By David Clucas and Charlie Lunan

It’s true what they say about the active lifestyle industry these days — experience trumps product.

A prime example is Vail Resorts Inc. (NYSE:MTN), as the ski resort business reported solid numbers for its fiscal full year 2016, proving it’s finding success amidst an otherwise tepid snow sports industry.

“We have not seen a slowdown in the high-end consumer,” Vail Resorts CEO Robert Katz told investors during the company’s fiscal fourth quarter 2016 conference call September 26. “I think, obviously, there have been some wobbles in the high-end consumer spending seen in some parts of travel, some parts of retail in particular. But I think what we’re seeing is it feels like vacation spending in particular has so far been strong. And certainly, over the summer we didn’t see any signs of some kind of slowdown. I think people are still booking trips. There may be this trend towards buying experiences, spending money on experiences versus buying luxury goods. Obviously, that would help us.”

The company reported its mountain revenue for the fiscal year ended July 31 up 18.2 percent to $1.3 billion, driven by an 18.5-percent increase in skier visits and a 21.5-percent increase in season-pass revenue. Part of those gains included the company’s first full year of its recently added Perisher Resort in Australia and a 13.2-percent increase in U.S. skier visits, helped by the addition of Wilmont Mountain near Chicago, inflating the numbers a bit. Still, effective ticket prices rose 3.5 percent, meaning that even though Vail raised its prices, more people continued to hit its slopes.

Retail Sales Piggyback
It all seems to be translating well for Vail’s retail/rental business, including more than 200 sporting goods stores, which saw sales rise 10 percent in the fiscal year to $241.1 million. Nearly 60 percent of the increase, or $13 million, came from an 8.2-percent increase in retail sales, while the balance came from a $9 million, or 15.3 percent, increase in rental revenue.

Retail sales growth was driven primarily by improved snowfall in the Tahoe region, which drove sales increases at stores near or in Vail Resorts’ three resorts in the region, as well as its Any Mountain stores in the San Francisco Bay Area. Retail sales at the Perisher resort in Australia, which Vail Resorts acquired in late 2015, also contributed to the growth. The increase in rental revenue came primarily from stores near the company’s mountain resorts in Tahoe and Colorado, where skier visits also increased, and incremental rental revenue from Perisher.

The company’s ski school and dining sales were also up — rising 13.5 percent and 19.8 percent, respectively— compared to the prior year. Overall resort revenue, including Vail’s real estate holdings, grew 16.2 percent to $1.6 billion.

Net income attributable to Vail Resorts Inc. was $149.8 million, or $4.01 per diluted share, for the fiscal year, compared to a net income of $114.8 million, or $3.07 per diluted share, in the prior fiscal year.

“We experienced another outstanding year in Colorado, with visitation and guest spending outperforming last year’s results,” Katz said. “In Park City [Utah], we met our very high expectations following our capital transformation last summer that combined Park City and Canyons into the largest mountain resort in the United States. In Tahoe [California], our results rebounded strongly, as favorable weather conditions helped to reactivate visitation in the region.”

Summer Gains
Katz said Vail’s summer business is also on the rise with mountain revenue for its spring/summer fiscal fourth quarter, ended July 31, up 21 percent to $98 million. And although the warm-weather season is still a money loser, the company trimmed the quarterly net loss to $65 million versus a net loss of $70 million a year ago.

The report validates estimates by DestiMetrics, which reported last week that spending on lodging at western mountain resorts set a record in August for the fifth year in a row as higher room rates continued to offset lower season-to-date occupancy. Vail Resorts estimates its 11 U.S. resorts accounted for 17.6 percent of skier visits in the country during its fiscal year, including nearly one-third of visits to the Rocky Mountains (including Colorado and Utah) and one-quarter of visits to the Tahoe region.

More Growth And Acquisitions
Looking ahead, through September 18, 2016, Vail’s U.S. season-pass sales were up 24 percent in units and 29 percent in dollars, although Katz expects those growth rates to slow as the company has done a better job in selling season passes earlier.

“Our growth continues to be driven by our increasingly sophisticated and targeted marketing efforts to move destination guests into our season pass products, with this segment representing over half of this year’s growth,” he said. “Last year at this point in the year, we had sold approximately 60 percent of our season passes for the upcoming ski season, though we believe that figure may be higher this year, given we are moving guests to purchase earlier in the selling cycle.”

Companywide, officials provided fiscal-year 2017 guidance; however, the figures excluded Vail’s previously announced, planned acquisition of Whistler Blackcomb. Canadian anti-trust authorities have cleared the transaction, which officials expect to close this fall pending Whistler Blackcomb shareholder and remaining Canadian regulatory approvals.

So, without Whistler, Vail expects net income to come in at between $165.5 million and $194.5 million, with EBITDA growing between 6.1 and 12.7 percent. That assumes normal weather patterns and an exchange rate of 77 cents between the Australian and U.S. dollar, officials said.

It plans to do that while also raising wages and “expanding our employee housing offerings,” Vail Resorts CFO Michael Barkin said. “One of our top priorities will remain improving the employee experience at our resorts.” He concluded: “We expect our growth will be driven by the continued success of our core strategy of increasing guest loyalty by moving skiers and riders into our season pass products, creating a more personalized and relevant conversation with each of our guests and using sophisticated approaches to drive yield increases.”

Photo courtesy Vail Resorts