Here Comes the Snow: Lending Support for Winter Businesses

Denali State Bank: Tapping into Alaska tourism

When people think of Alaska, long winters come to mind. According to Steve Lundgren, president and CEO of $500 million-asset Denali State Bank in Fairbanks, the temperature remains below zero for at least four months each year and can drop to 60 degrees below zero at night. Furthermore, it’s dark in the winter: On the winter solstice, Dec. 21, the sun will come out for only an hour or two.

“We have a ski hill here in town, and we’ve lent money to that operation, but skiing in the winter here is different than a lot of other places,” Lundgren says. “The hill is not lighted, so you can only ski in the middle of winter two or three hours a day.”

While ski resorts may not be one of Denali State Bank’s key industries, the extreme weather in Alaska means the bank works with many other kinds of winter-friendly businesses.

For example, visitors come from all over for dog-mushing competitions. The state also hosts the World Ice Art Championships each year in Fairbanks, and that draws a crowd of ice carvers who love knowing their creations won’t melt quickly. All these visitors need places to stay, and Denali State Bank lends to hotels, bed-and-breakfasts and other lodging operators.

Another category of winter-related tourism in Alaska is organized tours that search for the northern lights. Lundgren explains that the tourism organization in Fairbanks has been promoting the aurora, especially to tourists in Asian countries, for the past two decades.

“We’ve seen real growth in winter tourism from clients to see the northern lights, so we have financed properties that are on the hillside and have glass-covered domes so people can be inside and view the northern lights,” Lundgren says.

He notes that Denali State Bank also provides financing to tour operators who manage the northern lights visits. “The tour operation will fly them in, they’ll provide housing in town here, and then they’ll bus them out to the viewing area in a van or something.”

Park State Bank experiences a lost winter

Winter in Minnesota is a fun time. Residents there don’t hide in their living rooms when the thermometer registers single digits. Instead, they grab their ice fishing gear, snowshoes, hockey sticks and skis and head for the outdoors.

But in the winter of 2023, things were different. People in the state call it “the lost winter.” According to the Minnesota Department of Natural Resources, most parts of the state received less than half the average amount of snow through February, and heatwaves in December, January and February produced record‑high temperatures.

“Last winter, when we didn’t have a lot of snow up there, it was a tough environment for a lot of the resorts that rely on winter tourism,” says David Saber, president and CEO of $925 million-asset Park State Bank in Duluth, Minn. “The whole hospitality industry is, one way or another, connected to tourism, and we’ve got stores up there that are seasonal and stock winter gear and equipment.”

Saber notes that the community bank’s clients in northern Minnesota that thrive in cold weather, such as ski resorts and ice fishing outfitters, did not have widespread credit issues.

“They’re seasoned operators, great clients,” he says. “The situation could impact their general [winter] cash flow, but by and large, all of these clients are able to repay any debt obligations they would have to the bank. We don’t have any worries on that front, even after a winter like last year, where there might be less ice on the lakes for ice fishing and less snow for other typical tourism activities.”

Saber is pleased to serve the community by supporting these types of businesses, and Park State Bank’s underwriting practices take into account seasonality as appropriate. 

“The overwhelming message is that we are essentially lending to these customers on the same terms as others,” Saber says. “We might structure seasonal payments to coincide with the cash flow, but that’s really the only difference.”

“Lodging is a very big category for the bank, whether it’s new hotels being built or the support of long-standing, veteran hotel properties across the different resorts.”

—Michael Brown, Alpine Bank

Alpine Bank: Powering the businesses that support ski season

Alpine Bank, which is based in Glenwood Springs, Colo., has branch locations in some of the most prestigious ski areas in the country, including Aspen, Breckenridge and Vail. Thousands of snow-loving tourists pump up the economies of those communities every winter, swooshing down the hills in the latest skiwear and relaxing après-ski in resort hot tubs.

But the corporations that run the major Colorado ski facilities, such as Vail Resorts and Aspen Skiing, are only one part of the economic base of those communities. The ski-adjacent businesses that interact with tourists much more frequently are the restaurants, hotels, equipment outfitters, tour operators and other ancillary businesses. And those businesses are the primary lending clients of the $6.6 billion-asset bank.

“Where we come in as a community bank is that we lend to a wide variety of resort-related businesses,” says Michael Brown, Alpine Bank’s regional president for Eagle, Summit and Routt counties. “These areas are constantly rejuvenating, updating, growing [and] evolving, whether it’s new businesses and new restaurants, new hotels or new housing developments.”

Visitors to ski resorts have many options if they spend the night: lodges directly connected to and managed by resorts, hotels in resort areas unaffiliated with the resort operators, and rental properties scattered throughout the communities. Alpine Bank supports that niche with construction loans for new developments and upgrades to existing properties.

“Lodging is a very big category for the bank, whether it’s new hotels being built or the support of long-standing, veteran hotel properties across the different resorts,” Brown says. “We help those long-term customers with everything from lines of credit for updates to the property to deposit business management.”

Weather naturally affects the success of ski resorts throughout Colorado. The success of winter seasons is heavily influenced by snowfall timing and total, with consistent snow contributing positively, especially during key holiday periods in both late winter and spring.

An interesting phenomenon arising from the unpredictable weather is that many skiers observe snow conditions and wait until the last minute to book trips, Brown says. He says the industry calls that “just in time” booking, borrowing a phrase from the manufacturing industry. 

Nevertheless, Alpine Bank has not felt the need to hedge against snow-less winters. Brown says that despite every winter season’s risk factors, such as low snowfall, weather has remained consistent enough for the bank to proceed and succeed with winter lending.

“In our market, we have a lot of seasonal businesses in the summer and in the winter, and that’s the risk that we try to manage and underwrite and understand.”

—Mark Lavarnway, Watertown Savings Bank

Watertown Savings Bank: A true snow angel

The Dry Hill Ski Area is a family-owned resort in Watertown, N.Y., and like many such businesses, utilizes its community bank for funding. Watertown Savings Bank provided financing for the current owners to purchase the resort, financed the equipment needed to make snow and groom the hills, and offered working capital to smooth out the seasonality of the business’s cash flow.

“We have all three types of loans for them,” says Mark Lavarnway, president and CEO of $1.46 billion-asset Watertown Savings Bank in Watertown, N.Y. 

Unsurprisingly, the cash flow at Dry Hill Ski Area peaks in December, January and February. Consequently, the community bank has structured repayments to best fit that situation, Lavarnway says.

“We take a concerted, measured approach up front to structure the debt and the repayments that make sense for the industry they are in,” he explains. “With many of our winter-related commercial borrowers, including the ski hill, we have seasonal payment plans whereby they may only make two or three principal payments during the year, and interest-only the rest of the year. But those three principal payments would equate to an annualized debt reduction as if it was made on a 12-month basis.”

Other clients that Watertown Savings Bank accommodates in that fashion include snowmobile-related businesses in nearby Tug Hill Plateau, a natural area laced with winter trails. 

Restaurants, bars and hotels in the Tug Hill area can also benefit from seasonal repayment plans, Lavarnway says. But what happens if it doesn’t snow enough and even the winter cash flow for these businesses doesn’t meet expectations? The community bank works it out.

“Because we live here, we’re boots on the ground as well,” Lavarnway says. “We understand that if it didn’t snow this year, that’s not necessarily indicative of bad management or anything. So, we have typically worked with them on repayment, restructuring, etc., to allow them to remain in business and support our community. We might say, ‘Look, no payments this year, we’re going to go interest-only all year.’ 

“In our market, we have a lot of seasonal businesses in the summer and in the winter, and that’s the risk that we try to manage and underwrite and understand,” he adds. “Mother Nature is a tough business partner.”

The bottom line is that any bank can lend to a ski resort, snowmobile tour operator or ice fishing outfitter, but community banks are uniquely positioned for that kind of credit. 

Why? Community bankers understand the unique characteristics of businesses serving winter clients, and if the snow refuses to fall in a given season, they aren’t quick to pull the plug on a client. 

“We don’t just shut them down,” says Lavarnway. “We say, ‘OK, over the long haul, what’s going to work? We’ll work it out.’”

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