the market (intermediates), they do more skier days (the number of skiers per day over the season) than any other resort in NZ, and of the big 6 areas, they are number 4 in terms of skiable terrain. So they are number 1 in skier days, yet number 4 in terrain and capacity. They have been a victim of their own success. To solve it, they either needed more area, or another area. Enter SOHO and Treble Cone.
  2. And if you don’t know, SOHO is owned by the majority shareholder of Treble Cone.  Whatever deal was done, it’s a win /win for sure. Cardrona gets SOHO, and that is great news. Two base areas (and more car parking?) and HUGE terrain. Plus, they get one of the countries jewels, Treble Cone, and some of the market may shift from Cardrona to Treble Once, if it’s on the same ticket (unlikely the other way however).
  3. But, it would appear that Treble Cone has had it's fair share of financial ups and downs. Cardrona is a slick operator, arguably the best in the industry, and if anyone can make TC work, it’s Cardrona. The discussion of economies of scale is true, mostly around management and marketing we’d expect.
  4. And talking of marketing, Cardrona (owned by Wayfare Group, think Real Journeys) are also some of the best marketers in tourism. Treble Cone will be marketed like never before.  You’ll want to go there!
  5. The Cardrona/Treble Cone story is good. Two great skier areas, one lower (?) price. Well, you can expect TC’s prices to come down to Cardronas, but I am less sure about the claims to “offer a dual mountain offer with more variety than either NZ Ski or Ruapehu Alpine Lifts for a lower cost to consumers”. Time will tell on that one.
  6. What we do know however is that the two areas combined will have 50% more terrain than any other ski region in NZ. Ruapehu has around 1000ha, Queenstown has close to 650ha. Cardrona and Treble Cone combined would have nearly 1500ha. They will be the giants.  

And lastly, there’s one really important thing to consider. Cardrona is the most popular ski area in NZ. Treble Cone, one that is renowned and without a doubt the most scenic, but many would say it's underperformed.  With Cardrona buying them, and the level of expertise they will bring to the management and marketing of the resort, this will make Treble Cone accessible, and mainstream again. It will also launch Wanaka towards being the snowsports epicentre of the Southern Hemisphere. Currently that title arguably sits with Queenstown, so if and when this goes ahead, the game could change.

So, will this merger have any great impact on competition and should ComCom block it? We don’t think so. Firstly, there are so many things competing for consumers leisure time; "life", shopping malls and tropical islands are the competition! Secondly, just over the hill you have Coronet Peak and The Remarks, coexisting a short distance away from each other, with a relatively similar market. By comparison, Cardrona and TC are 50km away from each other, and have very different markets. And then thirdly, snow users are mobile and travel, Japan is probably a bigger threat these days, especially if prices keep rising locally. So we think this should go ahead, it will be the making of Treble Cone, adds nicely to the Cardrona offering, and more importantly adds an exciting story around Wanaka being a winter hub of the future. 

However, we do have one concern … You might have heard of the ongoing battle, mostly in North America, between Vail Resorts and Altera – the EPIC vs IKON pass.  Once a ski area hits 400,000 skier days, that’s said to be the point at which one of the global giants of the industry start getting interested.  Cardrona/Treble Cone would be a jewel. But think also of the The Remarkables and Coronet Peak. Life could get a bit tougher for them, and suddenly the lure of joining EPIC might make more sense. And then, who knows what happens, possibly way more expensive skiing …

Compare Resorts 

How do the areas featured in the report compare? Try our new comparison tool and see for yourself! Maybe Cardrona is right, their day ticket pricing at least is better ...

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