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WIKI ANALYSIS
Vail Resorts owns 5 ski resorts in Colorado, California, and Nevada, along with a luxury hotel chain and several golf courses. However, 63% of Vail's 2009 revenue came from its ski resorts business.[1], which includes Vail Mountain, Breckenridge Mountain, and Keystone Resort - the first, second and fourth most visited ski resorts in the U.S. in 2009 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 - 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[3]). 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.[4]
Company Overview
The Vail Resorts portfolio includes four resorts in Colorado (Vail Mountain, Beaver Creek, Breckenridge, Keystone) and Heavenly, located in the Lake Tahoe area of California/Nevada. Each resort offers a full complement of recreational activities, including skiing, snowboarding, snowshoeing, sight-seeing, mountain biking, guided hiking, children’s activities and other recreational activities.
Business and Financial Metrics
Third Quarter 2010 Results[5]
During the third quarter of 2010, the mountain segment's net revenue increased by 8.3% total skier visitation improved by 4.6% for the third quarter as compared to the same period in the prior year. The Mountain segment reported EBITDA improved by 9.6% and the Resort segment reported EBITDA improved by 9.0% for the third quarter as compared to the same period in the prior year. Net income attributable to Vail Resorts, Inc. increased by 18.1% for the third quarter as compared to the same period in the prior year.
Lift ticket revenue increased 7.0%, with similar percentage increases in both lift revenue excluding season passes and season pass revenue. The company's Heavenly resort experienced a 9.8% increase in visitation, while overall visitation for the company's four Colorado resorts increased by 3.7%. Season pass holders skied approximately ten days on average during the 2009/2010 ski season, with the number of days skied per season pass being lower by a half day on average across all season pass products, despite record low snowfall at Colorado resorts during the early part of the season. Overall destination visitation increased by an estimated 7.9% during the third quarter, which favorably impacted total lift revenue. The ski school and retail/rental businesses experienced the largest revenue increases in the third quarter, up 11.7% and 14.3%, respectively, while dining revenue increased 6.6%.
Business Segments
Vail Resorts separates its operations into three segments: Mountain, Lodging and Real Estate.
Mountain (63% of 2009 revenue)[6]
The Company's Mountain segment derives revenue through the sale of lift tickets and season passes as well as a comprehensive offering of amenities available to guests, including ski and snowboard lessons, equipment rentals and retail merchandise sales, a variety of dining venues, private club operations and other recreational activities. In addition to providing extensive guest amenities, the Company also engages in, among other activities, the leasing out of the Company’s owned commercial space around its base resorts for restaurants and retail stores.
Lodging (18% of 2009 revenue)[6]
The Company's Lodging segment includes the following operations:
- RockResorts - a luxury hotel management company with a current portfolio of eight properties, including four Company-owned and four managed third-party owned resort hotels with locations in Colorado, Wyoming, New Mexico and St. Lucia, West Indies as well as six properties currently under development that the Company will manage;
- Six additional independently flagged Company-owned hotels, management of the Vail Marriott Mountain Resort & Spa (“Vail Marriott”), Mountain Thunder Lodge, Crystal Peak Lodge and Austria Haus Hotel and condominium management operations, all of which are in and around the Company's Colorado ski resorts
- GTLC - a summer destination resort with three resort properties in the Grand Teton National Park and the Jackson Hole Golf & Tennis Club (“JHG&TC”) near Jackson, Wyoming;
- CME - a resort ground transportation company;
- Five Company-owned resort golf courses in Colorado and one in Wyoming.
The Lodging segment currently includes approximately 3,900 owned and managed hotel and condominium rooms. The Company's resort hotels collectively offer a wide range of services to guests.
Real Estate (19% of 2009 revenue)[6]
The Company has extensive holdings of real property at its resorts throughout Summit and Eagle Counties in Colorado. The Company's real estate operations, through Vail Resorts Development Company, include the planning, oversight, infrastructure improvement, development, marketing and sale of the Company's real property holdings. In addition to the cash flow generated from real estate development sales, these development activities benefit the Company's Mountain and Lodging segments through:
- The creation of additional resort lodging and other resort related facilities and venues (primarily restaurants, spas, commercial space, private mountain clubs, skier services facilities and parking structures) which provide the Company with the opportunity to create new sources of recurring revenue, enhance the guest experience at the resort and expand the destination bed base;
- The ability to control the architectural themes of the Company's resorts; and
- The expansion of the Company's property management and commercial leasing operations.
Additionally, in order to facilitate the sale of real estate development projects, these projects have included the construction of resort assets benefiting the development, such as chairlifts, gondolas, ski trails or golf courses. While these improvements enhance the value of the real estate held for sale (for example, by providing ski-in/ski-out accessibility), they also benefit the Mountain and Lodging segments’ operations.
Operating Metrics
The 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
Portfolio
Vail Mountain[6]
Vail is the single most visited ski resort in the United States for the 2008/2009 ski season and the single largest ski mountain in the United States. Vail offers some of the most expansive and varied terrain with approximately 5,300 skiable acres including seven world renowned back bowls and the rustic Blue Sky Basin area of the resort.
Breckenridge Ski Resort[6]
Breckenridge is the second most visited ski resort in the United States for the 2008/2009 ski season and host of the highest chairlift in North America, the Imperial Express Super Chair, reaching 12,840 feet and offering above tree line expert terrain. Breckenridge is well known for its historic town, vibrant night-life and progressive and award-winning pipes and parks.
Keystone Resort[6]
Keystone is the fourth most visited ski resort in the United States for the 2008/2009 ski season and home to the highly renowned A51 Terrain Park as well as the largest area of night skiing in Colorado. Keystone also offers guests a unique skiing opportunity through guided snow cat ski tours accessing five bowls.
Beaver Creek Resort[6]
Beaver Creek is the seventh most visited ski resort in the United States for the 2008/2009 ski season. Beaver Creek is a European–style resort with multiple villages and also includes a world renowned children’s ski school program focused on providing a first-class experience with unique amenities such as a dedicated children’s gondola.
Heavenly Mountain Resort[6]
Heavenly is the ninth most visited ski resort in the United States for the 2008/2009 ski season and the second largest ski resort in the United States with over 4,800 skiable acres. Heavenly straddles the border of California and Nevada and offers spectacular views of Lake Tahoe. Heavenly boasts the largest snowmaking capacity in the Lake Tahoe region and offers night life including its proximity to several casinos.
Trends and Forces
Vail Resorts' revenues are affected by seasonality and changes in holiday timing
On average, 79% of total combined mountain and lodging revenue are earned during the Company’s fiscal second and third quarters.[7] 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.[8] 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.
Vail Resorts' revenues are affected by weather changes and the surrounding environment
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[9]. However, since up to 25%[10] of Vail's total lift revenue comes from season passes, some of the revenue source is slightly less vulnerable to weather changes (as visitors buy ski passes in advance).
Increased international visitors due to weak dollar could attract more visitors to Vail Resorts
Up to 64% of Vail Resorts' total visitors[11] are 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. 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.
Competition
Vail 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.
National
- Intrawest: Intrawest develops and manages destination resorts. These include about 10 ski resorts in North America, including Whistler Blackcomb in British Columbia, Copper Mountain in Colorado, and Stratton in Vermont. Intrawest also owns the a Golf and Beach Resort in Florida, a provider of helicopter access to ski and hiking trails, a luxury safari and tour operator; and about 15 golf courses. In 2006 Intrawest was taken private by private equity firm Fortress Investment Group in a deal worth about $2.8 billion.[12] It's Copper Mountain, Colorado ski resort in particular competes with Vail Resorts' Colorada property as it is located within the same region. Intrawest's other ski resorts also compete with Vail Resorts as they both attract national and international destination tourists (which in 2007 made up 64% of Vail Resorts' total visitors.[13]).
- Aspen Skiing Company: The Aspen Skiing Company operates the Aspen/Snowmass resort complex, comprising four ski areas near the town of Aspen, Colorado. In addition to skiing, the resorts offer accommodations, restaurants, and tours, as well as such summer activities as gondola rides, hiking, mountain biking, and naturalist programs. As a premier skiing destination in the U.S., Aspen competes with Vail Resorts both for regional visitors (as both are located in Colorado) as well as national and international visitors.[14]
Market Share
By revenue
The total US ski resorts market earned a revenue of US$2,375.6 million in 2007.[15] As Vail Resorts' Mountain segment (which comprises of the main ski resort operations) earned US$665.3 million in 2007, this represents a market share of up to 28%.
By skier visits
The 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.[16]
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[17].
References
- ↑ MTN 2007 10-K, Item 1, Page 1
- ↑ MTN 2007 10-K, Item 1, Page 1
- ↑ Wachovia Equity Research: Vail Resorts, p. 1
- ↑ Wachovia Equity Research: Vail Resorts, p. 13
- ↑ Vail Resorts Reports Fiscal 2010 Third Quarter Results
- ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 Vail Resorts 10-k 2009
- ↑ MTN 2007 10-K, Item 1A, Page 15
- ↑ MTN 2007 10-K, Item 1A, Page 15
- ↑ MTN 2007 10-K, Item 1A
- ↑ MTN 2007 10-K, Item 1, Page 5
- ↑ MTN 2007 10-K, Item 7, Page 34
- ↑ Intrawest website
- ↑ MTN 2007 10-K, Item 7, Page 34
- ↑ Hoovers Company Profile: Aspen Skiing Company
- ↑ [http://www.ibisworld.com IBISWorld Industry Reports: Ski Resorts U.S. Industry Report]
- ↑ MTN 2007 10-K, Item 1, Page 3
- ↑ MTN 2007 10-K, Item 1, Page 1
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