US Ski Resort Pricing and Volumes: Downhill Racing January 2018
US Ski resorts have dramatically increased prices. Casual skiers have been particularly hard hit Vail Resorts Effective Ticket Price Average ticket prices have increased at 2.25x the rate of inflation since 2008 (US CPI = 2.1%) 31.2 32.0 34.2 34.1 37.7 39.3 41.8 +4.7% +5.6% 55.8 56.0 58.2 46.2 48.7 47.2 48.1 49.0 63.4 65.6 67.9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Effective Ticket Price Excluding Pass Holders vs. Inflation (2008 = 100) 180 160 Ticket prices for casual skiers have increased at 4.5x the rate of inflation since 2008 176 6.5% CAGR 140 120 113 100 1.7% CAGR 80 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Indexed Vail Resorts Effective Ticket Price (excl. pass holders) Indexed US CPI 2
These price increases have led to very strong financial metrics Vail Resorts Margins and ROIC 20 EBIT Margin 15 ROIC 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 3 Source: Bloomberg
And high valuations which assume continued price increases Vail Resorts Valuation Metrics 30.7x Implies company can continue to earn returns c. 4x it s cost of capital on incremental investments in perpetuity 21.5x 15.3x 4.7x FY1 P/E Price / Book EV / EBIT EV / EBITDA Price increases at 2x+ inflation cannot continue indefinitely. Long term growth must be volume driven 4 Source: Bloomberg
What has enabled this? US Resorts are exploiting a perceived lack of competition (from Vail Resorts 10-K) 5
But these price increases have come at the cost of significant declines in industry volumes Total Skier Days (NSAA) -0.4% 62,000 60,000 58,000 56,000 54,000 55,949 55,068 60,502 59,787 59,214 57,641 57,156 57,354 60,540 59,227 57,098 56,904 56,137-1.6% 56,491 55,658 54,787 53,578 52,792 54,287 54,761 53,710 52,000 50,966 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Skier Days 3 Year Rolling Average 200 150 100 50 0 Total Skier Days / 1,000 US Residents -1.2% -2.2% 199 183 189 192 187 191 193 195 194 193 185 180 180 177 174 176 162 167 163 170 168 167 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Skier Days / Person 3 Year Rolling Average Skiing in the US has become significantly less popular despite a major economic expansion since the end of the crisis and continued population growth 6 Source: NSAA, Bloomberg
As prices continue to increase, skiers will continue to seek out alternatives Other types of vacations (e.g. beach) Alternative mountain sports (e.g. backcountry skiing) New capacity in US (possible given price umbrella) Travel to other geographies (e.g. Europe) Regulation (e.g. antitrust regulation preventing further acquisitions) Recession Example of a threat to US ski industry seen in following pages NOT THE ONLY ONE (or even the most likely to have an impact) 7
US lift ticket prices are now dramatically out of line with global standards Price of One Day Ski Pass (Per Resort Website for February 24 2018) 2.94x 164 164 129 135 83 83 76 65 73 56 39 45 94 Children under 9 Ski Free 0 Vail Park City Jackson Hole Chamonix Verbier Megeve Zermatt Adult Child Total Ticket Costs for 5 Day Trip for Family of 4 (from February 25, 2018) 2.74x 2,420 1,980 1,920 1,046 1,093 883 941 Vail Park City Jackson Hole Chamonix Verbier Megeve Zermatt 8
High ticket prices have largely eliminated any cost advantages for Americans to ski domestically Total Costs for 5 Day Trip for Family of 4 (Assumed to be Coming from New York City) 3,153 3,412 1,980 3,586 1,920 3,515 1,046 3,562 1,093 3,352 883 3,410 941 Skiing Cost 2,420 Flight Cost 733 1,432 1,666 2,469 2,469 2,469 2,469 Vail Park City Jackson Hole Chamonix Verbier Megeve Zermatt Flight Time 04:55 05:36 05:30 07:36 07:36 07:36 07:36 Drive Time 02:06 00:48 00:30 01:19 01:51 01:15 02:40 Total Travel Time 07:01 06:24 06:00 08:55 09:27 08:51 10:16 Mountains are not tradeable goods, but skiers are! 9 Source: Google flights (flight prices) and Google Maps (drive times)
Are US Resorts a Luxury Product? Europe has a superior product to the US along the most utilized quantitative metrics Comparison of US vs. European Resort Size (KM of Trails) 1.7x Km of Trails 234 265 140 412 445 360 Vail Park City Chamonix Verbier Megeve Zermatt Comparison of US vs. European Resort Size (Skiable Acres) 3.6x 26,000 Skiable Acres 5,289 7,300 2,500 15,000 Vail Park City Jackson Hole Chamonix Verbier Vertical Drop 1.7x 3,450 3,100 4,139 6,922 5,580 3,835 6,837 Vertical Drop Vail Park City Jackson Hole Chamonix Verbier Megeve Zermatt 10 Source: Resort websites, Wikipedia, OnTheSnow, Snow-Forecast.com
Are US Resorts a Luxury Product? European amenities are generally superior to those in the US US Ski Lunch (Granite Grill, Jackson Hole) Zermatt Ski Lunch (Chez Vrony) Not a luxury product 11
Are US Resorts a Luxury Product? US Resorts have generally copied their ambiance from Europe US Ambiance European Ambiance Mammoth: Imitation European Restaurant Vail: Imitation European Village Europe: Real European Villages Wikipedia from History of Squaw Valley Zermatt Cushing modeled the resort after European ski destinations. He reengineered the model of traditional U.S. ski resort by locating a swimming pool, ice rink, roller disco, and restaurants on the mountain instead of at the base. His designs also brought the most advanced lift technology to the U.S. for the first time. [10] When Squaw Valley opened, its Squaw One lift was deemed the longest double chairlift in the world. [11] Chamonix 12
Are US Resorts a Luxury Product? European and US après ski scenes are not comparable European Apres Ski (La Follie Douce, Megeve) American Après Ski 13