The Business of Snow
If you've ever flown to Denver during the ski season, you understand the maniacal quest skiers have to get to the slopes. It drives prices higher for airfares, hotel rooms, rental cars, and food.
Colorado is already a boomtown because marijuana is legal and gives a natural boost to the economy similar to taking a trip to Amsterdam, and if you add the Rocky Mountains to this mix, you get the kind of price appreciation you have in Vail Resorts (MTN) which is reporting numbers today.
Like just about every current stock, the rally in MTN started in 2009. At that point, it sold for $18 per share, and the total value of the company had fallen to about $600 million. Today, Vail Resorts is trading at $85 per share and is worth $3 billion. The business of snow is a big business, but you must have snow, or the quarterly earnings numbers can be like a tricky black diamond run. Shares have taken the gondola from $18 to $90, with few pullbacks over the six year stock market rally. It is always good to look at a variety of stocks and how they perform, and in the case Vail Resorts, you might look to other luxury stocks, like Coach Inc. (COF) or Tiffany & Co. (TIF) . Of course, Vail Resorts must account for the added factor of weather.
Adventure Seekers Keep the Ski Business Booming
Skiing is big business, and when Vail bought Park City Mountain Resort in September 2014 for $182.5 million, resolving a messy legal battle between Vail and Powdr Corp. that threatened to cancel the ski season, many avid skier's let out a sign of relief.
Vail began leasing and operating Canyons in May 2013. "The 7,300 combined acres of skiable terrain will certainly make it among the nation's largest," said Michael Berry, president of the National Ski Areas Association.
"Skiers and snowboarders are adventurists, and they are always looking for the next adventure," said Nathan Rafferty, president of the trade group Ski Utah. "People get to pour over the map and plot out how they are going to ski those two mountains together. That's a lot of skiing."
It's difficult to run a business when mother nature can bankrupt you with a bad season, but these investors are more aware of weather patterns than Al Roker, and they make a living anticipating the seasonal snowfall. It is the same in the hotel business in Jamaica, or Cruise Ships in Florida. The weather is not something a CEO can control, and even more difficult to hedge.
Today, we learn a little bit more about the business of snow. Vail Resorts is a great stock to watch because they are such a huge player in the industry and by all reports the snowfall in the area and the ski conditions have been great! But buried somewhere in the numbers will be the proof that Vail Resorts is tidy on the balance sheet and in their long term planning, because 2015 was a year with snow...and as we know, 2016 may not be.