Vail Resorts, Inc. (MTN), Whistler Blackcomb Holdings Inc (WB), Great Moat For A Good Price

Whistler Blackcomb Holdings Inc (TSE:WB) is owner of the ski resort of the same name located in British Columbia, Canada.  It has a stable business model and pays a $0.975 annualized dividend, which is a 7.2% yield.

Vail Resorts, Inc. (NYSE:MTN)

Whistler Blackcomb Holdings Inc (TSE:WB) owns a 75% interest in both Whistler Mountain Resort Limited Partnership and Blackcomb Skiing Enterprises Limited.  These combined are the four season mountain resort business located in Whistler in the Coast Mountains of British Columbia 78 miles from Vancouver.  Whistler the largest resort in North America, the most visited and has one of the longest ski seasons. It has 2.6 million annual visitors, 3,500 employees on 8,171 skiable acres with 37 lifts and 1,192cm of average snowfall.  Vail Resorts, Inc. (NYSE:MTN) is the second largest with 5,289 acres, 929cm of snowfall.  Breckenridge, also part of MTN, has 2,358 acres and 762cm of snowfall.  Both Vail Resorts, Inc. (NYSE:MTN) and Breckenridge have 31 lifts.  Aspen/Snowmass is another competitor but is privately held.

Not surprisingly winter accounts for 85% of revenue at Whistler with the 15% in the summer coming from sightseeing, a bike park and glacier skiing/riding.

Industry Trends

Industry trends are relatively stable with annual skier visits ranging from 70 – 80 million annually over the last ten years and are correlated to snowfall.  In 2012, there were just 70 million visitors but snowfall was low.  Revenue growth is closely tied to ticket prices which have increased at a 3.6% CAGR since 2001.  The last significant new entrants to the market were all in 1980/81 when three North American resorts opened.

Customer Base

There are two types of guest at a resort like Whistler, local & regional guests and destination guests.  The region surrounding Whistler, which includes Vancouver and Seattle, leaves 7 million people within a five hour drive and represent 63% of its customers.  These guests often purchase season passes provided a pre-committed revenue stream often before the first snow and 75-80% of pass revenue I earned by December 31.  Destination guests are aided by the accessibility via flights in and out of Vancouver.  These guests generate more revenue per visit.  Management notes its customer base is internationally based and not reliant on any one region.  No single region accounts for more than 30% of guests although the US and Canada do represent 53% of destination customers.

Steady Growth Opportunity

Management has targeted three areas to drive future growth, increase destination visits – both summer and winter, continue to increase the effective ticket price – up 5% y/y in FY12, and expand the average revenue per guest.  While the following trend shows a decrease in destination visits offset by a rise in regional visits, destination visits did grow by 20% in FY12.  Management sees an opportunity to increase the number of destination visits from 830k to 1 million which is a return to their historic levels.  Given that the number of skiers annually has remained somewhat stable over time, the decline in destination visitors means Whistler’s share of destination skiers has declined.  Whistler can also increase its skiable terrain by up to 25%.  However, a plan to expand only makes sense if guest view the already largest resort as somewhat crowded or it would need to open up a new type of terrain not currently addressed.