The Management Discussion section in Vail Resorts, Inc.’s filings with the Securities and Exchange Commission and transcripts of earnings calls provided tangible evidence supporting the analysis in previous appendices. The majority of credit extensions and current assets held by Vail Resorts, Inc. have been invested in other properties, amenities, and improvements to maintain the quality experience demanded by guests (Real Estate Segment, 2009, para.1).
The revenues of the firm are largely susceptible to government regulatory changes, particularly forest permits and approval criteria for capital expenditures (Risks, Trends and Uncertainties section, 2010, para.4). They depend greatly on weather conditions for the operating season as the mountain and lodging segments generate the most business, approximately 63% and 18% (Management Discussion section, 2009, para.4).
Attendance for the 2009 and 2010 seasons dwindled by about 5% each year. Decreasing revenues were detrimental when sales of lift tickets did not reach forecasted amounts. Lift tickets are the firm’s cash cow, contributing to 45% of mountain revenue for Fiscal 2009 and 2008 (Management Discussion section, 2009, para.4).
The company targets both destination and in-state guests for business. Unfortunately when the economy entered a recession, many families found themselves with tighter budgets. Vacations became an unaffordable luxury when electricity and grocery bills took precedence. Thus, the destination guests who accounted for 64% of skier visits in 2007 reduced to comprising only 57% of guests in 2009 (Mountain Segment section, 2009, para.1). Vail Resorts Inc. explained that destination guests account for a large part of mountain and lodging revenue because they tend to spend more money while on vacation. In-state guests are usually regular attendees and seek greater value and lower costs and are more sensitive to weather conditions (Management Discussion, 2009, para.2).
Vail Resorts, Inc. reported decreasing operations costs the past few years, and attribute them to the lack of patrons. Food service, retail, lift tickets, and ski school have low operations costs when there are no guests purchasing these goods and services. A lack in purchases may offer discounts in operating expenses, but they also affect income from these activities (Results of Operations section, 2009, para.1).
Luckily, “destination guest visitation is less likely to be impacted by changes in the weather due to the advance planning generally required for vacation trips” (Management Discussion, 2009, para.2). To assure that the firm will realize some profit in the year, they designate extensive marketing expenses for the sales of season passes. These sales are made before the beginning of the season and are commitments of usage by guests, generating more frequent skier visits. Capital expenditures on snow making equipment allow the firm to prolong the skiing season and subsidize snowfall inconsistency...