Vail Resorts Inc (MTN) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Vail Resorts fiscal 2010 first quarter results conference call. (Operator Instructions) This conference is being recorded today, Tuesday, December 8th of 2009. I would now like to turn the conference over to Rob Katz, CEO of Vail Resorts. Please go ahead, sir.

Thank you, Operator. Good morning, everyone. Welcome to the Vail Resorts, fiscal 2010 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 turn to a discussion of our results, let me remind you that we're using the term 'reported EBITDA' to report earnings for each of our operating segments. Namely, Mountain, Lodging, and Resort, which is the combination of the Mountain and Lodging segments and Real Estate. The Company defines reported EBITDA as segment net revenue less segment operating expense plus or minus segment equity investment income or loss, and for the real estate segment plus gain on sale of real property. The Company also uses the term 'net debt' which is defined as long-term plus long-term debt due within one year, less cash and cash equivalents. Complete reconciliations of reported EBITDA and other non-GAAP financial measures can be found in this morning's earnings release and on the Vail Resorts.com web site 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 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, 2009 and Form 10-Q for the first quarter of fiscal 2010. In addition, the Safe Harbor language in today's press release also applies to our comments on this call. While 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 statement except as may be required by law.

So with that said, let's turn to our first quarter fiscal 2010 results and outlook. Our first fiscal quarter is a seasonal low earnings period, and historically a loss quarter since our mountain resorts are not open for winter ski operations during the period. The first quarter resort results, which includes our Mountain and Lodging segments, are generally driven by the Company's summer mountain operations, lodging operations, including our summer seasonal business at GTLC, golf operations, and group business.

The Company's mountain reported EBITDA results in this year's first quarter improved by 6.1%, compared to the prior year first quarter and benefited from the cost-savings initiatives previously implemented in January and April of 2009, including wage reductions for our full-time and seasonal employees, conversion of certain full-time positions to seasonal, suspension of our 401K match, and a more aggressive procurement process for our purchases.

Additionally, mountain segment results were favorably impacted by an improved retail rental contribution due to higher gross margins, which are the result of tight inventory management and lower cost basis in our inventory, due in part to opportunistic buying. We saw improved summer operations due in part to prior year construction impacts at Breckenridge and Keystone, which offset negative impacts from lower group business, especially at Beaver Creek. We realized higher fees and dues revenue from private club operations, predominantly due to the opening of the Vail Mountain Club and lower marketing expense due to the timing of marketing spend, which included a significant shift away from more traditional print media, historically incurred in the first quarter.

Lodging segment results in the current year first fiscal quarter included an expected operating loss from CME, which was acquired at the beginning of the second quarter last year and negatively impacted year-over-year lodging reported EBITDA comparisons by $1 million in a seasonal loss first quarter. The Company's lodging segment results in the first fiscal quarter were impacted by an expected reduction in group business. When combined with a reduction in transient guest occupancy, RevPAR at our owned hotels declined by 11.7%. While we are not happy with any RevPAR declines, we are pleased that our declines were much smaller than the results of the luxury and upper upscale segments of the lodging industry as a whole for the same period, which experienced estimated RevPAR declines of approximately 22% and 17%, respectively.

Real estate revenue and real estate reported EBITDA decreased significantly as expected, due to the timing of project closings, as the prior year included closings of 39 Crystal Peak Lodge units and one Lodge at Vail Chalet unit, partially offset in the current year by the sale of a land parcel at the Arrowhead Base area of the Beaver Creek Resort.

Before I turn the call over to Jeff, I wanted to highlight some of our key early season indicators. We are very pleased with the results of our season pass sales efforts. Our season pass products offer our guests an incredible value while providing the Company with greater stability by securing a significant portion of our lift ticket sales before the beginning of the ski season. As a reminder, we recognize the revenue on advance season pass sales over the course of the ski season. Even in this challenging economic environment, our Company has been able to markedly grow total season pass sales, which continues to expand one of our most important guest loyalty programs. Through December 6, 2009, compared to the comparable period of the prior year, our total season pass sales to date have increased approximately 11% in units and approximately 9% in sales dollars. As season pass sales in the prior year represented 34% of ultimate total lift ticket revenue, we believe this season pass sale performance provides good momentum heading into the ski season.

Among the various season pass products, the sales of the Summit Season Pass increased significantly, with the majority of the increase coming from guests who reside outside of Colorado. We believe this increase was due to the inclusion of the Summit Season Pass in our national marketing efforts for the Epic Season Pass, and its availability online for first-time buyers starting this year. Buyers of our season passes came from every state in the United States, 63 countries, and as far away as Australia, Singapore, Russia, and South Africa, as we continue to grow the market for our season pass products. The season pass program is and will remain a cornerstone of our business model as we look to drive greater guest loyalty, repeat visitation, and increased spending on dining, ski school, retail rental, and lodging products.

Beyond the season pass results, we are also very pleased with the strong early season sales results of another advance purchase ticket product, the Keystone 4-Pack lift ticket, which are up approximately 35% year-over-year, yet again showing our guests' strong willingness to commit in advance for a value proposition in this environment.

Turning to our advance lodging books, as of November 30, 2009, the Company's lodging advanced bookings through our central reservations and directly at our owned and managed properties for the 2009-2010 ski season are down approximately 13% in room nights compared to the same period last year. It is important to note that at this point in the booking cycle, it is still very difficult to project trends for the current season. Though overall advance reservations are lower than the prior year, we have seen an even shorter booking window than last year and are seeing bookings at some resorts and some time periods actually ahead of last year. In fact, as of November 30th at our owned and managed properties, total room night bookings are down 7% for the second quarter ended January 31, 2010. It is also important to note that as of November 30th of last year, advance bookings for transient guests represented less than 50% of such total ultimate bookings for the prior year ski season.

In addition, airline reservations for Eagle County Airport, the nearest airport to our Vail and Beaver Creek Resorts, are currently approximately 4% ahead in the number of seats sold, compared to the same time in the prior year. We are excited that Eagle County Airport has added flights from Detroit, a Delta portal from cities farther east, as well as an additional American flight from Miami, one of our larger destination markets and a gateway for our international guests. In addition, Southwest Airlines has continued to grow their presence at Denver International Airport with 13 new daily flights and six new non-stop destinations. Looking at all of these trends, we currently anticipate that full season bookings trend will improve significantly from the booking status as of November 30, 2009.

With regards to snowfall, although our early season snowfall was on the lighter side, which is similar to the prior two ski seasons, it looks like we are catching up in a hurry. Heavenly Resort was just hit with the first major winter storm of the season, bringing nearly three feet of snow to the resort overnight on Sunday through Monday. Another series of storms is expected to bring even more significant accumulation to Heavenly, Thursday through Sunday of this week. At our Colorado resorts, there is a winter storm warning in effect through tonight with additional snowfall expected.

Let me turn the call over to Jeff to further discuss our results and fiscal 2010 guidance before I discuss our real estate projects and some of the new projects and programs that await our guests this winter at our resorts.

Thanks, Rob. Good morning, everyone. Earlier this morning, we released our earnings for our first quarter fiscal 2010, ended October 31, 2009 and filed our Form 10-Q for the quarter which you can find available now at our VailResorts.com web site. Now turning to the highlights of our results.

The first quarter is historically a loss quarter for our resort business and predominantly an expense-based quarter since the mountain resorts are only open for summer mountain activities and the lodging business is at a seasonal low point. Overall, we were pleased with our results for the first quarter fiscal 2010. As Rob mentioned, the Company's results reflect the impact of the cost-savings initiatives implemented subsequent to the first quarter fiscal 2009, including wage reductions, which will continue to provide comparative benefit on a larger scale in the second and third quarters as our seasonal workforce comes on board fully and our procurement initiatives are more fully realized during the seasonally high ski season period.

The mountain segment summer business activities improved with the alpine slide and other on-mountain activities at Breckenridge opened again this summer after being closed in the prior year quarter due to real estate construction activities and with improved summer event business at Keystone this year after being impacted in the prior year due to the new gondola construction. These improvements, together with increases in retail rental contribution margins, private club fees and dues revenue, and the lower marketing spend that Rob described earlier, allowed our mountain segment reported EBITDA results to be up over 6%, despite a lower real estate brokerage income, which appears as mountain equity investment income, due to lower project and residential sales.

Turning to our lodging segment, besides the $1 million negative impact from adding a seasonal loss first quarter for CME in the current year, as it was acquired just after the first quarter in the prior year, lodging was impacted by a room revenue decrease year-over-year due to declines in group business and to a lesser extent, transient declines, with the lower group business also negatively impacting dining, golf, and other lodging revenue.

The predominantly summer business of our national park concession, GTLC, has a significant impact on first quarter lodging revenue and contribution. In the current year, GTLC's ADR increased 9.6%, as we raised rates in accordance with our national park contract, supported by recent room renovations completed at the Jackson Lake Lodge, which offset occupancy decline resulting in flat revenue at GTLC. The ADR increase at GTLC drove the overall 6.7% increase in ADR for our owned hotels, while its flat RevPAR results helped to contain the overall owned hotel RevPAR decrease of 11.7%, despite the negative impacts of a significant reduction in group business at our mountain hotels in this period prior to the ski season.

Now to our real estate segment. As many of you know, our real estate segment results are primarily determined by the timing and closings and the mix of our real estate sold in any given period, which was certainly the case in the first quarter of fiscal 2010. Additionally, besides project-specific profit, which can vary significantly by quarter based on the timing of closings, real estate reported EBITDA each period includes administrative and overhead costs, allocated corporate costs, and marketing expenses on projects which have still not closed. As Rob mentioned, we expected that real estate revenue and real estate reported EBITDA would significantly decrease year-over-year. While the prior year first quarter had closings on 39 residences at Crystal Peak Lodge in Breckenridge and the closing on one lodge at Vail Chalet unit, the first quarter fiscal 2010 included the sale of the undeveloped land parcel located at the Arrowhead Base area of the Beaver Creek Resort for $8.5 million, which was not included in real estate segment net revenue, but rather was recorded as a gain on sale of real property at $6.1 million, net of $2.4 million in related cost of sales, which is included in real estate reported EBITDA.

Our net loss attributable to Vail Resorts widened in the first quarter, again as expected, by $6.7 million, due to the drop in real estate reported EBITDA of $14.3 million, partially offset by the improved resort results. You will notice in your 10-Q disclosures and on the face of our financials that we adopted FAS 160 in the current quarter, which impacts certain classifications on our financials related to non-wholly owned subsidies.

We remain on target with our previously announced calendar year 2009 resort capital guidance of $50 million to $60 million, excluding resort depreciable assets arising from real estate activities, of which approximately $36 million was spent as of October 31, 2009, leaving approximately $14 million to $24 million to spend in the remainder of the calendar year, 2009. Included in these capital expenditures are approximately $32 million to $37 million in resort maintenance CapEx, which we believe are necessary to maintain the appearance and level of service appropriate to the Company's resort operations, including routine replacement of snow grooming equipment and rental fleet equipment.

Despite the impacts of the back-to-back, seasonally low fourth and first fiscal quarters, as well as our continued investment in two real estate projects under construction, the Company remains in a strong position from a capital structure and balance sheet perspective, which we believe offers us even greater flexibility during these times of economic uncertainty. As of October 31, 2009, the Company's net debt leverage was 2.4 times trailing 12 months total reported EBITDA. Our $400 million senior credit facility which matures in 2012 and has $307 million available for borrowing after considering $93 million in currently issued letters of credit had no outstanding borrowings under our revolver at the end of the first quarter of fiscal 2010. In addition, our senior subordinated debt does not mature until 2014. Consistent with our previous statements, we do anticipate modest revolver borrowings at certain times in fiscal 2010 which occurred within the first fiscal quarter as well, given the remaining investments required for our two real estate projects under construction.

Turning to our guidance, as mentioned in our earnings release, overall our key early season metrics are indicating some optimistic signs with strong year-over-year season pass sales and improved airline bookings in Eagle County Airport. However, our overall lodging bookings are showing mixed results with some periods and locations stronger, while most periods are down compared to the prior year, especially in Summit County.

Accordingly, at this early point in our 2009-2010 ski season, we are reiterating our fiscal 2010 guidance ranges issued in late September, 2009. Our guidance anticipates growth in resort revenue benefiting from increases in season pass sales, destination visitation, and increases in ancillary business revenue. We also anticipated a more stable economic environment compared to fiscal 2009 should benefit our business.

Additionally, the cost-savings initiatives implemented during fiscal 2009 will provide a favorable, full year impact in fiscal 2010. As such, our fiscal 2010 guidance range anticipates growth in year-over-year resort reported EBITDA in a range of $178 million to $188 million. The resort guidance includes a range for mountain reported EBITDA of $170 million to $180 million after [$5 million] of stock-based compensation expense, and lodging reported EBITDA to range from $5 million to $11 million after $2 million of stock-based compensation expense.

Our real estate segment results, which are impacted in any given year by the timing and mix of real estate sold and closed, are expected to decrease significantly given the type and number of units closed in fiscal 2009 as compared to anticipated closings for fiscal 2010. Therefore, real estate reported EBITDA is expected to range from a loss of $8 million to zero after $4 million of stock-based compensation expense. Based on our current estimates, we expect net income attributable to Vail Resorts to range from $25 million to $35 million.

Before I turn the call back to Rob, I wanted to mention that we will again announce certain ski season metrics, including season-to-date skier visits on a combined basis for all five of our mountain resorts and season-to-date lift ticket revenue at certain interim periods during the ski season with the first update occurring following the Christmas-New Year's time period. Now, back to Rob.

Thanks, Jeff. Now, turning to our real estate development projects under construction -- One Ski Hill Place in Breckenridge and the Ritz Carlton Residences Vail. Construction continues in earnest on these two projects, and we expect is to incur between $150 million and $170 million in cash expenditures subsequent to October 31, 2009, to complete these projects, which is consistent with our prior total estimates of cost for these projects, having real estate investment of approximately $285 million in previous periods to date. Both projects are currently tracking on schedule with One Ski Hill Place projected to be completed in the late spring of 2010, and the Ritz Carlton Residences Vail expected to be completed in the fall of 2010 and our first quarter of fiscal 2011.

As we enter the winter selling period for these projects, we remain comfortable that these projects are priced at the right levels, with One Ski Hill Place units priced at an average of approximately $1,250 per square foot for both current list price and units under contract, while the Ritz condominium units are priced at an average of approximately $1,600 per square foot. For a current list price of unsold units, with the overall selling price including units sold to date as well as the fractional units being sold to Marriott of approximately $1,400 a square foot. The projected cost basis for these projects is approximately $965 for One Ski Hill Place and $1,140 for the Ritz Residences Vail.

In addition, we are enhancing our sales and marketing efforts in an effort to drive prospective buyers to both of our real estate projects during the ski season, leveraging our exclusive and distinct access to the overall mountain resort experience. Skiing down to the bottom of Peak 8 in Breckenridge, one can already see that One Ski Hill Place will be the preeminent location in Breckenridge, just steps from the gondola which connects the mountain to the historic town and adjacent to four chairlifts ready to take folks skiing and boarding on the mountain.

The Company has upgraded and relocated the marketing center to an area which is highly visible to heavy skier traffic. We have begun tours of the project and developed a wide range of buyer and broker incentives to drive traffic and new buyers. To drive increased traffic and lead conversion, our plan includes broker incentives and a comprehensive lead conversion tool, to include ski lodging and equipment incentives for purchasers. For our existing contract holders, we are offering an introductory owner's club program membership for the next year to encourage loyalty to our mountain and hospitality products and to keep them engaged in One Ski Hill Place.

At the Ritz, we have developed a number of buyer and broker incentives to drive traffic and new buyers. We have upgraded our marketing campaigns to emphasize the strong sponsorship of the project with service levels and support from both Ritz Carlton and Vail Resorts and the connection to Vail Mountain to be included in memberships in the Arrabelle Club, just steps away from the Eagle Bahn Gondola. We are also scheduling events to generate sales traffic to the project, such as first track skiing experiences on the mountain and the recently completed broker event at the Birds of Prey World Cup Downhill in Beaver Creek that showcase the project to top producing Sotheby's brokers from around the nation.

The real estate market remains dislocated from past years, and it is unclear the kind of sales environment we will see during this ski season. However, we remain highly focused on delivering these projects on time and on budget, and we will use the considerable tools at our disposal to generate additional sales. Fortunately, our strong balance sheet allows us the flexibility to fully complete and support these projects, even in this challenging economy.

Before I turn the call over for questions, we look forward to welcoming you at one of our extraordinary resorts this winter season. A new skier bridge awaits guests at Keystone, which has greatly enhanced the overall guest experience, making it more convenient to ski the mountain using the new gondola installed last year. In Vail, we are proud that our recently constructed Arrabelle Hotel was ranked the top ski resort hotel, as seventh best resort hotel overall in the continental United States in the latest Conde Nast Readers' Poll of top hotels in the world.

In addition, we have launched new programs, products, and offerings designed to recapture the revenues that we lost in our dining and ski school areas in fiscal 2009. Our new dining initiatives focus on offering guests a high quality meal at an attractive price point. Guests can experience our newly redesigned Epic Burger or our Daily Special Value Meal priced at $9.95 or take advantage of our pre-paid Mountain Meal Card, offering up to a 20% discount on food purchases. Our new Adventure Sessions program, which is a guided ski school program for those guests not wanting a traditional ski school lesson, offers line-cutting privileges and the feel of a private lesson at the price of an adult group lesson.

In addition, we will continue to aggressively offer packages and promotions with these strategies centered around offering our guests value in exchange for their advance commitment. We have laid the groundwork in the off-season to build a stronger product offering, which has enabled us to offer our guests what they most desire -- an exceptional experience with great value available at a wide range of price points. While the economic environment has improved from last year, it is far from fully recovered. However, we believe the consumer will be more willing to spend during the economic recovery but will be more discerning. Vail Resorts is ideally situated to capture this guest visitation and spend as we provide a consistently high quality experience that far distinguishes us from other options our guests may have.

Finally, I would like to thank our 15,000 employees as we enter this ski season for the passion and commitment to quality service they bring to their positions each and every day. At this time, Jeff and I will be happy to answer your questions. Operator, we are ready for questions.

Thank you, sir. We will now begin the question and answer session. (Operator Instructions) Our first question comes from the line of Felicia Hendrix with Barclays Capital. Please go ahead.

Good morning.

Good morning.

A few questions for you. I know it's snowing now, but with the lack of the early season snow, and people, obviously waiting for last-minute hotel deals, your booking stats definitely make sense to me. What I am wondering is what are you doing to stimulate business at the lodging properties that you operate? And then more importantly, what are you seeing from the third party lodging operators at your resorts?

We are really running the business as we started to do last year with almost a message calendar. So we are literally, week by week, looking at our booking results. Looking at what other people are doing, and then coming up with new packages of promotions to provide to our guests. We are not necessarily changing them every week, but we literally -- I think, the days of coming up with a plan for the season and just hoping that people come are long gone. And we are actively out there marketing. I think it's based on a lot of that - that gives us comfort, quite frankly, that even though our lodging numbers are down right now, that that is not something that we believe is going to continue for the year whatsoever.

What I would also say is that a lot of our competitors -- I think we were very early last year to jump on doing a better job on packaging and promotion. A lot of the other lodges -- some of them independent and even the chains -- I think were a little bit slower to start providing more value to guests last year. We're seeing them do that much earlier this season, and we feel like that is actually going to be a huge benefit for the season, especially as you start to compare to last year. Obviously, all of that is still going to be subject to how the economy moves and where consumer sentiment goes. But again, we would obviously like to see our advance bookings be better, but given some of the subtrends that we're seeing in a number of areas, we actually feel pretty good.

Great. And then just on ticket pricing -- just given the commentary that you provided in the release about the mix of season pass sales. I'm just wondering if the average ticket price implied by sales so far is tracking your expectations?

I guess what I would say is this -- I think that our regional expectations probably didn't include as significant an increase in the Summit Pass as we actually saw. I think we have been very pleasantly surprised at the receptivity of that product now to the destination market. Much like the Epic Pass the year before. But that product is at a lower price, so from a mix perspective, our average pass price went down. But the pricing for each product was completely consistent with what we set out at the beginning.

We also have Heavenly, which is also, I think, doing quite well this year, and their snowfall, which we believe will continue to instigate new sales there. Again, that pass product is also at a lower price point. So again, you are seeing a mix issue. All of the product prices are exactly where we set them at the beginning of the selling period.

Okay. You sold some land in the quarter. Are there other opportunities to do that again?

I think land sales at this point are a one-off opportunity. I think we're always looking for ways that we feel like we can maximize the value of our real estate in this time period. So I think there are additional opportunities, but they are going to be one-off and more selective rather than any kind of pattern.

Finally, last question. Just wondering, you seem confident, especially in your One Ski Hill Place product, and I was wondering what lends to that confidence in terms of your keeping pricing where they are now?

I think a couple of things. One is, there is no question that One Ski Hill Place is the best and will remain the best location in all of Breckenridge. And I think it's also a product -- I think much like the Arrabelle, that when you ski down to the bottom of the lift at this very central point in the overall resort, this is clearly -- it's a gorgeous building that is now up and you can actually see. We are taking people through it. And I think people can really see the very close connection of that project to the mountain. That is number one.

Number two, we did have sales in that project over the last year, even in this, literally, awful real estate environment. I think we still were able to show people what the future of that project would be like, and I think people were really reacting to the confidence that we see in the buyers to that project. And that is what gives us confidence in the project going forward.

Great. Thanks a lot.

Thanks.

Thank you. Our next question comes from the line of David Katz with Oppenheimer & Company. Please go ahead.

Good morning, all. Jeff, can you help us break out what the capital spending was between -- it looks like if I go back to what your real estate comments were last time, versus Rob's this time, it looks like you spent about $40 million on real estate in the quarter.

That is right.

Are you able to apportion that between the two projects?

David, that is not something that we're talking about individually. We are just talking about it as a group. I will tell you that construction has been moving along exactly on schedule for both of those projects. So it includes spending on both, as we would have anticipated.

And your maintenance for the year has been $32 million to $37 million. Did you give us a total aggregate CapEx spend in the quarter? And what that was spent on? How much of that was maintenance, and all that? Or are we just apportioning that $32 million to $37 million equally throughout the year as our best guess?

I think that is fair. I think the overall -- remember our CapEx guidance is on a calendar basis. And the reason for that is a lot of the spending happens in the summer, which will overlap our fiscal year-end. So you could assume that more spending will happen within the summer months, or the first and fourth fiscal quarter than they would in the winter months, just based on the construction schedule to do a lot of that CapEx.

Okay. And then I noticed a couple of things on your cash flow statement, where it looked like there was some in and out of about $29 million or $30 million, where you had proceeds from borrowing of $29.5 million and then payments of $29.6 million? Do you recall what that was?

Well, as we noted in comments earlier, we did borrow on our revolver within the first quarter. And the cash flow statement, any time you borrow, the borrowing shows up on one line and the repayment -- even if you repay it the very next day, shows up on the other line. So that is an accumulation of borrowings that we would have had during the quarter as well as on SSV's revolver as they were [printing] and buying inventory as the year went on. So that is what happens on a cash flow statement. That just shows up. We did have borrowings within the quarter. They were all paid off by the end of the quarter, but that is why it shows up that way on the cash flow statement.

Okay. And in some of the commentary when you talk about lodging bookings going forward, it seems to be, I think, if I am reading it correctly, more focused on room nights and counting that up? Have you talked at all about what kind of price level you are booking those room nights at? The reason I ask the question is, on a RevPAR basis, for your lodging segment, I wound up coming out relatively close to where you were. But I turned out to be a little -- from a rate and occupancy perspective, I was off in different directions than where you ultimately wound up.

I think the advance booking information that we're giving you is an attempt to try and give a pulse of the overall resort. Because we're actually combining our -- for most of these statistics, we're combining the central reservations bookings, which includes a third party lodges and condos with our own bookings.

I should point out that to the extent somebody books directly at a property, it's not captured in any of the statistics that we give, because that is not something that is obviously made available to us. So just, on that. We're not focused as much on that stat on rate, because that is obviously something that we use to manage our lodging business. But in terms of giving the guidance that we're giving today, it's really about trying to give people a sense of where people are in terms of bookings to come to the resort as a whole for their vacation.

Does that help? I think what I would tell you in terms of rate guidance is, I think we're being very opportunistic -- meaning that I think there are places where we are obviously being very aggressive on rate in certain places. I think Jeff mentioned that Summit County was obviously a little bit behind, especially at Keystone. And I think we are being very aggressive at rate on Keystone. Where if you looked at a number of our lodges in Vail that, quite frankly are doing quite well, and are up for many periods and in certain situations, actually even coming close to being sold out over the Christmas period. We are, obviously, starting to get more aggressive on rates.

So we're really -- it's more of a fine-tune. It's hard to broad-brush all of these resorts and all of these properties with rate guidance.

Okay. No, that is, definitely, incrementally helpful. And I think I'm all set for now. Thanks very much.

Thanks, Dave.

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

Hello there.

Hello.

A couple of questions. First, can you just talk about -- maybe give a little more granularity on the booking progression as you have gone through November and into December. I'm assuming that you are seeing some kind of pick up? And then maybe a little color on what is transpiring during the holiday weeks, like Presidents' Birthday, Martin Luther King? And if those areas are filling in nicely?

I think I'd probably position it this way -- I think if you looked at our results on maybe a month-by-month basis, I think what you would see is that the further out you go, the worse the bookings look. And I think the reason for that, and so what is coloring this down overall trend that we reported today, is that even though last year was a very, very difficult year from an economic perspective, there were many people who had already booked for Presidents' Week in March and even April, months and months in advance, because that is what they always did.

I think this year, we are not seeing that. What we're seeing is a much closer-in booking. Therefore, even though last year March was challenging, they had already had bookings that might have been six to nine months in advance. Today, no one is booking six to nine months in advance. That is what I think is weighing down the overall number. I think the further you go out, the worse it is.

I think what we're seeing is that these close-in booking times are performing quite well as we are moving forward. And what I would say on the holiday period is -- last year, the only caveat I would make is that we feel good about the holiday period. I would also say that last year from a skier visit perspective if you go back and look at our stats, the holiday period was relatively strong. It really started to decline for us after the holiday period. But with that said, again, I think that we feel like everything we're seeing right now is that the booking window has gotten shorter, and everything is matching up with that trend.

Okay. Do you think you are seeing a shift from some of the traditional Summit County guests to maybe Vail, because pricing has gone down?

I think it's hard to say. I think one of the things and again, this is a trend that I think we're seeing out there is that the upper part of the market -- the luxury part of the market appears to be coming back a little bit before maybe the rest of the market. Again, that is a broad trend. I think you are seeing that on some of the stories that are coming out around Wall Street. I think that you are seeing it in other parts of travel. I think that one of the most unique things about the recession last year was how hard it impacted the luxury part of the market, which typically stays a little bit more resilient. I think what we're seeing this year is that part of the market is coming back a little bit quicker as the Dow has come up and as people feel better about their savings and their investments, I think they are more willing to travel. I think we're going to see the shortest booking window and the most concern, quite frankly, at the lower end of our market.

Alright. Is that manifesting itself in ski school bookings over the holiday? Privates and such?

Yes, I think we are seeing some of that. I think we're seeing that with bookings at some of our higher end restaurants, and I think mostly you are seeing it in bookings to the Eagle County Airport. So in other words, I think one of the interesting dynamics that we feel like may be going on is that you are seeing Eagle County Airport up 4%, but bookings not necessarily tracking the same way. Again, this is more anecdotally -- many people are making sure they have their flights, but then holding on to get the best booking -- lodging opportunity. They feel like either they will get a better opportunity. They don't have to commit as early. Again, you look at a stat like Eagle County Airport being up 4%, which again mostly serves our resorts in Vail and Beaver Creek. That's a fairly positive sign.

One last question. With the expanded season pass program, in that you've gone outside of Colorado. How do we think about ETP for the season?

I think some of that -- what I would say is that last year we certainly saw some shifts there in terms of overall ETP, because it was one of the first years, obviously, that we had introduced the Epic Season Pass. I don't think we are expecting to see any kind of major shifts in that this year, because the primary impact from Epic I think we felt last year. There's no question, Epic was up this year again. But again, it's more incremental than it was last year. I think Summit will also start to -- the increase in the Summit Pass this will start to affect that. But again, not to the same extents that we saw before. We should see some more normalized trends this year. With that said, we are focused on value. And at this point, are certainly not expecting to raise any of our lift ticket prices this year to our guests.

The other thing I would say, Hayley, is overall ETP is going to get impacted as you continue to build on this pass base by just the number of visits that the pass holders make during the year. And as you know, they have more flexibility sometimes to do that with the pass. They can be more impacted by snowfall, especially early and late in the season and that can affect overall ETP. And that's why as you see us disclose our stats on ETP in the second and third quarter in the MD&A, we tend to also talk about what ETP was excluding season pass for that very reason.

Right. I was just wondering as you extend the pass program to a larger population, especially this year, if we need to be worried about ETP trends? But, it sounds like that is all managed.

I would say that in this environment, I think locking in -- obviously. We're seeing this. I think everyone in travel is seeing this incredibly short booking window. The fact that we can lock in, right -- 34% of our lift ticket revenue before the season begins obviously months and months and months before people are even expecting to take a vacation is a countertrend to this shorter booking period.

Now whether these people have already made their reservations -- whether it's an airline reservation, whether it's a lodging reservation to use their pass, that may not be clear yet. But we know they are very likely to come, and they are very likely to spend. So therefore, it really provides us momentum that I don't think you really see in other parts of travel. It's very rare to see in travel having 34% of your lift ticket revenue or your visits or however you want to look at it, somehow booked anywhere from a month to six to nine months in advance. I think we feel like we're not as focused on ETP on that. We are focused on getting people into the resorts, and the fact that it's up double digits is a huge thing for us.

Thank you.

Thank you.

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

Thank you. Good morning, Rob. Good morning, Jeff.

Hello, Will.

Question on the season pass sales. The percentage growth figures got worse and worse as we moved through the selling period, and I guess between the end of September and December 6th went from 15% up in revenues to 9% up, yet there was an easier comp. I know the Epic Pass is fairly new, but maybe you could explain that?

What I would say is, on the one hand, you could look at that -- the fact that our -- that the increase in our season pass sales has been going down as some kind of negative trend. We look at it has a hugely positive trend. The reason is is that one of our goals is not only to increase the program, but to get people to purchase their pass further and further in advance of the season. Again, we feel like that provides much more stability and starts locking people in and creating loyalty as customers.

So to the extent that we moved a lot of people who bought last fall to buying this spring, or we moved a lot of people who last year bought in November or October, to buy this year closer to Labor Day. So before that September earnings call that we had. So we consider that a huge win. I'm not sure it's realistic to have any part of our business up 30%, 25% in this environment. We think double digits is terrific. And quite frankly, next year, we hope we see this exact same trend. Which is our biggest pass increase is in the spring, and then it continues to go down. That means that we're moving people to purchasing earlier and earlier in the cycle. Does that help?

Yes, that does. Thank you. On the hotel bookings -- different subject here. You gave the 13% figure, and that is to all properties, right? Not just your own?

Yes.

And then the 7% figure, doesn't really compare to that because it's just for the second quarter while the 13% seems to be for the whole season? Do you have that 7% figure for the whole season, or is it meaningful?

I don't think -- we don't believe there is a significant difference in that trend. Ultimately -- obviously, we have better tracking on our own, especially year-over-year tracking, as compared to ultimate bookings on our own properties rather than bookings that may have happened with third parties and what their ultimate bookings were. So as we start to get more granular, we feel more comfortable just talking about something that we have greater confidence in, which is our own stat. But we don't believe that the trend would be very different. Certainly a lot of the evidence that we look at in pieces would show that exact same thing. That if you looked at overall bookings, including central reservations, the toughest part of that cycle is the further out you go, the worse those booking comps are.

On the negative 7% figure, can you give us some idea of does the low end of guidance assume negative numbers from bookings this year?

I think what I would say is this, the guidance does not include a decline in skier days. So I think our guidance does not assume that we are -- so putting aside bookings and how ultimately people get to the resort, when they show up, how many people are in each room. Putting all of that that aside because some of that may be relevant for our lodging business, but not relevant for the overall resorts. What is relevant for the overall resorts, obviously, is how many people go up on the mountain, and how much they spend. And from that, we are not anticipating a decline in those numbers for guidance.

Even at the low end?

We are not anticipating a decline in lift ticket revenue in total in our guidance.

Thank you. I think one other question on Keystone. I guess we can assume you are not going to move forward with your real estate project this year?

No, we're not anticipating doing that.

Great. Thank you very much.

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

Thank you. Hello, Rob. Hello, Jeff. Most of my questions have been answered, but Rob, one for you. I think I saw you give a presentation somewhat recently regarding how you are spending your advertising dollars. I think you said, historically, you spent close to $80 million. But at a certain point this fall, you hadn't spent any of it yet. I'm sorry, go ahead.

Just to be clear. I didn't say we spent $80 million. I said we have reduced our print advertising budget by -- the long-lead print -- by about 80%.

I see. Can you tell me if that has been redeployed? If you are planning on redeploying it, or is there potential that you are just going to hold back entirely?

No. Our plan is to redeploy those funds. I think the point I was trying to make was that if you looked last year and years prior to that, the vast majority of our marketing funds were expended in terms of ads and when consumers would actually see our advertising would be done before Christmas. And I think this year what we are saying is, no -- yes, we have shifted some of that -- a big chunk of those funds out of long-lead print and into more real-time -- could be newsprint, could be radio, could be online, could be direct-mail. There are all kinds of things that we could look at. But trying to get in front of the consumer when they are making their decision to book, rather than talking to them months in advance.

Is there potential savings in using a digital media versus the traditional print?

I think there could be, but I think that at the moment, we are not anticipating a savings by reducing our marketing. So that is not currently in our forecast.

The idea, perhaps, being generating a better return from the digital media at this point?

I would say, again, yes. We do -- very often digital media does provide a better return. But what I would say is that we are expecting a better return by being in front of our guests when they are making their decision.

Understand. If not digital, then what are the other avenues? If you can share?

Could be news. Could be direct-mail. Could be promotions. There are lot of ways to allocate those funds, and I guess our focus right now is on making sure that we're in that conversation closer in to when somebody is considering coming.

That is helpful. That is everything. Thank you very much.

(Operator Instructions) Our next question comes from the line of Erin Caddell with Hovde Capital. Please go ahead.

Hello, can you hear me okay?

Yes, we can.

Thank you for taking my question. I have two questions. The first is just on -- I apologize, I missed a few minutes of the call so I apologize if you addressed this. You didn't buy back any stock during the quarter. Can you just give your thoughts on that? As you are thinking about capital structure, debt, share buyback? Say, for the rest of the fiscal year?

We don't really comment specifically on the decisions that we make around our buyback program. Other than what I would say is we're constantly looking at the market, our stock price, allocation of capital. Obviously, it is still a pretty robust program if you look back over time, and it's still in place.

Got it. Secondly, and different people before have addressed this, but more generally on the issue of pricing power. For a number of years, you were able to raise your ticket prices fairly consistently. You have obviously shifted your strategy given the environment with the value meals and the different options for ski school. And then, obviously, just the overall pricing.

If you look out, maybe not just this year, but over a longer period of time. Is your base assumption that you are dealing with a different type of consumer environment, and you're making do with a little bit less in terms of pricing? Or is this you're adapting to the current environment, and whether you raise prices two years from now -- you are not really so worried about that?

I would definitely say it's the latter from the standpoint of we are reacting to the current environment. I think we're not making any estimation as to where the environment goes from here. With that said, as I look out over the long-term, we believe that the business model and growth model that we have outlined over many years is still totally intact, although maybe going through a bit of a hiccup this year.

One of the things that is interesting though, is that if you looked at our ticket pricing, our pass pricing, things like that and compared -- yes, it may be that we are not able to get the increases that we may have had in previous years. But if you compare that to what is going on in the rest of travel, in terms of hotel and casinos and cruises, what I think you would see is incredible price stability for -- again, not in lodging, but in our ski and mountain products. Incredible price stability compared to, I think, other places in travel. So we still feel very, very confident, although obviously the whole sector has shifted down a bit. Once the sector comes back up, we think we're still going to be in a very good position there.

Thank you very much for taking my questions.

Thanks.

Thank you. Our next question comes from the line of Hayley Wolff with Rochdale Securities.

Hey there. Just two more questions. Can you give any color on international bookings so far?

At this point, what I would say is that I don't think we're ready. I think I would say you are seeing two different trends on the international side. One trend, which is positive is currency. But the other trend that is negative is that you are seeing a lot of our stronger markets also going through an economic shift. I think one of the things that we're pleased about as we outlined about our season pass sales is that we are really growing that product and have it now in many, many countries around the world. So that gives us a toehold to really start building on our international business, particularly as the economy rebounds. At this point, I don't think we're seeing anything of note to report on international bookings one way or the other. I think we'll have more to talk about that on our earnings calls later in the season.

Okay. And this is an unrelated question. The US Forest Service recently denied any kind of expansion at Crested Butte? Can you talk about how you think about that from A, a competitive positioning, but B, from future growth prospects?

I think I'm not going to comment at all about the process at Crested Butte. I don't think that is for us to weigh in on here. We obviously -- I will just leave it at that. That is just not something I am prepared to comment on.

Okay. Fair enough.

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

Thank you. I think you may have mentioned that, but I missed it. Daily pricing? Have you announced your daily pricing?

No, we haven't yet.

Okay, and you probably won't comment further, even if I ask, right?

Probably not, but you can try.

No, I'm not going to waste everyone's time. Excuse me, let me ask about Utah and the Canyons. Can you offer -- is there public data on when a particular loan is due there?

Again, that is another one I'm not going to comment on at all. Obviously, we talked about that a while back. And at this point, I guess the only comment I make is in general, we are very interested in securing opportunities for strategic growth. At the same time, I think one of our strengths over this last couple years that showed up was our discipline over the prior five years in terms of how we grew the Company and where we made certain investments. We're very interested in making strategic or creating those strategic opportunities. At the same time, we're not moving away at all from our discipline. And those are the two things that we're going to use as we look at different things going forward.

Perfect. Thanks.

(Operator Instructions) Our next question comes the line of Yasuna Murakami with MC2 Capital Management. Please, go ahead.

Hello.

Good morning.

Just so you know, my question got answered. So thanks a lot.

It was a great question.

Literally, all three got answered.

Great.

Take care.

Thank you. Our next question comes from the line of Avi Chiat with MC2 Capital Management. Please go ahead.

Ditto. Ditto to Yasuna. All set. Thank you though.

Thanks. (Operator Instructions) At this time, there are no further questions. I would like to turn the call back over to Rob Katz for any closing remarks.

Thank you, Operator. This concludes our fiscal 2010 first quarter earnings call. Thanks to everyone who joined us on the conference call today. Please feel free to contact myself or Jeff directly should you have any further questions. Thanks for your time this morning, and goodbye.

Ladies and gentlemen, this concludes the Vail Resorts fiscal 2010 first quarter results conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325 with the access code of 4186856. Thank you for your participation. You may now disconnect.