A lot of ski resorts have found themselves in precarious financial situations this season and I’ve spent a fair amount of time discussing that on this blog.  Something I’ve been thinking about lately is that it isn’t really the ski business that is hurting – it’s the luxury real estate developments on the balance sheet of many ski areas that are bringing them down.

Nothing exemplifies luxury ski area real estate like The Yellowstone Club.  Homes in the Yellowstone Club start at $3 million and club membership is an additional $250,000. The Club’s ski hill features 10 lifts and 64 trails, and with membership capped at 864 nobody ever waits in line.  Yellowstone Club is the pinnacle of luxury ski communities – and it’s now declaring bankruptcy.

The smallest residences at Yellowstone Club

I’ve been watching the Yellowstone Club story with interest thinking it had something to do with the ski industry.  The fact is, this bankruptcy has nothing to do with skiing and everything to do with luxury real estate.  The Yellowstone Club’s business model is based on real estate – a model they share with other cash strapped resorts like Intrawest Resorts, and Moonlight Basin.

I’m gonna go out on a limb here and say I predict mountain resort real estate prices are going to keep falling and we’ll probably see a few more of these giant ski areas mountain real estate developments run into cash crises.  I also think that those resorts who don’t rely on real estate for their business model (Alta, Mt. Baker, Wolf Creek etc.) will be just fine this season.  Consumers still want to ski regardless of the economy, but they might hesitate to ‘invest’ in a $10 million dollar ski house.

If you still think now is a good time to buy mountain resort real estate compare the mortgage payment on that home to what you’d be able to charge renting it out, then compare the mortgage payment to what it would cost for you to stay in a hotel for the days you planned on using that second home.  After you do those calculations I bet you’ll agree that the days of 18% annual appreciation on vacation real estate are OVER.

For hilarious coverage of the YC bankruptcy check out The Goat “Billionaire Industrialists Cook up Kooky Scheme to Save their Community Center” and The Business Sheet “Bankrupted Millionaire-Only Resort Can’t Afford Food.