Vail Resorts posts ‘modest declines’ early in ski season
BROOMFIELD, Colorado – Given Mother Nature’s stubborn refusal to provide snow during the first months of the ski season, it would be easy to assume Vail Resorts’ CEO is tuning to the blues station on his satellite radio.
Katz and company co-president Jeff Jones Tuesday provided a report about the company’s performance during the second quarter of its 2012 fiscal year – December, January and February. And the news wasn’t entirely bad.
In fact, Katz announced that Vail Resorts’ board of directors had recently approved an increase in shareholder dividend, up to 18.75 cents per share.
“We’ve made a commitment to return to shareholders,” Katz said. “This year has given us more confidence in our business.”
That confidence comes despite what Katz called a “worst case” scenario regarding snowfall. While snowfall was thin in Colorado through December and January, resorts in the Tahoe area received no measurable snowfall during December.
But, Jones said, Vail Resorts has posted increases in season pass revenue this fiscal year, even as skier visits have dropped. Those declines have been modest in Colorado – about 5 percent – and more pronounced at the company’s California resorts, with Tahoe’s skier visits dropping more than 30 percent from the same period last season.
Katz said recent snowfall has brought more skiers, but added that he doesn’t expect the company to make up its early-season shortfall over the rest of the fiscal year.
Despite the drop in visitors, and an increase in expenses – snowmaking alone cost the company $2.2 million more this season than the same period last season – Jones said the company remains “well positioned with the high-end consumer.”
Vail Resorts’ “average daily rate” at company-owned lodges has increased by nearly 14 percent, Katz said, and dining revenue is up by nearly 10 percent. And, while overall skier visits have declined, the number of international guests has increased.
Moving through the rest of the company’s fiscal year, Katz said he’s excited about Vail Resorts’ pending acquisition of Kirkwood, a high-elevation resort near Tahoe and Northstar.
Katz called Kirkwood a “unique” resort.
“It has the most annual snowfall of any mountain in the Tahoe region,” Katz said.
While Kirkwood is in the same neighborhood as other company-owned resorts in California, Katz said Vail Resorts is taking a “more global” approach to its business.
“It’s about how to add value,” Katz said.
When the company does acquire property outside North America, Katz said the company’s approach will still be “methodical.”
Katz also talked about the company’s capital spending plan for this fiscal year, the centerpiece of which is a new gondola from Vail Village to Mid-Vail. The company will spend between $75 million and $85 million on those improvements, down from about $125 million in capital spending in the 2011 fiscal year.
During a question-and-answer period with analysts, Will Marks of JMP Securities asked about the luxury real estate market in Colorado.
Jones said the markets in Vail and Breckenridge have improved.
“The feel is pretty good in both markets,” Jones said. “We’re well on our way to hitting our goals. … That speaks well to the luxury component coming back.”
But don’t expect the company to start any new real estate projects any time soon. Jones said he expects Ever Vail to have its approvals in place by the time economic conditions permit, but there are “no plans to launch anything now,” he said.
While company officials put a happy face on a bad snow year, a pre-call report from Marks stated he continues to expect Vail Resorts’ stock to outperform the market, and has issued a price target of $57 per share.
And, on a day when the Dow Jones Industrial Average dropped more than 200 points, Vail Resorts’ stock was up 1.79, to $43.27 per share.
Business Editor Scott N. Miller can be reached at 970-748-2930 or firstname.lastname@example.org.
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