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Robust North American Seasons Pass Sales Aid Vail Resorts (MTN)

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Vail Resorts, Inc. (MTN - Free Report) is benefiting from robust season pass sales for the upcoming 2021/2022 North American ski season, strategic investments and strong liquidity. Consequently, the company’s shares have surged 21.1% in the past six months, compared with the industry’s growth of 4.7%. However, coronavirus woes still persist.

Growth Drivers

Increased demand for skiing has led the company to witness higher season pass sales lately. The company is witnessing robust season pass sales for the upcoming 2021/2022 North American ski season owing to 20% reduction in pricing across all pass products. The company further announced that through Sep 17, 2021, season pass units and dollars increased by 42% and 17%, respectively, compared with the same period in 2020. Robust unit growth was primarily driven by renewing pass holders and stronger unit growth from new pass holders. The company witnessed the strongest unit growth in the destination markets, which include the Northeast.

Despite the pandemic, the company continues to reinvest in its resorts to boost customer traffic. During the fiscal third quarter, the company highlighted some of its investments, which were previously deferred due 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.

The company focused investments on maintenance capital to support infrastructure across resorts. Vail Resorts anticipates capital plan for 2022 in the range of $315 million to $325 million, which excludes any real estate-related capital or reimbursable investments. This capital plan is nearly $150 million above the company’s typical annual capital plan based on inflation and previous additions for acquisitions.

Maintaining liquidity during the coronavirus pandemic has become a herculean task for most of the companies. Vail Resorts has enough liquidity to survive the coronavirus pandemic for some time. As of Jul 31, 2021, the company had $1.2 billion of cash on hand, almost flat sequentially. As of Jul 31, 2021, the company had total cash and revolver availability of approximately $1.9 billion. Although Vail Resorts’ long-term debt at the end of the fiscal fourth quarter stood at $2,736.2 million (compared with $2,740 million at the end of the prior-year quarter), the company stated that it has sufficient liquidity to fund its operations. During the fiscal fourth quarter, debt-to-capital ratio came in at 0.6, almost flat sequentially.

Zacks Investment ResearchImage Source: Zacks Investment Research

Concerns

Although the company is optimistic about the 2022 performance, the coronavirus related woes cannot be ruled out. The company’s results in 2022 might get affected by change in coronavirus related guidelines and regulations by government bodies. Change in consumer behavior due to the pandemic might hurt the results.

The company further announced that it witnessed robust demand for Australian ski season in the beginning of 2021. However, during fourth-quarter 2021, COVID-19-related stay-at-home orders and temporary resort closures negatively impacted the company’s results.  The company anticipates negative impact of pandemic in Australia and the associated limitations and restrictions. Vail Resorts will have a negative Resort Reported EBITDA impact of roughly $41 million in the first quarter of fiscal 2022 in comparison to the first quarter of fiscal 2020.

Vail Resorts has a Zacks Rank #3 (Hold).

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