Vail Resort is a major participant in the upper end vacation segment of the travel industry. Among its peers it is in the enviable position of being both a quality and a volume leader in the industry. Four of its mountain resorts are among the top five most visited resorts anywhere in the United States. In addition, the company's resorts serve a customer base with an above average income of $170,000 per year across all five of their resorts.
Vail Resorts, Inc. operates mountain resorts and urban ski areas in the United States. The company operates in three segments: Mountain, Lodging, and Real Estate. The Mountain segment operates eight mountain resort properties, including the Vail, Breckenridge, Keystone, and Beaver Creek mountain resorts in Colorado; the Heavenly, Northstar, and Kirkwood mountain resorts in the Lake Tahoe area, California and Nevada; and the Canyons mountain resort in Park City, Utah, as well as two urban ski areas, such as Afton Alps and Mount Brighton Ski areas. Its resorts offer various winter and summer recreational activities, including skiing, snowboarding, snowshoeing, snowtubing, sightseeing, mountain biking, guided hiking, children's activities, and other recreational activities; and ski and snowboard lessons, equipment rental and retail merchandise services, dining venues, private club services, and other winter and summer recreational activities. This segment also leases its owned and leased commercial space; and provides real estate brokerage services. The Lodging segment owns and/or manages various luxury hotels under the RockResorts brand, and other lodging properties; various condominiums located in and around the company’s mountain resorts; destination resorts; and golf courses, as well as offers resort ground transportation services. This segment operates approximately 4,900 owned and managed hotel and condominium rooms. The Real Estate segment owns, develops, markets, and sells real estate properties in and around the company’s resort communities. Vail Resorts, Inc. was founded in 1997 and is based in Broomfield, Colorado.
(Summary) (Company) (Daily Chart)
| 23 August 2015 Price $108.42 1yr Target $118.38 Analysts 8 Dividend $2.49 Payout Ratio 86.15% 1yr Cap Gain 9.18% Yield 2.29% 1yr Tot Return 11.47% | Market Cap $3.94 Bil 1yr EarnGR 302.59% 3yr EarnGR 89.05% 5yr EarnGR 30.15% 1yr DivGR 51.09% 3yr DivGR 48.58% 5yr DivGR --- Revenues $1.37 Bil Earnings $109.50 Mil Profit Margin 7.95% | Beta 0.97 EPS (ttm) $2.89 EPS next yr $3.41 EPS next 5yr 42.10% P/E 37.52 PEG 0.89 Debt/Equity 0.66 ROA 4.70% ROE 13.00% ROI 7.00% |
Corporate Structure
Vail Resorts, Inc. operates in three business segments: Mountain, Lodging and Real Estate, which represented approximately 77%, 19% and 4% of their net revenue. The Mountain segment operates eight world-class mountain resort properties and two urban ski areas as well as ancillary services including ski school, dining and retail/rental operations. The Lodging segment owns and/or manages luxury hotels under the RockResorts brand, as well as other strategic lodging properties and a large number of condominiums located in proximity to their mountain resorts, certain National Park Service concessionaire properties including Grand Teton Lodge Company which operates destination resorts at Grand Teton National Park; Colorado Mountain Express, a Colorado resort ground transportation company; and mountain resort golf courses. Together the Mountain and Lodging segments are considered as simply as the Resort segment. The Real Estate segment owns and develops real estate in and around the resort communities.
The Mountain Segment
The following are the company's world-class mountain resorts and urban ski areas:
- Vail Mountain (“Vail Mountain”) - the single most visited mountain resort in the United States for the 2013/2014 ski season. Vail Mountain offers some of the most expansive and varied terrain in North America with approximately 5,300 skiable acres including seven world renowned back bowls and the resort’s rustic Blue Sky Basin.
- Breckenridge Ski Resort (“Breckenridge”) - the second most visited mountain resort in the United States for the 2013/2014 ski season with five interconnected peaks offering an expansive variety of terrain for every skill level, including the recent addition of Peak 6 which provides access to above tree line intermediate and expert terrain, and progressive and award-winning terrain parks. The Town of Breckenridge is well known for its historic town and vibrant nightlife.
- Keystone Resort (“Keystone”) - the third most visited mountain resort in the United States for the 2013/2014 ski season and home to the highly renowned A51 Terrain Park as well as the largest area of night skiing in Colorado. Keystone also offers guests a unique skiing opportunity through guided snow cat ski tours accessing five bowls. Keystone is a premier destination for families with its “Kidtopia” program focused on providing activities for kids on and off the mountain.
- Beaver Creek Resort (“Beaver Creek”) - the sixth most visited mountain resort in the United States for the 2013/2014 ski season. Beaver Creek is a European-style resort with multiple villages and also includes a world renowned children’s ski school program focused on providing a first-class experience with unique amenities such as a dedicated children’s gondola. Beaver Creek also annually hosts the only North American men’s World Cup downhill races, and with Vail Mountain will host the 2015 FIS World Alpine Ski Championships.
- Heavenly Mountain Resort (“Heavenly”) - located near the South Shore of Lake Tahoe with over 4,800 skiable acres, straddling the border of California and Nevada, offers unique and spectacular views of Lake Tahoe and boasts the largest snowmaking capacity in the Lake Tahoe region. Heavenly offers great nightlife including its proximity to several casinos.
- Northstar Resort (“Northstar”) - the premier luxury mountain resort destination near Lake Tahoe and offers premium lodging, a vibrant base area and over 3,000 skiable acres. Northstar’s village features high-end shops and restaurants, a conference center and a 9,000 square-foot skating rink.
- Canyons Resort (“Canyons”) - the largest mountain resort in Utah offering over 4,000 skiable acres and features a modern base area located less than 35 miles from the Salt Lake City International Airport and adjacent to the historic downtown of Park City with all of its distinctive restaurants and nightlife. The resort offers guests an outstanding ski experience with fine dining, ski school, retail and lodging.
- Park City Mountain Resort (“PCMR”) - acquired on September 11, 2014, PCMR is located in the heart of historic Park City, Utah, one the country’s great ski destinations. PCMR offers terrain for every type of skier and snowboarder on over 3,300 acres including manicured groomers, bowls and some of the industry’s most progressive terrain parks and half pipes. PCMR’s location gives easy access to outstanding lodging, dining and shopping in the vibrant town of Park City.
- Kirkwood Mountain Resort (“Kirkwood”) - located southwest of Lake Tahoe and offers a unique location atop the Sierra Crest. Kirkwood is recognized for offering some of the best high alpine advanced terrain in North America with 2,000 feet of vertical drop and over 2,300 acres of terrain.
- Urban Ski Areas - Afton Alps Ski Area (“Afton Alps”) is the largest ski area near a major city in the Midwest (33 miles from the Minneapolis/St. Paul metropolitan area) and offers 48 trails on 300 skiable acres, with night skiing, riding and tubing. Mount Brighton Ski Area (“Mt. Brighton”) is located 43 miles from Detroit and offers 26 trails on 130 skiable acres offering night skiing and riding. Both Afton Alps and Mt. Brighton underwent transformative upgrades for the 2013/2014 ski season to enhance the ski and base area experience for skiers and riders in each market.
The Mountain segment derives revenue through the sale of lift tickets and season passes as well as a comprehensive offering of amenities available to guests, including ski and snowboard lessons, equipment rentals and retail merchandise sales, a variety of dining venues, private club operations and other winter and summer recreational activities. The company also leases some of their owned and leased commercial space to third party operators to add a variety of restaurants and retail stores to the resorts.
The Lodging Segment
The Lodging segment includes the following operations:
- RockResorts -- a luxury hotel management company with a current portfolio of six properties, including four Company-owned hotels and two managed resort properties with locations in Colorado and Jamaica.
- Five additional Company-owned hotels, management of the Vail Marriott Mountain Resort & Spa, Mountain Thunder Lodge, Crystal Peak Lodge, Austria Haus Hotel, Grand Summit Hotel, Silverado Lodge, Sundial Lodge and condominium management operations which are in and around the mountain resorts in the Colorado, Lake Tahoe and Park City, Utah regions.
- Two National Park System concessionaire properties - GTLC, a summer destination resort with three resort properties in the Grand Teton National Park, and Headwaters Lodge & Cabins at Flagg Ranch located between Yellowstone National Park and Grand Teton National Park.
- CME -- a resort ground transportation company in Colorado.
- Five Company-owned mountain resort golf courses in Colorado, one in Wyoming and one operated in Lake Tahoe, California.
The Real Estate Segment
The company has extensive holdings of real property at their mountain resorts throughout Summit and Eagle Counties in Colorado. Their real estate operations, Vail Resorts Development Company, include planning, oversight, infrastructure improvement, development, marketing and sale of our real property holdings. In addition to the cash flow generated from real estate development sales, these development activities benefit the Mountain and Lodging segments by (1) creating additional resort lodging and other related facilities and venues (primarily restaurants, spas, commercial space, private mountain clubs, skier services facilities and parking structures) that provide us with the opportunity to create new sources of recurring revenue, enhance the guest experience and expand our destination bed base, (2) controlling the architectural themes of our resorts, and (3) expanding the property management and commercial leasing operations.
Currently, Vail Resorts Development Company’s principal activities include the marketing and selling condominium units related to The Ritz-Carlton Residences, Vail, and One Ski Hill Place in Breckenridge; planning for future real estate development projects; and the occasional purchase of selected strategic land parcels for future development as well as the sale of land parcels to third-party developers.
Finally, Vail Resorts Retail (VRR) manages a collection of approximately 200 individually styled ski, bike, golf and fly fishing shops located throughout Colorado, northern California, Nevada, Utah and Minnesota that cater to outdoor enthusiasts seeking the best products with the best service and the best value. Ski and snowboard rentals are offered at Breeze Ski Rental and online through Rentskis.com, a division that offers rental services at most major western resort destinations as well as direct-to-lodging delivery services at all Vail Resorts properties.
My Perspective
I find myself extremely attracted to this very interesting niche investment. It's a small company targeted toward those rich individuals who are little affected by the overall economy. Hence, the company is also unaffected by the overall economy and would be expected to do well in the years ahead.
Looking at the numbers above it can be noted that the estimated 5 year growth in earnings is projected to increase at a rate in excess of 42% per year. That's a tremendous amount of growth for any company and it's the kind of estimates I love to see in any company I'm investing in. It can also be seen that previous earnings and dividend growth rates for Vail Resorts have been growing even faster. I expect this slow down of these fundamentals to grab hold over the next year so this is one reason I'm not in any hurry to buy these shares at these prices
On the downside, it's also obvious that the company hasn't gone undiscovered by investors. The P/E ratio (37.52) is extremely high and twice what I would normally like to pay for a company. It can also be seen that the company's PEG (0.89) is less than one and that tells me that the earnings are growing even faster than the P/E (which is also incredible!).
So here's my strategy for this obtaining shares in this company. Since I'm in no hurry to own these shares, this is a perfect candidate for executing the option strategy of buying shares by selling cash secured puts. The put(s) can be sold at a strike price that will lock in both an acceptable entry price and an excellent dividend yield. It's an excellent strategy but this strategy can often take awhile to execute if the puts are executed to far out of the money. However, it has the advantage of providing premium (income) while an investor waits for execution to occur. Finally, if multiple out-of-the-money puts are allowed to expire and resold, the initial entry price can be reduced significantly when the option is eventually "put" to the investor. And a low entry price creates a high dividend yield.
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