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February 6, 2012
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Despite snow woes, Vail Resorts prospering

Editor's note: This story has been revised from an earlier version.

EAGLE COUNTY - This is a down snow season just about everywhere in North America, but one analyst still has Vail Resorts on his "buy" list.

Vail Resorts' stock closed at $44.35 per share Friday. That price was closer to the stock's 52-week high than its low over the same period.

Will Marks, an senior analyst for the resort and hotel industries with JMP Securities of San Francisco, said the market seems to have Vail Resorts valued "correctly" at the moment, despite a disappointing season for snow. In fact, he said, he believes the company's stock should trade higher over the course of this year, so he's advising investors to buy and hold.

The reason, he said, is because Vail Resorts is doing a number of things well.

At the top of that list is the company's season pass programs. Those programs - including the Epic Pass - now account for 35 percent of the company's lift ticket revenue.

"That means the company knows there will be some revenue from those sales," Marks said.

While the company might take a hit on next year's pass sales if more snow doesn't come, especially if there's not a lot of fresh snow for Presidents Day weekend, Marks said the company is in strong enough position to ride out lower pass sales for more than one season to come.

That's because the company has been conservative with its cash, while still putting its money to work with its acquisition of the Northstar and Heavenly resorts at a good price.

The company has also diversified away from skiing with by expanding its retail operations.

"They own over 130 retail stores now," Marks said. "The company also now owns the most-visited ski-related website, and a couple of years ago purchased Colorado Mountain Express."

Vail Resorts has also wound down its real estate division, Marks said. And, as other developers have sold at "fire sale" prices over the last couple of years, Vail Resorts has been selling units "at about market level," Marks said

The diversity in its revenue streams is in stark contrast to other ski resorts, which lean heavily on lift ticket sales. Many ski resorts also have to rely on revenue from one mountain.

Jerry Jones, an Avon-based ski industry consultant, agreed that Vail Resorts is doing a lot right. Speaking by cell phone on the way back from a trip to Crested Butte, Jones said Vail Resorts has several advantages that others in the ski industry don't.

The biggest, in Jones's mind, is the diversity of experiences available to Colorado skiers. Visitors can stay in one place and ski either Vail or Beaver Creek. People skiing Summit County are able to pick between Breckenridge, Keystone and Arapahoe Basin. Epic Pass holders can ski any of those mountains easily.

Vail Resorts' diversity also brings in revenue to the company even if people aren't skiing. Marks said Vail Resorts now gets about half of its customers' spending from off-mountain sources.

Vail Resorts' size, and its ability to put an attractive price on the Epic Pass, has also put pressure on other resorts. Marks said that California's Squaw Valley and Alpine Meadows resorts have cut their lift ticket prices in response to Epic Pass pricing.

Ultimately, though, skiers need snow.

"I'm sure all (Vail Resorts') profit centers have been affected, so there's some concern," Jones said. "At the same time, nothing has changed with the company or the people running it. They're going to continue to do well."

Business Editor Scott N. Miller can be reached at 970-748-2930 or smiller@vaildaily.com.


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The VailDaily Updated Feb 10, 2012 12:30PM Published Feb 6, 2012 01:25AM Copyright 2012 The VailDaily. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.