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Vail Resorts (MTN) Banks on Improved Visitation Amid Pandemic

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Vail Resorts, Inc. (MTN - Free Report) has been riding on improved visitation owing to a strong season pass program along with other efficient marketing efforts. Also, the company is benefiting from improved performance by the Mountain and Lodging segments. Shares of Vail Resorts have gained 39.8% compared with the Zacks Leisure and Recreation Services industry’s 35.6% rise over the past year.

However, disruptions owing to the coronavirus pandemic along with competition and weather-related woes remain a concern for the company.

Major Growth Drivers

Season Pass Program

Vail Resorts has a season pass program under which the company offers a variety of season pass products for all the mountain resorts and urban ski areas in both domestic, and international markets. Increased demand for skiing has led the company to witness higher season pass sales lately. The company is benefiting from improving visitation. Also, stronger destination visitation at Colorado and Utah resorts drove the company’s results. Markedly, the company has been benefiting from its offerings such as Epic Pass, Epic Local Pass, Epic Day Pass and Epic Coverage products.

Strategic Investments Plans

Despite the pandemic, the company continues to reinvest in resorts to boost customer traffic. During the third quarter of fiscal 2021, the company highlighted some of its investments, which were previously deferred owing to COVID-19. This includes plans to work on the 250-acre lift-serviced terrain expansion in the McCoy Park area of Beaver Creek. It also plans to install a new four-person high-speed lift to serve the popular Peak 7 at Breckenridge. Furthermore, it planned to replace the Peru lift at Keystone and replace the Peachtree lift at Crested Butte with a new three-person fixed-grip lift. Meanwhile, Vail Resorts anticipates spending $115-$120 million during fiscal 2021 as resort capital expenditures, excluding one-time items associated with integrations worth $5 million and reimbursable investments in real estate worth $12 million. Nonetheless, total capital plan is expected in the range of $135-$140 million.

Solid Marketing Efforts

Robust growth in the season pass sales reflects Vail Resorts’ efficient guest-focused marketing efforts. The company orients its strategy with data analytics to drive targeted and personalized marketing toward guests. Guest data is captured through season pass programs; e-commerce platforms, including mobile lift ticket sales; the EpicMix application and operational processes at the lift ticket windows. Additionally, Vail Resorts is involved in digital marketing, and media advertising to drive traffic and sales. Notably, the company has spent more than $1.2 billion over the last decade to drive guest count. Also, to boost sales under the epic pass program, the company has implemented 20% discounts on ski school, food, rentals and lodging. Going forward, the company expects it to be a key growth driver as it relates to the growing number of people associated with the program.

Vast Geographical Network

Vail Resorts has widespread geographical boundaries. Apart from operations in the United States, the company has expanded in North America, Japan and Europe. During the third quarter of 2021, the company witnessed border openings and weather remained better than that in the previous year. The weather conditions remained normal across Australia and North America. Also, there was no potential impact of COVID-related shutdowns or lockdowns in these areas. By widely diversifying its geographical locations, Vail Resorts aims to cushion the business from weather inconsistencies.

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The coronavirus pandemic along with Canadian travel restrictions and border closures negatively impacted the company’s operations for the three months ended Jan 31, 2021. During the third quarter of 2021, excluding Peak Resorts, total visitation at the company’s U.S. destination mountain resorts and regional ski areas declined 3%. Although the company is witnessing sequential improvements in visitation, it is still behind the pre-pandemic levels.

Zacks Rank & Key Picks

Vail Resorts carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Bluegreen Vacations Holding Corporation (BVH - Free Report) , SeaWorld Entertainment, Inc. (SEAS - Free Report) and RCI Hospitality Holdings, Inc. (RICK - Free Report) . Bluegreen Vacations and SeaWorld Entertainment sport a Zacks Rank #1 (Strong Buy), while RCI Hospitality carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bluegreen Vacations and SeaWorld Entertainment’s earnings for 2021 are expected to surge 172% and 176.4%, respectively.

RCI Hospitality’ earnings for fiscal 2021 are expected to rise 523.5%.