Investors remain cold toward Vail Resorts (MTN, Financial) as the ski resort operator missed top and bottom-line estimates in Q3 (Apr). This marks the fifth consecutive quarter without earnings or revenue upside. MTN also cut its FY24 (Jul) financial targets, projecting net income and comparable EBITDA well below previous forecasts. Consequently, shares are sliding rapidly, adding pressure to a stock already down nearly 25% over the past year.
- What continues causing MTN problems?
- Demand and weather issues persist. During the 2023/2024 ski season, total visits fell by 7.7% year-over-year, indicating a correction towards normalization after record visitation in the previous season.
- High interest rates and inflation have impacted demand, reducing vacation frequency and encouraging trade-down activities like fewer travel days and cheaper lodging. Competitors such as Marriott Vacations Worldwide (VAC, Financial) face similar headwinds but to a lesser degree.
- For example, Hyatt Hotels (H, Financial) saw a 4% year-over-year increase in all-inclusive resort bookings in the Americas in Q1. Travel platforms like Booking Holdings (BKNG, Financial) and Airbnb (ABNB, Financial) are still delivering solid results despite normalizing demand dynamics.
- Macroeconomic troubles are creating a dichotomy between MTN's lackluster results and other travel sites' relatively positive numbers. Inflation and high interest rates are driving value-seeking behavior, prompting travelers to choose between multiple lower-priced vacations or one higher-priced vacation. MTN's ticket prices offer a narrower range than many competitors.
- MTN is also affected by weather patterns. Snowfall during the 2023/2024 ski season was about 28% lower than the previous season, especially in the Eastern U.S. Even when weather conditions improved, ticket visitation did not return to typical levels, reducing the potential new pass holders in the spring.
- On a positive note, despite challenges in Q3, MTN grew resort net revenues and EBITDA to record levels, supported by its advanced commitment strategy and sustained growth in ancillary spending across its ski school, dining, and rental businesses. MTN also saw improving results in March and April, particularly benefiting Western North American resorts.
MTN's Q3 report was disappointing, with weather and macroeconomic headwinds creating significant hurdles. However, the company is beginning to look attractive after a lengthy correction. Vail Resorts operates several ski resorts worldwide, deriving revenue from passes, dining, and rentals. Its global positioning offers demographic and seasonal diversification. While the current ski season has been challenging, the pandemic created a higher foundation for skiing, setting MTN up for long-term success.
