Vail Resorts, Inc. (OTCQX: MTN) - Company Profile

Vail Resorts, Inc. Company Profile

Vail Resorts, Inc., through its subsidiaries, operates mountain resorts and urban ski areas in the United States. The company operates through three segments: Mountain, Lodging, and Real Estate. The Mountain segment operates 11 mountain resorts, including Vail Mountain, Breckenridge Ski, Keystone, and Beaver Creek resorts in Colorado; Park City resort in Utah; Heavenly Mountain, Northstar, and Kirkwood Mountain resorts in the Lake Tahoe area of California and Nevada; Whistler Blackcomb in Canada; Stowe Mountain resort in Vermont; and Perisher in Australia, as well as 3 urban ski areas, such as Wilmot Mountain in Wisconsin, Afton Alps in Minnesota, and Mount Brighton in Michigan. Its resorts offer various winter and summer recreational activities, including skiing, snowboarding, snowshoeing, snowtubing, sightseeing, mountain biking, guided hiking, zip lines, challenge ropes courses, alpine slides and mountain coasters, children’s activities, and other recreational activities; and ski and snowboard lessons, equipment rental and retail merchandise services, dining venues, private club operations, and other winter and summer recreational activities. This segment also leases its owned and leased commercial space to third party operators; and provides real estate brokerage services. The Lodging segment owns and/or manages various luxury hotels and condominiums under the RockResorts brand, and other lodging properties; various condominiums located in proximity to the company’s mountain resorts; destination resorts; and golf courses, as well as offers resort ground transportation services. This segment operates approximately 5,400 owned and managed hotel and condominium units. The Real Estate segment owns, develops, and sells real estate properties in and around the company’s resort communities. Vail Resorts, Inc. was founded in 1997 and is based in Broomfield, Colorado.

There's More Than Just an Avalanche of Costs Crushing Early Season Skiers

An Avalanche of costs Crush early Skiers

With the federal government shutdown in full swing, I thought that Friday would be a great time to check out the Summit County and Vail ski crowds.  The MLK weekend, one of the three peak periods of the ski season, crowd was greeted with lots of fresh flurries, so I was sure that I’d shred sweet powder while simultaneously conducting my ski resorts due diligence.

Since Vail Resorts (NYSE:MTN) is trading near its 52 week lows, I wanted to see if I could confirm that the hubbub about “much lower” than expected pre-holiday visits were purely the residual effect of poor late fall snow conditions, at Vail’s resorts in the two preceding seasons, or if something else may be contributing to the shortfall.

I can attest to the fact that the poor Thanksgiving 2016 and 2017 weak conditions resulted in some of my out-of-state friends deciding to forego risking bad early season conditions, especially since the traditional better value reward proposition seemed to have disappeared last November.

The Epic Pass is the Key to Vail’s continued success

Value is probably the last thing that most people associate with Vail and I’m sure that some of the Vail bluebloods yearn for the good-old-days when we hoi polloi were unable to enjoy some of North America’s finest skiing and boarding, but value is precisely what drove Vail Resorts to record revenues, well over $1billion, but, with Vail’s walkup ticket window prices eclipsing the $200 mark for a one day lift ticket, it may be time to question Vail Resorts’ loyalty to their game-changing value proposition. 

It’s not just the painful daily lift ticket pricing, as Vail Resorts seems to have abandoned early season, before Christmas break, lodging deals, which improved bookings and increased revenues from meals, rentals, and other sales, over the last several years.

Vail’s Champaign powder dreams with a beer budget

Vail was never cheap, but lodging specials and its season pass offerings were the heart of an unbeatable value proposition.  Simply put, the Epic pass has been the gold standard, of all the planet’s many pass offerings, for the past 10 years, and I’ve met people from around the world who spent their annual ski week in Vail, because of the Epic pass.

It’s not that Vail Resorts were the progenitors of this value model, because Vail only started offering competitively priced season passes after Winter Park, in 1998, introduced its $200 season passes, if four friends or family purchased four season passes for $800, in a move that was thought to be a desperate money raise for a reportedly cash strapped ski resort.

By responding to the early-season price war, Vail Resorts changed its business model and, after tasting that success, became the industry’s undisputed heavyweight champ, with strong season pass sales generating a significant amount of Vail’s annual revenues.

Ikon presents a serious challenge to Epic’s dominance

After purchasing Epic passes, or its predecessor, for most of the past 20 seasons, I decided to go with the new Ikon pass. It might sound like Vail only missed out on my $899, the 2018-2019 pass price, but it’s much more revenues than that, as my out-of-state guests and their dollars will be tagging along with me to the Ikon resorts.

After nearly 20 years of season pass offerings that were head-and-shoulders above the rest, this year the Epic pass has a serious challenger in Alterra Mountain Company’s Ikon pass, which was brought online in the spring of 2018 for the 2018-2019 season.

I’m not going to argue the about which pass offers the best resorts (compare passes), but I think that Ikon’s smart resort offerings appeal to a wide range of skiers and boarders.  The iconic resorts include Copper, Steamboat and Aspen Snowmass, in Colorado; Solitude, Deer Valley, Brighton, and Alta, Snowbird, in Utah; Squaw Valley and Mammoth Mountain, among the California options; Crystal Mountain and the Summit at Snoqualmie, in Washington, as well as Jackson Hole, Big Sky, Taos, and others.

Many of these resorts are typically among the best snow conditions in North America and many of these resorts offer special deals that are seemingly no longer available in Vail. Alterra Mountain’s management stated that they expect to sell around 250,000 Ikon passes in its first year.  However, even without a pass, the daily ticket prices are also cheaper, so if you only plan to ski a few days, these destinations are highly competitive and easily affordable for most.

The Tracks are in the Snow and many are headed to Alterra

Two years of bad early snow, obviously had a negative impact on this season’s early Vail bookings. No one wants to ride one run down the mountain, and walk with skis for 15 minutes to get on a chair to go back up, all while paying a premium for lodging and meals. The Ikon pass destinations were wisely crafted and their lodging deals will make Ikon a serious competitor for the foreseeable future. 

What’s the Verdict?

As I- 70 west traffic was scooting along, on a fresh snow day, there was no way that I could tone down the smile on my face, but, a few miles before Georgetown, reality hit me, and I-70 turned into a parking lot.  The thought of 0-5 miles per hour, for the next 20 miles, was more than enough motivation to forget about Summit County and Vail, so I took US-40 exit to Winter Park.  The drive was easy and the conditions were great.

There’s no doubt that Vail Resorts will remain one of the best ski operators on the planet and I look for them to up their game, but it’s a tight race and Vail Resorts is more dependent on Interstate 70 traffic flowing, which seems to get worse and worse.

The upside to the I-70 gridlock is that American Airlines Group, Inc. (NYSE:AAL), Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings, Inc. (NYSE:UAL), which offer direct service into Eagle County Airport, the closest airport to Beaver Creek and Vail, from major markets including New York, LA, DC, Chicago, Atlanta, Dallas, Miami, Houston and Phoenix, are able to charge a premium for the convenience.  Travelers can expect to pay about 3 or 4 times as much for the direct flight, as opposed to flying into Denver and renting a car, or catching a shuttle, but an additional day of skiing while avoiding gridlock that’s so bad that most people wish they were only in their typical traffic jam back home, makes the premium a bargain.

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Key Executives​

Mr. Robert A. Katz – Chairman & CEO

Mr. Michael Z. Barkin – Exec. VP & CFO

Mr. David T. Shapiro- Exec. VP, Gen. Counsel & Sec.

Ms. Kirsten A. Lynch – Exec. VP & Chief Marketing Officer

Ms. Patricia A. Campbell – President of Mountain Division

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