Vail Resorts Inc (MTN) 2004 Q1 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen. Welcome to Vail Resorts first quarter conference call. At this time all participants are in a listen-only mode.

Following today's formal presentation instructions will be given for a question-and-answer session. If anyone needs assistance at any time throughout this conference press star 0. As a reminder this conference is being recorded today December 11, 2003.

I would now like to turn the conference over to Vail Resorts chairman of the board and chief executive officer, Mr. Adam Aron.

Thank you. Good morning everybody.

Welcome to Vail Resorts fiscal 2004 first quarter earnings conference call and simultaneous webcast both open to the public and press at large. As you know I'm Adam Aron, chairman and CEO of Vail Resorts.

Before I begin I would like to introduce to you our newly appointed senior vice president and CFO, Jeff Jones. As you know we issued a press release on November 18th announcing that Jeff is now responsible for all of Vail Resorts finance, accounting, purchasing, internal audit, Investor Relations function, both for the parent company Vail Resorts and its various subsidiaries.

Jeff joined us this fall as a CFO for Vail Resorts development company, our real-estate division, although when he was hired we always assumed that he would be the logical successor for Jim Donahue whenever Jim retired. Jeff has impressed all of us here in the short time he's been with us. He brings to the company a strong finance background with experience both in public company financings as well as mergers and acquisitions.

More importantly, given my and our absolute commitment to the timely issuance of accurate financial statements, Jeff earned his CPA, is a member of the American institute of certified public accountants, and has public accounting experience. Having served as an auditor earlier in his career for one of the big five accounting firms. Jeff brings a wealth of intelligence, enthusiasm and drive to his newly expanded role and his accounting background should be particularly invaluable to us. He also is an avid skier and has been vacationing at our resorts for decades.

Jeff, welcome.

Thanks, Adam, and good morning everyone.

I look forward to meeting many of you who are listening in to this conference call today. As all of you might guess, I'm incredibly excited about the prospect of being CFO of Vail Resorts. All of you my assurance, that I'll work passionately to get to the information and do so reliably, dependably, and most importantly, credibly.

Also joining us on the call from our corporate offices here in Vail Valley in Colorado is Leslie Roubos, our director of investor relation and corporate financial planning.

Earlier this morning, we issued a press release discussing earnings for our first quarter ending October 31, 2003. I'd like to begin by reviewing the first quarter's financial performance, followed by some more, about the current 2003-2004 ski season. At the completion of my prepared remarks Jeff and I will be happy to take any questions you may have.

Before we do so, I want to remind you that in conjunction with the new SEC rules regarding the use of non-GAAP financial measures we are now using the term reported EBITDA wherever we use the term EBITDA in the past to report earnings for each of our operating segments, namely mountain, lodging, resort, which as you know is the combination of mountain and lodging, as well as real estate.

Reported EBITDA for the mountain lodging and resort segment is defined as segment net revenue less segment operating expense, plus segment equity investment income. Real estate reported EBITDA is defined as real-estate net revenue less real-estate operating expense, plus gain on transfer of property, which is a new line item on our P & L, plus real-estate equity investment income.

A full reconciliation of these non-GAAP measures to GAAP can be found in our press release and on the www.vailresorts.com, website, in the Investor Relations section, under the Regulation G compliance tab.

It has only been a few weeks since we last spoke, so there's not much that's all that new information to relate to you, but included in the new information are the results of our first fiscal quarter 2004 which I think will you agree is an encouraging start to the new fiscal year. The financial results for the first quarter of fiscal 2004 were better than we had anticipated or budgeted. And we are pleased to announce that resort reported EBITDA improved year-over-year by some $2.5 million, or 8%.

Thanks both to revenue gains, but primarily to cost cutting efforts, we saw improvement both in the mountain and lodging segments. In addition, real estate reported EBITDA improved by $2.0 million, or 14%, compared to last year. Loss from operations improved by almost $6 million, or about 16%.

Net income and EPS were down 1% compared to last year, which was expected due to better operating results being offset primarily by increased depreciation and interest expense.

Revenue for the mountain segment rose 1%, primarily due to improved summer revenue at Heavenly as well as increased sales at our S S V stores operated through our retail rental joint venture. Mountain expenses were $2.7 million favorable to last year, due to non-recurring severance charges of approximately $1.3 million which we booked in the first quarter of fiscal 2003 in association with our management restructuring.

We also began implementation of our $25 million cost savings plan which resulted in a net year-over-year savings for the quarter in areas such as marketing, employee housing, and public affairs, as well as operational savings across our resorts. Mountain equity investment income fell $1.1 million compared to last year, due to reduced brokerage sales and our company no longer master leasing units from our housing joint ventures. Interestingly this loss in equity income fortunately is offset by decreased employee housing expense in the mountain segment.

The net result of all of this was a $2.1 million, or 7% increase in mountain resort -- in mountain reported EBITDA.

Lodging revenue for the quarter increased $2.1 million, or some 5%, primarily due to increased operations at the Vail Marriott. Last year we renovated the second wing of the hotel during the first and second quarters of fiscal 2003. This year, the handsomely renovated hotel is now fully open for business.

We also saw improved occupancies over the summer with corresponding revenue gains at the Grand Teton Lodge company in Grand Teton National Park outside of Jackson, Wyoming. Lodging expense increased $1.2 million, primarily due to the variable expense associated with the increased business at the Vail Marriott and Grand Teton Lodge company. These variable expense increases notwithstanding, we were encouraged to see that our expense savings initiatives broadly kicked in across our lodging properties.

Lodging equity investment loss increased compared to last year due to the new operations at the Ritz-Carlton and Bachelor Gulch and our Beaver Creek resort, a seasonal hotel which will earn the majority of its profit during the winter months when the ski area is open. With the hotel fully open for business in Q1 losses were anticipated and budgeted, while the Ritz was not open for business in last year's Q1 it did, nonetheless, record pre-opening and start-up expenses during the first quarter last year.

Given the company uses the equity method of accounting, for the Ritz-Carlton Bachelor Gulch, included in the fiscal 2004 first quarter loss, captured and lodging reported EBITDA is approximately $600,000 of depreciation and $600,000 of interest expense. The net effect of all this was an approximate $400,000 improvement in lodging reported EBITDA for the quarter, results with which we're quite pleased.

As I do each quarter I'd like to provide with you some statistics for our own hotels. Keep in mind that the first quarter is seasonally weak for most of our hotel properties as most have a winter peak season.

RockResorts-owned hotels saw a decrease in occupancy for the first quarter with an occupancy this year of 52%, down 8 points, or 14%, from the 60% occupancy for the same period last year. The average daily rate also decreased from $152 last year to $145 this year, a decrease of $7, or 5%. The 18% drop in RockResorts-owned hotel REVPAR was primarily due to soft group business, a legacy of the weak national economy over the past two years, at the lodge at Vail, lodge at Rancho mirage, and Keystone lodge.

Results for the Vail Resorts-owned hotels that do not carry the rock resort brand, hotels that are primarily concentrated at the base of our Colorado ski resorts, performed better on a year-over-year basis from their RockResorts counterparts. Occupancy decreased only 1 point this year, from 56 to 55%, but ADR increased $8 year-over-year from $130 to $138, resulting in a 4% increase in REVPAR. This REVPAR increase was driven primarily by growth of the Vail Marriott and Grand Teton Lodge company.

Real estate revenue for the quarter decreased $12.5 million because proportionately we sold more raw land this year while last year we sold finished condominiums. This year we primarily sold homesite lots in Bachelor Gulch and Breckenridge while last year we closed on a significant number of condominiums in Breckenridge.

While these lot sales resulted in lower revenues they are far more profitable than condominium sales, therefore the reduced revenues had a corresponding reduction in cost of sales expense and real-estate reported EBITDA was actually up $2 million compared to last year. And with $16.9 million of reported EBITDA in hand for our real-estate division, real-estate has already achieved its expected financial performance for the entire year. All we need to do is break even in quarters 2, 3, and 4.

While the quarter was an excellent one for our real-estate group this poor performance was expected, so our full-year real-estate guidance remains unchanged. Thanks to a good start, the new fiscal year, in both the mountain and lodging segments, as well as accelerating closings in our real-estate division, our EPS loss of .71 for the first quarter beat consensus street EPS estimates by .06.

In summary, the first quarter was better than expected, and starts us off well as we begin the new year.

Now let me move on to the ski season that is already underway. We're a month into it as we speak, and a lot of good things have already happened for us this ski season. We're pleased with the momentum we have going into the season. Our Colorado ski areas received an average of about five feet of snow in the month of November, and the snow fall has continued this week.

Heavenly snowfall in November was well above average, and received a foot of new snow this past weekend. We're getting this snow message out, that our resorts have a normal snowfall so far this season, which hopefully should enhance bookings as we go forward.

For the fifth year in a row, we have sold a record number of season passes at our Colorado resorts. Pass revenue at our Colorado resorts was up a whopping 20% compared to last year's record performance, one-third of that based on increased volume of passes sold, and two-thirds resulting from price increases.

Heavenly pass sales were up about 30%, a real testimony to our improving the skier experience another Lake Tahoe's most visited ski area. In total, season pass sales are running about $9 million favorable to last year and that cash is in hand.

Also encouraging for our Colorado ski areas is that advance reservations booked into the children's ski school are attracting 22% ahead of last year, reservations for adult ski school lessons are also up compared to last year. Air bookings into the local Vail Eagle County airport are 7% higher than last year at this time. Most nonstop flights into Vail eagle start up next week.

Hotel bookings for the ski season look solid enough as gross revenue booked through our central reservations is up 2% compared to last season. On-line sales bookings are up 8% which is promising news considering that online reservations, the cost of which is one-third less than that of a reservation made with a human telephone agent, now account for 25% of total reservations into our central reservation system.

It's hard to predict exactly what outcome will result from all this data, especially since travelers continue to book later and later, and closer in and closer in, a trend that has been seen throughout the entire travel industry for years now. We now typically see most of our backing activity in January and February for the months of February, March, and April, so we are a long way from knowing precisely what to expect through 2003-2004 ski season what. We do know now, however, does look quite good.

While the metrics we track are encouraging for the ski season as a whole, we should report that the ski season has gotten off to a slower start in terms of visitation than in the recent past, but since we've completed less than 5% of the ski season so far, and given such strong season pass sales and air bookings, we think the slower than normal early season visitation is not necessarily all that meaningful.

As I mentioned in November, lift ticket prices will rise a couple of dollars at each of our resorts this year. Ski school prices have always been raised, and we're optimistic that the consumer will notice significant product and experiential enhancements made at Heavenly, Keystone, and Beaver Creek over the summer, which should also drive revenue growth both in the immediate term and down the road.

As for our lodging segment the bookings data I've just discussed leads to us believe that growth will occur at our lodging properties in fiscal 2004. The completion of the renovation at the Vail Marriott, the Vail valley's largest hotel, positions us well for the current ski season. The snake river lodge and spa is off to an excellent start, responding to its renovation two years back. The Ritz-Carlton and Bachelor Gulch is heading into its second ski season and first full year of operations with momentum.

Moving to costs, as I mentioned earlier, we have begun the implementation of our $25 million expense savings plan as already seen in the first quarter decrease in year-over-year mountain expense. The lodging division has also begun to realize savings. However, the expense reductions there were in part masked by increased operations at the Vail Marriott, which was partially closed for renovation in the first quarter last year, and variable expenses at the Grand Teton Lodge company, which I'm happy to report experienced higher occupancies over the summer.

In summary, with normal early season snowfall, record season pass sales, strong ski school reservations, and solid bookings data, we continue to be up-beat about revenues for this year's ski season, assuming no new war, terrorist incident, or other unforeseen event. We've reduced costs at just about all of our properties, both on and off the mountains, all the while preserving the world-class quality expected by our guests and our real-estate division continues to plug right along. Therefore, at this time, we are reiterating the year-end financial guidance we provided in November.

Please refer to our press release dated November 13, 2003, for specific guidance ranges which do show a considerable improvement in the company's fortunes in fiscal 2004, contrasted with fiscal 2003.

Before closing, I want to quickly call your attention to five things. First, we have essentially received town of Vail government approval to proceed on our exciting and potentially lucrative Vail front door real-estate development project. We are now in active discussions with the U.S. Forest Service to receive their blessing as well.

Additionally, the town of Vail approval process for our redone Lion's Head is also moving forward briskly. We're explaining both projects to Vail guests this winter under the marketing monitor, Vail's new dawn. To learn more, go to the website, newVail.com, the website is now in final test mode and will go live any day. So I'm told you may have to leave out the normal three W prefix.

Second, the Wyoming cases are now in trial, and I encourage investors to see our description of litigation risk in our recently filed 10-K.

Third, RockResorts enjoyed just an extraordinary publicity coupe this week and last night. Yesterday evening, ABC broadcast nationally for two full hours in prime time the wedding of Trista Rhen and Ryan Sutter. ABC informs us that viewership was expected to be between 25 and 40 million people. The wedding was held at one of our hotels, the lodge at Rancho Mirage in Palm Springs, one of our owned RockResorts.

The show looked like a two-hour informercial for our hotel, which never looked better. We've already received an impressive 18,000 hits to the lodge at Rancho Mirage website set up for the purpose of displaying the wedding just in the past 18 hours. In addition to the television exposure last night, we also will enjoy significant magazine coverage of what is being billed as the wedding of the decade, amazing as it may sound, including, to prove that I'm not making this all up, the cover story this week in People Magazine.

Fourth, I suspect you will all be pleased to see that October to October, year-over-year, we paid off a little more than $41 million in long-term debt during the past 12 months, even though we spent a normal level of cap ex of this summer.

And finally, fifth, especially for the bond holders on the call, I want to mention that during the summer, just to be safe, we requested and received an amendment to our credit facility to increase the allowed funded debt through adjusted EBITDA ratio for the periods ending July 31 and October 31. As it turns out, for the benefit of hindsight, we lived within our original unamended covenants and did not actually need the amendment after all for either the July quarter or the October quarter.

At this juncture, Jeff and I will be happy to answer any of your questions, as you prepare for your questions you know that I need to mention that the comments made during this conference call, other than statements of historical information, are forward-looking statements that are made pursuant to safe harbor provision in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are subject to certain risks and uncertainties and could cause actual results to differ materially from those project. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only to the dates here of.

Such risks and uncertainties include but are not limited to general business and economic activities, failure to achieve anticipated cost savings and anticipated operational efficiencies, or conversely adverse consequences from cost reductions, competitive factors in the ski and resort industries, adverse consequences resulting from the current SEC investigation, the impact of the September 11 terrorist attacks on the travel industry, and the company or additional terrorist attacks, uncertainties and impacts on the threat of war or actual war, the impact of SARS or similar unfortunate seen global events on the travel industry and the company, expenses or adverse consequences arising from current or potential litigation against the company, including the litigation in Wyoming, implications arising from the implementation of FIN 46, SFAS 150, and any other such new FASB governmental rules or interpretations, and finally, the weather.

Investors are also directed to other risks and documents filed by the company with the Securities and Exchange Commission.

Operator, we're ready for questions.

Thank you, Mr. Aron.

Ladies and gentlemen, at this time we will begin the question-and-answer session. If you have a question please press the star followed by the 1 on your push-button phone.

If you would like to decline from the polling process please press the star followed by a 2. You will hear a 3-tone prompt acknowledging your question. If you are using speaker equipment you will need to lift the handset before pressing the numbers. Our first question is with Felicia Kantor with Lehman Brothers. Please go ahead.

Hi, Adam. How are you?

Hello, Felicia.

Good morning.

Are you recovering from New York's foot of snow?

Well, it's all gone, disappointingly. It got warm, and it rained so, now its kind of gone.

We have your snow. Go ahead.

That's Good. You could put it to better use than we can. Three questions for you.

First, just wondering quickly, I know it's behind you, so why you think you the ski season got to a slower start and if you think that -- doesn't sound like you're concerned about that kind of moving forward, but just wanted to know your thoughts on that.

Secondly, wondering if you could just talk specifically about some of the main enhancements that are driving results at Heavenly specifically but also across the board, and third, wondering if you could touch upon your plans for RockResorts, not necessarily the current properties, but RockResorts vis-a-vis your overall business model, and that's it.

Thank you.

First, what I described as a slow start. There are, I think, essential two reasons. Last year we had an unbelievable start. We had ten feet of snow on the ground by November 15, and Colorado was turning out in droves to ski at their nearby resorts. We really don't see a huge influx of out of state skiers before Christmas. It's pretty much a local thing. With the exception of the four-day Thanksgiving holiday.

The snow has been wonderful this year. I mean, it's -- in November it was above average in Colorado, it was above average in Heavenly. We are opening the back bowls at Vail tomorrow. We're opening both the back bowls and blue sky basin earlier than scheduled. So all this is good, but it's not like what we received last year.

Okay. Sought sounds like --.

But more important, if you look at the slow start, something like three-quarters of the slow start is represented from the group that includes only season pass holder skiers. And, of course, our revenues from season pass skiers is already banked and will be up approximately 20% year-over-year at season's end.

So whether they're showing up now or showing up later, or even if they don't show up at all, by the time the year is over, we're going to have a 20% increase in revenue from that population group, and that's the bulk of the slowness so far. I think induced because the snow was so extraordinary last year, but they've already bought their passes.

You want to ask a follow-up on that one?

No, that's good.

Okay. Enhancements.

At Heavenly, in addition to some environmental mission that we promised in exchange for all the things that south Lake Tahoe has already done to dress up the town of south Lake Tahoe, the big changes at Heavenly this year are a new high-speed quad on the California terrain. For those of you that have ever skied at Heavenly, up by the sky deck. This is a very important high-speed quad. It's allowing us to remove two old slow lifts which were expensive to operate and to maintain.

Importantly, it takes lift lines at the other high-speed quad just a few yards away that goes to a different point on the mountain, and cuts the congestion there in half, with increased capacity, and finally, it takes people to some very good intermediate terrain with big views at Heavenly, which, while the terrain was always good, nobody wanted to ski because of the slow lift access to get there. So a very dramatic change, we think, to the skiing pattern at Heavenly.

In addition, we have seriously renovated three major restaurant facilities at Heavenly which desperately needed it, this being our second summer in which to dress up the Heavenly ski resort.

As for RockResorts, we're pretty encouraged by RockResorts so far. If you look at -- while this quarter was our first not so wonderful quarter for RockResorts REVPAR, if you look at RockResorts REVPAR in the 24 months since we acquired it, we've been holding our own with REVPAR growth with all the major chains, often beating some of the largest and most notable hotel companies around. We've won lots of awards and designations for some of our RockResorts properties.

The snake river lodge after its renovation picked up a AAA four-diamond award, a very prestigious award within the hotel industry, signifying the quality of the property. Three of our RockResorts made the Conde-naste gold list. The lodge at Rancho Mirage, the site of the wedding was picked by Zaggott's as the best hotel in Palm Springs. And its restaurant was just in the last few weeks given a AAA four-diamond award, the only hotel restaurant in Palm Springs to have that designation and one of only three restaurants in greater Palm Springs to be rated AAA four-diamond.

So all this makes us feel good about RockResorts. We know that we could not have done this hospitality diversification in a worst time for the lodging industry, but the lodging industry can't stay depressed forever, and hopefully with an improving national economy the lodging industry will rebound, and so, too, will we.

Having said all that, it is not our plan today to acquire a lot of additional hotels at $50 million a pop. We would prefer, instead, to pick up either management contracts or what might be called sliver equity agreements where we modest minority investment in a hotel as part of an opportunity to manage it, and that's our plan for RockResorts.

That's great. That partially answered one of my follow-ups. Going back to Heavenly quickly regarding pricing there, given the renovation at the restaurants and perhaps some of the other general reservations, are we seeing pricing increasing both in terms of tickets and in terms of food, stuff like that?

Yes.

Interestingly, we held the price, the actual window price of the season pass constant this year without a penny of increase, but even so, we picked up close to a 10% increase in the average price of passes sold because people traded up from our mid-week pass to our full-week pass. So we sort of cleverly were able to look like we're not raising prices but actually did raise price, and the number of season passes that we sold at Heavenly was up from 17,000 last year to 23,000 this year. Those are round numbers and change in both cases. So that's an example.

The single day lift ticket price at Heavenly is going to get a kick this year. We will cross the $60 barrier for the first time ever, and while still giving people their very good value if they want to spring for a season pass, and we believe the reason that we can legitimately institute lift ticket pricing increases at Heavenly is because we are, in fact, bringing Colorado-style quality of the total ski experience to Lake Tahoe.

And are you bringing Colorado price $12 hamburgers?

But that includes fries.

We know that Heavenly is a broader-based resort than, say, Beaver Creek, and I would say that Heavenly's pricing is more akin to Keystone and Breckenridge's prices than it is akin to Vail and Beaver Creek's prices, and the prices at Keystone and Breckenridge are somewhat moderated from the opportunity you'll have, Felicia, to pay us $12, but free ketchup.

Look forward to all that ketchup. Thanks a lot.

Thank you.

Thank you, ma'am. Our next question is with Will Marks with JMP Securities. Please go ahead with your question.

Thank you. Good morning, Adam.

Good morning, Will.

Just a couple of follow-ups to Felicia's questions.

On Heavenly, can you reiterate, I know what you paid for it, can you tell me what you spent, what you've spent to date since you've paid for it and what you plan to spend going forward?

Yeah, I can. We've been pretty public with all the Heavenly stuff. We're so proud of it. We bought it for 6.2 times trailing cash flow, realizing that -- we paid $99 million for it.

Realizing that Heavenly had already invested $25 million in a new gondola complex linking south Lake Tahoe's main street to the top of the mountain, realizing that Marriott was five months away from opening a huge new bed base called Heavenly village right at the foot of the gondola, right on main street, and we expected to see considerable growth from the linkage to main street, the new quality bed base, combined with our own desires to improve guest service at the resort, combined with our acknowledgement, on the day that we bought it, that the restaurants were dilapidated and the lift network antiquated, and in our first two summers, we've renovated the entire California base lodge, renovated four major restaurants, put in a very important new high-speed quad, strategically located at mountain top.

This year we've also put in a whole new ski school beginner skiing area with its own dedicated ski school lift, which we think will help our ski school business dramatically. And in the first year of our ownership, we spent $6 million or so in the first summer. We saw 125,000 increase in lift tickets sold at Heavenly in the first year, partially day ticket, partially the result of our strategy to bring affordable season pass product to Heavenly. EBITDA was up about 20% at Heavenly in the first season.

We've invested approximately an additional $10 million at Heavenly this year, putting in the high-speed quad, renovating the three restaurants, putting in new attractive heavy log signage all over the ski mountain to give the customer there both a better sense of directional flow around the mountain, but as important, to give Heavenly a more up-market feel, because visual design does matter to a consumer. They don't know why it matters, but it matters. It changes their perception of a place.

As well as the environmental mitigation work that we had pledged our company to do, among other things. So we'll see what happens to cash flow and visitation at heaven until year. We obviously didn't put in that $10 million return as a charitable activity. We're -- we didn't put in a $10 million capital expenditure as a charitable activity. We hope to see incremental return at Heavenly as a result of our second round of capital investments there.

Great. Okay. And then just in the future, what your spending plans are.

Well, we bought Heavenly, we said that we expected to invest $40 million over the first five years, and we've spent $17 million over the first two years, so we're right on track. Just remember this: From a skiable acreage standpoint, Heavenly is as large as is Vail. Vail sells a 1,600,000 lift ticket. Heavenly sells under 1 million. Vail charges $73. Heavenly crossed $60 this year for the first time ever.

The population base near to Heavenly is - San Francisco, Sacramento, Reno, is significantly larger than Denver, and the air access to Reno airport and Sacramento airport is comparable to the air access we have here in Colorado. So our -- we're really optimistic that Heavenly was a great, great acquisition for us. It is the most visited ski resort in Lake Tahoe already and we're optimistic that that's only going to grow.

Okay. Couple of other things.

You made the comment at 75% of the slow start is from the revenue of season pass skiers. I guess I'm confused on what that means. Is that because the season pass holders have bought ticket but aren't using them so you're getting lower revenues from other amenities at the resort?

No, no. That's also true, but that's not what I meant.

What I meant was the way that we report skier days is we report them as scanned. So if a season pass holder, on average, skis about ten days a year, which is the number, we'll report those ten days during the season as they are scanned on the mountain, and we will take one-tenth of the season pass revenue from that season pass holder on each scan. We have not seen a lot of scans from season pass holders compared to last year.

On the other hand, the season passes have been bought. Now, I assume that they're going to come, and that we're just going to see a shift in the visitation from November, first week of December, into January, February, and March. By some fluke, if that doesn't happen, I guess it would mean that the average number of days skied would go down, but, of course, the revenues per day skied would go up, because we know what they paid for the passes, and it's 20% more than they --.

You haven't recognized the revenue yet?

Correct. And theoretically we might sell a hot dog fewer, but there's so much revenue out of this group, $9 million more than last year, that's one of the reasons we think we're sitting in such good shape.

Couple other quick questions. On the numbers you gave for RockResorts and Vail Resorts, those are both -- the RockResorts numbers were owned properties?

The RockResorts were the owned RockResorts and the hotel -- and the Vail resort hotels were the owned hotels.

So they don't include the ones you just operate, but not --.

Manage, and we've got a fee stream of about $3.5 million or so in management fees from all of the managed hotels, we get a much larger number for the managed condos.

But the REVPAR and A DR numbers are just for the owned?

Correct. And that's consistent with what we released for the past.

Right. That's what I thought. I just wanted to clarify.

I guess my last question is, looking ahead, you've often cited the weakness in the last two weeks of March last year. You've given a number in the past. Can you just reiterate that?

Yeah, I sure can.

March is about 25% of the season, and visitation last March was off about 25% or more. We think totally due to the war. So you simply do that math, and you should see a 6% increase in visitation and revenues across the whole of the year, or across the whole of the ski season if March returns to normal and, guess what, air bookings into Eagle County airport are up 7%, so that's an interesting proxy.

Having said that, we've got season pass sales being up, that's very encouraging. Hotel bookings being up only 2% is not quite as strong as I might like, but there are a lot of booking channels into the various hotels other than just our own same rev. For example, guests at the Hyatt in Beaver Creek don't book through our centers, primarily they book their own.

Breckenridge has its own, Heavenly has its own separate and apart from Vail reports and I hear they're going gang busters. Now, as an offset we do have the slow start, which might cost us a million or two million, I guess, but in all these pieces fit, from our standpoint, as we sit today, we'll know a lot more in three weeks after Christmas but as we sit today we're ahead of last year, ahead of our budgets, and as you know, based on our budgets, which include the expense reductions, most of which start to kick in, in the second and third quarters, not so much the first quarter, we were comfortable putting out an EBITDA range for reported resort EBITDA going from 103 million last year to between 130 and $140 million this year.

From the standpoint of expense reductions, you should see a chunk of those hit in the second quarter. From the standpoint of revenue gains, both because we're going to scan these season passes when they're used and the season passes have not been used in abundance in November and December, which suggest to us they're more likely to be used in February, March, April, and especially because we had the weak March last year and expect a normal March this year, we should really be looking in your own models for the big revenue hit for Vail Resorts is the third fiscal quarter, the February, March, April quarter.

And you have the more difficult comp for the January quarter?

Yeah, because we, remember, our results last November, December, January, were fabulous. And if we can just kind of keep pace with last year, November, December, January, that should put us in very good stead, assuming we have a normal March, and air bookings would lead you to believe we're going to have a normal March.

Air bookings and the fact that it feels a little more calmer and peaceful in the world, even though the Iraqi war is ongoing, but it's not new. All bets are off if there's a new terrorist incident.

I understand that. We're halfway through the January quarter now, so is there a chance could you hit last year's number?

Too early to tell. The last year's quarter Christmas/New Year's. Today is December 11th, I'll now how we do Christmas and New Year's after Christmas and New Year's.

You had given some Christmas and New Year's bookings in the last quarter, hadn't you?

Wed but we felt no reason to -- it's only been four weeks ago. At some point we just don't feel compelled to update every number, and it's so hard to read this data, we get so much conflicting stuff.

For example, we're all using a crystal ball here. Kids ski school reservations are up 22%, adult ski school reservations are up, but they're up in the neighborhood of 10%. So you tell me. Are we going to be up 10 or 22%? I don't think kids show up here without their parents. But I don't know -- I don't know if any kid who is shipped in here from Atlanta without some adult with them. But I don't -- I've been doing this for eight years, and we've usually been pretty good at reading data, but it gets harder and harder every year as the data internally conflicts.

On the other hand, you know, with the sole exception of Colorado season pass skiers not actually coming out to the hill yet, most of these indicators are quite positive. Sort of up, up, up, up, wherever you turn.

Well, thanks. And actually, when you're done with your subscription of people, can you maybe forward that on to me?

Yeah, we were also on the cover of Us. Not Us, but we, Trista and Ryan, and the ran which he mirage were on the cover of us, instyle, in style, all this week, and six weeks ago they were on the cover of good house keeping and nine weeks ago they were on the cover of TV guide, and I guess there's a reason why 25 or 30 million people are going to watch this wedding last night, because this is -- hopefully none of you on this phone call know who these two people are, but they are quite popular across the land, nonetheless.

And interestingly, I don't want to keep on going about this thing, but the other thing that's particularly helpful for us, other than the broad national exposure, which was -- which we were able to secure very inexpensively, this is a made for TV event, obviously, given that it's a real-life event in these two people's lives, and the industry that is the center of television, with my apologies to New York City, is Los Angeles. And Los Angeles is the origin market for palm springs hotels. And within the television business, this wedding, which is the culmination of all of these reality shows that have aired for the last year or two, is the biggest thing going in L.A..

This show last night is expected to be one of the ten most watched shows of the year, and, you know, the television industry, therefore, southern California, is also treating this big. We're also in the L.A. times, the Orange County register, Los Angeles magazine, Los Angeles television stations. It's very good for the major originating market for the Palm Springs hotel property. And reservations phones have been ringing ever since news broke that the hotel was going to be the site of the wedding, and as you might suspect, in every description of the hotel, they don't just mention the hotel's name, there are adjectives like luxurious and posh. You could not ask for better publicity.

Thanks a lot, Adam.

Ladies and gentlemen, as a reminder if you do have a question please press the star followed by the 1 on your push-button phone. If you are using speaker equipment you will need to lift the handset. Our next question is with Raymond Cheeseman with Jefferies & Company.

Congratulation on an excellent television event. I also watched. I want to ask you how Roger McCarthy's work over at Keystone has played out and how you see it impacting the resort across the whole year.

Just like we spent $10 million at Heavenly, we spent $10 million at Keystone this past summer and have been pull out all the stops. We put in $5 million of snow-making system upgrades to really improve the quality of the snow, and we put in snow cat bowls, so snow cat-served bowl skiing that is already in place.

We've put in a whole new -- we've devoted an entire section of the mountain to a whole new terrain park for snow borders, remembering that Keystone is traditionally been a family resort. We've added three or four major new restaurants and a nightclub to our river run base village, to increase the amount of evening activity.

The resort has gotten a little younger and hiper. With full apologies for telling you all, we've put in a pizzeria at the base named bite-me pizza, which is in keeping with its potential clientele. At the same time we upgraded the website dramatically for Keystone. At the same time we're also making Keystone a little bit more elegant for the parents of those kids.

We spent $700,000 to build a dramatic new rock log entry statement sign at the Keystone resort. It is said you never get a second chance to make a first impression, and we've got a dramatic, elegant imaging effort going on, literally as you enter the Keystone resort. So obviously we are giving it as good a college try as you can.

There's no way of knowing yet how that will really kick in for the year. You might say, since Keystone is one of the biggest beneficiaries of season pass skiers, of all four of our resorts, it runs neck and neck with Breckenridge and gets far more skiers than Vail or Beaver Creek from the season pass population. The fact that season pass sales are up 21% even in the face of much heightened competition because this year copper mountain and winter park, both under the aegis of intrawest came real hard at us trying to sell joint Copper Mountain / Winter Park products. I think that's a good sign. On the other hand, as I told you, since the Colorado season pass skiers haven't really started to ski yet, it's not reflect in the scan counts, only time will tell.

My follow-up question actually had to do with winter park and copper.

Do you feel that your increase in season pass product here in the state of Colorado means that you, in fact, picked up market share or is this a reflection of possibly the state economy getting better, maybe people participating in both plans, something like that?

Well, we certainly -- I don't know if we increased share, because we don't actually have their pass sales numbers in detail, you know. We have the typical bar talk that goes on in these little mountain communities.

So I can't tell you precisely whether we increased share, but it is generally our view that we certainly held on to our share even with price increases, and we had assumed that we would lose share, because how would you not lose share if two of your strongest competitors who had been acting independently now come together and act as one? So we were very encouraged by the season pass sale results.

Best of luck on the season, Adam.

Thank you, Ray.

Thank you, sir. Ladies and gentlemen, as a reminder if you do have a question please press the star followed by the 1 at this time. If you are using speaker equipment you will need to lift the handset before pressing the numbers. Our next question is with Dan Lowe with Jefferies & Company. Please go ahead, ma'am.

Hi, Adam.

Dan, howdy.

Can you just explain on your last conference call, central reservations were up 8%.

But now they're up 2.

Now they're up to 2. Kind of explain how that works and compare to the last year.

Yeah. Well, that is compared to last year. The 8 and the 2% numbers are, this point in time compared to this point in time last year for the full season. Last year, we got off to this huge start because we had 10 feet of snow in -- by mid November. And we had a tremendous amount of one-night cheap hotel stays in November and early December where we were trying to gin up come for the weekend kind of visitation from the front range here within Colorado, which is the dominant origin market for our resorts prior to about December 18th.

Since the snow wasn't that compelling this year, we didn't see as many early season hotel stays, but again, whether this is something to worry about, these hotel stays were really discounted, really cheap stuff, $69, $79, $89 a night hotel stays trying to drive whatever we could drive in the early season. As I said, we've completed like 2%, 3% of the ski season to date, so we -- and at much lower prices than we will be charging in January, February, and March.

So I think the only thing you can read into the bookings declining on a relative year-over-year basis is that we didn't capture a lot of this unexpected early cheap stuff prior to, let's say, December 10th. The other issue is that I said that people continue to book closer in and closer in and closer in, the bookings that we did have, both four weeks ago on that conference call and today, tend to be, it's not like no one's booked for February and March, but we're far more booked for November, December, and January, than we are yet booked for February, March, and April.

So what you're seeing is in these bookings numbers is the reflection of what happened in the early season visitation which while we'd love to have a million bucks rather than not have a million bucks, in the scope of the season, it doesn't tell us much. What I think tells us a lot more is the 7% increase in air bookings coming into Eagle County airport, because those flights, united flies very small planes from Denver, but the big 757's that come in here that are the bulk of our quarter of a million seats don't start until next week, and they run essentially through March 31st. So for the bulk of our season, when we're charging $73 for a lift ticket and not $59, when we're charging $200, $00, $600, $800 a night for a hotel room, not $80 a night, that's what those air bookings are for and they look quite robust. But again, it's conflicting data.

We're still feeling pretty good, so I would sure rather bookings for -- air bookings for eagle to be way up and November, cheap visitation, be down, than have November visitation be up and have February and March visitation be down.

Okay. And can you tell us about, let's say your holiday bookings. Is that a possibility? Holiday bookings this year versus holiday bookings last year, so you kind of take away the noise.

Eagle County is through the roof, summit County is a little softer. We have five resorts, and that's why we have five resorts, and it's hard to tell, again, how it's all going to shake out.

Including we have had years in the past when people have come but not skied. And so we still have people occupying the hotel rooms but let's say in one year they skied three days out of seven, and in another year they skied six days out of seven. So there's a lot of volatility even within the Christmas period, regardless of what's going on with hotel bookings. It's one of the reasons why we just have to watch it come in every single day before we actually know precisely how we're going to do.

Thank you.

Thank you, sir. Our next question is with Glen Reid out of Bear Stearns. Please go ahead with your question.

Yeah, hey, Adam.

In the past you've talked about kind of your visibility across the resorts in terms of the bookings. Maybe -- you know, and you talked about the other means by which people book their trips. What percent of res center bookings would you say your total visitation tends to kind of represent?

About 15% of our total lodging, bed base, books through our cen-res. So that's an interesting indicator, and hopefully declare active, but it is possible that people can book other ways. And, obviously, six out of seven do.

Okay. Thanks. That was really it.

Thank you. Mr. Aron, at this time there are no further questions.

Operator, just to make sure, can you just give one more poll around?

Ladies and gentlemen, as a reminder if you would like to ask a question please press the star followed by the 1 on your push-button telephone. If you are using speaker equipment you will need to lift the handset before pressing those numbers. We no longer have any questions, Mr. Aron.

Thank you, operator. A reminder, Leslie Roubos's phone number is 970-84502958, her e-mail is lroubos@vailresorts.com. She'll be happy to work with you individually.

As I close the call let me say to one and all, ski season is here, we're open, we think we're off to a great start in the first quarter, and based on all of this melange of data that that we get out as we try to figure out what's going on we look at the potpouree of that data and remain highly encouraged. Vail's legendary back bowls open tomorrow, make your reservation and tell your friends.

Thank you for participating on this call this morning. And good-bye.

Thank you. Ladies and gentlemen, this concludes the Vail Resorts first quarter teleconference call.

If you would like to listen to a replay of this conference replay will be available one hour after the conclusion of this conference, on phone numbers 1-800-405-2236, or 303-590-3000. Will you need to enter a six digit pass code, 571642. Once again, 1-800-4052236, or 303-590-3000, please enter code 561642.

This replay will be available until December 18th at midnight. Once again, ladies and gentlemen, thank you for your participation. You may now disconnect.