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Wall Street analysts expect Vail Resorts to raise wages

Investors are assuming ski resort operator will increase pay in an effort to adequately staff mountains next season

John LaConte
Vail Daily
Skiers cheer with excitement as they board the Colorado SuperChair at the base of Peak 8 on opening day Nov. 12, 2021, at Breckenridge Ski Resort.
Katie Young/Breckenridge Ski Resort

EAGLE — Vail Mountain is more than halfway through the 2021-22 season, and operations are picking up with Earl’s lift opening in Blue Sky Basin on Feb. 11.

Vail Spokesperson John Plack said the mountain still intends to get the dedicated lift staffed and running in its new Avanti Skills Zone at some point this season.

It’s a better-late-than-never scenario for the namesake property of Vail Resorts, a publicly traded company that has been criticized for deficiency in its ski operations this season. The diminished guest experience has been pointed out by many who have visited Vail Resorts properties in 2021-22, from average Joe skiers to the analysts assigned to cover the company’s stock on Wall Street.



Skiers have complained about lift lines, lack of parking, lack of availability for lessons, lack of on-mountain food options and — most of all — lack of lift openings, which the company acknowledged has contributed to longer lift lines at other lifts.

Locals have shared concerns about low wages, a gutting of the company’s mid-management positions which has eliminated institutional knowledge in operations, and a lack of housing in mountain communities.



And analysts have pointed out that the stock is pulling back quite bit. Vail Resorts stock (MTN) started 2022 at about $330, down from a high of $372 in November, and has been holding at about $275 for the past couple of weeks, which is lower than it has been throughout most of the past year.

“Still some uncertainty about how they will finish this season given the well-documented labor/staffing shortages,” said Tyler Batory, an analyst who covers Vail Resorts’ stock for investment bank Janney Montgomery Scott. “There also are concerns about next season because they have to do something to adjust operations.”

Hotels used different strategy

Janney, in mid-January, set a future value of $335 on MTN, meaning the firm is expecting Vail Resorts stock to reverse its current course and hit $335 at some point in the future.

Batory, on Feb. 15, said Janney’s view on MTN hasn’t changed since issuing the future value of $335 in January. But Patrick Scholes with investment banking firm Truist Securities issued a new opinion Feb. 9, moving the firm’s price target on MTN from $322 to $302.

Scholes was among the first analysts to address labor and staffing challenges in the travel and leisure sector, pointing out in April that “the industry is suddenly experiencing major challenges with hiring, rehiring, hourly industry staff.”

In his Feb. 9 opinion, Scholes said Vail Resorts’ strategy of going for volume instead of price, in hindsight, has not worked well this season in the tight labor environment. In March, Vail lowered the price of its season passes by 20%, which contributed to a 76% increase in pass sales over the 2019-20 season. Scholes examined this ski industry strategy alongside another travel and leisure industry: the U.S. full-service hotel industry.

“By comparison, the U.S. full-service hotel industry has (collectively) been doing the opposite of MTN as pricing was up approximately 7 percent in January vs. January 2019, whereas occupancy was down approximately 30 percent vs. January 2019,” Scholes wrote. “While the hotel industry certainly has its own labor issues, we cannot think of a specific major company (such as Hilton, Hyatt, Marriott) that has received the negative media attention for customer dissatisfaction to the degree MTN has.”

Another analyst assigned to MTN stock, Jeffrey Stantial with Stifel Financial, agrees with Scholes original price target estimate at $322. Stantial, in a January opinion, said investors have long been concerned about overcrowding at Vail Resorts properties “even before the step function growth in pass unit sales driven by the 20% price cut,” noting that the concern was “a key debate” following Vail Resorts’ investor day event in 2021. Vail Resorts’ annual investor day offers analysts a chance to glean some key insights while skiing at Vail Resorts properties, but the event was held virtually in 2021 and will be virtual in 2022 again.

“The counter argument here is that historically MTN operates well-below max visitation levels through much of the ski season, while elevated discretionary spending in CY22’s capital plan should dramatically improve lift capacity,” Stantial wrote. “Nonetheless, we see risk that mounting publicized criticism of the guest experience forces MTN to re-evaluate either the cadence of progression towards their strategic pass sales target (75% of lift revenues) or the staffing and/or capital investment required to get there — especially should Ikon opt to match Epic pricing next ski season (and hence evoke concerns of ‘pass swaps’).”

The assumption of increased wages for next season is also what prompted Truist Securities to lower its price target in February, Scholes said, as the firm expects fiscal year 2023 mountain revenue to fall by $12 million and costs to increase by $38 million.

“Our cost increase assumes that MTN raises wages for the 2022-23 ski season, something we believe they will need to do in order to avoid ‘Epic negative media attention’ again next season,” Scholes wrote.

Scholes also suggested Vail Resorts hold off on one of the key growth strategies it has employed over the course of the past decade, mergers and acquisitions, suggesting Vail Resorts “digest what you have” before buying more ski areas. A decade ago, Vail Resorts owned six ski areas; today the company owns 40.

“Before MTN starts acquiring any more resorts, we would like to see it get the operational issues straightened out, especially at its more recently acquired resorts,” Scholes wrote. “We hope MTN addresses these issues at its upcoming investor day on March 22 and provides an action plan on what they intend to do on staffing issues and employee housing.”

Scholes also drew attention to MTN’s catch-22 situation in making skiing affordable versus limiting crowds, saying investors sympathize with Vail Resorts as the company has been under pressure for years to make skiing more inclusive.

“Now that the company has made the ski pass even more affordable, it finds itself in somewhat of a ‘darned-if-you-do, darned-if-you don’t situation,'” Scholes wrote. “While we do not proclaim to know the answer on finding the right balance between price and customer experience, we do believe that improving the staffing and housing situations are a necessary step in the right direction.”


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