First look: Vail Resorts.
Arguably irreplaceable assets; leverage and lease renewals worry me.
I recently came across a reference to Vail as being cheap on every metric. Also, I have a high level thesis that if AI makes people more productive, they’ll have more more money and more time. That bodes well for expensive discretionary experiences on a 10-20 year view, and Vail fits, so I thought I’d have a look.
Ticker: MTN
What it does
Vail operates 42 ski resorts globally. It generally leases the land and owns the resorts themselves - the ski infrastructure and associated lodging, dining, and retail real estate.
These could reasonably be described as irreplaceable assets, but the irreplaceable bit is the location, not the resort, so one long term question I have is whether leases can be renewed on good terms.
Summary figures for the last full year:
$860m of ebitda, $300m of net income, $320m of FCF.
$3bn of net debt and operating leases.
Negative tangible asset value.
Profitability for the current full year is guided lower on poor snow conditions.
The vast majority of ebitda comes from Mountain operations, which break down like this:
Outlook
After several years of acquiring assets and then covid, Vail needs a reset to deliver visitor growth.
The CEO has been in place since May 2025, but had previously been CEO for 14 years, so he knows the business well. He discussed his views on the 4q25 call. According to him Vail has:
Been over-reliant on email marketing and has not sufficiently developed other channels.
Been over-reliant on call to action marketing at the expense of building an emotional connection to the brand and specific resorts.
Lost focus on Lift sales as they have grown Pass sales - they can grow both.
Failed to capitalise on strong engagement with their app, which doesn’t have checkout functionality, so conversion is low.
Not optimised the price/benefit relationship across thousands of products.
All of these problems feel solvable over a multi-year timespan.
Notably, a lot of people enter and exit the industry each year - skiing for more or fewer days, or skipping a year or two. This means there is a large opportunity to increase utilisation within the ski demographic, not just by attracting new skiers.
Valuation at a share price of $134, using last full year data
16x P/E.
9x ev/ebitda.
6.7% free cash flow yield.
I’d describe this as reasonable rather than cheap, but it would get cheap quickly if the company can grow revenue at high incremental margins.
Areas for more work
Lease renewals.
Deeper dive into financials, especially incremental margins and returns on capex.
Get more comfortable with capital allocation. The company is paying a large dividend and buying back stock; I worry it should be reducing leverage.
Conclusion
I thought I would be intrigued enough to buy a tracking position. On reflection I am not. I think these are fantastic assets and I can imagine a future in which rising disposable income and management efforts drive significant revenue growth at high incremental margins. But given the debt and the risk around lease renewals, I need to do a lot more work before I risk capital.
What do you think?
Links to previous work
Thanks for reading - if you enjoyed reading this please like and restack, and do get in touch if you have questions.
Pete
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