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Vail Resorts (NYSE:MTN)
Q4 2020 Earnings Call
Sep 24, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the Vail Resorts fourth-quarter fiscal 2020 earnings call. Today's conference is being recorded. [Operator instructions] At this time, I would like to turn the conference over to CEO Rob Katz. Please go ahead, sir.

Rob Katz -- Chief Executive Officer

Thank you. Good afternoon, everyone. Welcome to our fiscal 2020 year-end earnings conference call. Joining me on the call this afternoon is Michael Barkin, our chief financial officer.

Before we begin, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially. Forward-looking statements in our press release issued this afternoon, along with our remarks on this call, are made as of today, September 24, 2020, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. Reconciliations of these measures are provided in the tables included with our press release, which, along with our annual report on Form 10-K, were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at www.vailresorts.com.

So with that said, let's turn to our fiscal 2020 and fourth-quarter results. Our results for the full year were negatively impacted by COVID-19 and the resulting closure of our North American destination mountain resorts and regional ski areas beginning on March 15, 2020, a decision we made for the safety of our guests, employees, and resort communities. In addition, the resort reported EBITDA for the year was negatively impacted by the deferral of approximately $118 million of pass product revenue and related deferred costs to fiscal 2021 as a result of pass holder credits offered to 2019-2020 North American pass holders to encourage renewal for the 2020-2021 season. Following the resort closures and throughout the remainder of the year, we implemented a number of actions to enhance our liquidity and reduce costs, including raising $600 million through the issuance of unsecured senior notes, suspending our dividend for a cash savings of over $70 million per quarter, reducing our capital plan for calendar-year 2020 by approximately $80 million to $85 million and executing significant reductions in our operating expenses.

Our results for the fourth quarter continued to be negatively impacted by COVID-19, with the majority of our North American summer and Australian ski season operations not opening until late June and early July. In Australia, we opened Perisher on June 24, 2020, and Hotham and Falls Creek on July 6, 2020, and decided to subsequently close Hotham and Falls Creek on July 9, 2020, following the issuance of stay-at-home orders by the Victorian government on July 8, 2020. At Perisher, our operations were negatively impacted by poor snowfall, resulting in limited terrain, and as a result, limited guest capacity for a portion of July. In North America, our U.S.

resort communities experienced increasing demand from leisure travelers throughout the month of July, with group demand negatively impacted by COVID-19-related disruptions. At Whistler Blackcomb, demand in July was below our expectations due in part to travel restrictions with the Canadian border closed to international guests, including guests from the U.S. We maintained rigorous cost and liquidity controls throughout the quarter. Resort net revenue for the fourth quarter declined $167 million compared to the prior year, while resort reported EBITDA declined $43 million over the same time period, reflecting $124 million in net cost reductions, driven by a combination of reduced seasonal labor and expenses, as well as significant overhead cost-saving actions.

Turning to our operating plans for the upcoming North American ski season. We were pleased with the visitation we saw this summer at our U.S. resort communities from leisure travelers. We believe this speaks to the current preference of travelers for outdoor experiences, locations they are familiar with, and for many, the option to drive to our resorts.

As we approach the 2020-2021 North American ski season, we are committed to providing a comprehensive on-mountain experience that is consistent with our historical practice of opening as many lifts and as much terrain as soon as possible. We will be focused on the guest experience while also prioritizing the health and safety of our guests, employees, and resort communities. On August 27, 2020, we announced an operating plan that we believe will enable us to operate safely and consistently across our 34 North American ski resorts throughout the season, including the implementation of a reservation system for our guests that give preference to our pass holders, limitations on lift ticket sales, limitations on our dining facilities and other changes to our operation. We expect these operating plans will help enable a safe and successful ski season, but will also negatively impact our fiscal '21 financial results.

It is difficult at this time to fully assess the financial impact we may experience related to our operational and capacity plan, given continued uncertainty regarding the ultimate visitation to our resorts and any positive or negative changes, which may be required to our operations based on new information and potential impact from COVID-19. Turning now to our 2020-2021 season pass sales. Given the challenging circumstances surrounding the impact of COVID-19, we are very pleased with the results of our season pass sales to date. Season pass sales through September 18, 2020, for the upcoming 2020-2021 North American ski season, increased approximately 18% in units and decreased approximately 4% in sales dollars as compared to the period in the prior year through September 20, 2019, with sales dollars for this year reduced by the value of the redeemed credits provided to 2019-2020 North American pass holders.

Without deducting for the value of the redeemed credits, sales dollars increased by approximately 24% compared to the prior year. Through September 18, we have sold a total of approximately 850,000 passes for the upcoming North American ski season, which compares to approximately 1.14 million total passes sold for the North American season last year through December 2, 2019. We remain committed to providing the best value for all skiers and riders through our Epic Pass and Epic Day Pass advanced commitment product. As previously disclosed, we offered our 2019-2020 pass holders credits for the 2020-2021 season, ranging from a minimum of 20% to a maximum of 80% for season pass holders, with no minimum, but up to 80% credit from multi-day pass products, such as the Epic Day Pass, and deferred approximately $121 million of season pass revenue from fiscal 2020 to fiscal 2021.

We believe our results through our September deadline demonstrate the loyalty of our guest base to the experience we offer at our resorts, despite the travel challenges presented by COVID-19. The success of pass holder credits offered to 2019-2020 pass holders to incent renewal, the introduction of Epic Coverage, the introduction of Epic Mountain Rewards, the additional time provided to guests to make their purchase decisions and our operating plan is demonstrating our commitment to the safety of our guests. Most importantly, we saw very strong unit growth in our destination markets, with particular strength in our Northeast market, benefiting from our continued momentum from those guests and the first full year of peak resorts in our season pass network. We saw solid unit growth in our Colorado, Utah, Northern California, and Whistler market.

The primary driver of our unit growth was from renewing pass holders, and we believe the deadline for utilizing credits clearly drove an earlier season pass purchase for many of our renewing guests. Total units renewed to date are in excess of the total amount of renewals we saw last year. We're also pleased with pass sales to new pass holders, which represent a substantial portion of our sales through the September deadline. And while lower than last year, it is encouraging to see guests move into the program this year, given the current circumstances.

Through September 18, 2020, pass holders have used a total of $106 million of the aggregate credit we made available in comparison to the deferral of pass revenue from fiscal 2020 of $121 million. As we enter the final period for season pass sales, we expect unit sales from September 19, 2020, through our December 2020 deadline will be lower than unit sales in the comparable period last year. And we expect our total unit sales will finish at or around last year's sales, setting a very strong foundation of pass holders to drive revenue in the upcoming season. The decline in growth rate for the final period of sales is expected to be primarily driven by the pull forward of renewals to our September 17, 2020, deadline, given the expiration of the renewal credits, and potential declines in new pass holders, with the continued uncertainty related to COVID-19 and its impact on the travel market.

It is important to remember that we've expanded Epic Coverage this year, and we will see an increase in full or partial refunds based on pass holders who do not get their preferred priority reservations, guests who suffer an injury or other qualifying personal claims, or if we close one or more of our ski resorts due to events such as COVID-19. Our reported season pass growth rates do not include pending unprocessed transactions associated with approximately 71,000 online forms submitted around the deadline from guests that include transactions that could not be processed online, such as using a credit to purchase a lower price pass from what the guests had in 2019-2020. Additionally, we received approximately 4,000 online forms requesting refunds of an earlier purchase of a 2020-2021 pass, which have not yet been processed and are not reflected in our reported pass growth rates. Collectively, these unprocessed forms could increase the growth rate we are reporting as we complete their requested transaction.

Estimates of how these pending transactions will translate to sales are included in the full-year expectations we have for the pass program mentioned above. Pass sales results are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.76 between the Canadian dollar and the U.S. dollar in both periods for Whistler Blackcomb sales. The season pass revenue deferral is an estimate, and the actual amount of pass holder redemptions will differ from the amount of pass credit deferred revenue recognized during fiscal 2021.

Now I'd like to turn the call over to Michael to further discuss our financial results, liquidity, and fiscal 2021 outlook.

Michael Barkin -- Chief Financial Officer

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, our results for the fiscal year were significantly impacted by COVID-19 and the resulting closure of our North American mountain resorts. Net income attributable to Vail Resorts was $98.8 million or $2.42 per diluted share for the fiscal year 2020, compared to net income of $301.2 million or $7.32 per diluted share in the prior fiscal year. Resort reported EBITDA was $503.3 million for fiscal-year 2020, compared to resort reported EBITDA of $706.7 million in the prior fiscal year, primarily as a result of the negative impacts of COVID-19, partially offset by the cost actions implemented.

Our liquidity position remains strong with total cash and revolver availability as of August 31, 2020, of approximately $953 million with $360 million of cash on hand, $419 million of U.S. revolver availability under the Vail Holdings credit agreement, and $174 million of revolver availability under the Whistler credit agreement. As of July 31, 2020, our net debt was 4.1 times trailing 12 months total reported EBITDA. As previously disclosed on May 4, 2020, we completed an offering of $600 million, in aggregate principal amount of 6.25% unsecured senior notes due 2025, a portion of which was utilized to pay down the outstanding balance of our U.S.

revolver under the Vail Holdings credit agreement in its entirety. Additionally, on April 28, 2020, we entered into an amendment to the Vail Holdings credit agreement providing among other terms that we will be exempt from complying with the agreement's financial maintenance covenants for each of the fiscal quarters ending July 31, 2020, through January 31, 2022, unless we make a onetime irrevocable election to terminate such exemption period prior to such date. We continue to expect to have sufficient liquidity to fund operations through at least the 2021-'22 ski season, even in the event of extended resort shutdowns. Moving now to our fiscal 2021 outlook.

Given the uncertainty across the economy and the challenge COVID-19 has created for travel demand, and specifically, our assessment of the ultimate visitation to our resorts with evolving demand and capacity dynamics, the company will not be providing full-year guidance for fiscal 2021 at this time. With that said, we are very pleased with the results of our season pass sales to date and the indication that may provide on the loyalty and commitment of our guests to our resorts, even in the current environment. Given the broader dynamics in the travel industry, we do expect to see material declines in visitation to our resorts and associated revenue declines in fiscal 2021 relative to our original visitation expectations for fiscal 2020, primarily as a result of expected declines in visitation from non-pass lift ticket purchases. On a relative basis, we do expect stronger visitation from local and drive-through guests this season than guests who traditionally fly to our resorts.

We also expect stronger visitation from repeat guests versus new guests and infrequent skiers and riders. We expect more significant declines in international travel, which will have a particularly challenging impact at Whistler Blackcomb, where approximately 50% of visits typically come from outside of Canada. Given the expected outsized impact to destination visitation, we expect material declines for our ancillary lines of business, including ski school, food and beverage, and retail rental that tend to rely more heavily on our destination guests. Food and beverage is also expected to be negatively impacted by capacity constraints on our dining operations.

We are focused on disciplined cost management to efficiently operate the business. As previously mentioned, we plan to operate all of our North American resorts with a full terrain footprint, consistent with historical practices and conditions permitting in order to ensure a comprehensive guest experience to maximize our on-mountain capacity and to invest in the long-term loyalty of our pass holders and lift ticket guests. However, given our lower expected visitation revenue for the upcoming year, we have continued to actively manage our cost structure, including, but not limited to the implementation of cost reductions totaling over $70 million on an annualized basis as compared to our original operating expense expectations for fiscal 2020. We are also actively managing our expenses in the short-term where it aligns with our business levels and does not materially impact the guest experience, with savings resulting from these efforts expected to be realized in the first quarter of fiscal 2021.

In addition, there are unique headwinds this year relative to the midpoint of our original fiscal 2020 resort reported EBITDA guidance range provided on September 26, 2019, including an estimated $13 million impact from additional expenses in fiscal 2021 to address COVID-related operational challenges; an estimated $6 million of incremental off-season EBITDA losses from Peak Resorts from August 1, 2020, to September 24, 2020, as a result of the transaction closing on September 24, 2019, and the avoidance of those losses in the prior year; and an estimated $20 million impact from the inclusion of Epic Coverage in the price of every pass product based on the estimated personal injury claims paid, administrative expenses, the elimination of premiums for that coverage and any associated renewal credits for claims that would be deferred into the 2021-2022 season. The company expects to incur approximately $2 million of acquisition and integration-related expenses in fiscal 2021, representing an approximate $12 million reduction in those expenses relative to fiscal 2020. Even with a more efficient approach to our operations, the nature of our business, and our approach to guest service creates a high level of fixed costs. And any material revenue declines experienced in fiscal 2021 will have a large percentage decline in our resort reported EBITDA and will also reduce our resort reported EBITDA margins.

As an illustrative example, relative to our original resort net revenue guidance provided for fiscal 2020, if our resort net revenue declined by 30% for fiscal 2021 to approximately $1.8 billion, we would expect resort reported EBITDA of approximately $400 million. We would expect that an increase or decrease in revenue within a reasonable range from this example would result in increases or decreases to resort reported EBITDA of approximately 75% of the change in revenue for fiscal 2021. This example is specific to fiscal 2021 and is intended to provide a better understanding of the reduced cost structure under our adjusted operating plan reflecting our expectations for significant declines in visitation revenue compared to prior-year guidance and excludes any material disruptions or closures of our operations as a result of COVID-19. The example provided is illustrative in nature only and is not intended to be guidance or interpreted as such.

As noted previously, we will not be providing full-year guidance for fiscal 2021 at this time, given the significant uncertainty across the economy and the challenge COVID-19 has created for travel demand, operational constraints, and our ability to predict visitation to our resorts. We will look to provide an update in December as we gain additional clarity on pass sales and an updated view on demand and capacity. I'll now turn the call back over to Rob.

Rob Katz -- Chief Executive Officer

Thanks, Michael. We continue to be confident in the long-term prospects of our business model that is built on the loyalty of our guests, the strong lineup of season pass products that provide access to our irreplaceable network of world-class resorts, and the sophisticated data-driven marketing approach we use to communicate with and attract our guests. Our strong capitalization positions us to continue to invest in our people, our resorts, and the guest experience while remaining flexible to manage through the evolving circumstances caused by COVID-19. As we head into this ski season, we are grateful to our passionate, committed employees who we know are looking forward to providing an exceptional experience for our guests as we prepare for the upcoming season.

We could not be more proud of how they have shown up during this crisis. At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] We will take our first question from Felicia Hendrix of Barclays.

Felicia Hendrix -- Barclays -- Analyst

Good afternoon. Thank you. So Rob, I mean, this is an obvious comment, but COVID has definitely steered a lot regarding your underlying fundamentals. That said, you did talk about seeing strength in the Northeast given the Peak acquisition.

So just wondering if you could talk a bit more about what you're seeing from Peak Resorts, maybe, for example, how many Peak Resorts' pass holders have converted to Epic? And clearly, also having incremental drag to resorts to help mitigate the decline in the destination you expect to see the season, so any data that you can give us in terms of how Peak is driving things would be helpful. Thank you.

Rob Katz -- Chief Executive Officer

Sure. Yes. I guess I'd say that, number one, I think what's maybe most important is that our destination markets in total, including outside of the Northeast for Peak markets, performed very well. And definitely, again, was our strongest segment.

I think that was certainly something that was in question even outside markets where we have a drive-to option. But I think within that -- within the destination kind of category, the Northeast once again was our top performer. And I think absolutely, Peak is helping that. Also, I think it's -- we've now had a couple of years of continuing to build on the acquisitions that started all the way back with Stowe.

I think many of our core Epic products are some of our strongest. And so that was also quite heartening to us, in terms of people still, I think, looking to purchase a product that provides access to all of our resorts. And I think that drive-to option is a great nice to have, but it isn't necessarily what everybody is focused on or necessarily buying to. And I think, yes, this was a perfect opportunity, the Peak opportunity for us right now at this time because, clearly, having a second option, I think, is definitely a big positive in people's minds.

So when we look across our Peak Resorts, absolutely seeing a bump. I can't provide specific details on that. And honestly, probably tough to do that until we get to the end of the selling season anyway. But I would say, yes, absolutely providing an extra bump over just strong performance broadly from the destination markets.

Felicia Hendrix -- Barclays -- Analyst

So like -- did the conversion of Peak to Epic, did that surpass your internal expectations?

Rob Katz -- Chief Executive Officer

Yes. I would say broadly, yes, I think when we obviously saw some of that last year as well. Right? So this is a phenomenon that started last year, and I think we're starting to see this year. And I think, again, I think the market is -- the strong results that we're seeing in the Northeast, I think, highlight the success we've had at converting people who have an interest in those resorts.

And I think at this point, we probably have three factors all driving that success. One is broad destination strength. The second is just three or four years that we've had to compound, providing people in the Northeast more options and then absolutely Peak this past year.

Felicia Hendrix -- Barclays -- Analyst

Great. And then just as my follow-up, can you just talk about the mix of season pass sales you're seeing for this selling season, just Day Passes versus traditional Epic Pass maybe? Like what it looks like now versus what it might have looked like in a normalized year and are you seeing a trade up or trade down? And then just as kind of the follow-up on the second part of that, you did give data in your prepared remarks and in the press release that said on the season pass sales, you sold about 75% of last year's units. We know there's a pull forward, but just so that we can have a basis of understanding of the implications, what percent of your passes are usually sold by this time?

Rob Katz -- Chief Executive Officer

So I would say, I think, yes, we have not put out -- on the second question, we've not necessarily put out that stat. So I can't comment on that. But I would say that what we feel is that the results this year, I think, by somewhat triangulating into the overall kind of estimates that we're giving for the full year, I think, gives you a sense, right, of how that's likely to play out for the rest of the selling season. I think in terms of mix, what I would say is we're very pleased with the strength of the kind of Epic and Epic Local season pass products.

I would say that we can't really give exact commentary on any kind of downgrades at this point because it's very possible that once we get through the 70,000 online forms that were sent in, many of which were for a downgrade, that mix could shift. But I would say we, at this point, without even knowing what's in those forms because they haven't been fully processed, I mean, I haven't been able to go back to the guest yet, the performance of, again, Epic and Epic Local, has absolutely surpassed our expectations.

Felicia Hendrix -- Barclays -- Analyst

Great. Thank you so much.

Operator

Thank you. We will now take our next question from Shaun Kelley of the Bank of America.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Hi. Good afternoon, everyone. Just have a couple of like one or two quick clarifications. I guess to start, really appreciate all the additional color.

I know there's a lot in here to digest, and clearly, it's a lot more than is usually given. My first question is on the illustrative range that you gave, Michael, in the kind of sensitivity. Just to be super clear on this, that range excludes both the deferred sales and revenue impact from the carryover from the passes from last year. Am I thinking about that right?

Michael Barkin -- Chief Financial Officer

That would be on a reported basis for last year's guidance versus what the 2021 numbers would be on an illustrative basis. So that would include the impact of the credits in 2021 and no adjustment to the guidance for last year.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

OK. So it does include --

Michael Barkin -- Chief Financial Officer

We did not try to do like a same store for that adjustment in that example, if you will, for the credits.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

OK. So second question, which is also a little bit of a technical, but Rob, you hit on it a couple of times about the downgrades of the 71,000 delayed forms. Just to be more precise on that, should we think about that these are still, I guess, orders, but these have not been included in the units, but these would still be units that are yet to be counted, I guess, excluding the 4,000 or so refunds. Is that the right way to kind of directionally to think about it? Yes.

They may be at a different price point or they might be for a lower product, there might be some mix shift. But from a unit perspective, are those effectively additive to the unit base or how should we think about that?

Rob Katz -- Chief Executive Officer

So what I would say is, I think with all these forms, I mean, I think we really, unfortunately, just could not provide a pathway online given the short time frame that we had to essentially build the entire credit process. We couldn't provide a way online for people to downgrade their pass, let's say, from an Epic to an Epic Local or an Epic Local to an Epic 4-Day and use their credit. And so we told people they have to call into the call center or use this online form. Just given the numbers that we got, actually, we haven't been able to process them.

And these forms include kind of what the guest wants to do, but we still need to circle back to the guests, get their credit card, and actually process it. So at this point, we can't 100% say what those forms will translate into and they could include -- again, they certainly could include somebody going from an Epic Pass to an Epic 1-Day, but more likely, right, are going to include things along that continuum. And I think we're putting it out there just to highlight that it's a meaningful number, but we can't be precise on that. And the same thing is true with refunds.

We've got these requests for refunds. But until we actually go through the process of processing them, we can't be sure exactly how they will come out. I would say that it is actually not that surprising to us given the strength of our pass sales, that we would see a significant number of people wanting to downgrade, because every year, we have people upgrading and downgrading. But to do so with credit this year, you really had to do it through a form.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

But just to be clear, right, the 71,000 is not included in the 850,000. Right? So even if I'm downgrading, there's no unit incorporated today, and that would be a unit, it just hasn't been processed?

Rob Katz -- Chief Executive Officer

Correct. So the growth rates that we announced, the 850,000, none of that includes anything with the 70,000 forms or the 4,000 forms.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Great. OK. And then this is sort of maybe the bigger picture question. I know this was going to be tough, but you have some experience now operating with a little bit of the capacity constraints in terms of your actual amount in performance, I guess, at Perisher in Australia.

So could you just give us any color even if it's extraordinarily directional about what was some of the impacts that you saw when you go to this feature where you move to more of an advanced booking reservation component and you probably have some lift capacity constraint that's higher than you would normally have. Like how did that impact just volumes on the mountain? Maybe give people an illustrative sense of what we could expect in an environment like that because that's probably going to be a normal course for this coming season.

Rob Katz -- Chief Executive Officer

Yes. So what I'd say is, I think two things. That's important to remember about Australia, one is that actually, Australia had record low snowfall and very, very limited terrain. And so what I would say is it gives us an example of that.

And I think one of the things we took away from that experience is that the reservation system was critical for those types of moments. But I don't know that it gave us, especially for the first half of the season, really gave us a lot of insight into kind of a normal operating. I think as the season went on at Perisher, we saw better and better performance overall. Better performance financially, better performance in terms of how we were able to allocate capacity.

I would say, I think we believe that actually the insights that we've taken allow us to hone the operating plan for this year in North America, much, much -- to a much greater level of sophistication. There's no doubt that the biggest impact, right, is lift capacity. And so to the extent that we're not fully loading our lift, then that is capacity that we lose. Some of that could be just broad on mountain capacity, some of that could be upload capacity right at the start of the day.

And making sure that we're not creating a bad guest experience for people or any kind of safety issue and so we think there could be some capacity impacts to that. I would say, as many of you know, that there are very -- even though we tend to think about those peak days, the truth is, right, most of the season would not be impacted by the most likely capacity constraints that we have. Beyond lift, though, I think restaurant capacity is another limiter, and we do think that's not necessarily a limiter for the overall capacity on visitation for the mountain. But it is absolutely a limiter in terms of the revenue that we will see from F&B this year, and we think that we'll both have a demand constraint on F&B in terms of potentially less people buying food or less people coming to the mountain, but we will absolutely also have a capacity constraint.

Some of that, somewhat related to local regulations. Right? And obviously, we're going to be very much subject to those in terms of what guidance we get in terms of what the number of people we can put in our restaurants, both in terms of a percent of capacity and an absolute number. Is that good, Shaun?

Operator

Thank you. We will take our next question from Chris of Deutsche Bank.

Chris Woronka -- Deutsche Bank -- Analyst

OK. Hey. Good afternoon, guys. Thanks for taking my question.

I wanted to ask you about, I think historically, this time of the year, sometimes you've given out data points on hotel reservations in some of the Colorado resorts. I mean, how relevant are you willing to share any of those data points with us today, but also how relevant do you think they are right now, given that there seems to be a shorter decision-making booking window?

Rob Katz -- Chief Executive Officer

Yeah. We don't think they're very relevant at this point. I think this is typically pretty early in the cycle and even in the best years. And clearly, I think we saw this coming out of the '08-'09 recession, I think we're still good to see it today.

The booking window is obviously going to shrink quite a bit. And obviously, we are telling people that they will need a reservation to get on the mountain. And so we feel like we're probably not going to see the more substantial booking interest until after we put out our reservation system in early November. So I would say we're not putting too much focus on these early booking data points.

Chris Woronka -- Deutsche Bank -- Analyst

OK. Fair enough. And then can you share with us, given the reservation system that's in place for the upcoming season, if that had been in place last season, is it possible to kind of back into how many days you would have had to turn people away? I mean, I assume it's a pretty small number, but wanted to ask.

Rob Katz -- Chief Executive Officer

Yes. We really -- it's tough to give precision around that. So I think we've put out there publicly that we do believe that, certainly, for our season pass holders, we feel like they'll absolutely be able to access the mountain on the vast majority of days during the year and it won't be an issue. I think at this point in terms of lift ticket purchases, the only lift ticket purchases, I think that's more unknown.

And I think we made clear in the release that we do think that we will see a material decline in that as we limit those sales and potentially as impulse purchases have to go down. On the other hand, obviously, some of that could ultimately help some of our sales on pass sales, right, for the remainder of our pass selling season. So we'll have to just see how that plays out. But yes, very difficult for us to say exactly this year versus last year, other than to say that, yes, we're talking about managing a handful of days throughout the year for each resort.

Again, assuming normal weather conditions, and I think we need to put that out there. Obviously, if we have very poor conditions, then we may see the capacity restrictions be more frequent.

Chris Woronka -- Deutsche Bank -- Analyst

Great. And just kind of a housekeeping question. How do the mechanics work for -- you mentioned with the reservation system, there could be people who later request a refund. I mean, how does that work? Who is eligible for that? How do they request it? I mean, what are the mechanics behind that?

Rob Katz -- Chief Executive Officer

Yes. So what we're saying to people is -- for our season pass holders, they get up to seven priority reservation days. So obviously, the maximum of the number of days they have on their product or seven. And when we open our reservation system, people will be able to go in and get the days that they want.

If they don't, if somehow, someday that they want to come is -- doesn't have any capacity, and they can't purchase it, they can come back to us and ask for a refund. And for the whole product. And that is -- and that will happen really at the end of the reservation period -- that priority reservation period, which ends at the beginning of December. So we would have a pretty good sense of that probably going into final pass sales reporting on our earnings call, but not a hundred percent.

Chris Woronka -- Deutsche Bank -- Analyst

OK. Very good. Very helpful. Thanks, guys.

Rob Katz -- Chief Executive Officer

Yeah. Thank you.

Operator

Thank you. We will now take our next question from David Katz of Jefferies.

David Katz -- Jefferies -- Analyst

Hi. Afternoon, everyone, and thank you for the copious detail and the usual transparency.

Rob Katz -- Chief Executive Officer

Thank you.

David Katz -- Jefferies -- Analyst

Number one, I just want to go back to the illustrative model that you provided, which I think, Michael, you said, excludes any impact of carryover revenues. Right? If we were to hypothetically illustrate further, adding, I think, you have $121 million of deferred pass revenue on top of what's there. What does that do to the -- assume that flows through at a much higher level, right, to the EBITDA line, what is it that --

Michael Barkin -- Chief Financial Officer

So David, I just wanna -- yeah, I just wanna clarify the illustrative model assumes that the deferred revenue for the credits is recognized in 2021, as we've outlined in our prior disclosures. All we're doing is providing a reference point to the original guidance from 2020.

David Katz -- Jefferies -- Analyst

Right. So the $121 million --

Michael Barkin -- Chief Financial Officer

The 2021 illustrative example includes an assumption of the deferred revenue being recognized this year.

David Katz -- Jefferies -- Analyst

Right. And is it fair to assume that that deferred revenue flows through at a very high level and raises the margin that would be in there otherwise? Is that a fair impression?

Michael Barkin -- Chief Financial Officer

No. Because the deferred revenue largely mirrors, right, the revenue we would recognize in any year, right, with pass sales because the credits are largely a onetime issue so it's really a question of when the cash was received. But from a financial statement perspective, our perspective on it is that that largely mirrors a normal, right, revenue profile for the business because it's essentially grossing up to normal, right, pricing levels.

David Katz -- Jefferies -- Analyst

OK. Helpful. And my second question, if I may, is the operating model that you've laid out, if we were to apply that to, say, last year or a hypothetical normal year, is it a fair question to ask how many visitors may have been turned away under those circumstances with this operating model? Just to get a sense of that kind of impact.

Michael Barkin -- Chief Financial Officer

I think to Rob's prior comment, at this point, we really can't provide any more precision on kind of the capacity side. I think, largely, what we're trying to do with the -- by providing the road map of the illustrative example is to really give you a sense of our cost structure, both fixed and variable. And then, yes, I give you a starting point that then people can adjust revenue based on your assumptions. And we're certainly providing our perspective that there will be material declines this year, but not providing any specificity on visitation revenue around that.

Rob Katz -- Chief Executive Officer

I mean, I would just add on to that to say that the illustrative example is being driven by demand, consumer demand, not really being driven by capacity constraints. So other than for F&B, where that -- obviously, that is factored in because we have a pretty clear understanding of what that's going to be. But as we said earlier, in the release of the script, we really -- it's hard to quantify what the capacity impacts are going to be this year. So at this point, when you look at that illustrative model, it's really driven on demand.

But that, of course, whether we exclude people because of capacity limitations or there's no demand, it's obviously a similar revenue loss.

David Katz -- Jefferies -- Analyst

That's fair. I appreciate all of it. Thank you very much.

Rob Katz -- Chief Executive Officer

Yeah. Thank you.

Operator

Thank you. We will take our next question from Patrick Scholes of Truist.

Patrick Scholes -- Truist Securities -- Analyst

Hey. Good afternoon, everyone. My question's concern is, obviously, the logistical challenges with lift capacity and related to that, how do you think about potential staffing issues going into the winter specifically with international visa restrictions and potential employee fear of coming to the U.S. due to COVID and how much of a challenge will that be this year?

Rob Katz -- Chief Executive Officer

Well, I think we are assuming that we will not be -- in the U.S., we will not be bringing in any international visa employees, for the most part, no material amount of them. And there's no doubt that that is a real loss. On the other hand, obviously, the unemployment rate is higher than it has been for the last number of years, but we do feel like there will be other people in the U.S. who would be interested in working at our resorts this year.

And obviously, many of these folks might have been active in the restaurant, retail, leisure industries elsewhere. And of course, that's where we've seen the biggest reduction, right, in workforce. And so we do feel like we will be able to make up for the loss of international employees with additional hiring in the U.S.

Patrick Scholes -- Truist Securities -- Analyst

OK. Sounds good. And then any high-level lessons or takeaways that you learned from the Australian ski season specifically cost structures, operational issues that you will be taking forward to the North American ski season?

Rob Katz -- Chief Executive Officer

Yes. I think a key lesson was that it was critical for us to dial in the capacity of the resort. And we saw that in Australia. Key lesson was, obviously, how to manage the reservation system, which, in Australia, we had to do very, very quickly with limited opportunity to really create a custom system.

It took us a while to kind of get that burned in, where we feel like we've taken that and now are going to be launching a much more sophisticated approach to those pieces. We think we saw -- even though the restaurant at Perisher were limited in terms of visitation, we saw tremendous guest enthusiasm for the overall experience and people adjusted. They understood that they may or may not get into the restaurant exactly when they wanted, and they brought food and did other things to give themselves a great experience. I think maybe as much as anything, we learned that even during COVID, there's tremendous demand and excitement for getting out to ski at the resort and that's a core experience is one -- because it's outdoors and naturally has a lot of spacing, is one that actually resonates with people and that the lift limitations in terms of how many people are loaded is one that they were able to execute on successfully and we feel like we can do the same.

Patrick Scholes -- Truist Securities -- Analyst

OK. Sounds good. I look forward to the upcoming season. Hopefully, you'll have the cascade lift running early this year, so we can use that to bypass the village where all the potential lines are.

So thank you in advance for that.

Rob Katz -- Chief Executive Officer

Absolutely. We'll make sure to do that.

Patrick Scholes -- Truist Securities -- Analyst

Thanks.

Operator

Thank you. We will take our next question from Alex Maroccia of Berenberg.

Alex Maroccia -- Berenberg Capital Markets -- Analyst

Hey. Good afternoon, guys. The website's explanation of Epic Pass credits in circumstances where somebody chooses a cheaper pass, makes it sounds like the credit-only applies to the price of the cheaper pass, not the original pass. Can you just explain the mechanics of how this is going to impact deferred revenue? And should we assume that the remaining $14 million in deferred rev won't be recognized in full?

Rob Katz -- Chief Executive Officer

So the credit -- so a couple of things. One is, the way the mechanics work is that the credit -- everybody got an individual unique credit, and that credit could be used in full dollar amount for an equal or greater price pass this year, if you wanted to reduce your -- downgrade essentially your pass, the credit was also reduced to maintain the same percentage of the purchase price that you are paying, which is one of the reasons why we couldn't do it online. The deferred revenue that was on the balance sheet, when we put that out last year, was an estimate of what the total usage would be of deferred revenue this year. And we don't -- until we get through the rest of these forms, we don't know what the final deferred revenue usage will be.

And so we won't know that until we'll be able to update everybody in our December release.

Alex Maroccia -- Berenberg Capital Markets -- Analyst

OK. Understood. And then secondly, are you expecting to change the timing of CAPEX in fiscal '21, given the potential refunds you might see with that big coverage? And then when you resume normal CAPEX, what's going to be prioritized?

Rob Katz -- Chief Executive Officer

So we're not -- at this point, yes, we're not really making any adjustments to CAPEX in terms of capital spending, which would really happen after the season. This year, obviously, we, of course, are going to be monitoring the season closely. And I think before we come out with any plan for calendar-year 2021, we'll make sure we'll incorporate what happened this year. I think we, of course, feel like we'll likely be in still a conservative approach.

So hopefully, not as conservative as last year, because the environment around COVID and travel have all improved. And yes, we will definitely be prioritizing, just as we always have, projects that we think will have a significant impact on the guest experience and certainly, some of the projects that we deferred from last year to next year or this year to next year, will be top of the list in terms of what we're going to review.

Alex Maroccia -- Berenberg Capital Markets -- Analyst

OK. That's all very helpful. Thank you.

Rob Katz -- Chief Executive Officer

Thank you.

Operator

Thank you. We will take our next question from Paul Golding of Macquarie.

Paul Golding -- Macquarie Capital -- Analyst

Hi. Thanks for taking my question. So in looking at the $70 million figure of cost reductions over the expectations for fiscal '20, curious to what amount of that, if there's any breakdown you could give, that could indicate maybe something around marketing savings or something that we might expect to come back in following years? And then my second question is around capacity in the lodging segment. Any limitations there on capacity and any expectations around how the drive-up or local predominance this season could flow through to that segment?

Michael Barkin -- Chief Financial Officer

Sure. On the cost savings, there is a component within that cost savings, which is marketing. At this point, yeah, I'm not going to give additional details or granularity on that. A lot of that was obviously related to feeling that the credits that we were offering to people were obviously a very big marketing incentive and so probably needed less external marketing expense than normal for that.

And, yes, we would assume that in a normal year, we would see that marketing come back. I would say that component of the $70 million is still on the smaller side. Right? The vast majority of this does relate to our operating structure, I think, for the resort. And on the lodging side, yes, we're at this point not anticipating any limitations on room capacity.

Of course, that's always going to be subject to local regulations. So we will, of course, be following that. But at this point, we're not planning on that. I think some of the activities within lodging, we think will certainly be less, whether that's in the spa or food or other things, so like any other operator.

But in terms of rooms, we're not, at this point, expecting a reduction because of capacity limitations.

Paul Golding -- Macquarie Capital -- Analyst

Great. Thanks so much. Appreciate the color.

Michael Barkin -- Chief Financial Officer

Thank you.

Operator

Thank you. And we will take our last question from Ryan Sundby of William Blair.

Ryan Sundby -- William Blair & Company -- Analyst

Yeah. Hi, everyone. Thanks for taking my question. I just want to follow-up on the strength of the Northeast.

Could you maybe talk about how much capacity may be in terms of potential additional skiers that you could add in a normal year that the Peak Mountains could take on if we do see some of this destination visitation shift kind of out of the Western resorts end there? Because it does feel like maybe you're not going to see restrictions on a bigger amount like Park City, but maybe you do see them on something like that, snow?

Michael Barkin -- Chief Financial Officer

Yeah. I think there is certainly -- there is additional capacity we feel like we could add there. But in relation to the overall visitation in our Western resorts, obviously, that's far from a one-for-one opportunity. And I think, yes, that there could be capacity limitations on that front as well.

Again, most of the -- but we're only talking about those handful of days where there could be an issue. I'd say we also feel good because, again, there was an opportunity for people to buy a regional product in the Northeast. And again, we saw real strength in Epic and Epic Local, which I think tells us that people are really planning to come out west for their vacation. Obviously, of course, it's all going to be subject to COVID and what's going on with it at that time.

But we feel good about that. But I think the addition of Peak and the amount of snow and a couple of smaller resorts is great as an additional option, but not a capacity transfer opportunity of any material size from the west.

Ryan Sundby -- William Blair & Company -- Analyst

Got it. That makes sense. And then, Rob, just kind of curious from a pass standpoint. Sales, I think, holding up better than any of us would have expected.

Do you think maybe using some kind of renewal discount going forward is a good idea? Do you think that helps, kind of, hook people in, in the pass this year?

Rob Katz -- Chief Executive Officer

There's no doubt, I think. We obviously created the credit program to create loyalty. And I think we certainly saw the possibility that between people being disappointed with last season and the concerns about COVID coming into this season, that there was a chance, of course, that the program could take a material hit, even if our ultimate visitation for the year came out down, but OK. But if we lost a lot of people from our advanced commitment program, I think we were quite concerned about the loyalty piece.

And so I think we're quite proud of the sophistication that we used to put together this program and, of course, did incent loyalty, in some cases, from the people who are most likely to churn, obviously, with low usage from last season. I don't think, as we go forward though, no, we don't think that this is necessarily something we think this is more of a unique situation because of the odd dynamics of last year. And we think going forward, we wouldn't see this again even if there were resort closures. This year, we've got a refund program in place that's very clear on what people get.

And so I think we would assume that we're going to be moving much more back to the same approach that we had before. But the good news for us is that we'll be going into that return to kind of normal with a very high level of loyal and committed skiers and riders. And so that, in our minds, is a big win as we think about what life looks like post-COVID.

Ryan Sundby -- William Blair & Company -- Analyst

Makes sense. And then just last on the dividend rates, are you still kind of thinking two quarters or could that stay down?

Rob Katz -- Chief Executive Officer

Yes. I think at this point, yes, we're not making any decisions on that. Obviously, there are certain restrictions in the notes that we raised, but I think we'll take it quarter by quarter. But obviously, we're going to be incredibly sensitive to the dynamics and environment around the company.

And we'll make sure, one, that we don't jump too early if we don't feel like we've seen real stabilization. On the other hand, I think certainly before COVID, we were quite aggressive on returning capital to shareholders. And I think we would obviously go back to that once we saw the environment stabilize.

Ryan Sundby -- William Blair & Company -- Analyst

Great. Thank you.

Rob Katz -- Chief Executive Officer

Thank you.

Operator

Thank you. There are no further questions in the questioning queue.

Rob Katz -- Chief Executive Officer

Thank you, operator. This concludes our fiscal 2020 year-end earnings call. Thanks to everyone who joined us on the conference call today. Please feel free to contact me or Michael directly, should you have any further questions.

Thank you for your time this afternoon and goodbye.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Rob Katz -- Chief Executive Officer

Michael Barkin -- Chief Financial Officer

Felicia Hendrix -- Barclays -- Analyst

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

David Katz -- Jefferies -- Analyst

Patrick Scholes -- Truist Securities -- Analyst

Alex Maroccia -- Berenberg Capital Markets -- Analyst

Paul Golding -- Macquarie Capital -- Analyst

Ryan Sundby -- William Blair & Company -- Analyst

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