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It’s no secret that ski resort company Vail Resorts (NYSE: MTN) typically has the summertime blues. Vail is steadily growing its “Epic Experience” for guests visiting its resorts during the summer, but as a seasonal company, summer revenue always lags.
On Monday, Vail reported its fourth-quarter and full fiscal year 2015 earnings. For the fourth quarter, the company posted a net loss of $1.92 a share on revenue of $162 million. The consensus analyst estimate had called for a loss of $1.88 a share on revenue of $152 million.
During the same three-month period in fiscal year 2014, Vail Resorts reported a net loss of $2.08 per share on revenue of $135.5 million.
Vail Resorts stock closed down 4.1% on Monday after the earnings miss.
Ramping Up for a Strong 2015-2016 Ski Season
However, Vail predicts a strong winter season. Season passes, according to Vail CEO Rob Katz, are a key element of the business to build customer loyalty. The passes offer the best value in the industry, according to Katz.
Season pass sales for the upcoming 2015-2016 season are strong. Pass sales are up 16% in volume and 22% in dollar value compared to the same period last year.
Vail Resorts is North America’s largest resort operator, with a network of 11 resorts in Colorado, California and Utah.
In September 2014, Vail announced the acquisition of Park City Resort in Utah and unveiled an ambitious plan to connect Park City Resort with Canyons Resort in Park City. The plan, according to the earnings release, is on schedule and on budget.
When the Park City slopes open this season, it will become the biggest ski resort in the U.S.
Bad Snow Didn’t Keep Guests Away
California had its worst winter on record in terms snowfall this past season. Vail operates three resorts in the state: Northstar at Tahoe, Kirkwood and Heavenly. The company is often at the whim of the weather, but last season it proved its ability to withstand poor conditions, reporting strong revenue gains for the 2015 fiscal year.
Colorado also had below average snow reports, but it was still some of the best snow conditions experienced in the West for the 2014-2015 season. In Utah, conditions were less desirable in the late season, with a lot of rainfall when guests were still hoping for snow in the spring.
Despite the poor weather conditions at its resorts, CEO Rob Katz reported, “We achieved another year of record-breaking Resort revenue and Resort Reported EBITDA.”
Vail Resorts reported $1.4 billion in revenue for fiscal year 2015, up 11.6% year-over-year. Nearly all of the 2015 revenue came from on-mountain and lodging operations. Vail’s EBITDA (earnings before interest, taxes, depreciation and amortization) from lodging and mountain operations climbed 36%. Margins for mountain revenue increased 25.6% this fiscal year.
While total skier visitation increased 6.5% for the 2014-2015 season, that was almost entirely driven by the Park City acquisition. The new resort offset the 16.4% decline in skier visitation in Tahoe. Colorado resorts saw a gain, but many of these were California guests going to Colorado for better conditions.
Overall, the strong earnings are promising for the company that has suffered in the past from poor weather conditions.
Bad Timing for First International Acquisition
In June 2015, Vail closed on its first international mountain resort: Perisher in Australia, the largest ski resort in the country. However, the strengthening dollar is making it difficult to draw Australians to American resorts.
A key reason for the $135 million Perisher acquisition was to attract Australian guests to
Vail’s U.S.-based resorts by offering three free days of skiing on the passes sold for Perisher. International guests are highly sought after by U.S. resorts, as they typically spend a longer amount of time at the resorts than American vacationers.
The Australian ski season is typically from June to October. The combined passes give guests the perfect opportunity to take ski vacations year-round at Vail-owned mountains both in their own country and in the U.S.
However, the rising dollar value has dampened enthusiasm for guests to cross oceans to ski abroad. The number of Australian reservations for lodging is lower than Vail had hoped for the upcoming ski season.
At the flagship Vail Ski Resort in Colorado, 12-15% of the guests are international, making it the resort with the most guests from overseas. As the dollar continues to strengthen, this will be the resort most impacted.
Yet despite the fourth-quarter bottom line miss, future earnings should be bolstered by the Park City Resort acquisition. The strong outlook makes Vail Resorts stock one to hold on to.
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