Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vail Resorts Inc (MTN, Financial) achieved record levels of resort net revenue and resort reported EBITDA in the third quarter.
- The company saw improved results in March and April, particularly in Western North American resorts.
- Strong growth in ancillary spending per skier visit across ski school, dining, and rental businesses.
- The Season Pass program provided stability despite weather-related challenges.
- The company maintains a strong balance sheet with approximately $1.3 billion in total cash and revolver availability.
Negative Points
- Total skier visits declined 7.7% compared to the prior year period.
- Lift ticket visitation did not return to typical historical guest behavior, particularly at Whistler Blackcomb.
- Net income guidance for fiscal 2024 was reduced due to lower-than-expected lift ticket visitation and lowered expectations for Australian resorts.
- The acquisition of Crans-Montana is expected to contribute negative $12 million to resort reported EBITDA for fiscal 2024.
- Pass product sales for the upcoming 2024-2025 North American ski season decreased approximately 5% in units.
Q & A Highlights
Q: Kirsten, Angela, just wondering if we could dig a little deeper on the past behavior that you saw. Specifically wondering if you could just give us a little bit of insight on what feedback are you hearing from the guests that are in that kind of new pass cohort, and in the sort of, I guess, younger cohort that didn't renew this period.
A: Yes, thank you, Shaun. I think what we see with our renewing pass holders is different behavior depending on their tenure. Very pleased to see that our most loyal and tenured renewing pass holders, those that are three years or more, had strong unit growth. When we look at the renewals for those lower-tenured pass holders, first time pass holders or second year pass holders, as I mentioned, they did demonstrate lower renewal rates. This particular audience, we tend to see, can be impacted by conditions in their decision-making, and the timing of when they renew because they had been, in many cases, accustomed to making their decision about their ski vacations closer to the season.
Q: You mentioned in the release a little bit around post-COVID normalization, right, and so a lot of the activity here feels like it was connected to, especially, with the new pass holders around visitation, you didn't have that base of customers to sell to, and obviously, a lot of that traces back to weather. But the post-COVID normalization piece is a different factor, so could you just elaborate on what you mean by that?
A: Yes, thanks for the question, Shaun. We do believe this past season overall that conditions and the post-COVID normalization are both material factors impacting this season and we can see that when we look at the conditions and the guest behavior when conditions were challenging, versus when conditions improved, and where results improved or did not improve, or the behavior was there. When we look at the impact on spring pass sales, as I mentioned, the single biggest impact on our spring pass sales is new pass holders, and that is driven by lift ticket guests. And that behavior or that size of that audience is down significantly, which is impacting, then, our ability to convert them into new pass holders.
Q: Kirsten, Angela, thanks for taking our questions. Maybe starting off, I'll just try to ask Shaun's first question in a slightly different way. So, Kirsten, you talked a lot about soft lift ticket demand this past season impacting your conversion from lift to Epic passes during the spring selling season. To me that seems like more of a spring headwind, and going to ease up as the selling season progresses. You also talked about potential for some conversions of less tenured pass holders to accelerate in the summer and in the fall selling season. So I guess, can you just help us reconcile those two comments with the expectation for trends to remain stable to the levels you just reported through the remainder?
A: Thanks, Jeff. Yes, I think there are a lot of different moving factors that happen as you highlighted in the spring versus the fall in terms of behavior, and I did highlight, and it is possible that some of the early tenure pass holders, those first time pass holders or second year pass holders, shift their decision-making later in the season as we have seen that in the past. I think it is important for us to highlight that the US ski industry decline of 8%, our decline in visits of 8%, which was consistent with that, does reduce the pool of guests to transition into a path, and we do believe that it is having an impact, and will have an impact through the rest of the selling cycle, which is why we said that we believe that it would remain consistent.
Q: You called out specifically Whistler Blackcomb as showing the most headwinds here. I guess, could you expand on that a little bit more? Is there anything in terms of nuances to that resort that might explain it? Is it higher fly to traffic?
A: Yes. When we were looking at conditions, we saw conditions improve in our US Rockies Resorts earlier than we did at Whistler Blackcomb, those results stayed very challenged for longer, so that's number one. Number two, that resort is -- destination visitation is very important to the success of that resort. And three, lift ticket visitations is very susceptible to weather conditions. When we started heading into spring, we had noted that conditions were improving and we expected pass visitation because we have the data and we can tell who's pre-committed that we believe that then those guests will use their pass, and we saw that actually happen, Jeff, that the pre-committed guests returned as we expected them to.
Q: You noted the decline in passes was largely driven by lower new pass holders with that pool being primarily window ticket guests. I guess it's very reasonable that the pool is smaller given the poor weather, but when you look at the penetration of that pool of single-day window guests who subsequently decided to purchase a pass, was it consistent with what you would have expected, just at a smaller-scale, better or worse?
A: So it is both impacts. The biggest and largest impact on our year-over-year pass sales in the spring for new is the size of the audience in the lift ticket guests that there was a decrease. We do also see an impact in conversion relative to what we would have expected, but that is not the primary driver. It is the size of the audience that is the primary driver of the decline year-over-year.
Q: Kirsten, can you provide some context for the audience just how bad the weather was in Australia this season so far? Could this be a leading indicator on how the US might react if bad weather could continue for the next few seasons?
A: Yes, Australia has had highly variable seasons. Two years ago, a record-high season of amazing conditions, and then unfortunately, the next year, very, very, like, worst season in decades. So to tale of two extremes over the course of two years. I think that, so yes, I do think that is impacting the condition or decision-making about a pass in Australia. There's the other unique dynamics happening in Australia related to the economy. I think the unique factor about our business there versus our North American resorts is, a lot of our Epic Australia pass holders are visiting our local resorts, and what you see in North America is a lot of optionality.
Q: Your dividend payout ratio is at 100% on a trailing 12-month basis, can you discuss what's the ideal payout ratio going forward? Or asked another way, how do you prioritize your capital allocation strategy across the different avenues for shareholder returns?
A: Yes, thanks, Laurent. We do look at like consistently have looked at, right, our priority for capital allocation and the dividend has been our primary route for that, and we're not looking at a specific payout ratio per se.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
