Vail Resorts (MTN 0.79%) investors have some big questions heading into the earnings report in a few days. The ski resort giant will likely have a good handle on how well its peak season is going and whether the latest round of price cuts struck the right balance between ticket sales and profitability.
Vail's update, slated for the afternoon of March 14, will also show the exact impact of several trends that pressured sales through early 2022, including poor early season snow conditions, COVID-19 restrictions, and soaring expenses.
Let's dive right in.
Visitors are down
The biggest question is how closely the company has come to rebounding from the pandemic slump that swamped the business in 2020 and early 2021. Thanks to a mid-season update in January, we already have a good idea of the scale of that recovery.
Skier visits were down 18% compared to pre-pandemic levels through Jan. 2, management said at the time. This drop was a letdown as it showed no progress toward recovering from COVID-19 shutdowns.
Image source: Getty Images.
The timing of the omicron variant's rise couldn't have been worse for Vail's business. It sparked travel and flight cancelations just as the season was beginning to ramp. The weather didn't cooperate either with low snowfall levels delaying terrain openings through the 2021 Christmas period.
This week's report will fill in the blanks about the weeks that followed. Ideally, visitation trends rebounded by late January, helping lift ski school and dining revenue in the process.
Cash trends
Monday's report should clarify whether Vail is feeling any lingering cash pressures from the past two years of unusually weak operating results. The resort business is capital intensive, especially considering Vail's strategy of buying up ski retreats and then upgrading the infrastructure with things like new lifts.
That's a proven pathway toward higher guest satisfaction (and rising prices), but it can't work unless cash flow is strong.
MTN Cash from Operations (TTM) data by YCharts
Watch operating cash flow trends for signs of a flattening after a full year of gains. It's possible that two straight years of weak visitation trends will convince management to be less aggressive in areas like acquisitions and resort upgrades in 2022. But it's more likely that CEO Kirsten Lynch and her team will double down on their growth strategy, assuming cash flow is still solidly positive.
Looking ahead
Vail's intensely seasonal business means that the outlook for a given fiscal year isn't clear until the winter months in the North American market. In some cases, as we saw in late 2021, that outlook can shift significantly due to weather events just in a two-week window around Christmas.
Still, look for Vail to project a solid rebound for the business in the 2022/2023 season now that COVID-19-related pressures aren't hurting the travel industry as much. Investors should benefit from that recovery even if it won't be obvious until at least late 2022.
