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Intrawest stock drops in aftermath of Sept. 11



Long-term outlook remains positive

Like many listed companies in the tourism industry Intrawest stock took a beating in the days following the Sept. 11 terrorist attack on the U.S.

Intrawest stock had been steady at around $29 but plummeted to $21 last week, a drop of 25 per cent. It remains around that mark.

But, said Stephen Forgacs, manager of Intrawest’s corporate communications, the stock price does not reflect the strength of the company.

"We are a strong company and we are well financed," he said.

Intrawest may be in a better position than most to weather this most recent downturn because the company’s 10 resorts are within driving distance of many major markets, and real estate sales remain strong.

"Surveys done since Sept. 11 show that people are favouring leisure destinations they can drive to over ones that they can fly to," said Forgacs.

"Across our resort network roughly 85 per cent of our resort business comes by car from their homes."

Whistler is the greatest exception, with only 50 per cent of winter visitors arriving by car.

While Forgacs was reluctant to speculate on whether Intrawest would carry out new aggressive marketing in areas within driving distance of Whistler he did say: "It is probably safe to say that we will see, not just from Whistler, but from a lot of people in the travel industry, a lot of very attractive (holiday) packages."

Most Intrawest clients are under 35 years old and tend to be less influenced by political and economic uncertainty so they are not going to stop skiing and stop travelling because things are uncertain on a political or economic front, said Forgacs.

And for those travellers who do fly many may prefer to travel to a Canadian destination.

Intrawest has also already sold 80 per cent of the real estate analysts expected it to sell in the 2002 fiscal year.

"(So) there are a number of things we have working in our favour that should help us to weather this downturn, whether it is a brief recession or more prolonged.," said Forgacs.

But there is no doubt the company has experienced a decline.

"It took a huge hit," said Helmut Pastrick, chief economist for the Credit Union Council of B.C.

"Intrawest is very much a part of the tourism sector and it has a lot of property in recreational tourism. So clearly, the stock prices are reflecting a drop in those revenues and earnings."

But markets were in an economic downturn before the horrific events of Sept. 11.

"I suspect that would have affected some of these tourism numbers anyway," said Pastrick.

"But it would not have been this severe.

"How it will evolve is the big question and that... depends on how events unfold over the next few days and weeks."

Most experts agree that the economic downturn will be deeper, last longer, and will be global in reach. It’s likely it will only be followed by a muted recovery.

Not all businesses will be hurt to the same degree but there is little doubt that companies relying on travel, advertising, and retailing are in for a particularly rough ride.

Resorts like Whistler also face unique challenges as it is more difficult for them to cut costs if the guest experience is to be maintained.

Gondolas still have to be maintained and run even if they are carrying fewer people; restaurants must be open, and safety must be maintained whether there are a thousand people on the mountains or 20,000.

"There has been a broad sell off across the whole market," said Jock Finlayson, chief economist for the Business Council of B.C.

"The data would suggest that there is a huge portion of it being parked as cash. People are simply getting out of the market. It is not limited to or targeted at companies like Intrawest.

"I think it is the fear and uncertainly of the future."

Before Sept. 11 the markets were abysmal for a whole year. Many people were holding on in the hopes and expectation of recovery but now they may be deciding to cut their loses and get out.

But Finlayson said it is unlikely people will stop flying and travelling in the long term and that should offer some measure of protection for businesses reliant on tourism.

"Obviously Whistler has become a very high-cost place, from real estate to food to hotels," said Finlayson.

"So it is going for the premium market and a big chunk of that market is not Canadian so it’s very vulnerable to any change in the marketplace.

"But I think it is unlikely people are going to stop travelling and stop flying.

"If we see another 50 planes blown up that may differ. But if there is a period of stability or a period where attacks to that sector don’t reoccur then maybe confidence may come back."