Vail Resorts presents plans to investors as stock climbs from one-year low
Annual Investor Day event gives Wall Street analysts a look at the company that owns Vail Mountain and 39 other ski areas
Vail Resorts on Tuesday issued projections to the stock market analysts who have been assigned to follow the company in its annual Investor Day presentation.
The presentation comes at about the midway point of Vail Resorts’ third fiscal quarter of 2022, a quarter in which analysts have been mostly favorable, despite challenges following the bad press the company received for being understaffed at many of its North American ski resorts during the 2021-22 season. The staffing challenges contributed to guest dissatisfaction, Vail Resorts has conceded.
The company’s stock (NYSE: MTN) plunged following the negative attention, reaching a one-year low of $221 per share on March 7 after the stock hit $376 at one point in November.
MTN has rebounded somewhat in recent days, closing at $263 on Tuesday; a March 15 announcement detailing how the company plans to staff up for next season, along with the launch of Vail Resorts’ Epic Pass for next season, has come as welcome news to investors.
At Tuesday’s Investor Day event, analysts were briefed on the company’s future plans, including what Vail Resorts calls its “subscription” strategy of obtaining advance commitment from pre-purchased passes, along with the company’s commitment to reinvestment in its business model.
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Overall, “there was not an overabundance of new information,” noted Patrick Scholes with Truist Securities “as most of the presentation was a continuation of themes provided in previous investor days.”
Truist published a report following the event on Tuesday, in which Scholes pointed out that Vail Resorts is now much more aware of the challenges it will have in getting its resorts to full capacity ahead of next season.
“After listening to today’s presentation, it seems clearer to us that MTN was partly a victim of their own success as they noted 2021/2022 pass sales well exceed their own expectations and subsequently were caught flat-footed when it came to servicing these extra pass holders,” Scholes wrote. “The good news for MTN is that they have 8 months to work on being properly staffed for next ski season and unlike a year ago are obviously far more aware of the challenges with staffing.”
Capacities and capabilities
Fiscal year 2022 has, so far, demonstrated the strength of Vail Resorts’ business model in obtaining advance commitment via pre-purchased passes, the company told investors.
That business model prompted “shifts in guest behavior,” according to Vail Resorts, one of which went well noticed at the company’s namesake resort in Vail.
“Our strategy utilizes excess capacity,” Vail Resorts told investors.
With the majority of ski season comprised of off-peak days, “significant excess capacity exists at our resorts during these off-peak days,” according to Vail Resorts’ presentation. “Most of our resorts utilized excess capacity in FY22, growing visitation Monday through Friday and non-holidays.”
In Vail, the parking garages filled often on weekdays in January and February, a trend that was once more common Friday through Sunday. On two separate Mondays, a Wednesday and two Thursdays in February, the town of Vail was forced to allow free parking on the South Frontage Road to allow the excess vehicles in town.
But while the town of Vail has found ways to accommodate the excess vehicles, not all the roads surrounding Vail Resorts properties are as capable in that regard.
Scholes said those problems were not addressed on Tuesday.
“Infrastructure issues such as long traffic jams to get to some of MTN’s resorts and lack of parking really have not been addressed,” according to Tuesday’s Truist Securities report. “Such issues, amongst others, have drawn significant negative media attention (both traditional and social media). Arguably while there is only so much MTN can control, at least without materially jacking-up the pass price (is that the solution? Perhaps requiring reservations like some other mountains are doing?), as it relates to crowded mountain access roads and the like, travel times (traffic jams) contribute to the overall skier experience; We would like to see MTN more proactively address such infrastructure issues.”
Acquisitions and assurances
Vail Resorts’ commitment to reinvest in its business model includes not only a larger than ordinary capital plan to install lifts (including a new high-speed quad at Vail), it also includes a commitment to invest in its workforce, which company leaders have admitted was lacking in 2021-22.
In addition to those spending items, as of March 30 Vail Resorts will also increase its quarterly cash dividend to $1.91 per share, the highest it has ever been. (Prior to the pandemic, Vail Resorts’ dividend reached $1.76 per share, which was the previous high.)
In the company’s March 15 earnings report, Chris Woronka with Deutsche Bank asked if there are any other plans for the company’s excess cash on hand.
“You’ve put through a nice dividend increase this quarter, you’ve given us your capital plan which is above your historical average, but we think you’re still going to generate a lot of cash and have cash on the balance sheet,” Woronka pointed out in asking the future plans of Vail Resorts officials.
Vail Resorts acquired three new properties with the purchase of Pennsylvania ski areas Seven Springs, Hidden Valley and Laurel Mountain in December, and Vail Resorts COO Michael Barkin said the company will continue to focus its capital allocation where it has in the past, and that does include more acquisitions.
Barkin said acquisitions are part of a continuous strategy for the company, which is always interested in “finding opportunities to continue to expand the network.”
In Vail Resorts’ Investor Day presentation Tuesday, the company said it will target “high impact destination resorts and very selective regional ski areas that enhance network for guests.”
The specific criteria Vail Resorts is examining in targeting new resorts includes “location/accessibility, brand, network connectivity, guest demographics, guest experience, absolute price and purchase multiple, preference for operational control, utilize select pass partnerships where additive to our network,” according to Tuesday’s presentation.
Truist Securities, in a February opinion, said before Vail Resorts starts acquiring more resorts, “we would like to see it get the operational issues straightened out, especially at its more recently acquired resorts.”
Scholes, on Tuesday, said investors will take a wait-and-see approach to next season when it comes to staffing.
“Realistically,” Scholes wrote on Tuesday, “despite MTN’s assurances today, it will not be until early-mid December, once the ski season gets underway, that we will get a good indication if MTN’s resorts will be properly staffed.”