Vail reports increases in first quarter

Vail Resorts announced some bright spots in what is consistently a low earnings period in its quarterly earnings report.

The first quarter of the fiscal year is typically a loss for the company because its mountain resorts are not open for winter ski operations yet, but net revenues across all of the company's earnings categories were up compared to last year, with lodging up 7.3 percent and mountain revenue up 4 percent.

"This quarter was exciting on many fronts," said Vail Resorts Chief Executive Officer Rob Katz in the company's conference call Tuesday morning. "We're experiencing improving trends in mountain and lodging (segments)."

Real estate net revenue was $149.3 million for the first quarter, compared to $0.2 million in first quarter 2010, driven mainly by 57 closings at the new Ritz-Carlton Residences in Vail. The Ritz units' average selling price was $2.6 million and had average prices per square foot of $1,213.

The closings, which included 12 whole ownership units and 45 fractional units, also provide insight into the ongoing state of the real estate market, since fewer closings happened than the company expected based on the number of units that were under contract.

"We're really taking a patient and long-term approach," Katz said. "We're seeing some good economic indicators but haven't seen that translate yet into real estate sales."

Vail Resorts' Oct. 25 acquisition of Northstar-at-Tahoe for $63 million shows the company has a growing commitment in the Lake Tahoe region. Katz said the company isn't currently pursuing any real estate development opportunities there, but that Vail Resorts will invest in terrain expansion, new chairlifts, new restaurants and other village amenities at Northstar in the near future.

"We believe (Northstar) will be a great addition to our company and build upon our leadership position in the Tahoe area," Katz said. "The resort has tremendous momentum and our goal is going to be to continue that and make sure we don't take our foot off the gas pedal."

Northstar-at-Tahoe is expected to contribute about $8 million to the company's fiscal 2011 mountain segment reported EBITDA, which the company defines as net revenue less operating expense plus or minus equity investment income or loss.

That expectation accounts for both increases in visitation and price, said Vail Resorts Chief Financial Officer Jeffrey Jones.

Since the announcement of the acquisition, Katz said Northstar and Heavenly, the company's South Lake Tahoe resort, have seen significant increases in pass sales. Katz said the access to both a north and south shore resort with a single pass is a major benefit for guests who visit the region.

Vail Resorts' season pass sales improved in the fall and are higher by 5 percent in terms of number of passes and 7 percent in dollars over the same period last year. When including Northstar-at-Tahoe, pass sales are up by 8 percent in units and 10 percent in sales.

The early season snowfall that has blessed the company's resorts in both Colorado and Lake Tahoe has created a nice momentum for the season, with 10 times as many runs open across the company's resorts compared to the same time last year, Katz said.

Lodging bookings for the winter season are trending higher based on the company's central reservations and lodging properties, with increases at most properties in a range of mid-single digits to double digits increases in both units and sales dollars, Katz said.

He added that less than 50 percent of the bookings for the winter season are typically made by this time.

"While it is still early, these trends and indicators certainly are encouraging," Katz said.

While the Ritz-Carlton residences in Vail and One Ski Hill Place in Breckenridge had less closings than the company anticipated, executives say the company isn't necessarily in a rush to sell units.

Now that both projects are finished, Katz said he expects to see more interest from potential buyers. Vail Resorts will also be renting out some of the unsold units at the projects this winter to help drive buyer interest, he said.

Jones said it's become very evident that the sales of those units will be a "multi-year process." Because the company has no third party debt on either of the projects, the company can be patient, Jones said.

As for future real estate projects, including Ever Vail, Katz said the company is not in any rush to develop more projects.

"We do not plan on launching any new real estate projects until we see a meaningful improvement in the market from its current state," Katz said.

Ever Vail is in the town of Vail's approval process and Katz said he would expect the first phase of the project, which is the realignment of the South Frontage Road, to happen in 2011.

The rest of the project would not get going until the market shows strength, Katz said.

Vail Resorts' expectations for 2011 put resort reported EBITDA to be in the range of $211 million to $221 million, a 13 percent to 19 percent increase over fiscal 2010. The increase in the company's expectation for 2011 takes into account its acquisition of Northstar-at-Tahoe.

The company reduced its real estate expectations because the amount of anticipated closings at the Ritz-Carlton Residences in Vail has gone down.