VR earnings "robust’
“It’s simply a fabulous start,” the company’s chief executive officer and chairman, Adam Aron, said Wednesday. “It’s a robust start to the ski season. We’re about as close to being euphoric as we can be.”
The three-tiered resort company comprised of interdependent mountain operations, lodging and real estate divisions on Wednesday announced a quarterly loss of $24.8 million – less than projected – on revenues of $34.4 million. The loss beat the projected 71-cents-per-share loss by 17 cents per share, Aron said, based on strong real estate sales and strengthening lodging operations.
In the first quarter last year, Vail Resorts posted a $26.1 million loss.
A combination of better rates, more visitors and reduced expenses threw more money to the bottom line of resort operations, which posted a $30 million loss, $4 million less than anticipated, Aron said.
Early reservations activity at the ski resorts is encouraging, Aron added, and year-to-date bookings through Dec. 7 are up 13 percent over last year’s terrorism-tinged numbers.
Also encouraging, Aron said, is the fact that visitors are booking closer to their departure time than in the past. More and more people are using the Internet to book their ski vacations, he added, and those reservations are up 122 percent over last year.
“The good news may only be beginning,” he said.
Vail Resorts owns ski areas at Vail, Beaver Creek, Breckenridge, Keystone in Colorado and Heavenly in California, as well as lodging operations countrywide that include the luxury Rockresorts and various other slopeside properties.
Through Dec. 11, ski mountains operated by Vail Resorts hosted 110,000 more skiers this season than last, Aron said, and all of Vail Resorts’ Colorado ski properties experienced record opening-weekend crowds.
Vail Mountain, for example, opened Nov. 16 with a record amount of early-season terrain and snow, with a record 10,900 skiers and snowboarders hitting the slopes. The previous best was less than 5,000.
“The good visitation is not only due to good snow but also to various improvements at the resorts,” Aron said. “Boy, do we have momentum.”
That momentum has allowed the ski company to collect nearly 25 percent of the season’s lift-ticket revenue in the first 8 percent of the season, Aron said.
“We’re generating a lot of cash,” he said.
Lodging operations broke even for the first quarter, Aron said, while mountain operations lost $5.8 million.
Ski pass sales up
Revenue from preseason sales of season passes in Colorado is up 15 percent over last year. Including Heavenly, where pass sales this year tripled last year’s, preseason pass sales are up 22 percent over last year.
“We’re capturing more of the in-Colorado Front Range market,” Aron said.
Aron tempered, however, what he called “unabashedly good news” with a caveat that the national economy is still struggling and a war with Iraq could negatively impact business. Another unknown is the bankruptcy of United Airlines, the largest air carrier in Colorado.
“The U.S. is still experiencing tough times in the travel and lodging industry,” he said. “At this point I would have to say the momentum is in our favor.”
Aron, a former vice president of marketing at United, said the bankruptcy could cause the airline to cut costs and reduce ticket prices. That would be good for travelers to Colorado.
Prices for lodging, real estate and resort services are up virtually across the board, he said. At the Vail Ski School, a full-day private lesson with lift ticket now costs $600. Lodging has better occupancy rates and average daily rates. At Rockresorts, occupancy is up to 62 percent, and average daily rates were $162, up $17 for the quarter. Occupancies of non-Rockresorts properties owned by the company was 56 percent, with average daily room rates of $131, up $1.
Ski-pass pricing saw an 11 percent increase, and lift-ticket pricing at Vail and Beaver Creek is up 6 percent and 3 percent at Keystone and Breckenridge, Aron said.
Three luxury, 2,500-square-foot condominiums atop the Marriott in Lionshead recently sold for a record $900 per square foot, Aron said.
Part of the cost-cutting implemented last month was a reduction of 100 positions companywide. President Andy Daly and Executive Vice President of Corporate Affairs Porter Wharton III left the company, and some resort operations were consolidated. Severance payout over the first quarter totalled $2.5 million, Aron said.
Last year, the company spent $200 million on acquiring Heavenly, the Marriott Mountain Resort at Vail and the former Ritz-Carlton, Rancho Mirage in California. Vail Resorts now has $602 million in debt.
Aron acknowledged the company may work to “de-leverage,” or pay down that debt.
“We could de-lever our current position somewhat,” he said, adding that it is under consideration.
“We continue to be disciplined, smart and opportunistic buyers. If a wonderful ski resort would come on the market we would chase it in a second,” he said. “The same with hotels, too.”
“We always use other people’s money (for investing),” added Aron. “It’s the best way to live.”
But the company invested $110 million into the Red Sky Ranch golf course community in Wolcott. Sales of homes and lots there already have generated $80 million, Aron said, even without completion of the second golf course.
“We should have a blowout success there.”
But upgrades and additions to resort lodging will begin to hit the bottom line, Aron said. The Marriott’s $45 million remodeling will be done in time for Christmas and the Ritz-Carlton, Bachelor Gulch opened last month. The Snake River Lodge and Spa was completed late last winter.
Earlier this year, Vail Resorts examined purchasing a luxury hotel in Cabo San Lucas, Mexico, but decided against it.
The company’s cash-heavy second quarter will end Jan. 31, with the earnings report expected approximately 45 days later.
Vail Resorts stock (MTN-NYSE) closed Wednesday at 16.87, up 2.8 percent.
Cliff Thompson can be reached at 949-0555 ext 450 or email@example.com.