Vail Resorts reports strong earnings, credits results to Northstar-at-Tahoe buy
VAIL, Colo. andamp;#8212; Early season snowfall, an improving economy and the newly acquired Northstar-at-Tahoe resort helped add to Vail Resorts’ success during the second quarter of the fiscal year.Vail Resorts Chief Executive Officer Rob Katz and Chief Financial Officer Jeff Jones spent about an hour Thursday morning hosting a conference call that outlined the company’s second quarter earnings. The second quarter, which begins Nov. 1 and ends Jan. 31, is the first quarter of the fiscal year that includes the ski season.While increases in skier visits reflect on an improving economy, Katz said there has been andamp;#8220;meaningful improvementandamp;#8221; in the amount of money each guest is spending per visit.andamp;#8220;We continue to see a strong rebound in guest spending,andamp;#8221; Katz said. andamp;#8220;Revenue is outpacing growth in lift ticket revenue and visitation.andamp;#8221;The increased spending is evidenced by jumps in everything from ski school revenue to dining revenue to retail revenue to lift revenue.Overall, the company’s mountain-related earnings were up $57.3 million over the same period last year including earnings at Northstar-at-Tahoe, which accounted for $30.1 million of the revenue.
Vail Resorts spent in the neighborhood of $80 million in the 2010 fiscal year on resort upgrades, and Katz said Thursday the company plans to spend $83 million to $93 million in resort upgrades this year, not including the $30 million or so it plans to spend just at Northstar-at-Tahoe.Katz said Vail Resorts’ strategy is to continually reinvest in its resorts in order to offer andamp;#8220;the highest quality experience to our guests.andamp;#8221;He said the company is experiencing its highest guest satisfaction scores in company history this season, which he relates back to that continued investment.andamp;#8220;We intend to continue to build on that success,andamp;#8221; Katz said.Locally, Vail Resorts intends to build that success by building a new fine dining restaurant at Mid-Vail this summer and by upgrading the Rose Bowl chair lift at Beaver Creek. The upgraded lift will also open up more terrain in Rose Bowl, since the resort plans to increase grooming in that area, as well.Katz said Mid-Vail restaurant will be a nice addition for the andamp;#8220;high end client we’re trying to bring to Vail.andamp;#8221;The continued upgrades each year is consistent with the company’s operating model, which Katz said is to have world-class resorts. The company also works hard to offer exceptional guest experiences, Katz said, and its strategy is certainly to charge for that experience.Katz pointed to the fact that there are no new ski resorts being built anywhere in the country, putting Vail Resorts in a unique position because the company is constantly remodeling, rebuilding, redeveloping and upgrading, ultimately offering the newest products in the industry each year.Katz said as the company continues to create that guest loyalty, it will continue to charge guests for it. He said that while there’s no question the company will discount, anticipate and react to market conditions and the economy over time, andamp;#8220;we do see ourselves turning more to a more traditional approach to our long-term pricing strategy.”
The company increased lift ticket prices this season and has seen those increases help revenue, with lift revenue for the quarter up $6.9 million, excluding Northstar-at-Tahoe. The strategy is also part of a larger company strategy to encourage visitors to book their skiing in advance, which is why lift tickets bought a week ahead of time are cheaper than tickets bought at the ticket window.Real estate revenue for the current fiscal year is up, even though real estate reported EBITDA andamp;#8212; earnings before interest, taxes, depreciation and amortization andamp;#8212; totaled a loss of $200,000 for the quarter because of various ongoing administrative costs, Jones said.Real estate revenue included six closings at the Ritz Carlton Residences Vail, with an average sale price of $2.9 million, as well as an additional $6.2 million in revenue from deposits from buyers who defaulted on units under contract.The company, while happy with its second quarter results and more confident about economic conditions, isn’t adjusting the estimates, or guidance, it made last September. The company is cautious about third quarter earnings because of the unusually late Easter this year, which could affect visitation and revenue.The guidance calls for a resort reported EBITDA in the range of $211 million to $221 million, a 13 percent to 19 percent increase over last year. Real estate reported EBITDA is expected to be anywhere from negative $10 million to break even, Katz said.
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