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Vail Resorts (MTN)Stock (Hospitality Industry, Resorts & Casinos Industry)
 Vail Resorts owns 5 ski resorts in Colorado, California, and Nevada, along with a luxury hotel chain and several golf courses. However, 71% of Vail's 2007 revenue came from its ski resorts business.[1], which includes Breckenridge Mountain, Vail Mountain and Keystone Resort - the first, second and third most visited ski resorts in the U.S. in 2007 respectively.[2]. Since such a large percentage of revenues is tied to skiing, Vail's business is seasonal as its resorts are busy from November to March but relatively empty in the summer months. Business is also impacted by outside factors such as the weather - unseasonably warm winters hurt revenues (as happened in 2007 when visitation at Vail's Heavenly Resort decreased 12% partly due to a 40% reduction in snowfall for the region compared to 2006)[3] , and changes in holiday schedules - such as when Christmas falls in the middle of a work week, limiting vacation time. Although the resort industry as a whole is affected by the general economic slowdown and changes in consumer spending, Vail Resorts is less vulnerable as it mainly caters to a niche of high-end consumers (the average household income for visitors of Vail's ski resorts is $175,000[4]). Also, research has shown little correlation between changes in economic variables (such as U.S. GDP growth and the income of the top 20% of U.S. households) and skier visits to U.S. resorts.[5]
[edit] Business Financials[edit] Business SegmentsVail Resorts separates its operations into three segments: Mountain, Lodging and Real Estate.    [edit] MountainVail's Moutain segment contributed 71% of total revenue in 2007.[7]The Mountain segment earns revenue through the sale of lift tickets and amenities to guests, including ski and snowboard lessons, retail and equipment rental, restaurants, and private clubs. The company also leases out owned commercial space around its base resorts for restaurants and retail stores. Ski ticket sales made up 43% of the segment's revenue in 2007 and 31% of Vail's total revenues[8]. [edit] LodgingThe Lodging segment includes approximately 3,900 owned and managed hotel and apartment rooms and six golf courses. Revenues in this segment are earned from rooms, as well as sales of food and beverages in the hotels and additional fees from the golf courses. The company owns and manages seven luxury hotels under its RockResorts brand, located in Colorado, North Carolina, and Wyoming. It also owns twelve hotels and apartments located close to the company's ski resorts in Colorado and golf courses in Wyoming. [edit] Real EstateVail Resorts holds real estate at its resorts throughout Colorado and Wyoming. The company earns revenue through the development of condominium projects, house sales to individual home purchasers, and the sale of land to third-party developers.[9] To further diversify its business and have additional sources of growth, Vail Reports is growing its real estate sector, with new developments and projects coming up in 2008. These are mainly luxury hotels and spaces including the Ritz Carlton Residences and the Crystal Peak Lodge (ski residences).[10]
[edit] Business PerformanceBoth Vail's total revenue and operating income have grown steadily from 2003 to 2007. In the past four years, revenue has grown at an average of 7%, while operating income has grown an average of 38%[11]. This is due to an an improving operating margin, which grew from 4.8% in 2003 to 13.6% in 2007. Operating income in 2007 increased by $22.9 million, or 22%, from 2006[6]. This is mainly due to an increase in season pass sales, as well as an increase in the absolute price of Vail's individual lift ticket and pass products. In addition, rising revenue from Vail's ski schools was caused by both higher prices and more participation. Lodging revenue also increased $11.9 million, or 7.9%.[12], from 2006 to 2007 as the company charged higher room fees and saw more destination visitors (which increased from 60% to 64% in 2007 as a percentage of total visitors).[13]), who typically stay longer at the ski resorts. [edit] Operating MetricsThe main operating metrics for the ski resort and lodging sectors are: Skier visits: the number of people utilizing a ticket or pass to access a mountain resort for any part of one day ETP: Effective ticket price, which is lift ticket revenue divided by total skier visits ADR: Average daily rates, which is total room revenue divided by the number of occupied rooms during the respective periods RevPAR: Revenue per available room, which is total room revenue divided by the number of rooms that are available to guests during the respective periods The operating metrics for Vail Resorts from 2003 to 2007 are as follows[14]:
From 2006 to 2007, total amount of skier visits decreased by 1.1%. However, this effect on revenue was more than offset by the increase in price, which rose 10.3% from 2006 to 2007[15]. Vail Resorts' hotels also saw an increase in both ADR and RevPAR from 2006 to 2007, which grew 7.2% and 7.8% respectively[16]. [edit] Trends and Forces[edit] Vail Resorts' revenues are affected by seasonality and changes in holiday timingIn 2007, 79% of total combined mountain and lodging revenue was earned during the Company’s fiscal second and third quarters.[17] The mountain and lodging operations are seasonal in nature. In particular, revenue and profits for the Vail's mountain and most of its lodging operations are substantially lower and historically result in losses from late spring to late fall.[18] While peak operating seasons for Vail's golf courses occur during the summer months, the revenue and profits generated by these operations are not sufficient to offset Vail's off-season losses from its mountain operations. As Vail's revenues fluctuate from quarter to quarter due to seasonal effects, the timing of major holidays can also impact vacation patterns and visitation at the company's ski resorts. Thus operating results for any quarter at Vail are not necessarily indicative of the actual fiscal year's performance. [edit] Vail Resorts' revenues are affected by weather changes and the surrounding environmentIn 2007, Vail's visitation decreased 12% at the Heavenly Resort partly due to a 40% reduction in snowfall for the region in 2007 compared to 2006. Visitation at the Vail's Colorado resorts on the other hand was up 8% in 2006 compared to 2005 due in part to the strong early season snowfall.[19] However, since up to 25%[20] of Vail's total lift revenue in 2007 comes from season passes, some of the revenue source is slightly less vulnerable to weather changes (as visitors buy ski passes in advance). The ski industry as a whole is affected by snowfall levels and weather changes. Lower snowfall levels lead to decreased visitations to ski resorts, and a warmer winter in general will shorten the skiing season and increase snowmaking costs, leading to decreased income. Excessive natural snowfall on the other hand will increase the costs of maintaining trails and also make it more difficult for visitors to get to the ski resorts[21]. Indeed [edit] Increased international visitors due to weak dollar could attract more visitors to Vail ResortsUp to 64% of Vail Resorts' total visitors in 2007[22] were destination visitors (visitors who plan their trip in advance ahead and come especially for the ski resort), which includes both national and international visitors. As the US dollar continues to weaken against other major currencies, more tourists are coming to U.S. as it is relatively cheaper. Indeed, during the first four months of 2008, more than 15 million foreign travelers visited the United States and spent $11.6 billion in the month of April alone - a 21% increase from April 2007 - according to the U.S. Department of Commerce[23]. As Vail's Colorado resorts are located close to the Denver International Airport and the Heavenly resort is close to both Reno/Tahoe International Airport and Sacramento International Airport, this presents an opportunity for Vail to attract more visitors to its resorts. [edit] CompetitionVail Resorts competes with both regional ski resorts and national destination resorts. While there are many small, fragmented regional ski resorts, there are few national ski resort chains due to the significant barriers to entry and high cost of maintaining the ski slopes. [edit] National
[edit] Market Share[edit] By revenueThe total US ski resorts market earned a revenue of US$2,375.6 million in 2007.[27] As Vail Resorts' Mountain segment (which comprises of the main ski resort operations) earned US$665.3 million in 2007[6], this represents a market share of up to 28%. [edit] By skier visitsThe U.S. had a total of 55.1 million skier visits in 2007. As Vail Resorts reported total skier visits in 2007 as 6.219 million, this represents a 11.3% market share.[28] In particular, Colorado ski resorts recorded a total of 12.6 million skier visits in 2007. As Vail's four Colorado ski resorts had a total of 5.3 million skier visits, this represents 42.3% of Colorado's market share. Vail's California-based Heavenly resort had approximately 900,000 skier visits in 2007, capturing approximately 14.0% of California's and Nevada's 6.4 million total skier visits in 2007[29].
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