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Why Vail Resorts Jumped 13% in August

By Andrew Tseng – Sep 8, 2020 at 8:14AM

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Shares of the ski resort operator, which had been crushed in February and March, are quietly approaching flat for the year.

What happened

Shares of Vail Resorts (MTN -1.28%) jumped 13.4% in August, according to data from S&P Global Market Intelligence.

That move brought the stock's year-to-date loss to just 8.1%. For context, Vail's stock had been down as much as 44% year to date in early April when uncertainty around COVID-19 was at its peak.

In August, Vail Resorts announced its plans for the 2020/2021 ski and snowboard season, which include a comprehensive focus on safety. It also released a letter from Vail Resorts CEO Rob Katz about the company's 2020/2021 winter operating plan.

A skiier skis down a mountain.

Image source: Getty Images.

Some of the components of the operating plan are:

  • Guests will be required to wear face coverings in every part of the company's operations. That includes while loading and riding in chairlifts and gondolas, while inside all buildings, and during all ski and snowboard lessons. In short, no one will be allowed on any of the company's mountains without a face covering.
  • The company will be enforcing physical distancing on its mountains, which will require limiting the number of guests. To allow this, the company will have a reservation system at each of its mountains. It will also enforce limitations on chairlifts and gondolas and physical distancing at its on-mountain restaurants. 
  • There will be health screenings for all participants -- both employees and customers -- of the ski and ride school. Group lesson sizes will be limited to six, and all lessons will need to be purchased in advance.

Market sentiment toward many travel, leisure, and economic recovery stocks also improved during August. For example, shares of Expedia (EXPE -3.41%), Booking Holdings (BKNG -0.98%), and Six Flags Entertainment (SIX -2.64%) appreciated 21.2%, 14.9%, and 25%, respectively, during August. That sentiment improvement likely contributed to some of Vail's share price strength in the month.

So what

During March and April, there was tremendous uncertainty about COVID-19 and its impact on the global and U.S. economy. When the latter part of the 2019/2020 ski and snowboard season at Vail's mountains was canceled early, the duration and severity of the COVID-19 pandemic was extremely uncertain. It was possible the 2020/2021 ski and snowboard season would be canceled as well.

Vail announcing its operating plan for the 2020/2021 season provides more certainty about the business this winter. Investors will have to wait to see how Vail performs financially this winter, but the fact that there are concrete plans to have a ski and snowboard season at all has likely helped boost sentiment toward the stock.

Now what

Because so much of the company's business occurs in the winter months, the most we can do now is watch how COVID-19 and economic developments play out in the coming months.

Vail Resorts reports its fiscal fourth-quarter earnings results on Sept. 24, during which management will surely elaborate on its winter season plans. Investors should tune in.

Andrew Tseng has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Vail Resorts Stock Quote
Vail Resorts
$220.87 (-1.28%) $-2.86
Expedia Stock Quote
$95.61 (-3.41%) $-3.38
Six Flags Entertainment Corporation Stock Quote
Six Flags Entertainment Corporation
$18.42 (-2.64%) $0.50
Booking Holdings Stock Quote
Booking Holdings
$1,709.73 (-0.98%) $-16.98

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