When companies talk about targets or their “vision,” then suddenly don’t – and start mixing up metrics – the red flags get hoisted.
Example: Vail Resorts (MTN), the largest operator of ski resorts, including the five most visited in North America.
It seems Vail fell into the trap of so many recreational-related entities in the early days of the post-pandemic reopening, thinking the numbers they were seeing post-Covid were the start of something new.
As I’ve pointed out previously, we’ve seen it in bowling, and golf and as Vail shows....skiing.
You can see it clearly in the way Vail has been changing its messaging, starting at its Investor Day in April 2021.
‘Ultimate Vision’
That’s when Vail first mentioned its “vision” of getting “75% of total lift revenue” – even higher – from “advance commitments” by the sale of pre-season passes.
By June of 2022, advance commitments were selling so well that the company made a point of saying that they had hit 61% of lift revenue compared with 26% in 2008.
Management has reiterated “our ultimate vision” of 75% multiple times since then, last mentioning it at its Investors Conference in March, when it included this chart in its presentation...
But if you look closely, you’ll see the percentages haven’t budged in last three years, which may help explain why the “vision” hasn’t been mentioned since.
Instead, over the past two quarters the discussion of advance commitments has shifted from lift revenues to a percentage of “all skier visit.” Or as Vail put it in most recent earnings call in early December (emphasis added)...
We expect to have approximately 2.4 million guests committed to our 41 North American, Australian, and European resorts in advance of the season in non-refundable advance commitment products this year, which are expected to generate over $900 million of revenue and over 73% of all skier visits (excluding complimentary visits).
Competition and Crowds
There’s something else...
While Vail may be the largest operator of ski resorts, it has plenty of competition... and they’re following its lead on selling advance passes. On the company’s most recent earnings call, one analyst asked about “how that’s evolved to impact your performance either good or bad this year?”
CEO Kristen Lynch responded...
I mean, honestly, this industry – we view that as the more of this industry that is in a pass and committed in advance, the better. So I think, it's great to see the emergence of other passes out there.
Never mind that it’s rare to see a CEO who genuinely liked more competition… But the growth in passes has also generated bigger crowds. As one friend who is an avid skier (and ski instructor) sees it...
People have discovered that all these unlimited pass holders have destroyed the ski experience, so they reached a naturally cap and now it’s going other way.
Lack of Snow
At the same time, there’s the weather – in this case, the potential lack of snow. As you can see in the photo grabbed yesterday from Vail’s Whistler resort in British Columbia, there’s barely an inch of snow over the ground. That’s not exactly ideal ski conditions… especially not this time of year.
While that has always been a risk for the ski industry – so much that it’s listed among the “risk factors” in Vail’s filings – this year the term “weather-related” has been showing up for the first time in earnings releases, filings and on earnings calls.
More specifically, as it pertains to Vail, the issue is snow conditions, which right now are not good... and a far cry from the way things looked as though they would be just a few weeks ago.
According to the National Drought Information System...
Snow drought is most prevalent in the Northern Rockies, Sierra Nevada, and parts of the southern Intermountain West. Low precipitation is driving snow drought in the Rockies and southern Intermountain West, while the Sierra Nevada is experiencing low precipitation and warm temperatures.
The red, brown and yellow in the above map are not good, suggesting a western snowpack at less than 25% of normal. And that happen to be where a big chunk of Vail’s ski resorts are.
While weather patterns can shift rapidly, as Vail warns in its 10-K...
The early season snow conditions and skier perceptions of early season snow conditions can influence the momentum and success of the overall ski season.
In other words, as goes December, so goes the season... let alone advance commitments and pass sales.
To compensate, resorts can make their own snow, but that’s costly… and right now in some regions – like Lake Tahoe – the company has acknowledged it’s too warm to make snow. It’s the perfect storm, or as my friend says…
Their costs are exploding, their cancellation rate exposure is high and their traffic is way down.
Trifecta.
In the ski business, that’s one winning ticket you don’t want to have.
❄️☃️☃️ ☃️ ☃️☃️☃️ ☃️ ☃️❄️
On that note…
Happy holidays, everybody. I’ll be back shortly after the New Year with more special reports, red flag alerts, general observations and more. As they say, stay tuned.
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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!)
Feel free to contact me at herbgreenberg@substack.com. You can follow me on Threads @herbgreenberg.
Regarding the "weather" comments below. Yep - weather is always the convenient scapegoat. In this case, it's a REAL excuse, especially this year! But an equally compelling issue for Vail are the ones Fil cites below... His "crowds" comment supports what my skier friend had to say in the post. TBH, I hadn't even thought about staffing. That's a great theme throughout hospitality. And his "too darned expensive" comment (my words, not his) support what we've seen in with Bowlero and Topgolf.
They might be blaming bad weather for the next couple of years since the price of a day ski pass is unreasonable now. They are losing younger skiers since families of four aren’t going to pay $600 a day just for the pass