Vail Resorts, Inc. (MTN, Financial) offers an improving growth outlook, in my view, after its 32% stock price decline in the past year.
The mountain resort operator is investing in new technology, redeveloping some of its resorts and offering attractive discounts to its customers to boost its financial performance.
Innovative pricing
The company introduced a new pricing structure for its resorts in fiscal 2019. For example, it launched its Epic Day Pass that gives all skiers the same value for money and flexibility as the company’s season pass holders for just one day. This means that the pass provides a discount of up to 50% on the company’s standard prices. It has been very popular among Vail Resorts’ customers, according to its fiscal 2020 second quarter results, and may strengthen its competitive position.
In 2020, the business will release a new rewards program that offers its pass holders a 20% discount on a range of Vail Resorts’ products including food, beverages and ski lessons. This could increase the appeal of the company’s resorts versus those of its sector peers and may encourage its customers to increase their spending across its range of services.
In addition, the business is offering larger discounts on its passes that are sold in advance. This may provide it with greater certainty in its sales outlook.
Technology investment
The business is investing in new technology that allows it to collect a larger amount of data on its customers. It intends to use this data to make personalized recommendations to its customers based on their past purchases. This could boost demand for its services such as ski schools and equipment rental.
The company is planning to upgrade its ski rental website and its mobile app so that they will offer greater functionality for its customers. Vail Resorts expects this investment to make the process of renting skis easier for its customers, which could boost demand for its range of services in upcoming quarters.
Additionally, the business is set to implement the first phase of its automated staff scheduling system. This could make its workforce more productive and lower its costs.
Potential challenges
The company reduced its financial forecasts for the 2020 fiscal year in its second quarter update. It has experienced disappointing results across a number of its resorts in the first half of the year. For example, visitor numbers across its Pacific Northwest resorts declined 14% in the second quarter of fiscal 2020 compared to the same period of 2019. It now expects its profit for the full year to be $20 million lower than the financial guidance it issued in January 2020.
Vail Resorts may experience further challenges in upcoming quarters due to the impact of the new coronavirus. The disease may dissuade consumers from visiting public places unless it is necessary. This could reduce the company’s visitor numbers in 2020.
In response, the business plans to invest in its resorts to increase their appeal to a broader range of consumers. For example, it expects to expand its Beaver Creek resort by 250 acres and open a new high-speed chairlift at its Breckenridge resort. This could strengthen their appeal to families and help to differentiate them from the resorts of their sector peers.
Vail Resorts also plans to increase the seating capacity at its restaurants to boost its food and beverage sales. This forms part of the company’s $215 million investment program across its resorts in 2020, which could support an increase in its visitor numbers over upcoming years.
Outlook
Market analysts forecast that the company will report a 16% rise in its earnings per share in fiscal 2021. Its forward price-earnings ratio of 22.8 suggests that it offers good value for money.
Disclosure: The author has no position in any stocks mentioned.
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