Vail Resorts reaps benefits of acquisitions as other operators struggle

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Vail Resorts acquired Whistler Blackcomb last year.
Vail Resorts acquired Whistler Blackcomb last year.

As the winter sports industry nears the end of its 2016-17 season, ski resort operators can probably be divided into two camps: Vail Resorts and everyone else.

Vail continues to reap the benefit of its recent spate of mountain acquisitions, its stock approached record highs last week while the rest of the sector struggled to attract enough millennial skiers and snowboarders to replace the baby boomers who are exiting the market.

With the number of U.S. ski resorts shrinking, Vail has the luxury of hiking lift-ticket prices while boosting skier loyalty via its Epic Pass multi-resort season pass, sales of which have increased about 12% a year since 2012. For the quarter ended Jan. 31, Vail's net income jumped 28% from a year earlier, to $149.2 million, as skier visits rose 16%.

"There is ... room for further margin expansion as the company drives increased visitation, particularly at Park City and Whistler Blackcomb," MKM Partners analyst Christopher Agnew wrote in a March 20 note to clients.

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As Vail realized gains, however, the rest of the industry appears to be lagging. For the 2015-16 ski season, U.S. snow sports resort visits fell 1.5%, to 52.8 million, marking the third straight annual decline and approximating mid-1990s visitor numbers, according to the National Ski Area Association.

Meanwhile, the number of U.S. ski areas fell to 463 last year from 546 in 1991-92.

"We have a global phenomenon where the sport as a percentage of the global population is flat or declining," said Paul Pinchbeck, CEO of the Canadian Ski Council, speaking at the Mountain Travel Symposium (MTS) in Banff, Alberta, late last month. "We have work to do."

Additionally, the industry could be saddled with the larger issue of global warming, which many fear could irreversibly shorten ski seasons.

Technology Crossover Ventures partner Erik Blachford told the MTS audience, "You can debate this as much as you want as far as its causes, but climate change is going to force your hand."

Whether such broader trends catch up with Vail remains a question. Since 2012, the company has acquired "feeder" Midwestern ski resorts Afton Alps, Mount Brighton and Wilmot Mountain, and earlier this year, it agreed to buy Vermont's Stowe Mountain Resort for $50 million.

More notably, Vail in 2014 bought Utah's Park City Mountain Resort for $182.5 million, and last year it completed its $1.05 billion acquisition of British Columbia's Whistler Blackcomb.

As a result, Vail's debt had swollen to $1.26 billion as of Jan. 31, from $693.3 million a year earlier.

Vail representatives declined to comment about debt, global warming or industry trend concerns, instead referring to comments executives made last month on the company's earnings call for the quarter that ended Jan. 31, where Vail CEO Rob Katz cited "robust destination guest-spending trends."

As of late last week, Vail shares had surged about 48% during the previous 12 months to near-record highs, suggesting investor confidence that the resort operator is sufficiently girding itself against the impact of either more competition or fewer overall skiers.

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