After a sluggish start to the season, snow conditions improved through the rest of winter 2018-19, and Vail Resorts (NYSE:MTN) capitalized on those favorable weather patterns. The ski resort giant recently reported surprisingly strong sales growth for the critical fiscal third quarter that put it on track to beat management's prior 2019 earnings outlook.
In a conference call with investors this month, CEO Rob Katz and his team discussed the hits and misses from the latest quarter while explaining their rationale for the brighter outlook. Below are a few highlights from that presentation.
Vail is making its own luck
Our results throughout the 2018-2019 North American ski season highlight the growth and stability resulting from our season pass, the benefit of our geographic diversification, the investments we make in our resorts, and the success of our sophisticated, data-driven marketing efforts.
Snow conditions improved after a weak early season start to deliver robust growth in ski visits and higher average spending across Vail's core U.S. resorts. The business saw solid contributions from its growth initiatives, too, including rising season pass sales and upgrades, as well as robust demand in destination markets like Rusutsu, Japan.
Broadly speaking, executives said the results confirm that their strategies -- aimed at diversifying geographically and raising guest satisfaction -- are working.
Season passes are working
We are very pleased with the results of our season pass sales to date, which showed strong growth over the record past sales results we saw last spring.
Vail Resorts continues to get better at marketing its season passes, with 2019/2020 sales volumes up 9% and higher average prices driving a 13% revenue increase when compared to the same period last year. Its geographic expansion continues to fortify its position as the leading ski resort operator, but it also gives its marketing team flexibility when it comes to season pass offerings. Its global Epic pass now includes new properties in Idaho and Japan to bring the total to 69 resorts. Regional and resort-specific passes, which tend to appeal more to Vail's local visitors, are selling at a healthy clip, too.
Our commitment to reinvesting in our resorts and the guest experience remains one of our highest priorities.
Katz and his team raised their fiscal year earnings guidance for the second time in 2019, thanks to the solid results during the peak selling season in the U.S. The resort specialist has every intention of protecting that positive momentum in future years, mainly by spending aggressively now to upgrade every aspect of the vacation experience, from ski lifts to dining and lodging.
Most of these capital investments will take many years to generate positive returns, but one upgrade should start impacting results as early as next year. Vail is expecting to complete its manufactured snow system rollout across key resorts in Colorado over the seasonally weak summer and fall months. If everything goes according to plan, the company should be able to guarantee its visitors ski access around the Christmas and Thanksgiving holidays, which are traditionally less reliable snow periods.
That might allow Vail to enter the next peak ski season with an early sales lift. The new snow manufacturing capabilities will also remove another key piece of volatility for a business that's growing less turbulent with each passing year.