Vail Resorts, Inc. ( MTN Quick Quote MTN - Free Report) is likely to benefit from strong demand for North American ski season, expansion projects and digital initiatives. Also, focus on e-commerce and guest engagement tools bodes well. However, weather disruptions and high operating costs are a concern. Let us discuss the factors that suggest why investors should retain the stock for the time being. Growth Catalysts
Vail Resorts recently announced its interim period data for its 2022/23 North American ski season through Apr 16, 2023. The metrics include all North American destination mountain resorts and regional ski areas (including the results of Seven Springs, Hidden Valley and Laurel Mountain). Season-to-date (through Apr 16, 2023), total skier visits increased 6.1% compared with the prior-year season-to-date period’s (Apr 17, 2022) levels. Strong demand from local and destination guests and improved conditions at Northeastern U.S. resorts contributed to a rise in visitation compared with the prior-year period’s levels. Also, growth in its ancillary businesses on improved staffing levels and the relaxation of COVID-19 induced operational restrictions added to the positives.
The company continues to reinvest in its resorts to boost customer traffic. For fiscal 2023, the company set aside $180-$185 million to increase lift capacity and enhance the guest experience. The plan includes the installation of new or replacement lifts at Breckenridge, Northstar (NSTR), Heavenly, Stowe, Mount Snow, Attitash, Jack Frost, Big Boulder, Boston Mills and Brandywine. Also, the company intends to upgrade and expand Sedrun’s snowmaking to enhance the experience for key intermediate terrain. The company anticipates the projects to be completed in time for the 2023/2024 European ski season. However, Vail Resorts stated that developments are subject to regulatory approvals. Increased focus on digital initiatives bode well. The company emphasized on a new technology (for the 2023/2024 North American ski season) that allows guests to store their pass product or lift ticket directly on their phone, eliminating the need for carrying plastic cards, visiting the ticket window or waiting to receive a pass or lift ticket in the mail. Once loaded on their phones, guests can store their phones in their pockets and get scanned, hands-free, in the lift line using Bluetooth Low Energy technology. Also, it initiated work on network-wide scalable technology that will enhance analytics, e-commerce and guest engagement tools. The initiative will likely pave the path to target guest outreach, personalize messages and improve conversion. Image Source: Zacks Investment Research
In the past three months, shares of the company have increased 3.5% against the
industry’s decline of 1.9%. Concerns
The company’s margins have been bearing the brunt of high costs for some time. In the second quarter of fiscal 2023, the company’s margins were affected by inflationary labor costs. In the quarter, labor-related costs increased 55.3%, primarily due to increased staffing and salaries associated with employees and increased headcount to support more normalized staffing and operations at its resorts and additional labor costs incurred as a result of variable weather conditions, particularly at the Eastern U.S. resorts. The company stated that it increased its focus on hiring, retention and talent development to support business operations in the upcoming periods. For fiscal 2023, the company anticipates labor expenses, including inflationary adjustments, to be more than $175 million from fiscal 2022 levels. Our model predicts total lodging operating expenses in 2023 to rise 19.8% year over year.
Abnormal weather variability across its resorts (in the East) and significant storm-related disruptions at our Tahoe resorts are headwinds.
Zacks Rank & Key Picks
Vail Resorts currently carries a Zacks Rank #3 (Hold).
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