Vail Resorts pass sales get Epic boost
December 10, 2008
VAIL, Colo. ” Season ski pass sales are up, but advance room bookings are significantly down, Vail Resorts said Tuesday in its earnings report.
The company, which operates Vail and Beaver Creek mountains, reported the customary loss in earnings during off-season months preceding the ski season. The reported overall loss for the company was $34.5 million for August, September and October, compared to a loss of $24.6 million for the same period last year.
However, the numbers are not unexpected due to the turbulent economy, and the company is still in a strong financial position, Vail Resorts CEO Rob Katz said.
“We are very pleased that in this unprecedented period of disarray in the global economy and capital markets, our balance sheet remains very strong, even after two consecutive seasonally low quarters with virtually no ski operations,” Katz said in a conference call with analysts Tuesday.
The company’s biggest success was the increase in season pass sales. Vail Resorts sold a total of 204,000 passes earning $90.9 million, a nearly 29 percent increase in pass earnings compared to last year.
The new Epic Pass, which offers unlimited skiing at all Vail Resorts mountains with no blackout dates, significantly bolstered sales, Katz said.
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About 59,100 Epic Passes were sold, earning about $32.5 million. Sales of the Colorado and Summit Passes, which offer limited days at Beaver Creek and Vail, were down 2.6 percent. However, the company added it didn’t know how much of that decrease was from people who upgraded to Epic Passes.
The Epic Pass attracted both destination skiers, as well as Front Range skiers, whom the company expects to make up a larger portion of visitors this year.
Katz said a significant number of international skiers bought the Epic Pass as well.
“We’re very pleased,” he said. “We’re basically offering a program to international buyers asking them to purchase their skiing up front.”
Despite strong pass sales, company officials admitted that it will still be a rough season.
“There is no doubt that the travel and leisure sector is being, and will continue to be, negatively impacted in the short-term,” Katz said. “And while we have many attributes that differentiate us from other options guests may have, we are not immune to these negative trends.”
Advance room bookings are down 23 percent compared to this time last year, and if the trend continues, the company may fall below its earnings forecast for the year, said Jeff Jones, Vail Resorts’ chief financial officer.
Katz said it is difficult to tell whether people are delaying making their travel plans, or if they are planning not to travel at all.
The company is doing a lot of cost-cutting to deal with the downturn ” cutting staff, leaving positions unfilled, delaying raises, stopping matches for 401(k) plans and scaling back energy use.
Vail Resorts also hopes to draw guests with promotions that offer a free night of lodging with the purchase of a certain number of room nights and lift tickets.
“I can assure in each and every resort and property we are actively making sure we are targeting room rates and packages that allow people to come,” Katz said. “We’re going to do what we can do this year to make it an easier decision for them to come.”
The company is also working with local businesses and communities to make those promotions, he said.
Vail Town Councilman Andy Daly said the town is aligned with Vail Resort’s promotion efforts. The town recently set aside $550,000 for a winter marketing campaign that offers local shopping, lodging and dining deals.
“Obviously we’re very concerned about (the lodging component),” Daly said of Vail Resorts’ bookings report. “But the town’s objective is to sell the many benefits of the valley. I think we are aligned (with Vail Resorts) in that.”
One thing the company does not plan to do is discount the lift ticket rate, Katz said.
Vail Resorts also reported that its newly opened Vail Mountain Club, a private club at the base of Vail’s Vista Bahn, has earned $70.1 million in membership fees. Of the 400 memberships offered, 384 have been reserved and paid for.
The company has closed on all but one of its units at the Arrabelle in Lionshead Village, and it has closed on 42 of 45 chalets at a real estate project in Breckenridge’s Crystal Peak.
The acquisition of Colorado Mountain Express, a transportation service, was also completed for $38.3 million.
Many said that Vail Resorts’ lower-than-normal losses and gloomy lodging numbers are not much of a surprise.
“Personally, I would think that it could potentially to be worse,” said Janco Partners Research Analyst Greg Kolb. “Vail (Resorts) really has plenty of cash and plenty of room in a down market.”
Vail Resorts is faring better that some of their industry peers, he said.
The strong pass sales were “significant,” but it remains to be seen how much pass revenues will offset the loss of money spent in the villages and on the mountain, Kolb said.
Daly said the success of the Epic Pass, which is drawing both international and Front Range skiers, is good news for the town.
“It bodes well for the community because in all likelihood there will be more Front Range skiers who will help fill the void left by international and destination skiers this season,” he said.
Vail Resorts’ lower booking numbers are on par with what Antlers Condominiums are seeing, General Manager Rob LeVine said. However, December advance bookings have picked up significantly, he said.
The pass sales are encouraging, he said.
“Hopefully that will bring people up here, maybe just for the day, maybe more,” he said. “Right now any business is welcome business.”