Jully
Active member
I used to get paid to predict businesses future, so here's my guess where Vail goes from here, and while things look great right now, I do have some early concerns.
This EPIC pass effort has been very successful and it still has legs, so the stock price will keep going up for a bit, but I feel they're close to approaching the top of the bell curve on their potential success with this strategy.
So.....
They're a publicly traded company, not growing profits is not acceptable. As they struggle to grow revenue they will continue to buy mountains, as bolt-on revenue is the easiest way to continue to grow, plus......without getting too deep in the weeds....you can do a lot of accounting maneuvers to mask growth decline or growth stasis through acquisitions. Also, look for more "international" mountains being purchased, and you'll hear Vail say this is both to grow the business and seek to add additional markets for growth. To the novice, at this point it will look like Vail is taking over the world, but WARNING, at about this time Vail's acquisitions will begin to decrease in quality for two key reasons. 1) You've already picked off the low-hanging, most advantageous acquisition fruit 2) Acquisition cost increases through lower supply as well as the fact sellers know your MO and know you're now a "motivated" buyer. Big difference heading into a sale from a position of strength versus a position of weakness.
As it becomes increasingly difficult for Vail to grow revenue, they will now look to cut expenses. First, they'll look to cut the non customer-facing expenses so as to be relatively unnoticeable. There'll probably be a renewed emphasis on efficiency, competitive-bidding etc.. The next thing will be the labor cuts, and you'll no longer be able to swing a dead cat and hit a Vail employee. Seriously.... it's crazy how many employees these Vail properties have. Every 10 feet you see someone with a Vail coat. That labor-excess will end, and probably swiftly. But cutting expenses too much becomes a "nose spiting" exercise since Vail focuses so heavily on the high-end market and here too, they'll quickly reach the point of diminishing returns. Oh..... also.....the CEO is young and smart, so before things get too bad and when Vail's still relatively on-top, he'll probably resign to "seek new opportunities" and "seek new challenges". Essentially, Vail is so awesome and I've done such an amazing job, that I just cant help it become any better, but that will be an excuse for him to leave while still on top and get a new, high-paid, CEO gig elsewhere, and possibly in an entirely different industry.
The stock then starts to drop once the flaws and lack of growth can no longer be masked & hidden. The Vail business model will begin to be publicly questioned. Vail is just TOO large! Divestitures will begin to occur to raise cash, pay debt, strengthen the balance sheet, and make activist Wall Street investors happy. The initial mountains sold will be called "non-core" assets. And the world turns........
I give this all.......say....... roughly 10 years.
That is the challenge of all publicly traded ski companies isn't it? Profits are harder and harder to grow as you get bigger and bigger. I'm not sure how stable any publicly traded ski company ever is.