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Vail Resorts (NYSE:MTN)

2013 Earnings Call

September 27, 2013 11:00 am ET

Executives

Robert A. Katz - Chairman, Chief Executive Officer and Member of Executive Committee

Michael Z. Barkin - Chief Financial Officer and Executive Vice President

Analysts

Joel H. Simkins - Crédit Suisse AG, Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Smedes Rose - Evercore Partners Inc., Research Division

Bradford Dalinka - MKM Partners LLC, Research Division

Whitney Stevenson - JMP Securities LLC, Research Division

Bruce M. Zessar - Advisory Research, Inc.

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Vail Resorts Fiscal 2013 Fourth Quarter Results Conference Call. [Operator Instructions] This conference is being recorded today, September 27, 2013.

I would now like to turn the conference over to our host, Rob Katz, CEO of Vail Resorts. Please go ahead, sir.

Robert A. Katz

Thank you. Good morning, everyone. Welcome to our Fiscal 2013 Year End Earnings Conference Call. Joining me on the call this morning is Michael Barkin, our Chief Financial Officer.

Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties, as described in our SEC filings, and actual future results may vary materially. Forward-looking statements in the press release that we issued this morning, along with our remarks today, are made as of today, September 27, 2013, and we undertake no duty to update them as actual events unfold.

Today's remarks also include certain non-GAAP financial measurements. A reconciliation of these measurements is provided in the tables included with our press release and in our Annual Report on Form 10-K filed this morning with the Securities and Exchange Commission, and is also available on the Investor Relations section of our website at www.vailresorts.com.

In addition, during this call, we will discuss results that exclude certain acquisitions and transactions in fiscal 2013 and fiscal 2012, including Kirkwood, Afton Alps, Mt. Brighton and Canyons Resort, which we will refer to collectively as "the Acquisitions."

So with that said, let's turn to our fiscal 2013 results. We are very pleased with our performance this fiscal year. We reported record Resort revenue and Resort EBITDA that reflect higher overall visitations, improved pricing, increased average guest spend and strong pass sales. We generated significant real estate net cash flow, driven by the increasing strength in our Resort real estate markets. We were successful in our acquisition strategy during fiscal 2013, completing our transaction for Canyons Resort in Park City, Utah, and acquiring Afton Alps in Minnesota and Mount Brighton in Michigan. We also launched the initial activities for Epic Discovery on Vail Mountain and made continued progress in the approval process for our broader summer plans across our resorts.

Finally, we increased the number of mountains available on our Epic Pass from 12 during the 2012-2013 ski season to 26 for the 2013-2014 ski season, including the addition of resorts in Austria and France, truly creating a global offering for our pass holders.

Our Resort Reported EBITDA of $240.9 million represented an increase of 17.3% compared to the prior fiscal year, and excluding the Acquisitions, the increase was 18.4%. These results were primarily driven by the Mountain segment, which delivered strong results throughout the year. Total Mountain net revenue increased 13.2% for fiscal 2013 over the prior year. This was driven by a 13.6% increase in total skier visits driving a $48.3 million or 14.1% increase in lift revenue compared to the prior year. Lift revenue, excluding season pass revenue, increased $36.4 million or 17.6%, and season pass revenue increased $11.9 million or 8.8% compared to the prior year.

Our ancillary businesses also performed well, reflecting improvements in consumer spending that resulted in higher spending per guest. Relative to prior year, fiscal 2013 dining revenue increased 18.7%, ski school revenue increased 13%, and retail/rental revenue increased 9.7%. The Lodging segment also performed well in fiscal 2013.

The business benefited from improved summer visitation and increased winter demand during peak holiday periods. Total Lodging net revenue for fiscal 2013, excluding payroll cost reimbursements, increased $12.2 million or 6.5% to $200.1 million as compared to the prior fiscal year. Our owned hotels and managed condominiums, excluding Canyons, benefited from improved occupancy and rates, with revenue per available room increasing by 6.4%.

Turning to our Real Estate segment, we are very pleased with the increased level of sales activity at both of our development projects. For fiscal 2013, we closed on 12 One Ski Hill Place units and 10 Ritz-Carlton Residences, Vail units. Additionally, during fiscal 2013, we closed on the sale of 2.1 acres of land at the base of Breckenridge at Peak 8 for $11.1 million and recognized a gain on the sale of $6.7 million in the fourth quarter of fiscal 2013.

Net real estate cash flow for fiscal 2013 was $27.5 million, exceeding our revised guidance of $23 million to $27 million issued in June 2013. I'm also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts' common stock. The quarterly dividend will be $0.2075 per share of common stock and will be payable on October 24, 2013, to shareholders of record on October 9, 2013.

I'm very proud of our accomplishments over the past year and the continued strength we see at a number of key areas as we look towards the 2013-2014 ski season.

First and foremost, we turn to season pass sales. We are extremely pleased that our season pass sales for the upcoming 2013-2014 ski season continue to show strong growth and demonstrate the compelling value proposition of our season pass products to our loyal guests. Through September 22, 2013, season pass sales increased approximately 19% in units and approximately 23% in sales dollars as compared to the prior year period through September 23, 2012. These growth rates are consistent with the growth rates we reported in spring 2013 and exceeded our expectations.

Since announcing the Canyons transaction in late May 2013, we have seen a material acceleration in pass sales in the Tahoe and Utah markets, as well as in our destination markets. Our Minneapolis and Detroit markets continue to show growth rates well in excess of our overall results, and we continue to see strong performance in Colorado as well.

Based on historical patterns, approximately 55% to 60% of our total sales are made by this date. We believe this will be a strong overall year for pass sales, so we expect the final growth rate for the full selling season to be materially lower than where we were through September, as we know that a portion of this significant increase in sales to date is due to pass holders who purchased last fall buying passes earlier in the year.

Next, we look at our advanced lodging bookings. Although it's still early in the cycle, with less than 15% of winter season bookings historically made by this time, we are pleased that bookings are currently up in both room nights and revenue over the prior year.

Finally, we saw continued growth in guest visitation over the summer months and higher guest spending at our mountains and across our Lodging properties. This serves as a positive indicator as we head into the season and also demonstrates the strength behind our expanding summer operations. This is highlighted by the tremendous excitement surrounding the launch of the initial activities for Epic Discovery at Vail.

Now I would like to turn the call over to Michael to further discuss our financial results and our fiscal 2014 outlook.

Michael Z. Barkin

Thanks, Rob, and good morning, everyone. Before discussing our results and fiscal 2014 guidance, I want to remind you that you can find a full discussion of our financial results for fiscal 2013, ended July 31, 2013, in our Annual Report on Form 10-K, which we filed today with the Securities and Exchange Commission. Our Form 10-K and our earnings announcement can be found on our website at www.vailresorts.com.

As Rob mentioned, we're very pleased with the results from fiscal 2013 and the momentum we've created from our strategic growth initiatives. As you know, our fourth fiscal quarter is typically an EBITDA loss quarter. That said, our fiscal fourth quarter Resort revenue was favorable to the prior year by 8.7%, reflecting improved summer visitation and ancillary spend, along with the additions of Canyons Resort and the Urban ski areas.

Excluding these new acquisitions, Resort revenue was up 4.2% over prior year. Our fourth quarter Resort Reported EBITDA was unfavorable to the prior year by 13.5%, primarily due to operations at Canyons. Excluding Canyons and Urban ski areas operations and associated transaction, transition and integration costs, our fourth quarter Resort Reported EBITDA was essentially flat with prior year, with an unfavorable variance of 0.1%. These results reflect the increases in summer activities revenue and favorability in the Lodging business, offset by higher labor costs.

For fiscal 2013, Resort net revenue was $1,078,500,000, or up 10.4% compared to the prior fiscal year. Excluding the Acquisitions, Resort net revenue increased 7%.

As Rob mentioned, Resort Reported EBITDA increased 17.3% to $240.9 million for fiscal 2013 compared to the prior fiscal year. Excluding the Acquisitions, Resort Reported EBITDA increased 18.4% to $242.9 million.

Mountain Reported EBITDA for fiscal 2013 increased $29.8 million or 15% to $228.7 million compared to the prior fiscal year. Excluding the Acquisitions, Mountain Reported EBITDA for fiscal 2013 increased 16.5% over the prior fiscal year.

Our fiscal 2013 Mountain results benefited from higher pricing, increased average guests spend on ancillary services and higher pass sales, as Rob described earlier in the call. Lodging Reported EBITDA increased 91.4% to $12.2 million for fiscal 2013 compared to the prior fiscal year.

Excluding the Canyons contribution, Lodging Reported EBITDA increased by 79.2%. Owned hotel occupancy increased by 4.3 percentage points, driven primarily by improved summer visitation and an increase in transient guests attributable to increased skier visits at our Colorado and Tahoe resorts during the 2012-2013 ski season.

Finally, net income attributable to Vail Resorts Inc. increased 129.4% to $37.7 million, and we reported earnings per share of $1.03 per diluted share for fiscal 2013.

Our balance sheet continues to be very strong. We ended the quarter with $138.6 million of cash on hand, an increase of $92.6 million from July 31, 2012, and no borrowings under the revolver of our senior credit facility. Our net debt was 2.8x trailing 12 months total reported EBITDA. This net debt calculation includes $306.3 million of capitalized long-term obligations associated with the Canyons transaction and only includes EBITDA losses from the Canyons from fiscal 2013 for the period from closing in May through July 31, 2013. As Rob mentioned, we are very pleased with the results for fiscal 2013, and we are looking forward to the upcoming season.

Looking at dividends and share repurchases. In fiscal 2013, total dividends paid were $0.79 per share, which reflects the increase made in the dividend of approximately 11% in the third fiscal quarter from $0.1875 to $0.2075 per share. The company did not repurchase any shares of common stock in fiscal 2013.

Before turning it back to Rob, I'd like to cover our guidance for fiscal 2014. As always, our visibility into the upcoming ski season is limited at this point in time. Our guidance for fiscal 2014 anticipates normal weather conditions and a continuation of the current economic environment.

Based on our current estimates, our fiscal 2014 guidance range anticipates Resort Reported EBITDA of between $280 million and $295 million, including approximately $7.2 million in anticipated Canyons integration and litigation expenses and approximately $11.9 million of noncash stock-based compensation expense. We expect that Canyons EBITDA, including the benefit from season pass sales and excluding nonrecurring integration and litigation-related expenses, will modestly exceed our prior guidance for the first full year of operations.

Of the approximately $7.2 million of integration and litigation-related expenses included in our Resort Reported EBITDA guidance, an estimated $5 million is associated with fees for the Park City Mountain Resort litigation, which could be higher or lower than our estimate based upon how the litigation plays out.

Included in our guidance, we expect to increase our Resort EBITDA margin, defined as Resort Reported EBITDA divided by Resort net revenue, by approximately 0.7 percentage points to 23.0% in fiscal 2014, at the midpoint of our Resort Reported EBITDA guidance range. This margin increase represents margin growth from our existing portfolio of resorts, partially offset by the impact of the Canyons.

Many of you have inquired about how to compare our current margins to the Resort EBITDA margin we had in fiscal 2008 of 26%, which was our peak. The majority of the decline in our Resort EBITDA margin has been from the impact of adding new businesses, primarily new mountain resorts that have lower Resort EBITDA margins than the portfolio we operated in fiscal 2008.

While this margin shift will occur with most potential acquisitions, we absolutely expect to continue to drive Resort EBITDA margin growth from our existing portfolio and new acquisitions under our operations.

Moving to our Real Estate segment. Results are impacted in any given year by the timing and mix of real estate sold and closed. For fiscal 2014, we are estimating real, Real Estate Reported EBITDA of negative $14 million to negative $8 million, including approximately $1.7 million of noncash stock-based compensation expense. We expect Net Real Estate Cash Flow of $15 million to $25 million, including proceeds from the recovery of previously incurred project costs and after any additional investments made into the projects.

Net income attributable to Vail Resorts Inc. is expected to be in the range of $37 million to $55 million for fiscal 2014.

Now I'd like to turn the call back over to Rob.

Robert A. Katz

Thanks, Michael. We are excited about the upcoming ski season and expect to build upon the positive momentum from fiscal 2013 with several new initiatives in fiscal 2014 that we hope will continue to elevate the guest experience and financial results at our resorts. We are thrilled to provide our guests with full-season access to Canyons Resort in Park City, Utah. This further exemplifies our commitment to providing the best and most diverse season pass in the industry, while enhancing the overall guest experience.

On top of the exciting addition of Canyons Resort in Park City, Utah, we have expanded our pass partnerships in Europe. We recently announced that the Epic Pass will now include 5 days of skiing at Les 3 Vallées, France, which is the largest ski area in the world. This new partnership with Les 3 Vallées is an addition to offering 5 days of skiing at 5 resorts in the Albert region in Austria and expanded access to Verbier in Switzerland, which increased from 3 to 5 days of skiing.

Skiers and riders at our resorts this season will also witness remarkable on-mountain improvements we are making to continue to elevate the guest experience. At Breckenridge, we'll be opening Peak 6 this winter, which will represent a 23% expansion of terrain at the resort and is the first significant North American terrain expansion since the opening of Blue Sky Basin at Vail. The expansion will include 400 acres of lift-served terrain and 143 acres of hike-to terrain, along with a new high-speed 6-person chairlift and a new fixed-grip chairlift. Peak 6 will become another iconic feature of Breckenridge and improve the guest experience across the resort, which is perennially the #1 or #2 most-visited mountain resort in the United States.

I'm also glad to report that over the past month, helicopters and construction crews have been hard at work building Vail's new mountaintop express lift, or Chair 4. The addition of this new high-speed 6-person lift at Mid-Vail will result in a 33% increase in uphill capacity or 3,600 people per hour to complement the capacity expansion from Vail's Gondola One that opened last year.

This will benefit the resort and our guests tremendously and provide skiers and riders faster access to Vail's famous Back Bowls. We're also looking forward to the opening of our new Red Tail Camp restaurant at the base of Beaver Creek's famed Birds of Prey racecourse. This 500-seat restaurant will more than double the existing restaurant's capacity and offer gourmet dining options in an upscale cafeteria setting.

We are also executing on our Urban ski area strategy at Afton Alps and Mt. Brighton by reimagining the resort experience at these mountains. Our guests will be delighted with the substantial resort improvements like enhanced snowmaking, new base area facilities, new terrain parks and EpicMix technology installations. These improvements will redefine the standard for Midwest skiing and riding.

And finally, we are introducing the fourth generation of the groundbreaking, award-winning EpicMix application as EpicMix Academy, which offers a unique way to earn and share your accomplishments in our world-class ski and ride school. All of these projects reinforce our philosophy of continually reinvesting in our resorts to offer the highest-quality experience for our guests.

Before we conclude, I want to express our sympathy and prayers for everyone impacted by the terrible flood over the last several weeks in Colorado. This community is our home, and our company and our employees will be joining with so many others from around the state and around the country to help these towns rebuild and heal.

I also want to take this opportunity to thank all of our employees and guests for a wonderful year. The passion and commitment to service that our employees exhibit at all levels and in all areas is truly a hallmark of our business and an integral part of our success.

At this time, Michael and I will be happy to answer your questions. Operator, we are ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Joel Simkins with Crédit Suisse.

Joel H. Simkins - Crédit Suisse AG, Research Division

A couple of quick questions here. To the extent that you can talk about PCMR and where that stands, maybe what the next steps are here with the court date coming up? And I guess, given that this is still sort of going to be carrying on in the media out there in Utah, just are you guys sort of mindful of any sort of perception with locals?

Robert A. Katz

Yes, I guess -- I think, at this point, I'm not really going to comment on that. I think, obviously, there's a fair amount of publicly available information, both from court filings and in the media out there, about the litigation. And I don't -- at this point, I don't think we really have much to add from some of the comments we made earlier. And I think that ultimately, people can make their own impressions of, certainly, local reaction. I think, maybe, the only thing I would say is that things are proceeding completely consistent with, I think, how we expected. And our views and confidence in the situation is completely unchanged.

Joel H. Simkins - Crédit Suisse AG, Research Division

Sure. And 2 quick follow-ups, if I may, Rob. Just where are you guys at in the U.S. Forest Service approval process for the summer attractions next year? And then, you touched upon, briefly, the early booking trends. Obviously, you're only kind of 15% of the way in. Just, could you give us some anecdotal color on international, inbound, and what you're expecting, as Europe seems to be bottoming a little bit?

Robert A. Katz

Yes, so on the Forest Service approval process, we are expecting the Forest Service to shortly be issuing their draft policy regarding the summer activities. The Congressional bill basically gave them 2 years, which would be the end of November, to issue a final policy. We are obviously hopeful that we will stay on that time frame, but obviously, we can't guarantee that. But we're expecting that draft policy to be issued shortly. In terms of booking trends, I guess, at this point, I don't think it'd be appropriate to comment on -- given that it's pretty early. I'd say, right now, we feel very good, very positive results across the board, but -- including international markets. But I think we'll have more color to share on that in December.

Operator

And our next question comes from the line of Felicia Hendrix with Barclays Capital.

Felicia R. Hendrix - Barclays Capital, Research Division

Do you guys think that you've gained market share in your season passes since you've announced the Canyons, Afton Alps and Mt. Brighton deals? I know you guys have talked about improvement, but just maybe wanted to talk about some market share, like specifically, do you know of any former Deer Valley skiers that are now buying your Epic Passes for access to both the Canyons and the Colorado resorts?

Robert A. Katz

I think it's a little -- it's early. I'm sure there's anecdotal evidence about that, Felicia. I think it's a little early, though, to make any conclusions on that. I think, the way we've described our approach is that we're converting people, clearly, we feel, who were ticket buyers who are now buying season pass and -- with us. And what that means is we do feel that is a market share opportunity because, one, people sometimes don't make up their minds until further into the season or the last minute, or they might take one trip at one of our resorts and then another trip with somebody else. So if they buy our season pass versus buying lift tickets, that tends to mean that they're going to ski only at our resorts during the season. And then I would say, in some cases, we feel we're actually increasing skier visits because folks who buy our pass tend to ski more days than folks who buy lift tickets in total, at all resorts. And so we feel like that's an additional opportunity for us. Whether we have post-Deer Valley skier, I think maybe we'll have more evidence of that, certainly, at the end of the season. But again, our strategy isn't that as much as it's kind of get loyalty and kind of capturing every trip from one of these skiers versus maybe sharing with another mountain.

Felicia R. Hendrix - Barclays Capital, Research Division

Okay. Helpful. And Michael, your year-end cash balance is the highest it's been in a long time, and your debt remains low. Can you just talk about the dividend and how you're thinking about that and potential growth of the dividend?

Michael Z. Barkin

Yes, I think we feel like it was a great year from a cash flow generation perspective. As consistent with what we've done in the past, we'll revisit the dividend later in the year, most likely in March. But I think we feel very good about how our balance sheet lines up going into the new year and, certainly, continuing to have the flexibility to pursue opportunities as they come up.

Felicia R. Hendrix - Barclays Capital, Research Division

Okay. And then, you guys have just talked in the recent past about providing us a more detailed roadmap regarding CapEx. You did give us some color, Rob, on some of your projects, but just wondering when you might be prepared to provide some more quantifiable data points regarding your capital projects?

Robert A. Katz

Yes, no, we haven't. What I would say is that my expectation would be to stay with our current cycle of announcing capital in March. Having said that, I think we are looking internally at whether or not we can provide more consistent guidance, longer-term guidance on capital. And that's something that I would say we're either going to wind up doing in December or March, depending, but that is absolutely a priority for us, and it's something that both we and, of course, our board is actively looking at.

Operator

And our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Just a couple of questions about the guidance that you provided. So first of all, on the Resort guidance in the prepared remarks, Michael, I think you mentioned that the Canyons was actually performing a little bit better than your initial underwriting. Could you explain, maybe give us a little bit of color on what's driving that? And if that is opportunity to, I guess, improve the EBITDA contribution above what you thought or improvements just pending a little bit above what you thought?

Michael Z. Barkin

Yes, I think we continue to be very optimistic about the contribution that the Canyons is going to make in the coming year. I think we also -- particularly, as we've seen the strength in season pass sales over the summer, obviously, a big part of our opportunity in being at Canyons in Park City, Utah, is the season pass piece, and we feel like the outlook for that has improved slightly.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Great. And then, second of all, the contribution from Afton Alps and Brighton. I think you guys haven't given, I don't think, specific numbers regarding that. But could you just talk about the pace of the ramp-up there? Is that basically in line with your expectation? Or is that -- kind of how do you feel about those opportunities right now?

Robert A. Katz

Yes, I think they are in line with our expectation, and we feel good about it, obviously. I think they're incorporated kind of in our guidance consistent with when we first launched these. I think, obviously, I would say, separate from that, I would say that if the season pass -- again, the season pass piece from those markets has also exceeded our expectations thus far. So much like Canyons, I think, we're seeing both good -- everything that we're learning about these businesses as we look to make estimates for next year, I think, are consistent and very positive. And then, the season pass piece continues to outperform.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

That's helpful. And then maybe lastly, switching over to the Lodging side. It looks like, if we look at the midpoint of this year’s guidance, this would be pretty close to an all-time record for you in the Lodging segment. Could you just talk a little bit about -- we know you've reduced some cost there historically, but we saw a huge ramp in that division last year, and it looks like it's expected to continue this year. So is this year more revenue-driven or is it more margin and flow through driven?

Robert A. Katz

I think it's -- I would say 2 things. One, I think the restructuring that we did in the Lodging segment a couple of years ago, right, was specifically targeted to improve profitability. And I think we're absolutely seeing the benefit of that. We saw part of that last year. I think we'll continue to see that this year. I think you're also seeing better focus. So I think, within our current properties, we're seeing good strength there and I think -- driving better results and better flow through, candidly, at our existing properties. We also, this year, are adding the Lodging business from the Canyons, which is included in those Lodging results. So that's another pickup there. I think our operations in detail C [ph] are also continuing to grow. So again, in total, I just think we have a lot of things all working in the right direction for that division.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

And just one quick clarification on that then, Rob. The contribution from the Canyons in Lodging, could you just explain like what exactly is driving that? I didn't know if there were any hotels that were actually in that line item, or is it managed product?

Robert A. Katz

Yes, it is. It's managed condominiums. There's no owned hotels in that.

Operator

And our next question comes from the line of Smedes Rose with Evercore.

Smedes Rose - Evercore Partners Inc., Research Division

I was just wondering if you could update us on your condo sales activity, if there were any sold in the quarter and if there were any pending sales post the end of the quarter?

Michael Z. Barkin

So we won't give guidance on what's happened this quarter. But obviously, last year was a very strong year in our Real Estate business, I think, reflected in the sales that we had at both of our development projects at Ritz in Vail and One Ski Hill Place in Breckenridge. I think the other key thing in our fourth quarter results was certainly the land sale that we've talked about before, which is booked in our fourth quarter, which is going to be a great opportunity, also, at the base of Peak 8 for a timeshare development.

Operator

And our next version comes from the line of Brad Dalinka with MKM Partners.

Bradford Dalinka - MKM Partners LLC, Research Division

I wanted to ask you a little bit about Epic Discovery. You called out the first openings at Vail in the press release. It seems like a nice incremental opportunity. And I was wondering if there was any early results you could speak to or to what degree it was incorporated into the guidance?

Robert A. Katz

Sure. I would say it was incorporated in the guidance, although obviously, it's -- and that would be basically -- the summer months, the prime summer months in Colorado were July and August. And so for next -- for our fiscal year, you only have one month of that. And obviously, you have only a small portion of August from 2013. So you have a small portion in August in 2013, and then the full month of July. I'd say it's a modest contribution, really, relative to the total of Epic Discovery. I would say, yes, enthusiasm for the activities is very high. There's no question that -- I mean, people who are in Vail are anxious to get up on the mountain and do new activities and especially things that are really accessible to such a wide array of guests. So I think the experience really just reinforced for us -- as did, by the way, the summer activities we have at Breckenridge -- just reinforces the point that, that initial opportunity for us, which is to take the people who are already in these high-traffic, high-visitation summer tourism sites, is very ripe and very available to us once we get the approvals and can get all this in. What I'd say is next summer in total will be, again, more of a moderate part of the overall plan. And it'll really be the summer of 2015, and then, ultimately, the summer of 2016, where I think we'll see the full ramp-up.

Operator

And our final question comes from the line of Whitney Stevenson with JMP Securities.

Whitney Stevenson - JMP Securities LLC, Research Division

Michael, Rob, I was just wondering if you could talk a little more about where you're seeing any mix shift in terms of customer habits for when they buy passes during the preseason?

Robert A. Katz

Sure. So I would say the primary piece, I think, we've seen so far is trade-up into the Epic Pass. So the Epic Pass this year is one of our best-performing products. And that's, I think, a terrific sign, and I think points to, I think, adding the resorts in Europe that are only available on the Epic Pass, adding Eldora in Colorado, which is only available on the Epic Pass. And so that's been a really positive sign for us. On the other side, we've also had a tremendous amount of traction in our new Keystone A-Basin Pass, which is a lower-priced product. And so that's why you see our effective pass price, or the differential between units and sales, kind of hasn't skyrocketed. It's stayed more modest because we're both driving folks at the high end, and now also making inroads, we think, in the value segment, particularly here in Colorado. We're not a seeing huge-trade down, though. We're seeing new people come into that product or people trading up sometimes from 4-Packs or other discount products. So right now, we feel like one of the reasons why our pass sales are strong is because we are successful, really, in each of these targeted segments and really moving the needle and moving growth. So on a net basis, I'd say the effective pass price shift increase that we're seeing is pretty consistent with the past, but it's not because there's a 3% or 4% price increase across the board, it's because we're seeing real strength at the high end and new entrants at the low end.

Whitney Stevenson - JMP Securities LLC, Research Division

Okay. And then, do you see any difference in terms of timing in the preseason when the higher pass prices are being committed to relative to the lower price offerings?

Robert A. Katz

So far, no. I think, obviously, we -- the Keystone A-Basin product is new for us this year. So we'll have more information on that in December in terms of how it performed at the end of the season. So right now, we're seeing, I think, good momentum on both. I think we'll have more to share on the rest of the season when we announce final results in December.

Operator

And we do have one final question from the line of Bruce Zessar with Advisory Research.

Bruce M. Zessar - Advisory Research, Inc.

I have a question coming back to the Park City litigation, and it just relates to the disclosure in the 10-K today. It says, if the outcome of the litigation is unfavorable, we will be entitled to receive from Talisker the rent payments that Talisker receives from the current resort operator until such time as the current resort operator's lease has ended. I was just wondering how long that would run?

Robert A. Katz

It would run, assuming -- I think, assuming the lease was -- assuming that there was a ruling in the case that the existing lease with Park City Mountain Resort was extended in 2011, I believe that it would run until 2051. And so whatever rent payments were due to Talisker from 2011 to 2051, Talisker would then turn over to us.

Bruce M. Zessar - Advisory Research, Inc.

And what would those rent payments, per year, be?

Robert A. Katz

Well, I would say that there's a portion of it that's fixed, I believe, and a portion of it that's based on revenue. And so I can't say exactly, but it's in the hundreds of thousands of dollars.

Bruce M. Zessar - Advisory Research, Inc.

Hundreds of thousands, wait, hundreds of thousands of dollars a year?

Robert A. Katz

Yes, exactly. There have been press reports out, I think, quoting $150,000, $160,000, depending on the revenue on any particular year. Again, I don't know the exact figure. And obviously, without knowing the revenue, we don't know the exact lease figure. But it's, again, relatively to our company, from a materiality perspective, it's in that range.

Bruce M. Zessar - Advisory Research, Inc.

Okay. But then the next question would be, if their lease is held valid, would you still be on the hook for $25 million a year to Talisker in annual fixed payments?

Robert A. Katz

Yes. So the $25 million payment that we make to Talisker does not change based on the outcome of that litigation. And the value of that lease on our books would not change based on the outcome.

Bruce M. Zessar - Advisory Research, Inc.

But I mean, in that situation, though, the other operator would be operating the resort, wouldn't they?

Robert A. Katz

Right, but when we -- absolutely, but when we made -- the deal we cut was to sign up to this lease of $25 million a year and all the other terms that are in there for the Canyons Resort and the opportunity that we have with Canyons. And I think what we've shared is, over time, that, that is an opportunity that -- if it turns we lose the litigation, then this opportunity is not, obviously, as good for us. But we still think it's an incredibly strategic decision by our company on account of that we are already seeing those results, given the impact that Canyons is having on our season pass sales. To the extent that we win the litigation, obviously, then this opportunity becomes that much better.

Bruce M. Zessar - Advisory Research, Inc.

Right. I guess, I'm just trying to understand what the downside scenario is. If you guys -- if you lose the litigation, then, you're not operating a resort and you basically are only going to get $150,000 a year from the current operator, but then you have to pay $25 million a year...

Robert A. Katz

No, I think you're confusing -- sorry to interrupt, but I think you're confusing. We are paying $25 million a year, again, and then all the other terms that are in that lease for the Canyons Resort and whatever happens in Park City. It's not that we're paying $25 million a year just for the opportunity, again, with PCMR. It's $25 million a year for the Canyons, right, which is a resort that's obviously going to, we think, kind of generate -- our prior guidance was that within a few years, it could be up to $25 million of EBITDA. Obviously, huge impacts on our season pass sales, very strategic in putting us in Utah, all of those things. And then, the opportunity, obviously, with Park City as well will suffer [ph]. I mean -- and as we've identified, that has -- there's not perfect certainty or clarity on that. Does that help?

Bruce M. Zessar - Advisory Research, Inc.

I'm still a little confused because, I mean...

Robert A. Katz

Why don't we -- I think we'd be happy to talk offline. We could walk you through this situation in more detail.

Operator

And we have no further questions at this time. Please continue with any closing remarks.

Robert A. Katz

Thank you, operator. This concludes our Fiscal 2013 Earnings Call. Thanks to everyone who joined us on the conference call today. Please feel free to contact myself or Michael directly should you have any further questions. Thank you for your time this morning, and goodbye.

Operator

Ladies and gentlemen, that does conclude our conference for today. If you'd like to listen to a replay of today's presentation, you can do so by dialing (303) 590-3030 or 1 (800) 406-7325, and then entering in the access code of 4638135. Thank you for your participation. You may now disconnect.

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Source: Vail Resorts Management Discusses Q4 2013 Results - Earnings Call Transcript

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