Vail Resorts (MTN 1.98%) has proved to be an impressive and resilient performer. In this clip from "Real Talk" on Motley Fool Live, recorded on March 18, Motley Fool contributors Jason Hall and Matt Frankel discuss how Vail could be a big winner over the long term.
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Jason Hall: This isn't a recovery play. This isn't like a return-to-normal play. These are timeless assets. They really, really are. They're also assets that I think are less exposed to the usual consumer cycles and the downturns. Of course, their businesses will be affected when there are those economic periods. But if you just look at how much the company has been able to grow and expand, I'm going to share this real quick. This is from April of last year. There's a lot more properties that you were naming that were not on this so this is one of those businesses, Matt, that when we are going through those economic periods where everybody else is scrambling to figure out how to pay the bills, this is a business that's in a position of strength to be able to take advantage of those opportunities to get even stronger.
Matt Frankel: Yeah, and I am glad you mentioned that they aren't just a pandemic or a recovery play. The business has been very resilient. Demand for experiences is off the charts this year. If you've tried to go anywhere with a lot of people, you know this already. Vail ski lift revenue, I mentioned, their single largest revenue source is 10% higher than it was in the last pre-pandemic ski season. That's really impressive and a really resilient business. It missed expectations on both earnings and revenue and the reason is because the more COVID affected areas of its business haven't rebounded just yet, specifically the restaurants and ski lessons. Obviously, the Omicron surge really hurt the ski season and it prevented them from opening the restaurants at full capacity, things like that, so that part of the business has been a drag. It hasn't quite rebounded yet but the business has been really impressive and this has been a big winner over the long term. Let me quickly share, I'm going to be the y-charts guy this time.
Hall: Love it. Matt, didn't this used to be a REIT and then their recap classified to not be a REIT? Do I remember that correctly?
Frankel: You might be correct on that. I'm not 100% sure. To be a REIT, you have to get 75% of your income from real estate and I don't know if they still qualify for that. But, here you go. This is a 10-year chart of Vail versus the S&P. You can see that during the beginning of COVID, they took a sharp downturn. That's pretty much any experiential-related stock. They were never in any serious danger of going out of business. They have $1.4 billion of cash on their balance sheet. They suspended their dividend but they have since almost reinstated it to the pre-pandemic level. They just more than doubled it this past quarter. Now yield's about 3%, so good income stock again. You see it more than double the return of the S&P 500 over the past 10 years, which have been a very good 10 years for the S&P. This has been a great performer. One thing that concerns some investors is that they just had a big leadership change at the CEO position. Their longtime CEO just retired. In November, they appointed new CEO Kirsten Lynch who was formerly Chief Operating Officer of the company and was the one who was pretty much responsible for this transition to season pass-based marketing. I can't think of a better hire. I'm very excited about Vail going forward.