Too much snow in the Western U.S. and not nearly enough in the East negatively impacted business for Vail Resorts during its second quarter.
The conditions caused the company to lower its guidance for fiscal 2023, “primarily due to the significant weather disruptions” in the Eastern U.S. as well as significant snowstorms affecting its Tahoe resorts.
“We expect contribution margin from our 26 Eastern U.S. resorts, including an allocated portion of pass product revenue, to underperform initial expectations provided in September 2022 by approximately $43 million,” Angela Korch, chief operating officer for Vail Resorts, told analysts during Thursday’s quarterly update call.
Vail Resorts operates 37 mountain resorts and regional ski areas including Vail, Beaver Creek, Breckenridge, Keystone, and Crested Butte in Colorado; Heavenly, Northstar, and Kirkwood in the Lake Tahoe area and Stowe, Mount Snow, and Okemo in Vermont.
Korch detailed how the company’s Eastern U.S. resorts continue to be negatively affected by extreme weather.
“Across our Eastern U.S. resorts, over 25% of planned operating days for the 2022-2023 ski season were negatively impacted by extreme weather events, including many days with full or partial resort closures,” Korch said.
The majority of the underperformance occurred after the holiday period, she added.
Regarding the company’s Midwest, Mid-Atlantic, and Northeast resorts, Kirsten Lynch, chief executive officer for Vail Resorts, said abnormal weather conditions reduced operating days, terrain availability, and activity offerings across the region.
The lack of snow and warmer-than-usual weather caused the company to lean more on snowmaking and grooming capabilities, which drove up costs. Some of their resorts in the East rely heavily on snowmaking, which requires cold temperatures.
“Results at our Eastern U.S. resorts were significantly below expectations in the post-holiday period, as conditions did not return to normal after the holidays as was incorporated into our guidance. During January, only 50-60% of lifts and terrain were open,” Lynch said.
Despite the Eastern resorts having the most significant impact on results, the heavy snowstorms in California also played a substantial role.
“Visitation at our Western U.S. resorts was negatively impacted by airline travel disruptions during the peak holiday period, as well as severe weather disruptions at our Tahoe resorts,” said Lynch.
“In Tahoe, significant snowstorms continued to impact resort access and limited our ability to fully open our resorts throughout the remainder of the quarter. We always budget for normal and I would say the East and Tahoe have been dramatically abnormal.”
The company said visitation in the Rockies has continued to improve as the season has progressed.
“We continue to be pleased with the results that we’re seeing in that segment and believe that we are set up for a strong spring, meaning that conditions are fantastic,” Lynch added. “The timing of Easter is actually very conducive to vacation occurring over spring break.”
The company also pointed to positive business at its Whistler Blackcomb resort in British Columbia, Canada.
One difference between the two regions is the adoption of advanced commitment products, which include the company’s Epic season pass.
According to Lynch, customers in the Western U.S. are more likely to commit to purchasing passes in advance.
“The East is a little bit different,” she said. “Where there’s still a large percentage of the visitation that occurs on lift tickets. And that is part of the reason why we saw an impact from the limitations on our operations.”
To react to that, the company is trying to get customers on a pass and “convey the benefit of moving from a lift ticket into an advanced commitment product,” Lynch added.
Vail Resorts offers a Epic day pass that is specifically tailored for local resorts in the Midwest, Mid-Atlantic and East.
“Our goal is to continue to grow the pass business, really focused on that East area,” Lynch said.
“By moving those visitors out of lift tickets into the pass we create more stability for the company for situations like this.”
SSI Venture, the retail subsidiary of Vail Resorts, also recently announced it planned to shutter 19 retail and equipment rental locations in Aspen, Snowmass Village, and Telluride.
By The Numbers
- Net income was $208.7 million for the second fiscal quarter of 2023 compared to $223.4 million in the prior-year period.
- Season-to-date total skier visits increased 3.6% and total lift revenue increased 2.5% through March 5, 2023 compared to the fiscal year 2022 season-to-date period through March 6, 2022.
- Retail/rental revenue for North American resort and ski area store locations was up 21.2% compared to the prior year season-to-date period.
- The company updated its guidance for fiscal year 2023 and is now expecting net income to be between $282 million and $328 million.
Bart Schaneman can be reached at email@example.com.