Vail Resorts: visits are down, earnings are up
Colorado Sun
Skier visits are down 9.7% at Vail Resorts’ 37 North American ski areas so far this winter, with snowfall 42% lower than the start of the previous 2022-23 winter, when the company reported a record 17.2 million visits.
Vail Resorts CEO Kirsten Lynch called the start of the season “incredibly challenging,” but said improved snowfall — and a higher-than-usual percentage of the 2.4 million skiers who have already bought Epic passes and lift tickets but not used them — indicates visitation will rebound.
Despite the challenges with snow and declining visitation, Vail Resorts this week reported an annual 7.7% increase in earnings for the three months that ended in Jan. 31. The company reported $1.1 billion in revenue for those three months, a slight decrease from the previous season.
The stability of earnings and a small drop in revenues after a slow start to the season and declining visits reflects Vail Resorts’ overarching strategy to harvest 75% of its lift-ticket revenue from skiers who buy long before the snow falls. Before the emergence and proliferation of advanced purchase season passes and lift tickets in the late 2000s, a poor snow year and downturn in skier numbers would have dealt blows to bottom lines.
The Vail Resorts second-quarter report showed fewer skiers spending more on lessons, dining and gear at the company’s retail and rental stores. (The company does not break out visitation or spending by individual resorts or even by state or region.)
“There is no sign they are pulling back on spending, but they are pulling back on visitation,” Lynch told investors, noting that she was anticipating a strong spring as conditions improved at its resorts in all its regions — the Northeast, California, the Rockies and Pacific Northwest.
Vail Resorts told investors to expect earnings between $847 million and $889 million on close to $3 billion in revenue for the fiscal 2024 year that ends July 31, which gives Vail Resorts an earnings yield of about 30% on its revenue. In September the company told investors to expect earnings between $912 million and $968 million with a margin around 31%. In January, the company told investors that visits were down 16.2% compared to the previous season and estimated the year’s revenue would fall into the lower half of the September guidance.
The company reported access to $1.4 billion, with $812 million in cash on hand and $409 million in loan availability. The company reported $2.8 million in debt.
In November, Vail Resorts acquired a majority interest in the Crans Montana ski area in the Swiss Alps for $135 million. The company announced plans to invest $34 million in the resort in the next five years and the resort is expected to deliver an additional $17 million in earnings a year. The purchase price was about eight times the resort’s expected cash flow, which is along the lines of traditional resort valuations over the years. (So Vail Resorts did not spend crazy money on its second European ski hill.)
We don’t know how much Vail Resorts’ competitor Alterra Mountain Co. paid for its most recent acquisition, Arapahoe Basin, because the company is privately owned. One investment representative asked if Vail Resorts looked at acquiring Arapahoe Basin.
Lynch reminded the investor that Vail Resorts sold Arapahoe Basin in the late 1990s due to federal anti-trust concerns with its purchase of Breckenridge and Keystone. Vail Resorts had a 20-year partnership with Arapahoe Basin before the ski area in 2022 ended its partnership that allowed unlimited access for Epic Pass skiers.
“It makes a lot of sense to us that Alterra appears to be pursuing a strategy that might be more similar to our strategy of an owned and operated model,” Lynch said.
Alterra Mountain Co. and Vail Resorts last week released prices for the 2024-25 passes, with annual increases around 8%, which is similar to the rate of increase in previous seasons.
The Ikon Pass, with access to 58 ski destinations and April skiing for early-purchasers at several resorts including Steamboat and Winter Park, starts at $1,249 and the more restrictive Ikon Base selling for $869.
Vail Resorts’ Epic Pass is selling for $982 for 2024-25, with unlimited access to all 42 of the company’s ski areas, plus seven days at Telluride ski area and access to partner resorts in Canada, Europe and Japan. The company’s Epic Local is offered for $731 with holiday restrictions and unlimited access to 32 ski areas. The company’s Epic Day passes sell for as little as $52 for non-peak days at 22 resorts to $129 for unrestricted access to all 42 ski hills.