Vail Resorts Inc (MTN) 2009 Q1 法說會逐字稿

(OPERATOR INSTRUCTIONS) I would now like to turn the call over to Rob Katz,CEO of Vail Resorts. Please go ahead Sir.

Thank you Operator. Good morning everyone. Welcome to the Vail Resorts Fiscal 2009 First 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 term reported EBIDTA to report earnings for each of our operating segments, namely mountain, lodging and resort which is the combination of the mountain and lodging segment and real estate. The Company defines reported EBIDTA as segment net revenues less segment operating expenses plus segment equity investment income or loss. The Company also uses the term net debt which is defined as long-term debt plus long-term debt due within one year, less cash and cash equivalents. Complete reconciliations of reported EBIDTA and other non-GAAP financial measures can be found in this mornings earnings release and on the Vail Resorts.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 or forward-looking statements that are made pursuant to the safe-harbor provisions and 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 documents filed by the Company with the Securities and Exchange Commission including the Company's Form 10-K, for the fiscal year ended July 31, 2008 and Form 10-Q for the first quarter of fiscal 2009. 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 forecast or forward-looking statements except as may be provided by law.

So with that said, let's turn to our results for the first quarter as well as an update on Real Estate project status and 2008, 2009 season indicators. The results for the first quarter cover a seasonally low period in which we historically incur a substantial loss and the results are generally consistent with our expectations. These results are driven by our Summer mountain lodging businesses including our Summer Grand Teton Lodge Company operations, golf operations and the timing or real estate closings. The results are also impacted by normal increases in fixed non ski season related expenses which expenses drive the historical first quarter loss each year. Importantly, we are very pleased that in this unprecedented period of disarray of the global economy and capital markets, we ended the frist quarter in a very strong financial position with our ratio of net-debt to trailing 12-month total reported EBIDTA of 1.38 times.

Jeff will provide more detail on our financial position a little later but I want to say how proud I am of the discipline the Company showed over the past few years as it is certainly a differentiator in today's environment. In addition, much of our effort in building loyalty, exclusivity, and commitment from our guests is becoming evident as another differentiator for us.

First, Colorado Season Pass sales actually strengthened since our last earnings call despite a period of worsening macroeconomic conditions. And we introduced a paradigm shift in how destination guests purchase their skiing with the introduction of the Epic Season Pass. For the 2008-2009 season, we have sold to date approximately 204,000 total season passes including Epic Season Passes for total sales of $90.9 million as compared to approximately 173,000 passes and $70.5 million in sales dollars in the prior year same time period, an increase of 18% in pass units and 28.8% in sales dollars. Total Epic Season Pass sales for this year were approximately 59,100 passes and $32.5 million in sales dollars, a terrific beginning to this new program particularly in the current environment.

The number of Colorado and Summit Season Passes sold for the 2008-2009 season are down 2.6% in units as compared to the number of passes sold in the prior season when including Colorado Summit Season Pass holders who upgraded to the Epic Pass. If we include sales of Heavenly Season Passes to date, the decline is 4.7%. These compared to declines of 8.4% for Colorado Summit and 10% including Heavenly that we reported on our last earnings call. Our Season Pass program continues to be a fundamental and growing part of our operating model offering stability from economic and weather-related concerns by locking in a significant amount of our lift revenue before the winter ski season even begins. Historically season pass revenue has represented approximately 26% of lift ticket revenue with this percentage mix expected to increase materially this season.

Second, we closed on 42 of 45 units to date in our Crystal Peak, Breckendrige real estate project for gross proceeds of $54.6 million. In this market, these closings represent a huge vote of confidence from buyers in our Breckenridge resort and in the long-term quality of our real estate projects.

Third, we received final deposits on 384 of the 390 reserved memberships to date for the recently opened Vail Mountain Club representing gross proceeds from initiation deposits of $70.1 million. This represents another strong commitment from our guests in the experience they know our company can provide. Offsetting the impact of these positive indicators were lodging reservations which have continued to be soft. Advanced lodging bookings for our upcoming ski season through our central reservations and directly at our owned and managed properties are currently 23% below last year's levels and room nights. This reflects a similar trend that others have seen in the travel and leisure sector.

Bookings to date represent approximately 50% of the ultimate total room nights for the season we historically have booked through these channels. Although we still have limited visibility on bookings in this environment, we believe that many consumers are at a minimum delaying their travel decisions while some are apparently choosing not to travel at all this year, a trend that makes us grateful for the significant season pass and drive-to business that we have.

While we believe our company goes into this economic downturn in a very strong relative position, we also do not believe we are in any way immune to the potential impacts. Therefore, we have continued our efforts to find ways our company can be more efficient providing the guest experience we are known for while at the same time reducing costs. Toward that end, we have instituted numerous cost-saving measures across the company including outside third-party fees, consolidating our purchasing, reducing energy and materials usage, limiting compensation increases and benefits, and targeting -- targeted reductions in our full-time, year-around staff. Most important, regardless of how many guests ultimately come to our resorts this year, we remain 100% committed to creating an exceptional experience for each and every one of them -- a fact that will be ingrained in all us this season.

As an update on the current mountain conditions, we have had great recent snowfall at our Colorado resorts with more snow in the forecast. At Vail, for example, we currently have 19 lifts open including a portion of the back bowls and plan to have over 4,000 acres open by this Saturday to include Blue Sky Basin in addition to the back bowls. I would like to now turn the call over to Jeff who will provide an overview for the results of the first quarter of fiscal 2009. I will then provide an update on real estate projects as well as other exciting news at Vail Resorts. Let's now turn to Jeff for our results.

Thanks, Rob, and good morning, everyone. Earlier this morning we released our earning for our first fiscal quarter ended October 31, 2008. Also this morning we filed our form 10-Q for the first quarter. Turning to the highlights of our results. As Rob mentioned, the first quarter is seasonally a low quarter and historically lost quarter since the mountain resorts are only open for summer mountain activities, lodging, business, and golf operations. In the first quarter this year we did have construction-related impacts related to our summer mountain operations which negatively impacted results to do the temporary closures of Keystone on mountain dining facilities due to the construction of the new Keystone gondola and the temporary closure of the summer on mountain activities in Breckenridge including the alpine slide due to real estate construction activities at Peak 8. Due in part to these impacts, total mountain revenue decreased 4.1% which included a $1.1 million decrease in retail rental revenue negatively impacted by lower sales volumes primarily in the Colorado front range.

Taking a look at the mountain segment operating expenses during the first fiscal ,those expenses contained nonseasonal, predominantly fixed expenses and allocated corporate expenses which all increased normally in the current year quarter. In addition, the prior-year quarter mountain operating expense included $2.3 million of legal costs associated with the Canyons litigation. Excluding the litigation expense in the prior year, expenses would have increased by 3.3% in the current year, primarily due to higher repairs and maintenance and allocated corporate costs, partially offset by lower variable expenses associated with the reduced retail rental and dining revenues. Mountain Equity Investment income which represents our 50% stake in the Slifer Smith & Frampton retail brokerage business was also unfavorable due to the overall decline in real estate closings compared to the same period in the prior year from both commercial projects and residential sales. All of these anticipated items impacted mountain reported EBITDA which declined 8.2% in the quarter compared to the prior-year quarter.

Our lodging segment revenues favorably impacted by the Arrabelle Hotel which opened in January, 2008, as well as the ADR increase of 6% for our owned hotels and managed condominiums which is partially offset by fewer available rooms and lower occupancy primarily as a result of a decline in conference and group room nights especially at GTLC. While RevPAR was flat to the prior year, when looking at it on a same-store basis excluding Arrabelle Hotel, RevPAR was down 1.5%. During the first quarter of fiscal 2009, lodging segment results contained a full quarter of expected seasonally low results from the Arrabelle Hotel which were lower than the impact from pre-opening and startup costs from the prior year.

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 year included administrative and overhead costs, allocated corporate costs, and marketing expenses on projects which are still not closed. The first quarter of fiscal 2009 real estate segment results were driven by the closings on 39 of the 45 Crystal Peak lodging units in Breckenridge accounting for $51.2 million in revenue and one lodge at Vail Chalet accounting for $14.4 million in revenue. Subsequent to the end of first quarter of fiscal 2009, the Company closed on an additional three Crystal Peak Lodge units, two Lodge at Vail Chalet units and one Arrabelle unit. Four additional Chalet units are anticipated to close during the second quarter of fiscal 2009 with the remaining unit expected to close in third quarter of fiscal 2009 due to the extensive nature of the Buyer upgrades associated with that unit.

In addition, we are very pleased to have completed construction on the Crystal Peak Lodge project at lower than anticipated project costs making the Crystal Peak Lodge real estate development project more successful from both an absolute contribution basis as well as a contribution margin basis than what had previously been estimated. This favorably impacted the first-quarter results which contain the significant majority of Crystal Peak Lodge closings.

Taking a look at the bottom line, net loss was $34.4 million(Sic-see press release) or $0.93 cents per diluted share in the first quarter of 2009 compared to a net loss of $24.6 million or $0.63 per diluted share in the first quarter of fiscal 2008. Including the prior year results is the $11.9 million contract classified as contract dispute credit and not included on our EBITDA from the final settlement in our favor of the Cheeca dispute. In addition, the results were impacted by increased depreciation, associated primarily as a result of placing in service significant resort assets which included the Arrabelle Hotel, new skier services building, and Vail Mountain Club associated with the Chalets project and an increase in the fixed asset base due to a higher level of capital expenditures. Net loss was also impacted by a $2.6 million decrease in investment income due to lowered interest rate environment and a decrease in average invested cash during the period as a result of significant share repurchases over the past year. Higher capital improvements and construction costs related to vertical real estate development. Our tax benefit for the quarter was 36% which was lower than the statutory rate and our historical rate due primarily to period-specific reserves. We still anticipate our provision for the full fiscal year to approximate 39% which is in line with our recent historical rate.

As Rob mentioned earlier, we're very fortunate that we have a strong balance sheet. At October 31, 2008, the Company had cash and cash equivalents on hand of $102.7 million. Net debt of 1.38 times trailing 12 months total reported EBITDA and a $400 million senior credit facility which matures in 2012 with no revolver borrowings under the facility currently priced at LIBOR plus 50 basis points. Very importantly, the Company has only $3.2 million of principle maturities due in total over the next five years. After paying off the nonrecourse financing for the lodge at Vail Chalets and a $15 million revenue bond at maturity in the first fiscal quarter of fiscal 2009. Let me turn to the fiscal 2009 outlook as we mentioned in the release.

While we cannot say with any certainty at this point in time what impact the macro economic environment will have on the ultimate visitation and guest spend for the 2008-2009 ski season, we feel very fortunate to manage a company with world-class assets, a strong been sheet, and terrific employees. However there's no doubt that the travel and leisure sector is being and will continue to be negatively impacted in the short term. And while we have many attributes that differentiate us from other options guests may have, we are not immune to those negative trends. Since issuing our Fiscal 2009 guidance in late September 2008 we have seen a further deterioration in the overall economic fundamentals.

In addition, while our Season Pass sales have been relatively strong, our advance lodging bookings have not improved. We have just begun our 2008-2009 ski season and still have limited near-term visibility, therefore we believe it's too early to formally adjust our fiscal 2009 guidance. However if booking trends do not improve from the current level, we almost certainly will fall below the low end of our guidance range.

I do want to announce that we have had -- we have decided to release more frequent disclosure of skier visits over the course of the ski season. These updates will include total season a day skier visits on a combined basis for all five of our mountain resorts and will also include the subset of skier visits recorded from season passholders. These disclosures will cover the season of eight periods ending January 4, 2009, February 22, 2009, and April 12, 2009, and will be issued shortly after the end of those periods. These disclosures should provide more frequent updates on one measure of how our season is progressing.

Finally, during the first quarter of fiscal 2009, the company repurchased 278,400 shares of common stock at an average price of $26.63 for a total amount of approximately $7.4 million in the quarter. Since the inception this program in fiscal 2006, the company has repurchased 3,282,508 shares at an average price of $40.48 for a total amount of approximately $132.9 million with 2,717,492 shares remaining available under the existing repurchase authorization. The purchases under this program are reviewed by the Company's Board quarterly and are based on a number of factors to determine the appropriate uses of excess cash. Including the Company's future financial performance, the Company's available cash resources and competing uses for cash that may arise in the future, the restrictions in the Company's credit facility and in the indentured governing the outstanding 6.75% senior subordinated notes, prevailing prices of the Company's common stock, and the number of shares that become available for sale at prices the company believes are attractive. At this time, I would like to turn the call back to Rob.

Thanks, Jeff. Turning to our real estate activity as I mentioned earlier, we have had a tremendous success with the Vail Mountain Club. With over $70.1 million of proceeds now received for the Club, it is one of the most successful projects in our history, and with the doors just opening for the Club, we look forward to having our members start to enjoy one of the finest club experiences available anywhere in the world. Turning to our company's lodging development, we are days away from the re-opening of the Osprey at Beaver Creek, formerly the Inn at Beaver Creek which will be relaunched as Rock Resorts newest edition, expected in time for Christmas, 2008. This luxury boutique hotel, the nearest hotel to a chair lift in North America, will have a more contemporary design and will feature 41 rooms situated in the heart of the village of the world-class Beaver Creek Resort. In addition, this quarter we announced continued growth in the Rock Resorts portfolio including the return to the northeast with a planned addition of the Mansfield Inn at Stowe in Stowe, Vermont. Our Rock Resorts brand will continue to seek opportunities to diversify the portfolio in truly iconic, new mountain resort, and warm weather locations.

As an update on our acquisition of Colorado Mountain Express, on November 1, 2008, we closed on the acquisition of CME for a total consideration of $38.3 million, as well as $0.9 million to reimburse the seller for certain new capital expenditures. We're very pleased to welcome CME and their employees to the Vail Resorts family. The operating results of CME will be reported within the lodging segment beginning with the three and six months ended January 31, 2009. CME is Colorado's leading ground transportation company providing service between the company's four Colorado ski resorts, other locations in Summit County and Aspen, and both Denver International Airport and Eagle County airport.

Before taking questions, I think it's important to highlight that even in the face of current economic challenges the world is facing, Vail Resorts remains in a relatively very strong position. Over the past five years we have used our excess cash to reinvest in our resorts and pay down our debt. As a result, as a result we find ourselves with a very strong balance sheet and assets that have been primed for the future. Our five mountain resorts have five of the top-10 most-visited in North America and all get outstanding marks from our guests in an industry that has not seen a new major resort created in 27 years. Our lodging, real estate, retail rental, and transportation businesses are all in very strong positions and are well integrated into the core mission of our company. Our sizable season pass program unique not only among other ski resorts but also within the entire travel industry remains a tremendous strength, allowing us to leverage the strong customer loyalty our company enjoys and provide our guests a very advantageous value.

This year will assuredly offer us a challenge, but I can guarantee all of you -- I can guarantee you all of these attributes combined with the incredible passion of our over 15,000 employees will continue to allow us to deliver on our long-term objectives. At this time Jeff and I will be happy to answer your questions. Operator we are ready for questions.

Thank you, we will now begin the question-and-answer session. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Hayley Wolff with Rochdale Research. Please go ahead.

Hi, guys.

Hey, Haley.

A couple of questions. Can you tell us what you've seen season to date through Thanksgiving and into December on visitation. And then related to that can you talk about the bookings patterns of late as the snows come, you get closer to Christmas, what kind of holes do you have during certain peak periods this winter?

Sure. I'm not going to give an update on visitation. I think that as Jeff mentioned we're going to be giving an update shortly after the -- after the Christmas and New Year's holiday period. So I think we're going to hold off commentary on visitation until then. And I think our hope in doing that is to really provide that information much quicker than we did in previous years. On the booking patterns, it's very hard to -- for us to really make any conclusions based on the short-term bookings. We have seen a pickup in bookings in a number of different areas after we started get something pretty significant snowfall last weekend. Or two weekends ago. But again we're talking about days and -- and blips. I think that--we're not drawing any conclusions yet from it. But obviously getting our early season snow which right now in Colorado puts us in a strong position especially relative to Utah is something that's obviously a positive.

When you look at your mix of business, you've always talked about sort of 60% destination, 40% Front Range. When you think about your destination, what percent of that actually is kind of more of a drive-to skier and then on the Pass numbers, it looks like you didn't see that big of a decline in the Colorado Pass-Summit Pass buyer. Who bought the Epic Pass? , can you give us a little color on that buyer?

I -- I don't have off the top of my head the exact number on the drive-to market. I think what -- what I would say, though, is I think we would expect two things. One is based on the current trends as we're looking at them, I think we would expect our mix of business to shift this year from what it was last year. And obviously Colorado and local to go up as a percentage of our total business. I -- I think when we look at the end of the year and we can probably provide more color at that point, I think we will also see some benefit in some of the drive-to markets except that there's also -- most of that drive market is going to Keystone and Breckenridge, probably guess at the lower end of the income scale. So again, I think we're going to have multiple factors which are going to be contributing to what we see from the drive-to market again outside of Colorado. No question inside of Colorado we're going to see that business grow.

In terms of the Pass numbers, we definitely saw I think significant strength from Colorado past buyers which I think was a huge vote of confidence. And I think will be a huge differentiator for us going into the season. In terms of the Epic buyers, I think we literally have just wrapped it up. I don't think we're ready yet to provide color on exactly who they are. I think we're going to be, , putting a lot of that information together and will probably be able to talk about that more at the end of the season. But -- but we -- when you look at who bought it, we definitely saw folks from -- I think a portion certainly from Colorado. Some of the folks that upgraded. Not a huge amount, I would say relatively speaking to the size of the Colorado Summit program.

We saw people from -- I don't know if it was every state in the country, but a wide variety of states all around certainly our country. And we saw a significant interest abroad, as well. A real chunk, probably not all that dissimilar from our overall destination business, quite frankly, in terms of percentages of international buyers buying the Pass, as well. So in total, I think we've been very pleased. There's no question that when you're -- we're essentially introducing a program to the destination market asking them to purchase their skiing up-front. I think given the economy and given how people are clearly delaying their purchase decisions in general, the fact that we have these kind of results for the first year for the Epic program, I think, , speaks volumes.

Okay. Great. I'll let somebody ask questions. Thank you.

Thanks, Haley.

Thank you. The next question comes from the line of Anthony Powell with Barclays Capital. Go ahead.

Thanks. Hi, guys. A question on your strategy as you go into the ski season on promotions on the rooms. Some of the casinos have been discounting heavily on the rooms and are getting people to visit even though they're visiting at lower room rates. I've seen you done some sort of small promotions. Will you get more promotional as things get closer to peak seasons it you're not seeing the rooms filled like you want?

Yeah. I guess what I would say is I think we very early on embarked on a strategy of -- of being much more promotional. I think that what you're seeing in terms of our press releases are some of the companywide promotions. But what I can assure you is in each and every resort and property we are actively day by day, week by week, making sure that we are trying to target room rates and packages that allow people to come. , I think we have a huge, very loyal customer base. And we're going to do what we can do there year to make it easier for them to make the decision to come.

I think most important, quite frankly in my opinion, and we've had a lot of these discussions, is not only the rooms that we control, but really working with all of the other lodging partners that we have in our communities, to make sure that they are on the same page in terms of strategy for being promotional as we are, and I think sometimes it may take a little bit longer for that group to do so. But I think we're seeing that, as well be right now. But I think certainly for our owned and operated properties we've been in that mode from the beginning. I don't think you'll see any -- any greater acceleration of that. But we're going to stay that way unless we see an economic shift over the next three months.

Would you consider maybe extending that to the actual lift ticket prices or do you want to hold the line there?

I think our plan is -- is really to include lift tickets as part of packages. Obviously when you do that, there's an inherent discount in that.

Right.

What you will not see us do is really discount the lead lift ticket price. I think what we're looking is for folks either to buy their skiing up front in which case the Epic pass and our other pass products are obviously an incredible value. Or to buy a combination of products in which case, I think we'll drive it that way. Our view is when we look at the absolute experience that we provided, that will be provided this year given all the capital that was spent last year, we feel very comfortable that -- that at the frontline or the top price so to speak that those prices are -- justified in, I think, increasing. But it doesn't mean that we're not going to be more promotional as we go forward like I said in the packages.

The other thing that I would say is that there's been a big difference between if you looked over the last four to five years in how quickly lodging rates have come up in the luxury sector versus our lift ticket price. I think the -- the mode we go into, we do not take up our lift ticket price 20%, 30%, 40%, 50% just because demand is high in a particular period. We take a rateable approach. We take it up 4% to 5% per year, steadily in good times and bad. I think the difference is just how promotional we are based upon the economic conditions around us.

Okay. And -- of your past customers how many have already booked their vacations for this year? And how many are still waiting? If you have that.

I don't have that.

Okay. And final one. On the comp payments-- do you have a target number for what you look at this year and next year?

We do. It's not something that we're disclosing at this point. I think that given that there's a lot of factors that are going to play into how we do for this year, I think we felt that since we were not providing new guidance per se, we do not want to just provide one piece of it. I would say it's material. I think the combination of all the things we outline sudden really a material improvement to wherever the revenue line ends up coming in.

All right. Thank you.

Thanks.

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

Hey, good morning, guys.

Good morning, Chris.

Just want to maybe try to ask a margin question a different way. How do you look at it? We know you've been more promotional, that's probably the right thing to do. We know your taking some costs out of the system where you can, but how -- how do you guys look at kind of the marginal profitability of your customer, and can -- can you use price to entice visitation and just kind of how you think about that as the season unfolds.

I -- look, it's always a trick. Obviously, I think what you're looking to do is to provide great packages that entice people to come. Packages that allow people to pick up the phone even if they don't buy that exact package, they may buy something else. But you're obviously not looking to give away product where it doesn't help to generate business. Therefore, we -- we spend a tremendous amount of time literally every day looking at what packages, prices, and promotions are working. What I would say is, and you can obviously look at our overall business, the promotions on our lodging business clearly on s something we have to watch with the occupancy. But that's not necessarily going to be in and of itself a huge driver of our EBITDA for the year. What is the big driver, obviously, is -- is the business that goes on our mountain.

And on that side what I would say that clearly, if we're going to be doing more local and Colorado-based business and less destination business, I mean, that is a higher margin customer. So there's no question about that. I think if -- if we see fallout from the bottom of our income scale, that might have been a lower margin customer on the destination side. So there's a lot of different factors that really are playing into this. And I think we're going to have to add our savings plan and the fact that we're going to be as fish as we possibly can be for the season. I will say we said it a number of times and a number of places. But I would say we will not reduce the experience for the guests. So even if we're down in skier days, we are not going to reduce our terrain. We are going to still open as much terrain as we can do given the weather in terms of restaurants, in terms of lifts. All of that. Obviously anyone who comes out is going to be expecting a certain level of experience. And that's not something we're going to want to disappoint people on.

There are variable expense that's we will be able to pull down. Obviously if we have less people in a restaurant, we need less people to bus tables or we need less people to serve. But apart from that, the experience will be the same. So I guess in total, yes, I think we are expected certainly a margin decline. Exactly how that's going to play out -- exactly how that's going to play out I don't think we're ready to say.

Okay. And can you just tell us how the seasonality of that CME business works?

The CME business, Chris, is highly seasonal, very much like our mountain business. So in our mountain lodging-related business. So their high season is -- is right in line with ours. And then they will do business throughout the summer similar to our mountain lodging business, but in a smaller proportion than what obviously we do in the mountain. So it tracks very similarly.

Okay. Great. Thanks.

Thanks, Chris.

Thank you. Our next question comes from the line of Will Marks with JMP Securities. Please go ahead.

Thank you. Hello, Jeff, hello, Rob.

Hey, Will.

I want to go back to this -- the 23% decline in -- in the lodging, and first of all, do you have a figure for what that is in -- in revenue?

About the same, Will. I think 24% in sales dollars, 23% in room nights.

Great. Thanks. And then on your -- on not changing guidance at this point, can you just clarify a little more, is this a combination of because of snow not falling until fairly recently, you're doing this, it's because of shorter booking windows, and maybe if you could -- if you can look back at the 2001/2002, was there a situation where bookings really picked up?

, I think it's a decision that I -- I think what we're really trying to do is two things. We're laying out for people that -- that based on the bookings that we're seeing, even with the sales, the season pass sales numbers that we have which obviously have been a positive, that that combination if it does not improve from where we are, we will fall below the guidance. Now, I think that -- that we do think that there is a real possibility for close-in bookings. In fact, we have seen some of that. But what's not clear can is how much we will get. I think in the '01 time period, I think our overall bookings were down around 5%. Our destination bookings. I don't -- I think that we are looking at numbers that are much more significant in terms of the decline. I think we're looking at booking periods-- are much shorter end even than they were in the 2001 time period. With that said, we're also looking at -- I think at an overall macroeconomic picture that's as volatile as anybody's ever seen. Volatile means down and up. And I think we're still obviously going to do everything that we can to prime ourselves for the possibility of really seeing some -- seeing some pop on the short-end bookings. Yes, we still think that that's a very real possibility.

Great.

Does that help?

Yeah. That's very helpful. Thanks. Two other things. On the Chalets, it appears there are five left to close. Is that correct?

Yeah. There's -- and there's actually -- I mean, closings happening literally in the next few days, as well. So really the -- all but one will have closed here in the next few weeks, and the one that won't close for the third quarter just has a -- a significant amount of prefunded upgrades that are making it a longer, they get it done but will be done in the third quarter.

And do you have any reason to think that buyers would walk from their deposits in --

No. We've gotten no indication whatsoever that any -- any of the buyers for the Chalets would walk from their deposits.

Okay. Along the same lines, I think it was six mountain club buyers haven't closed. Can you give a reason for that?

They -- I don't know that we can give a reason. But they did default. So I mean, I think they -- I don't know what -- I think there were a couple full memberships with $100,000 deposit, a couple of social memberships with a $50,000 deposit. I don't think we can get into why they didn't close.

Sure. And including those, how many potential sales are there -- at Vail Mountain Club?

I think it's -- I think the -- I think we had talked about 400. That's really what he we had available. And I think we're going to monitor that closely. We also are going to be taking -- making preparations for the Arabelle Club. So we'll be looking at kind of both of those. Both the available inventories at the Vail Mountain Club, then the timing of the watch of the Arabelle Club. What I'd say is it's a handful at this point.

Okay. One final question. Any updates on the Canyons? I assume that deal did close, and -- and any resolution -- is there a pending lawsuit?

Yes. That did -- did close. And there is a new buyer who own the Canyons. We do still have pending litigation in that. And so we're not going to comment on it beyond what I just said.

Great. Thanks, guys.

Thanks.

Thanks.

Thank you. (OPERATOR INSTRUCTIONS) And our next question comes from the line of Jake Hindelong with Monness, Crespi & Hardt .

A few questions. The first on the on-mountain spend. The increased skier date this closure is definitely going to be helpful. Can you comment on how you expect the next shift with the Epic Pass to impact on-mountain spending. And obviously you don't know yet, but I guess from what you've seen in the first few weeks.

I -- first of all I would say that, , I think we can give some thoughts on it but it has no -- the first few weeks has no bearing on this color. I think what I would say is that -- I think the Epic Pass is the product that people will use to get on the mountain. I think it's -- it's certainly our hope and one of the reasons why we watched it is people will take more trips to our resorts if they've purchased an Epic Pass. We've heard anecdotal evidence of that. We won't know any of this until the end of the year. I think that the key thing is -- is not really the lift ticket product that they purchased. But obviously whether they're a destination customer or a local or regional customer. And I think that's going to determine what the ultimate spend is. And then obviously even if you're a destination customer, say, from New York or Chicago, how much is that person going to spend even if they do come out. I think both of those are things that are still unclear at this point. It's way too early in the season. This will not be part of the disclosure that we make right after the Christmas/New Year's holiday period, but will be part of the disclosure in our standard quarterly conference call at the beginning of March.

Okay. Great. That's helpful. And on the corporate level, the recently announced cost-cutting initiatives, can you make any kind of commentary on either a percentage or a dollar basis what that's going to mean to operating expenses? It might even be helpful to address what it would have meant in a seasonally slow quarter, say, as the first quarter if those adjustments had been made previously.

We're not -- and I think it's -- I think we made the decision that because we're not providing more guidance or more guidance on our guidance that we're not going to provide pieces of it. And so at this point, I think what I said earlier I'll stick with. Which is that it is a material amount. That will impact this fiscal year. Obviously, part of it will have an impact also on the next fiscal year, as well. But it -- it will be material in this year, as well. And we'll provide more guidance on that as the year unfolds.

Okay. Great. Thanks. One last question -- just to follow up on -- on the last M&A question. Given your balance sheet strength and some very weak competitors in the current credit climate, does -- is there anything on your radar this ski season that wasn't there a year ago?

Obviously we don't comment on -- on potential M&A. I think what I would say is that our interests in making strategic investment, acquisitions is not diminished by the change in the economic outlook, it certainly might change our view of -- of value in the current environment. But in terms of our interest in making the right strategic moves, that remains certainly totally ensconced. And I would say that absolutely our balance sheet and financial position gives us a lot of options that's a lot of other people don't have.

Great. Thank you.

Thank you. Our next question is a followup question from the line of Hayley Wolff with from Rochdale Securities. Please go ahead.

Hi there. Could you maybe walk us through real estate cash flow for this year? You disclose that you have $320 million to $340 million remaining on existing projects. What piece of that goes out the door in fiscal '09?

Haley, yeah, I think the -- this year in '09 will be a net investment in real estate. So net of the proceeds that we have received which, again, we have nonrecourse financing on the Chalet project. So a lot of those proceeds, obviously, went to -- to pay off the debt with the EBITDA coming forward as net proceeds. And Crystal Peak we obviously showed you the revenue there. We're spending more than that on the investment of -- of construction and process on both the Ritz project and the One Ski Hill Place project in Breckenridge. So it is a net investment year in real estate.

Okay. And then how -- how low can you take CapEx and still investment in the resorts?

I think that, look, what we disclose is every year what we call kind of a maintenance level of CapEx. And I think that that's a number that we feel is what's required not just to keep the lifts running but really to keep our resorts at the position that they are in in terms of the experience that they provide. We -- we estimate that that number I think ranges from $38 million to $42 million per year. And I think that is certainly a number that if -- I think we view as required. Like I said, we could that number could probably be cut further. If you looked at I think what other ski resorts spend, that maintenance number would still put us in a very strong position, I think, on a competitive basis versus everyone else out there. So if that helps.

Okay. And the -- the down 23 booking number will you even venture what that flow-through would look like on EBITDA if you stayed status quo?

No.

Okay. I'll ask the question differently. How does that flow through to ski school bookings?

I think that's -- I think there's two pieces to that. One is clearly if we're losing people who bought ski school last year and they're not coming, then obviously there's a 1-1 decline there. But I think there's another level here, obviously, which is if -- if more -- there's two things. One that could make the mix go up, one that can make the mix go down. The piece that could make the mix go up or better is if we're losing people who didn't buy ski school last year. And the people who are coming are folks who continue to buy school ski. I think -- ski school. I think obviously that's still a negative. On a mix basis you could wind up okay. The other piece that's going to go the other way is there's a very real possibility, it's maybe even likely, that you're going to get some people who even if they bought ski school last year will come back this year and still come but not buy, it or they bought three days of ski school this year they'll buy two. There's a lot of different factors. We don't have enough visibility now to make any estimate as to how that's going to play itself out. And I think, again, we'll have more -- a better picture of that when we get to March.

Now with the epic pass and your total season pass numbers, you could see that we, see a high 30% to 40% of your visits coming out of Pass sales. Is that sort of ballpark right?

I think based our current season -- if -- I guess I'd say this -- based on the guidance that we originally gave out, based on the current season pass sales that we have, we would do about 33% of our lift ticket revenue from season passes, which would be up from 26% last year, up from probably the low 20s a few years back. So I think there's no question that that strategy is still ensconced. Obviously right now our booking numbers as we said for the destination side of the business would show us below where our original guidance is. So yes, that number could -- that 33% could be higher. Obviously that's not really at this point what we want, though.

Right.

Anymore.

Right. Okay. Thank you. Yep.

Thank you. Our next question comes from the line of Yusana Murakami with MC2 Capital Markets. Please go ahead.

Hi, Rob. Hi, Jeff. Great job. I've got a couple of questions, one which was already answered so obviously nix that. Looking at staffing, are you guys having any kind of issues related to what's going on immigration likewise? I saw a recent article talking about the slowdown of people from New Zealand, Australia, some of traditional work force for the ski industry. What are you guys seeing for that?

I think actually there's no question that I think that immigration has not been one of our -- our best areas, our most favorite areas. I think that -- that there's work that needs to be done on a political level to make that a more smooth process, one. So yes, I think that we have had issues there that started a year, year and a half ago. I think with that said, a year ago, we began a process of -- of an entire upgrade of our whole recruiting effort. And what I will say, there couldn't have been a better time because when we did really lose access to many of the H2-B visa workers, seasonal workers that we were getting from around the world, the good news is that we had a whole apparatus set up, and we are fully staffed. There will be no staffing issues whatsoever at any of our resorts. With that said, doesn't mean that these immigration issues are completely gone. I think we'll like to still improve them over time. In terms this kind of season, staffing is not an issue whatsoever.

Okay. On the CME side, do you see any -- is the van fleet pretty much everything -- you don't see any hidden kind of upgrade that have to be done to the fleet itself, or is it everything pretty much carrying over rebadging basically the CME vans into the Vail Resorts name or whatever or are you going to keep it CME?

Well, we're going to keep the name CME and keep during business under CME for sure. What we are doing is seeing what opportunities exist and doing a lot of meetings between our marketing folks and their marketing folks, our lodging folks to see how we can best take advantage of -- of now owning that business to drive more business both to CME and likewise from CME into our company. There are absolutely no surprises. The closing went very smoothly. We got everything we were expecting. And, , to date, nothing that's come up since then that was -- that wasn't anticipated. So we're very pleased with how that whole transaction went down. And occurred and -- and the -- they have a great, loyal, long-term employee base that we were very happy that came over. And we're real excited about seeing it in operation this year.

Great. Now, I -- what -- just looking back on all the other questions that were answered, as far as the 23% reduction in advanced bookings, is there any guidance you can give us as far as which resorts were affected more than others? Like was Heavenly part -- to a greater extent affected in Vail, or as opposed to Keystone, etc. , etc. , is there any guidance you can give us on that?

No. I -- I think we're not going to share the breakdown. We don't usually do that.

Yeah.

I guess what I would say, though, is I think there's their are always and I think this year are differences between the resorts. But I would say there's a lot more commonality between the resorts in terms of the decline. I think that it's a broad-based decline. I think as we get further into the season and certainly after the season, I think we'll be able to look backwards and have some sense. But I think given the -- the macro economic issues, I think that's the -- the lion's share of the impact that we're seeing. And that's pretty broad based.

Okay. Fair enough. I guess I'm just looking at it as the demographics and, , who's -- who's going to be going on these vacations, etc, etc. I appreciate what you have said. Great.

Great.

Great, thank you.

Thank you.

Thank you. Our next question comes from the line of Larry Shoemaker with Oppenheimer. Please go ahead.

Hi, guys. I might have missed this, but have you seen any quantifiable impact on your foreign guest visitations?

Well, I would guess you maybe -- we maybe could speak to more foreign bookings. We have definitely seen a slowdown in foreign bookings. That's certainly included as part of the 23% number that we've been talking about. I think a combination of -- of the fact that the economic issues that we had in the US, I think started to expand to the rest of the world. I think that's one issue. I think number two is that the dollar has strengthened. And I think particularly against something like the Australian dollar. And I think that's raised issues, as well. With that said, I think what we feel like is that we had some good momentum last year. And that will actually last us quite a while because we got a lot of first-time people here into our resorts to actually try for the fifth time and establish a relationship and establish a communication dialogue and a connect with these guests and the wholesalers. I think this year given those two factors there's no question that -- that the international visitation is going to be impacted, as well.

Uh-huh. And just have you seen any discernible rise in cancellations? Do you give that number out?

We don't give that number out. We've seen some. But I think what the vast majority of what we're seeing is delayed bookings or -- or that issue much more than we're seeing people who once they book are canceling.

Okay. Thanks.

Thanks.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from the line of Gregory Cole with Janico Capital Partners. Please go ahead.

Hi, guys. Thanks for taking the question. Really two timing questions I guess. On Crystal Peak and Vail Chalets, you guys gave helpful color on the timing of closings obviously because you have -- have that visibility. I was wondering if you guys had any more visibility aside from the one that's closing. Do you close the Arabelle and the others, the other units? And timing of the mantle and is that going to be included in the second quarter and third quarter as a full number, or is it going to be kind of a partial number in there? Thanks.

On the first thing, I think -- , we really have the one Arabelle unit that still has not closed is not under contract. And so we can't really give any guidance per se as to when it will close. I think that will -- that will be a process that will unfold. The Manfield Inn is a project that is under construction so it will not be in our numbers for any of this fiscal year. I think it will come on line in -- we believe two years.

Great. Thanks a lot.

Thanks.

Thank you.

Thank you. Our next question is a followup question from the line of Will Marks from JMP Securities. Go ahead.

You started to say something about daily pricing. Did you say you have not come out with the numbers yet?

We have not announced the top lead price at our resorts yet, no.

Okay. And on cap next you mentioned a maintenance number. Anything further than that I guess you're budgeting for now?

No. I think we're going to be reviewing that in detail. Obviously talking it over with our Board, as well. What -- we'll be able to share more details on that in the March call. I think -- what I would say is two things one, we are totally committed to continuing to drive the guest experience and use our financial strength as -- as widening the differentiation between us and others. At the same time-- our heads are not in the sand. And obviously we're going to be looking at the economic environment around us. And adjust accordingly.

Okay. A couple other quick things. Keystone, I don't think you've made any announcement on new development there. I assume this is on hold?

Yes. I think One River Run is certainly ready to go. In the current environment, that's not a project that we're ready to launch yet.

Okay. And my last question is this -- the CNL transaction which I believe included crested Butte. Did you look at this deal? Were there any comments?

I guess I'm not going to comment on whether we looked at the deal. I would say that many of those resorts would not be similar to the current resorts that we have.

Okay. Thank you very much.

Thanks, Will.

Thank you, our next question comes from the line of Victor Consoli with Parella Weinberg. Go ahead.

Just a couple of questions. Following up on the C&L, from what I read in industry newsletters, I understand there's potentially a lot of assets for sale out there. Perhaps it may be even some assets coming out of the Intrawest properties that [Fortress] manages. Could -- if anything came up and was interesting to you whether in the east or in the west, could you use your revolver line to make a purchase, that $400 million of undrawn revolver?

Yeah. We have the ability to use our revolver line as part of that -- any acquisition activity that we'd be looking at.

So I again imagine the number-one marginal buyer in the industry since -- you've got a healthy balance sheet. So I imagine you're seeing all kind of deals. Anything compelling? Is there a possibility of picking up an asset on the cheap in the next six months?

Well, first, I don't think we'll ever use the word "marginal. But I would say --

No on the margin --

I'm sorry. I'm only making a joke. I think what I would say is that -- what I said earlier, that we don't comment on prospective M&A. With that said our interest in the right strategic assets is not diminished by the current economic climate.

Okay. And just -- are you seeing a lot of competitive responses? I mean I imagine there's a lot of loyalty for your resorts. Are you seeing some of the other areas that are -- that may be undergoing more stress? Let's say the Intrawest properties for example are. They promoting heavily and you feel you'd have to have a competitive response to that?

We have not seen anything -- we've not seen anything in the market that is irrational. I mean, I think people are responding to the environment that we're in. I think it's very consistent. I think it's consistent with what we're seeing in the travel sector. If anything, I think the -- the mountain resort part of travel will be-- will not see the same level of promotion that you'll see in Las Vegas or Hawaii or the Caribbean or elsewhere. Just because of the -- the customer loyalty. I think the -- the issue or the -- the challenge sometimes for the mountain industry is growing because we can't create new ski resorts, . They have to be there to a certain extent in the first place. The benefit in this type of environment, though, is that the -- the number of ski resorts that are really choices for the destination traveler has not changed in 30 years. And, therefore, I think that -- that puts the industry in a good place. So at this point we have we haven't we haven't seen a shift other than what you'd expect given the environment.

Do you think the elasticity is driven more by the price of airline tickets or -- or by lodging offers?

I think it's a combination of both of those. I think we have little control over airlines so that's not something that we can focus on too much. We do, obviously, work closely with our airline partners. But a lot of times those prices are -- are set by a lot of other factors that have nothing to do with us. But with -- as it relates to lodging, ski school, food, lift tickets, that's something we do have control over. And we're going to be aggressively pushing that. What I would say is I think people want to feel -- a lot of chatter out there about well if you give somebody a $50 discount on a ski vacation, how is that going to make a difference? I think we're seeing that people want to feel good about making the decision to come out. And they want to feel like they are able to get a package or they were able to get the Epic Pass or able to stay on one of the holidays for free. And we do see that a lot of that is motivating people to pick up the phone. So -- and we do have a -- a variety of aggressive rates out there that have been quite successful at some of our properties.

And I guess it will -- we'll find that out soon. But with all of the seasonal passes, you sold a bunch more than you did last year. I mean, has your experience before been that once people come they still tend to spend more on food and drink? They spend less but they're not going to be brown bagging lunch or things like that.

I think the season passes we have in Colorado and the Tahoe market, I think that they spend less than folks coming from New York. We don't know yet whether somebody who is in New York who last year bought daily lift tickets, this year bought an Epic Season Pass. We don't know whether that spending is going to change.

Okay. Thank you very much.

Thanks.

Thank you.

Thank you. Our next question comes from -- is a followup question from the line of Anthony Powell with Barclays Capital. Please go ahead.

Just one more quick one on -- on real estate.

How is the activity with the sales at One Ski Hill Place and the Ritz? I think, , that -- I would say two things. One is that mountain real estate prime season for selling, obviously, is --

Coming up.

Coming up now. The other thing I would say and I think it's important to understand this, both of those projects do not close and come on line until,kind of mid-to later 2010. And so I think one of the things that I -- I think we're fully expecting that the incentive for people to buy years in advance of when they can actually move into their unit, obviously, has gone down. And we're not -- that's not surprising to us at all. I think the good news is in both projects we have a healthy number of presales and contracted sales. In fact, almost 1/3 of the units to -- in the Ritz project to Marriott themselves. So I think we actually feel, we obviously prefer that the market be more robust, but we're -- we feel like both projects are still in good shape given when they -- when they closed.

Have you talked to the buyers at all about if they have an interest in going along with it, or have they come back to you with the difference on price or has it been any communication at all?

Say that again, missed the first part.

Between just the -- between the buyers of--essentially of the Ritz and you guys, I mean, have you talked to them about their continuing interest in going through with it, have there been cancellations yet?

No. No. And it's not a conversation we're having.

Okay. Thanks.

Thanks.

Thank you. Once again, ladies and gentlemen, if there are any additional questions at this time, please press the star followed by the one on your touch-tone phone. And as a reminder, if you are using speaker equipment, you will need to lift your handsets before making your selection. The next question is a followup question from the line of Yusama Markami with MC2 Capital Markets. Please go ahead.

Hey, one more followup, quick question. One thing that wasn't mentioned I don't think was Ever Vail. Are you guys still going full bore on that or is that temporarily on hold?

No. We're actually -- we are moving, undeterred on all of the planning, all of the approvals. So I would say that's not a project that we're holing off on at all. I think when it comes time to begin presales and construction on the project, obviously we'll be looking at the market around us. But -- but at the moment, , we are -- we're fully engaged on that.

Great. Great. Oh and one last question on the airport. Last year you guys were talking about meeting with Eagle Vail and maybe getting extension of the runway, etc. , etc. Is that in this environment -- has that been put on hold?

That -- that process is actually -- when you say, you mean the Eagle Vail airport?

Eagle Vail, exactly.

That process is a process that's going on with the Federal Government. So I think we can get back to with the exact status of that. I don't have it off the top of my head.

Sound good. Thanks, guys.

Thanks.

Thank you, at this time, there are no further questions in the queue. Ladies and gentlemen, this concludes the Vail Resorts Fiscal 2009 first-quarter results conference call. Thank you for your participation.