Vail Resorts Inc (MTN) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you so much for standing by. Welcome to the Vail Resorts fiscal 2008 third quarter conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today on Thursday, the 5th of June, 2008.

I'll now now turn the call over to Mr. Rob Katz, CEO of Vail Resorts. Please go ahead, sir.

Thank you, operator. Good morning, everyone. Welcome to the Vail Resorts fiscal 2008 third quarter earnings conference call and simultaneous webcast, both open to the public and press at large. I'm Rob Katz, Chief Executive Officer of Vail Resorts. Joining me on the call this morning is Jeff Jones, our Chief Financial Officer.

Before I get into the discussion of our results, let me remind you that we are using the terms reported EBITDA and reported EBITDA excluding stock-based compensation to report earnings for each of our operating segments, namely Mountain, Lodging and Resort, which is a combination of the Mountain and Lodging segments and Real Estate. Complete reconciliations of reported EBITDA, reported EBITDA excluding stock-based compensation, and other non-GAAP financial measures can be found in this morning's earnings release and on the VailResorts.com website in the Investor Relations section.

I also need to mention that comments made during this conference call, other than statements of historical fact, are forward-looking statements that are made pursuant to the Safe Harbor Provisions in the Private Securities Litigation Reform Act of 1995. Certain risks and uncertainties could cause actual results to differ materially from those contained in the forward-looking statements. Investors are directed to the risks and uncertainties described in the document filed by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended July 31, 2007 and Form 10-Q for the third quarter fiscal 2008. In addition, the Safe Harbor language in today's press release also applies to our comments on this call. All guidance and forward-looking statements made on this call are made as of the date hereof, and we do not undertake any obligation to update any forecasts or forward-looking statements, except as may be required by law.

So with that, let's turn to our results. As we mentioned in our earnings release, I am quite pleased with our results for the fiscal 2008 third quarter and for the nine months ended April 30, 2008, which includes virtually all of the 2007/2008 ski season. Despite the worsened U.S. economy and its impact on the travel sector, as well as the very slow start to the ski season due to difficult weather conditions, our results for the third quarter and first nine months of the fiscal year 2008 set new all-time records in Resort revenue, Mountain and Resort reported EBITDA and net income. Importantly, all of this growth was achieved on an organic basis at our existing resorts with no meaningful acquisitions impacting the results.

Mountain segment revenue in the third quarter increased 5.5% over the prior year's third quarter with approximately 66% of our incremental revenue growth flowing through to Mountain reported EBITDA, resulting in Mountain reported EBITDA margins increasing from 51% to 51.8%. For the 2007/2008 season, compared to the 2006/2007 season, total skier visits were slightly down by 0.5%. However, excluding the early season, defined as the period from the start of the season through December 23, 20007, total skier visits were up 4.1%. Lift revenue for the season, excluding season pass revenue, was up 4.3% reflecting effective ticket price growth of 7.7%, excluding season pass and solid visitation during peak periods offsetting softer visitation during the early season and other non-peak periods. Season pass revenue was also up 7.6% for the season, and season pass holders skied an extra one half day per pass on average.

During the quarter, our ski school, dining, and retail rental ancillary Mountain segment businesses grew, outpacing our total skier visit growth with guests continuing spend more on these areas per visit. A key driver in our growth for the year was an estimated 26% increase in international guest visitation, compared to the prior year, which included an estimated 28% increase over the prior year third quarter. This growth in international visitation mitigated softness in U.S. destination visitation due to the U.S. economic weakness, especially since these international visitors tend to stay longer and spend more per visit.

In our Lodging business, despite the fact that our mountain-related lodging properties experienced similar trends that we indicated earlier, our Lodging segment on a same-store basis in the quarter benefited from a 6.9% average daily rate increase, due to strong demand during the peak periods which also helped drive a 6.3% increase in total lodging revenue, excluding the impact of the revenue associated with the prior year's termination fee of $2.6 million. In addition, our Real Estate segment benefited from the closing of 17 additional Arrabelle units in the third quarter, driving a $9 million increase in real estate reported EBITDA.

As we look ahead to the 2008/2009 ski season, we are very excited with the launch of the Epic Season Pass. It offers unlimited and unrestricted skiing at all five of our resorts for the entire season at an initial price of $579. The pass must be purchased on or before November 15, 2008. With this new product, we expect to build on the success of our Colorado Heavenly and other season pass products, which currently represent approximately 26% of our total lift ticket revenue, the vast majority of which are purchased prior to the start of the ski season, providing greater stability to our results. With the Epic Season Pass, we are hoping to increase that percentage and provide our guests from around the world a true full season experience at our resorts.

Additionally, we have just concluded our Colorado spring pass sales efforts, which historically have represented approximately 26% of our total Colorado season passes sold in sales dollars prior to the Epic Season Pass introduction. This year's Colorado spring pass sales, excluding Epic Season Passes sold to new pass holders were up 2% in sales dollars over the prior year. It is important to note that the comparable Colorado spring pass sales in the prior year were up 59% in sales dollars over spring pass sales for the 2006/2007 ski season, though ultimately flattened out in the fall. Therefore, at this point, we are satisfied with these results. Since I am sure it will come up during the Q&A, we will not be providing statistics on the Epic Season Pass until after we complete sales set for November 15. While we are very excited about the Epic Season Pass, it is a completely new product which has no history to provide comparisons. As such, we will wait until we have all of the data before providing any conclusions about its performance.

Before I turn this call over to Jeff, I wanted to make some general comments on the overall economy and our business model. While challenges exist with the U.S. economic climate and outlook, we feel that our business model remains resilient, supported by the results of our third quarter, the strongest quarter of our fiscal year. And while we are not completely immune to the overall economic impacts, our goal is to continue to drive year-over-year growth and operating performance as evidenced by our record results we achieved this quarter and nine-month period. In addition, this season, the U.S. ski industry benefited from incredible snow conditions across the U.S., resulting in new record industry visitation. We believe this reinforces our view that the industry is experiencing a new level of cache and excitement with both older and younger demographics. With virtually no new supply, all future growth will go to the existing operators, where we believe the lion's share will go to the few, led by us, who can continue to drive significant improvements in the guest experience.

Another important take-away from our results this year, is their relatively low correlation to snowfall, particularly as compared to the rest of the industry. From fiscal 2003 through fiscal 2007, our company showed very strong annual growth in Resort reported EBITDA with annual varying snowfall. For fiscal 2008, we are estimating slower growth despite great snowfall after the early season, due in part to the economic slowdown in the U.S. With that said, Jeff will provide you with an overview of our results for the fiscal 2008 third quarter and outlook for the remainder of fiscal 2008. I will then provide an update on the status of some of our real estate projects, as well as other exciting news at Vail Resorts. Let's now turn to Jeff for our fiscal 2008 third quarter results.

Thanks, Rob and good morning, everyone. Earlier this morning, we released our earnings for our fiscal third quarter ending April 30, 2008, filed our Form 10-Q for the third quarter. I would now like to take you through some of the highlights of our third quarter and year-to-date results. Started with our Mountain segment, Mountain revenue increased 5.5% for the third quarter, including a lift revenue increase of 5.9% and Mountain reported EBITDA set a new record of $168.6 million, up 7.1% from the prior year. Overall skier visits were up 2.5% for the third quarter, including increases from our season pass visitors who in the quarter skied an additional half day compared to last year, catching up from the slow start to the season. Although visits excluding season pass holders decreased 1.4% in the quarter, including a sharp dropoff after the early Easter holiday.

ETP continues to grow consistently each period. In the third quarter, total ETP increased 3.3% and ETP excluding season pass, eliminating impact of the increased pass holder visits, increased 8.1%. or the full season captured in the nine-months period, despite the slow start in November and early december, mountain revenue increased 3.4%, and Mountain reported EBITDA increased $11.1 million or 4.7%, with the current year absorbing $2 million of costs related to the Canyon's litigation. As Rob mentioned, we were able to continue to grow our season pass sales over our strong performance last year with season pass revenue up 7.6% over the same period last year, due to an 8.8% increase in effective pass price, although units declined by 0.05%. Our season pass holders skied an average 9.7 days on their pass, approximately half a day more than the prior season.

Turning to our ancillary Mountain businesses including Ski School, Dining and Retail Rental, these generally tracked with our lift revenue growth including benefiting from absolute price increases in the quarter. Our Dining revenue growth of 6% was also impacted by the acquisition of two licensed Starbucks stores in June 2007. And the retail rental revenue growth of 11.5% was due in part to the revenue associated with the operations of 18 Breeze ski rental locations acquired in June 2007. Excluding the impact of the acquired stores, Retail Rental would have increased by 6.4%. Other revenue declined for the three months ended April 30, 2008, compared to the same period in the prior year due to the disposition in April, 2007 of the Company's investment in RTP. Excluding the impact of the divestiture, other Mountain revenue would have increased 3.4%. Mountain segment operating expenses increased 3.1% in the quarter.

For our Lodging segment, the results were impacted by Easter falling so early in March and the compression of spring break into one week, which negatively impacted the first two April weeks as well as softness in the first two weeks in March. However, there were differences between the peak and non-peak periods with strong performance from weekends of President's week in February, and the compressed spring break period of March 17 to the 21st with softer demand in the non-peak periods. On a same store basis, excluding the new Arrabelle opening with it's strong ADRs, ADR grew by 6.9% at $290.37 for the quarter. On a same store basis, occupancy fell by 4.1 percentage points for the quarter, resulting in flat RevPAR this year compared to last year.

Also impacting the Lodging segment, the prior year period included $2.6 million of revenue associated with the termination of the management agreement at the Equinox, pursuant to the terms of the management agreement as a result of the sale of the hotel by the hotel owner. Excluding the termination fee, Lodging revenue would have increased $2.6 million or 6.3%. Lodging reported EBITDA for the quarter was also impacted by lower results from our Lodge at Vail property, due to construction impacts from the soon-to-be-completed Chalets project, as well as decreased contribution from our Keystone lodging properties due in part to lower group nights and impacts from the reduced non-peak period visitation. For the nine-month period, Lodging reported EBITDA fell by $10.4 million, but was impacted by $3.1 million in preopening and start-up costs for Arrabelle in the current year, and $5 million of revenue associated with the termination at the Equinox and Rancho Mirage in the prior year. ADR for the nine months on a same-store basis was $247.79, up 5.8%, with RevPAR of $118.26, up 5.2%.

Now, to our Real Estate segment. As many of you know, our Real Estate segment results are primarily determined by the timing of closings and the mix of our real estate sold in any given period. Additionally, besides project specific profit which can vary significantly by quarter based on the timing of closings, Real Estate reported EBITDA each quarter includes administrative and overhead costs, allocated corporate G&A, and marketing expenses on projects which still have not closed. During the third quarter of fiscal 2008, real estate revenues driven primarily by the closings of 17 Arrabelle condominium units, to date we have closed on 29 of the 67 units and anticipate closing on 35 of the remaining 38 units in the fiscal fourth quarter. We are shifting the expected closing of three of the remaining Arrabelle units into fiscal 2009, based on the timing of completing construction on those units, including one unit which is no longer under contract but has been relisted for approximately 37% over its previous contract price.

Finally, we still anticipate closing on six of the 13 Lodge at Vail Chalets in the fiscal fourth quarter, with the remaining seven chalets closing in the first half of fiscal 2009. Net income for the third quarter fiscal 2008 was $87.3 million or $2.24 per diluted share and was impacted, in addition to the business segment results, by accelerated depreciation expense on assets which will be taken out of service due to new capital projects, including the previously announced Keystone gondola and its skier services area which will be replaced before the next ski season, and depreciation on the new Arrabelle Hotel placed in service in December. Net income was also impacted by a $1.9 million decrease in investment income, due to the lower interest rate environment.

Turning our attention to our strengthening balance sheet and the quarter's capitalization events, at the end of the third quarter fiscal 2008, we had $304 million of cash and cash equivalents on hand excluding restricted cash, no revolver borrowings under our senior credit facility, and a ratio of net debt defined as long-term debt plus long-term debt due within one year less cash and cash equivalents, to total reported EBITDA calculated on a trailing 12-month basis of 1.48 times. During the third quarter, we exercised an according feature on our senior credit facilities to secure an additional $100 million of commitments under the facility for additional borrowing capacity currently priced at LIBOR plus 50 basis points. Given our current cash position, this was done opportunistically to lock in interest rate spreads at what we believe to be very favorable terms on additional incremental commitments for the next four years and also indicated strong support from the participating lenders.

Now, let's discuss our outlook for the rest of fiscal 2008. As we mentioned in our earnings release, given our performance to date and with the conclusion of our winter season including a softer April for the resort business than expected, we are reaffirming our previously announced guidance that we issued in March 2008, although we now estimate falling at the lower end of our Resort and Real Estate guidance ranges, and at or slightly below our net income range. We currently expect full-year Resort reported EBITDA, the combination of Mountain Lodging segments, to fall at the lower end of 230 to $240 million range, and Resort reported EBITDA, excluding stock-based compensation expense, to fall at the lower end of the 235 million to $245 million range. The Resort guidance includes a range for Mountain reported EBITDA of $218 million to $228 million, and Mountain reported EBITDA, excluding stock-based compensation expense of $222 million to $232 million, while we expect Lodging reported EBITDA to range from $8 million to $14 million, and Lodging reported EBITDA, excluding stock-based compensation expense, to range from $9 million to $15 million.

With respect to Real Estate, given the shifting of three of the Arrabelle units in the fiscal 2009, we expect our Real Estate reported EBITDA to be at the lower end of the previous announced $54 million to $60 million range, and Real Estate reported EBITDA, excluding stock-based compensation expense, to be at the lower end of the $57 million to $63 million range. Based on our current estimates, we expect net income to be at or slightly below the lower end of the $112 million to $122 million range. And net income, excluding stock-based compensation expense, to be at or slightly below the lower end of the $117 million to $127 million range.

Finally, during the third quarter, we continued our previously announced share repurchase program, as we mentioned in our release, resulting in the repurchase of 321,150 shares at an average price of $46.70 for a total amount of $15 million. Since inception of this program in fiscal 2006, the Company has repurchased 1,506,233 shares, at an average price of $44.29 for a total amount of approximately $66.7 million, with 1,493,767 shares remaining available under the existing repurchase authorization. Our purchases under this program are reviewed with our Board quarterly and are based on number of factors, as we evaluate the appropriate uses of our excess cash, including but not limited to the share repurchase program. At this time, I'd like to turn the call back to Rob.

Thanks, Jeff. Before I provide an update on our real estate activities, I wanted to highlight our newest edition to the Vail Resorts Board of Directors, Jeff Jones, the Senior Executive Vice President and Chief Financial Officer of Vail Resorts. Jeff has made an incredible contribution to Vail Resorts from the moment he arrived in 2003. While immediately making great strides in our finance and accounting areas, Jeff has also brought our banking and investor relations efforts, as well as our strategic development activities, to a whole new level and he is a key leader on our entire executive team. I'm very excited to have Jeff's insight and participation added to our terrific Board, and I congratulate him on his appointment.

Now turning to our real estate activity, we are well on the way to transforming the Breckenridge real estate landscape and are very excited with our ski in/ski out projects currently under development, including Crystal Peak Lodge at the base of Peak 7 with all 46 units under contract and closings on these units expected to occur in the winter of 2008. In addition, our latest project, the RockResorts branded One Ski Hill Place, which we brought to market in December 2007, will create a unique luxury experience at the base of Peak 8. To date, we have released 70 units of the total 88 units with an average price per square foot of $1,246, a 29% in excess of Crystal Peak released just a year ago.

Currently, we have 49 units under contract representing gross sales proceeds of $69.6 million and have commenced construction on this exciting project. We currently expect at income before provision for income taxes and before allocated corporate or Vail Resorts Development Company overhead, for One Ski Hill Place, will range from $15 million to $25 million. Additionally, the One Ski Hill Place project will involve the construction of Resort depreciable assets to be used in the future operations of the Resort business, including the replacement of the historic Bergerhaus Ski restaurant with a modern, larger skier restaurant, conference space, and back-of-the-house space for RockResorts management of all of Peak 8, as well as skier services facilities including much improved space for ski school operations.

Turning to our Vail development projects, one additional Ritz Carlton residence Vail unit was placed under contract in the quarter, with currently 47 of the 71 available two to six bedroom whole ownership condominium units, and all 45 fractional condominium units under contract representing 67% of total expected revenue. I would also like to comment about the highly successful results we have seen from the sales of the Vail Mountain Club memberships, as we have nearly sold all of the currently available social and full memberships. To date, we have sold 383 or 96% of the available memberships, including 184 full memberships which include parking privileges, and an additional 199 social memberships which exclude parking privileges, representing total sales commitments of $69 million of total proceeds when paid in full. This includes the sale of 23 full memberships and 28 social memberships, since our March 10, 2008 earnings release. The sales of these memberships, in the midst of this economy and before the club is opened which will occur next ski season, are truly discretionary, nonspeculative purchases and certainly signal the extraordinary experience that membership in the Vail Mountain Club will offer and provides another exclusive commitment to Vail for many of our guests.

Turning to our Company's Lodging development, we are excited with the development occurring at our RockResort lodging brand with the announcement this quarter of two new properties to the brand, including another new warm weather destination, with the management of the third Turtle Club and Spa in the Turks and Caicos Islands. This property is expected to open in 2011, and will feature approximately 280 total ocean and marina front one, two, three and four-bedroom units. In addition to managing the project's luxury residences and suites, spa facilities, and restaurants, RockResorts will also manage the resort's commercial activities, private yacht harbor, and beach club.

We also announced The Osprey at Beaver Creek will join the RockResorts brand as an owned hotel, formerly known as The Inn at Beaver Creek. The Osprey is undergoing a $7 million transformation this summer, and scheduled to be relaunched as RockResorts' newest edition in time for the 2008/2009 ski season. The 41-room hotel is situated in the heart of the village of the world class Beaver Creek resort, set against a spectacular mountain backdrop and is the closest hotel to a chair lift in North America. The addition of these properties reflects a tremendous opportunity of the RockResorts brand as we continue to add to our collection of unique, upscale resort hotels.

Before I turn the call over to questions, I must once again give huge thanks to all of our passionate employees whose hard work, dedication, and focus on the guest experience are the reason we were able to deliver another great season despite numerous external challenges. As our focus now turns to our summer operations, we hope that you visit one of our resorts to enjoy many of the summer activities that our resorts offer, including a new zip line ride at Heavenly with its spectacular views of Lake Tahoe or the beauty of Grand Teton National Park and our operations there. We are also spending the summer bringing to life a significant number of capital expenditure and real estate construction projects that will welcome back guests for the 2008/2009 ski season.

Keystone will have a state-of-the-art new gondola, complete with a mid-station which will transform the experience of what is already one of the most visited resorts in the United States. Beaver Creek, as I already mentioned, will see a full renovation of the Osprey and the second phase of the Beaver Creek children's ski school improvements will be completed, including an on-mountain ski school building following the new Buckaroo Express Gondola installed in 2007. We also will have enhanced snow making at our resorts and many other projects, which continue to differentiate us and create the exceptional experience for our guests. At this time, Jeff and I will be happy to answer your questions. Operator, we are now ready for questions.

Thank you, sir. Ladies and gentlemen, we will begin the question-and-answer session at this time. (OPERATOR INSTRUCTIONS). Our first question is from the line of Felicia Hendrix with Lehman Brothers. Please go ahead.

Hi, guys. Good morning. Okay. I know you don't want to give a lot of details about the Epic Pass, but I'd like some. I'm wondering if the sales are at least tracking your expectations or exceeding your expectations, if you can give us any kind of color at all.

Felicia, what I would say is that the -- I would say that they are exceeding our expectations, but that the bulk of our expectations for their sales were really in the fall. What I'd say is, we're pleased to date, but obviously, this is a product where the sales really start in earnest after Labor Day. And I think it's not the same as our Colorado pass and Heavenly passes, where I think we've conditioned the market to start purchasing these passes much earlier in the year. Does that help?

That's actually very helpful. Now, regarding your Colorado pass and your other passes, do you think that you're seeing any kind of cannibalization from the Epic Pass, perhaps now people are going to wait and buy that pass later versus the current passes that you have?

I wouldn't call it cannibalization. I'd probably call it an upgrade. We are seeing people who purchase the Epic Pass -- who purchased a Colorado or Heavenly or Summit pass last year, purchasing the Epic Pass this year. We don't think in the end that that will be a huge number, but we are seeing some of those people upgrade and that's certainly part of the reason that I think it was a good product. But again, ultimately the Epic Pass' success will really be about how well it does outside of Colorado, starting in the fall.

Okay. For like the 2% increase in the Colorado pass sales, can you attribute -- the number's a little bit lower than what we expected. I know there was tough comps. Can you attribute some of it to what you just mentioned? Or do you think some of it might be just general consumer weakness?

I think it's very hard for us to say. I think that the Epic Pass I think helped those numbers somewhat, because of the higher price. But what I would say, though, is that I think that the piece that I think we're focused on is the fact that we were so far ahead of last year, and yet ultimately wound up ahead, but nowhere near 59% ahead which is I think something that we knew last year. We're a little low to start drawing comparisons or getting -- this is why we said, we're pleased with what's happened. We're very satisfied with the results to date. I think we'll know a lot more come the earnings release at the end of September.

Okay. Just moving on from that, I was just wondering if you could parcel out your destination revenues and your more local revenues or drive to revenues. Were your destination revenues down for the quarter?

I think if you break out -- we had two different things that would you look at. One is international, so we include international in destination. I think if you looked at our destination, just U.S. destination revenue, it was not down but it was softer than the international revenue.

Okay. But it was not down? Okay. And then are you -- regarding your destination, your U.S. destination visitation for the following season, are you thinking of any -- clearly, the economy is tough and all that. Are you thinking of doing any promotions or more advertising or marketing, or anything just to drive people to your resorts for next ski season?

I think certainly, one of the things that we believe helps to address that is the Epic Season Pass. We think it does provide a reason. And I think the main reason for it is because all of a sudden, it makes it a lot easier and a lot more affordable for somebody who may come out for one week to come back for another weekend or come back a long weekend or a second week during the year, obviously because of the attractive price in that case for the Epic Pass. I think that's certainly one area. I think there's no question that we're going to be doubling our efforts on the marketing side to make sure that even in a tough economy, we can still deliver the kind of growth that we want. At the same time though, we're certainly not going to go crazy with marketing spending in a challenging environment.

Okay. My final question is if you could give us your take on what you think is happening with the Ritz sales. Clearly, they're slower than some of your other real estate stuff. Then also, if you could just give us some details on that Arrabelle unit that fell through. And then, I'm done with my questions.

On the Ritz side, I'm not overly concerned about the fact that we only sold the one unit. Obviously disappointed from the standpoint, I would have liked to have sold more. But when you think about how much of the building is already under contract, many of the units that are remaining do face the EverVail site, and I think when the plans for that are finalized over the next year, I think that will really help to energize those sales. That's one. Number two is that you still would have to wait two years to get into your unit. I think with the Arrabelle units closing and the availability of people to actually purchase a unit and move in right away, I think that also hurt the Ritz sales. And finally, there's no question that with -- I think you add all that to the fact that there is a slowdown on the real estate side, which although may not be to the same extent as the rest of the country in our mountain communities, still certainly has an impact.

You add all that together and it's not all that surprising, and given that we have two years before we open the building, I feel very comfortable with where that project sits. On the Arrabelle unit, I think we -- that's somebody who basically decided that they did not want to close on the unit. I think -- we obviously feel that that unit that we're getting back is significantly -- that the market value today is significantly above that. Obviously in terms of the time that it will take us to sell it, we can't be sure of that, but we think it actually represents an opportunity for us.

Okay. Thanks a lot.

Our next question is from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Hey, good morning, guys. Couple questions. One is, could you also tell us on the two other units that are going to -- Arrabelle units that are going to close, pushed out until first quarter fiscal '09, just what the issue, what the construction issue there is?

Sure. Those issues were really about just the -- those are lots of changes, lots of buyer-directed requests. We're trying to work with them, and make sure that we can deliver the other two units obviously in the way that the buyers wanted them. Our goal is quite frankly, to bring them to -- finish those up by the end of the fiscal year. But the more we've looked at the schedule and looked at what we need to actually deliver them, we realized they were going to slip into the next year. It's a non-issue, other than the fact that our fiscal year happens to just fall right in the middle of that time period.

Chris, yes, it's actually one buyer who is combining two units into one and is doing a significant amount of upgrades and finishes that he's paying us for in advance on a non-refundable basis to get that done. It's really -- the construction just couldn't be completed to his specs by the end of the year, but certainly it's something that he's putting a lot of money in to get it done. And so, it's very clear to us that we're very confident those will close in '09.

Okay. That's very helpful. And then, any thought as to maybe potential timing on starting a mountain club in Breckenridge?

I think that's something that we've had a lot of internal discussions about. At this point, I don't think that's something that we're ready to really discuss, but it's certainly something that's a possibility for the future. The club, though, that will be coming to market next year is the club within the Arrabelle. That's something that we'll be talking more about in the fall.

Okay. Just one final one, on One Ski Hill Place, you're obviously doing very well there on the sales pace and you've started construction. In the event that -- just hypothetically, you didn't sell all you wanted to as time gets closer, does the design plan allow you to reduce the scope at all or reconfigure the units? Just as a side to that, is there a situation under which you might put a couple or several units into hotel inventory if you couldn't get the price you wanted at the time you wanted?

I'll take those maybe a couple at a time. I think what I would say is that we cannot change the design or scope of the building. We can't shrink the building. We would not go in there and change condos into hotel rooms, because we could never sell them. I think we have quite some time. I think we actually feel very good about that building. I think if there is a slowdown or a further slowdown in the market or we're not happy with the pace, I think that we would delay other buildings. But I think this first building, given the pace and given what we have so far, given the time frame until the building gets brought to closing, given that it's really the best location in Breckenridge, we feel very good about it and certainly, would not be changing the design of the building at this point.

Okay. Great. One final quick one. Any update on the expansion at Eagle that I believe is taking place this summer, and whether you've heard anything from the airlines about what they may be doing there?

So far, no. We don't have -- we can't -- I can't say anything because I haven't heard anything. I do know that Eagle is for many of the airlines a very profitable route. It's obviously something that they -- it's a discretionary addition to their routes, rather than lots of the other hubs that they may fly to. We're not expecting a major impact at Eagle but obviously, there are new announcements coming out every day and we're going to be paying close attention to them. But it's something that we're very focused on and in conversations with them about.

Okay. Great. Thanks very much, guys.

Thanks, Chris.

Thank you. Hayley Wolff with Rochdale Securities. Please go ahead.

Hi, guys. A couple questions. First, can you talk about Vail's lack of visit growth or visit declines over the past couple years versus what's gone on at Beaver Creek, and if there's any cannibalization. And then, do you think that you have to strengthen Vail's market position to start to drive skier visit growth?

Sure. I think one of the issues that I think -- and I think we've been talking about it for the last few years. One of the issues when you look at the difference between Vail and Beaver Creek is the quality of the hotel rooms and condo inventory, and particularly in relation to the total, Beaver Creek really has a much more upscale, more luxury units, a higher quality bed base than Vail does. And I think it's something that we as a company I think noted a couple years back, and I think quite frankly the community noted as well. It's one of the reasons why we really feel like this whole Vail's new dawn and the multi-billion dollar redevelopment of Vail is really about bringing the quality of the town up to the quality of the mountain.

I think the Arrabelle clearly was the first step of that. But I actually -- but as these construction projects are going on, we actually take inventory out. It might be lower quality inventory, but we're taking it out and until the new beds come on, I think we're going to -- that's going to hamper Vail's ability to grow. At the same time, when you look at the Ritz coming on board, the Solaris project, the Four Seasons project, our EverVail project, and the project that's been talked about in Lionshead. Recent announcement that Fairmont is coming in on the Evergreen side in Vail. I think you look at all of those things together and all of a sudden, you've got a lot of new inventory. And obviously for next year the Arrabelle, which only came on mid-season, most of the condos weren't even available this year, will all be available next year.

From all of that, I think that's one of the key ways that you grow a resort. In terms of the market position, I do think that the market position for Vail is going to be changing with the upgrade of the base area. I think that the marketing that we'll be doing around that is going to be consistent with that message.

And will that come into place this upcoming season or will it be a year away?

You will start to see that this season. In terms of having a major impact, it's probably another year away until the Ritz and Solaris and Four Seasons really start to come on line.

Okay. On the real estate side, can you just comment on any real estate projects in the pipeline, any anxiety that you may have about pushing out launch dates? Particularly, the big one coming up would be at Keystone?

I think that's something that we're looking at very closely right now. I think we've got -- I think we think that there may be a very good opportunity in Keystone. Inventory in Keystone is very low. There's a lot of interest, quite frankly, in a higher end product in Keystone. I think this will be a topic of discussion on the September earnings call.

Okay. And then lastly, on the One Ski Hill Place, 15 to $25 million of profit, sort of pre-overhead, that -- I guess I would have thought that project would have been higher margin. If I kind of back into the math, is it like 100, $105 million to build out the project, so if your pre-sales get pretty close to that number, you wouldn't even think about changing it up or changing the development mix anyway?

Just to go back to the comment I made earlier, we're not going to be changing that building in any way. I think once we -- I think we could change other buildings within the project, but we're not going to be changing that building. And nor do I think quite frankly, I think the sales results to date, actually to us, point to the fact that the building is designed well and has sold well. That's not something that we would change. I think that that building also is the first building of a number of buildings for the overall project where there will be more profitability around that. But it's also a complex site that's got embedded in it certainly, a lot of other amenities that we'll be looking at.

Okay. Great. Thanks a lot.

Thank you. (OPERATOR INSTRUCTIONS). Our next question is coming from the line of Will Marks with JMP Securities. Please go ahead.

Thanks. Hello, Rob. Hello, Jeff. On the Arrabelle, on that one unit, I'm curious. I was just looking at Slifer Smith website, and it appears they have one unit for sale and maybe that's it. I don't know if you could comment on that. How many Arrabelle units are for sale, period, right now?

I can't. I'm not looking at the website, so I don't know if that is. I do know that unit has been relisted at I believe, it's $12.5 million. If you're looking at a unit that's --

No. It must be a different one. Do you know approximately how many units, other units, are for sale?

Not off -- I could find out, but I don't have it off the top of my head. Maybe Jeff could provide that to you later.

Okay. That's fine. On the April month, you mentioned that it was a little bit weaker than you expected. How much of this was due -- you knew that Easter was coming early. Did that make it -- was that a big factor?

I think it's a combination. I think what happened is so Easter moves into March. I think that's overall, a negative event for us. I think it compresses the entire spring vacation cycle, so that spring break and Easter are now at this exact same time instead of having multiple weeks. It's hard to make up that profitability. What that does is it turns the Easter week, that last year was in April, into a non-peak week in April this year. And I think that you add to that the softness in the U.S. economy, and the fact that all season long, we did better in peak weeks and worse in non-peak weeks, I mean on a relative basis. I think that's what really became a challenge for us, that we I think had hoped to maybe, even though we knew it wasn't going to be like last year, I thought we would do better even through it was a non-peak week. Really, not even what we saw was consistent with everything else, which was that those non-peak weeks really were hurt by the sluggishness of the U.S. economy.

Okay. And looking ahead on the volume, I guess your revenue increase versus in past sales does imply that unit volume was down. I know that Interwest dropped their pricing this year. You made a comment a year ago about how, I believe, it would be tough to steal market share at this point. You had stolen so much in the last five years, and now, it's all about raising prices. Would you say that's the case?

I think that -- I guess what I would say is that I think that we always are looking to obviously increase the performance of that program. And I think that I would be careful not -- obviously, there's two numbers to look at. One is how well our unit growth is and then also, how well -- how great the -- whether the market moved up or down. Even if our unit growth is modest, if the market was growing down, we obviously could have still picked up share. I'd say that's one thing.

The other thing is that Interwest did not really reduce price this year. They had one product. Last year, I don't know how well that product did where they kind of matched that price this year. It was a little bit over, with a new product for them last year, they had priced it over our Colorado pass. This year, they priced it right on top of our Colorado pass. But their Rocky Mountain Super Pass, their individual passes at the resorts, and other things, all basically went up.

The main products I think, both Interwest and Vail all increased. And yes, you're right. I think the 2% sales growth in passes, I think is a price increase offsetting a somewhat or slight unit decline. Again, given how far up last year's were and yet, we wound up only modestly ahead in units, we feel very good about the fact that we are pretty much equaling last year's Colorado pass sales.

Okay. Great. Thanks. Actually, one final question. On the fourth quarter, in order to hit the bottom end of the Resort EBITDA guidance, I think you have to lose no more than $26 million, approximately, of EBITDA. And last year, the loss was about $30 million. Just any comments on how you could improve the -- I realize you improved the positive EBITDA over the first three quarters, but how can you cut the loss in the fourth quarter?

Well, it's Jeff. I think that for the Mountain side obviously, the fourth quarter is really predominantly an expense quarter, and so we're not having to count on X amount of revenue to hit that guidance. We really have to count on managing expenses in the fourth quarter, and we've done detailed forecast to look at that. I think last year had some expenses due to timing and other unusual items that might have made last year's expenses higher than what we would anticipate in the same categories that we see this year coming out. I think we feel good about where our expenses are. And quite honestly, we're pushing for savings where we can for folks to make sure that we're being as efficient as we can. I think that's a continued expectation of the fourth quarter.

On the lodging side, I think, again, we do have revenues coming in our lodging properties, including in our national parks business. Obviously we have some visibility into the bookings at this point, and look to both that and the expense side of things where we think lodging is going to come out. All that being said, we do anticipate a better fourth quarter so-to-speak, a less of a loss in the fourth quarter this year as last year, and that's why we were -- where we were comping it at at this time, given the guidance we did.

Great. Actually, I do have one final question, no one's asked yet about Utah. Can you give us any update and confirm that the sales at Talisker has not closed? And any thoughts, is there a possibility that you could be involved in that project in any way?

I think consistent with what we would always say on this topic, we don't comment on M&A rumors at all.

Great. Thanks, guys.

Thanks.

Our next question is from the line of Mimi Noel with Sidoti & Company. Please go ahead.

Hi, Jeff. Hi, Rob. I'll be quick. Jeff, you mentioned about some visibility into the coming bookings. Are those bookings saying anything right now about the effect of higher gasoline, higher costing gasoline?

I think so far, we are looking at our national parks business and -- at a very consistent booking level that we saw in the prior year. I think gas prices weren't overly cheap last summer, but obviously they're higher this year. But to date, and that is a primarily drive-to-market, we're seeing a very consistent booking pattern which is -- overall, which is promising.

Sure, sure. Also, I didn't hear -- I don't think I heard a whole -- much of an update on EverVail and particularly, the plans in place and the local approval that you may have gotten subsequent to the last quarter. Is there anything to report there?

No, actually that approval process I think more formally is going to begin very shortly.

Okay.

But it's also a project where we've already taken a lot of input from the town, from the local community, and we'll continue to do so. And I think we have every expectation that we'll be able to put together a project that is great for us and also really supported by the town.

Thus far, you've gotten a lot of cooperation, it sounds like.

Yes.

Okay. Also wanted to ask about the effective ticket price, and the growth there slowing in the third quarter from the second quarter. Can you explain to me how that happens? Why that happens?

Well, again, I think you have to really look at the effective ticket price excluding season pass, because how season pass holders ski and visit can really skew your effective ticket price. I think as we talked about on the call and in our release, our effective ticket price excluding the season pass, was still quite strong and pretty consistent. I think other than a mix of when -- who's coming in when and how they're buying the passes, it really is a function of our -- effective ticket price is really impacted by our absolute price increases, by the mix of what products people are buying, and then, by the visitation from our season pass holders. That's why we like to break that statistic out so it doesn't skew it, and that's why we like to talk about both overall and without the season pass.

I would have to conclude that you had a greater mix, the greater proportion of the mix, season pass skiers in the third quarter versus the second quarter

Yes. When you take that out -- the pass holders, again remember, because they're on a fixed revenue product, when they ski more year-over-year, that's going to take that effective ticket price down. Or if they're doing -- if you had more visitation coming from skier visitors, this year, compared to last year in the total mix, that will take that down. But again, we look at that product on a revenue standpoint, and measure that against the effective pass price, which is the type of absent price increases we're getting on the pass. That's how we monitor the success of that program versus the ETP excluding the season pass, which is more an absolute price than just mix of our destination, skier visits, on what type of product they're buying.

Okay. I'm good. That's it for me. Thank you.

Thanks, Mimi.

Thank you. (OPERATOR INSTRUCTIONS). We do have a follow-up from Felicia Hendrix. Please go ahead.

Hi, guys. I know this isn't your project, your real estate project. But I was wondering if you could just give us some color of what you know about the Solaris project and how that might be selling.

Not something that we're going to comment on. I think there's a sales office that I'm sure you could -- any of could you call into. But I think it's better for us not to comment on other people's projects.

Okay. Thank you.

Thanks.

Our next question is from the line of Gregory Kolb with Janco Partners. Please go ahead.

Thanks for taking my question. One quick question. There was an article in The Wall Street Journal on H2B Visas, obviously which is more of a Visa for seasonal workers, how they're cracking down. And actually, the -- around Taos and Denver, it has some issues with that. I was just curious approximately how many employees you have on H2B Visas during the winter? And if you see any possible effects from restrictions of those Visas? And if you have any other plans in place to possibly help offset if there's any decline in that?

We probably -- of our seasonal workforce, we probably have had anywhere from 10 to 20% sometimes on H2B Visas. I think that the -- I think what's been talked about is that there has been an exemption in the past for returning workers, somebody who has had an H2B before, they've been exempted from the cap. That provision hasn't been renewed, so there's no question that that is something that we're focused on and we would like to see corrected. We're not looking for an expansion of that. We're just looking for a return to what we had over the last five years or so.

With that said, we've actually recently hired a new head of recruiting, brought in a state-of-the-art recruiting software, and have a whole new recruiting effort that's going on. What I would say is that we do have a number of plans to ensure that when we get to next year, regardless of what may happen with H2Bs, that we're obviously ready to provide the outstanding experience that everybody expects. I do think -- we went through this season without that returning exemption. I think it would probably be a little bit more of an impact for next year, and it's something we think needs to get corrected. At the same time, yes, we're working on a number of contingencies.

Great. That's helpful. Thanks a lot.

Our next question is a follow-up from the line of Hayley Wolff. Please go ahead.

Hi. Just a couple more questions. First, can you give some color on pass sales at Heavenly, because we had a good season this year, following what was a lousy season two years ago.

Pass sales at Heavenly have been so far slower, but their cut-off date hasn't occurred yet so we're not complete. We're not really going to give any details on it yet. What I would say is I think Heavenly pass sales last year started to slip a little bit, because I think people started waiting for the snow. Obviously next year, they don't do anywhere near as big a program in the spring as Colorado does. They're soft, but that's something that we'll be updating people on in the September call.

I'm confused by the 2% number you gave out on Colorado passes, 2% increase. Does that exclude people who had a Colorado pass sale that may have traded into an Epic Pass?

No. It includes -- what we did was --- we are tracking -- if somebody bought an Epic Pass and last year had a Colorado pass or a Heavenly pass or a Summit pass, then those would with included in that number. But somebody who didn't have a season pass last year who has purchased an Epic Season pass, that is not included in that number.

Okay.

Does that make sense?

Yes. I have trouble with too many double negatives and things. Last question, this Arrabelle unit that didn't get closed on, assuming it's that $12.5 million one that was talked about, so you've relisted it for about $3 million more than the original sales price?

Yes.

Okay. And that -- assuming that it's sold near that sales price, you pick up $3 million more than you envisioned?

Yes.

Okay. Horrible. The whole profit on that project was, what, 30 to $40 million?

Right, that was our range.

Net of the -- right. After netting out --

All right. Thanks.

Thank you. I'm not registering any further questions at this time. (OPERATOR INSTRUCTIONS). This will be your final opportunity. Mr. Katz, there are no further questions at this time. Please continue with any closing comments.

Thank you, operator. That wraps up our third quarter call. Thanks to everyone who joined us on the conference call today. Please feel free to contact me or Jeff directly, should you have any further questions. Thanks for your time this morning and good-bye.

Thank you, ladies and gentlemen. This does concludes the Vail Resorts fiscal 2008 third quarter earnings conference call. If you would like to listen to a replay of today's conference call in its entirety, you can do so by dialing 1-800-405-2236 or 303-590-3000, input the access code 11114032. Those numbers again 1-800-405-2236 or 303-590-3000. Enter the access code 11114032. AT&T would like to thank you very much for your participation today. You may now disconnect. Have a very pleasant rest of your day.