Vail Resorts Inc Q2 FY2026 Earnings Call

Good afternoon, and welcome to the Vail Resorts Fiscal Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. I will now turn the call over to Connie Wang, Vice President of Investor Relations at Vail Resorts. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Vail Resorts Fiscal 2026 Second Quarter Earnings Conference Call. Joining me on the call today are Rob Katz, our Chief Executive Officer; and Angela Korch, our Chief Financial Officer. Before we begin, 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 our press release issued this afternoon, along with our remarks on this call, are made as of today, March 9, 2026, and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non-GAAP financial measures. Reconciliations of these measures are provided in the tables included with our press release, which, along with our quarterly report on Form 10-Q were filed this afternoon with the SEC and are also available on the Investor Relations section of our website at www.vailresorts.com. I would now like to turn the call over to Rob for opening remarks.

Thanks, Connie. Good afternoon, everyone, and thank you for joining us for our second quarter earnings call. This quarter and our full year outlook reflect the challenges we faced this season, including the most difficult weather environment in the Rockies we have ever seen, with snowfall and snowpack at or near all-time historic lows, even worse than fiscal year 2012, which had previously been our season with the worst conditions in the Rockies. Our second quarter was significantly impacted by these unprecedented weather challenges in the Rockies, which weighed on visitation and overall performance. In addition to Rocky snowfall through February being at historic lows, it's also been the warmest winter to date on record for Colorado. For example, February was 9 degrees warmer than average in the Rockies, which has dramatically impacted our ability to open terrain. This season saw the latest opening of the back bowls at Vail Mountain and Imperial Lift at Breckenridge and only 70% to 80% of acres opened through the end of February at our resorts in Colorado and Utah. The Rockies are the largest driver of resort EBITDA for the company, and as such, the poor weather had an outsized negative impact on our results this year. While these conditions weighed on our results, they also underscore the importance of our advanced commitment strategies. While pass units may have declined a couple of points over the past few years, it's important to highlight that we've grown our pass units by 55% over the past five years with pass holders now making up approximately 75% of our annual visitation, providing meaningful stability, especially in a year like this. Over the past decade, we've also meaningfully expanded the geographic diversity of our portfolio to help mitigate regional weather impacts. While that benefit is less evident this year given the severity of conditions in the Rockies, diversification has provided more support than it did historically, and it will continue to play an important role over time. We're proud of the resilience of our business model that is now more durable, more diversified and well positioned for our next phase of growth. We continue to advance strategic initiatives to optimize visitation, supported by enhanced marketing initiatives and new products. We saw the first signs of that last fall as we materially changed the trajectory of pass sales post Labor Day, which was critical heading into this season. We also launched pass sales for the 2026/2027 season last week with new products and targeted pricing adjustments. Most notably, we introduced new pricing for skiers and riders ages 13 to 30 at 20% less than standard pricing, providing a more accessible pathway for the next generation of skiers who are the future of our sport. This incentivizes young adults, those ages 18 to 30, who tend to be more price sensitive and likely were more impacted by the price increases we took over the past four years. We supported this new product with our enhanced marketing strategy, including the launch of a new campaign this week called Epic Passion, which leans into the emotional connection skiers and riders, particularly Gen Z, have with the sport. This campaign exemplifies our evolved marketing approach of supporting new products through integrated investment and messaging across channels, including a social-first and influencer-driven approach to content to reach younger guests and drive awareness and conversion. For our broader array of passes, we announced 3% to 4% price increases for Epic and Epic Local passes before taxes. Combined with our new 20% discount for young adults, price changes we made to Epic Day passes and other unlimited regional products, this results in an approximately 3% to 4% blended price increase before the impact of any mix changes. Additionally, this year, we are passing through the sales and lift tax the company pays to local communities on multi-resort passes in the same way we do for lift tickets and all of our other mountain products. The tax rate for most of our passes is approximately 3%. Lastly, as part of the broader integrated approach across lift tickets and passes, we also made targeted updates to pass pricing, including adjustments to Epic Day pass pricing to incentivize greater frequency, resulting in higher increases on 1- to 2-day passes and year-over-year decreases on 6- to 7-day passes. These are key steps in advancing our portfolio of products to address our largest opportunities to drive revenue growth. Moving on to our lift ticket initiatives. We are seeing positive early reception to our Epic Friends and Advanced Lift tickets introduced this season, both of which are especially noteworthy in light of the soft weather conditions we've had this year. Epic Friends ticket redemption rates are up over the legacy pass holder benefit tickets and showing growth in visitation compared to declines across traditional ticket types, demonstrating that this product is both delivering meaningful value to pass holders while also expanding a key top-of-funnel audience. Similarly, our 1-month advanced lift tickets are showing positive signs of moving guest purchasing behavior earlier despite the uncertainty this year around weather. We are also encouraged by the results from our off-peak pricing strategy at select resorts. It's been a difficult season to truly evaluate performance of these products given the magnitude of the weather overhang, but these initial results give us confidence that these products are expanding our reach and strengthening the funnel into our pass business. Most importantly, in the face of very challenging conditions, we achieved record high system-wide guest satisfaction scores this season, including increases year-over-year in Colorado and Utah, which is a direct reflection of the caliber of our team members and their exceptional execution throughout the season. I want to extend my sincere appreciation to our frontline teams for their unwavering commitment to our guests, which was critical during this time. Overall, the collective strength and focus of this organization are evident. As I mentioned upfront, this year underscores the stability of our advanced commitment strategy, what it provides. We have purposely built a model that has been designed to withstand challenging weather years through regional diversification, pre-commitment of roughly 75% of visits through our pass products and continued investment in snowmaking, and that's just part of the story. Combined with new lift ticket and pass initiatives launched this season and our reimagined marketing approach and significant investments in guest-facing technology and an opportunity to completely reimagine the gear business, I'm confident we are setting ourselves up for the next phase of growth. Looking ahead, we are well positioned to continue elevating the guest experience, executing with discipline and delivering sustainable long-term value for our shareholders. With that, I will now turn the call over to Angela to review our financial results and outlook in more depth.

Thanks, Rob. Good afternoon, everyone. I will now go through our second-quarter financial results, season-to-date metrics, and our updated outlook for fiscal 2026. Starting with the second-quarter results, as Rob mentioned, the historically challenging conditions in the Rockies significantly impacted our performance, with snowfall down 43% year-over-year. Conditions in Whistler and Tahoe have also been variable, while the East saw strong conditions this season, providing a partial offset and highlighting the geographic diversification of our portfolio. Total net revenue for Q2 declined about 5% compared to the prior year due to unfavorable weather conditions that negatively impacted visitation and ancillary spending for both local and destination guests. Lift revenue for Q2 decreased about 3%, even though visitation was down 13%. This performance illustrates the stability provided by pass sales, which increased by approximately 3% as we entered the season. Resort reported EBITDA for Q2 fell about 8% from the prior year, although weather-related challenges were partly mitigated by disciplined cost management and ongoing savings from our Resource Efficiency Transformation Plan. Looking at season-to-date metrics through March 1, skier visitation has decreased about 12%, reflecting the ongoing weather impacts we observed in the second quarter. Lift revenue has dropped approximately 4%, as growth in pass revenue was offset by declines in non-pass lift ticket revenue. To put the impact of conditions into perspective, even our most dedicated pass holders showed a visitation decline of around 14%, while non-pass lift ticket visitation went down about 6%. Ancillary revenue trends have improved compared to January metrics, but they remain lower than last year due to reduced visitation, partially offset by increased yield per visit. Now regarding our fiscal 2026 full-year outlook, the ongoing challenging weather conditions through February in the Rockies continue to restrict terrain availability, prompting us to lower our net income and resort reported EBITDA guidance for fiscal 2026. We now expect net income attributable to Vail Resorts to be in the range of $144 million to $190 million and resort reported EBITDA to be between $745 million and $775 million. As a result of the earnings reduction, we anticipate cash taxes for the year to be about $95 million to $105 million. Considering the unprecedented weather conditions in the Rockies, we are satisfied with the stability provided by our pass program and the savings from the Resource Efficiency Transformation. This season's snowfall in the Rockies is about 40% lower than in fiscal 2012, previously the most unfavorable year weather-wise. We recognize that with such challenges persisting late into the season, our earnings guidance has greater variability despite the limited time left in the season. Our updated guidance range reflects our assumptions detailed in the press release, including the expectation that conditions for the rest of the season will remain consistent with current levels in North America. In terms of our Resource Efficiency Transformation Plan, we now expect to exceed the original $100 million annualized savings target by approximately $6 million by the end of fiscal 2026. This program is making significant strides in enhancing organizational effectiveness and operational efficiency. For fiscal 2026, we aim for about $42 million in incremental savings compared to the previous year, before accounting for approximately $15 million in one-time operating expenses. Finally, regarding liquidity and capital allocation, despite this year's difficult operating environment, we maintain confidence in our cash flow generation and the stability of our business model. Our balance sheet is strong, having ended the quarter with approximately $1.1 billion in liquidity and a net leverage ratio of 3.1 times trailing 12 months EBITDA. During the quarter, we retired our $525 million convertible debt using a combination of net proceeds from our delayed draw term loan and cash on hand. On February 9, we amended our credit agreement to extend the maturity date to 2031, revised pricing levels, and slightly increased the facility size. Our capital allocation priorities remain unchanged as we continue to focus on reinvesting in the business and maintaining balance sheet flexibility to pursue attractive acquisition opportunities, followed by returning capital to shareholders. We reaffirm our capital plan for calendar year 2026 with core capital expenditures projected at $215 million to $220 million and total capital spending in the range of $234 million to $239 million, while continuing to emphasize technology investments that can be scaled across the organization. We also maintained the quarterly dividend at $2.22 per share and will be opportunistic in buybacks, having repurchased 0.3 million shares for a total of $45 million year-to-date. Given this year’s results, we reevaluated the current dividend level and decided to keep it unchanged as we don’t believe this year’s cash flow decline reflects the long-term cash generation potential of the business. We take a long-term perspective when investing and setting the dividend level, knowing that weather fluctuations can impact performance, and we have developed a business model with strong cash flow generation and a resilient balance sheet to manage these variations while staying focused on future growth. In conclusion, although this season has faced particularly difficult weather conditions, the quarter reinforced the resilience of our business and the benefits of strategic decisions we’ve made over time. The stability provided by our commitment strategy, progress in lift ticket and pass initiatives, and our Resource Transformation Plan have all helped to mitigate the impact of these extremely challenging conditions this year. We remain confident in our actions, the durability of our cash flow profile as conditions normalize, and the strength of our balance sheet to support both business reinvestment and shareholder returns. I will now turn the call back over to the operator for Q&A.

We'll take our first question from Shaun Kelley with Bank of America.

Just wondering, Rob, if we could start off by discussing next season. I know there's still quite a bit of work for everyone on the team, but can you share how the conversation with your consumers is evolving this season? We’ve also seen reports about unusually warm temperatures in areas like Denver and Salt Lake. How do you think this will ultimately affect renewals and the outlook for next year in these local communities that experienced tough weather conditions this year?

Yes. I think it's certainly something that people will take into account. But I think what we've seen historically when there are big aberrations like what we saw this year in terms of weather, we saw this I think back in 2012, we saw this, I think, the following year in 2012, '13 for Tahoe, which had a pretty tough year. I think what we see is that people tend to look at this in terms of how many times they may have used their pass as also an aberration that it's not really that they don't love skiing. It's not that they're not as connected to the sport, but just that the weather didn't show up this year like they may have hoped. But I think everyone also knows that, that doesn't really change the likelihood that next year could be an amazing season even in this year where we had tough conditions out West. We obviously had really strong conditions in the Northeast. So I think people understand that there is a little variability to that. That's one of the reasons why we do provide our passes at a low price so that it's something that people can plan on year after year through good years and bad. Not to say, obviously, since we haven't seen a year like this, it's hard to know exactly how this will play out, but I don't think this is going to impact kind of long-term engagement in the sport.

Great. And then maybe just as a short follow-up more on the numbers. Angela, I got a couple of questions regarding sort of just the flow-through assumption here. So if we look at the change from where you started the season in revenue relative to the change in EBITDA, it's quite high. I mean it's roughly 80%, which I think when we think about locking in a lot of the lift revenue would hopefully be a little bit of an offset. But can you just talk us through that, maybe where the delta and expectation was to your model and why that flow-through is as elevated as it is, understanding that you're obviously a fixed cost business?

Yes, Shaun, that’s the main point. We anticipated the revenue impact from the season’s conditions. What you are noticing in the change is really tied to how demand has shifted, which affects our revenue. There’s a significant flow-through because we are doing everything possible to operate our resorts and provide the best guest experiences, as reflected in our guest experience scores. We maintain our focus on these efforts and don’t scale back. Therefore, when there’s a large increase in visitation, it significantly influences revenue during the season.

We'll move next to David Katz with Jefferies.

Rob, I wanted to revisit one of the topics we discussed earlier, which is the marketing efforts, especially regarding our social media presence. Any feedback, results, insights, impact, or updates on that would be appreciated.

Sure. We began to notice the significant benefits from our pass sales in the fall of last year, particularly around Labor Day. This trend has continued into this year. Our social-first and influencer content has performed exceptionally well throughout the year, illustrating a strategic shift toward more authentic, real-time content that resonates with audiences. People are seeking diverse voices beyond just company messaging, and they want to engage with us where they are active, which we have successfully done this year. We're very optimistic about the media spending and channel changes we've implemented, as we are observing a positive incremental return from that investment. However, it's important to note that these efforts haven't fully offset other challenges related to weather and visitation. Nonetheless, we believe we made the right decisions and plan to continue on this path moving forward.

I appreciate that. As a follow-up, I wanted to ask if we should expect continued progress in offering specific types of discounts, like the Buddy programs, Epic discount programs, and the Gen Z program, to drive visitation with the hope of generating additional spending and encouraging repeat visits.

Yes, we'll provide more details at the investor conference. However, our strategy isn't focused solely on discounting. Instead, we're consistently examining ways to optimize pricing, features, benefits, and performance. We're ready to make decisions that we believe are best for the business and the program. Our recent efforts targeting Gen Z and young adults showed that this demographic was experiencing significant challenges, despite overall growth in various segments of our pass business over the years. Previous price increases over the last four years may have impacted those earlier in their careers more harshly. Therefore, we're recalibrating based on our data and insights. It's essential to keep these individuals engaged in the sport for the future. Moving forward, you can expect us to make additional adjustments, including potential price increases and other strategies that align with our overall revenue goals.

We'll move next to Patrick Scholes with Truist.

When I think back to the most recent weak snowfall season, that being 2017 to 2018, after that season, you went very heavy on the CapEx and upgraded your systems for snowmaking. Is something like that being contemplated for after this season in light of the very weak snowfall?

I can’t recall the specifics right now and would need to review what actions we took after that particular year. However, our planning for capital year 2026 starts in the spring of 2025 or sometimes even earlier, with commitments typically made by late summer or September 2025. We invest in snowmaking based on the results from that year since it’s too late to act once the season is underway. These decisions involve lengthy permitting processes as well. We are committed to enhancing our snowmaking capabilities to improve the guest experience. Despite the challenges we faced this year, Keystone performed well, largely due to our investments in snowmaking there. Our past investments at Vail also proved beneficial. This approach will continue going forward, and this year won’t alter our strategy. We have a long history in this industry, and we understand the nature of the business, so we’ll prioritize these opportunities when they make sense.

We'll take our next question from Matthew Boss with JPMorgan.

So Rob, maybe just trying our best to parse through some of the most difficult weather conditions this season for your business as you cited. Could you elaborate on traction that you're seeing with the proactive actions that you've put in place to accelerate visitation? Or how would you rank order maybe some of the green shoots...

It’s challenging to analyze this year since it’s been so unique. However, we emphasized the measures we implemented to boost pass sales, which clearly had a positive impact as we entered the season. We discussed our December initiatives, particularly what we did in the fall, and we did notice those changes. Regarding the three lift ticket initiatives we introduced, the Epic Friends ticket type performed well, increasing even when other ticket types declined significantly. This suggests that people are interested in visiting, and the lower price point contributed to that interest. We also observed many new users taking advantage of Epic Friends, coming from various segments. This was a positive indicator. The one-month advance discount we offered also showed growth amidst a decline in other advanced ticket types. Notably, we attracted many new prospects through this one-month advance ticket, which is unusual given the weather volatility this year. The increased visibility and call to action on our website a month in advance likely helped, as people were actively planning their vacations. We’re optimistic about this trend. Some resorts, like Keystone, saw better conditions and significantly outperformed, which we attribute to adjustments made to off-peak ticket prices. When comparing off-peak to off-peak and peak to peak at the same resorts, the lower pricing clearly had an impact this year. While this isn't surprising, we recognize the necessity of aligning prices appropriately. Each of these developments represents positive signs, which we plan to build upon next year. However, this doesn’t imply a blanket discount strategy. Instead, we will take a more precise approach, analyzing each product and time period to determine the best ways to optimize our offerings.

Great. And then Angela, with resort EBITDA forecasted roughly $100 million below initial expectations for this year, under normal weather conditions, if that played out, I mean, what do you see as the recapture opportunity next year? And are there any reinvestments for us to consider as it relates to bottom line?

Yes. Thanks, Matt. The changes from this year are all weather related as we noted, right? So all of this we see is, yes, the visitation impact that was obviously not part of our original guidance and very stark visitation obviously had the large revenue impact that we were just talking about with Shaun. And so yes, that is all things that we would say was very unusual related to weather for this year.

We'll move next to Jeff Stantial with Stifel.

Maybe following up on Shaun's question and then Matt's question just now. Rob, so obviously, a chunk of the pass sales historically has come from cross-selling skiers over that purchased a window ticket in the prior year season. Can you just remind us sort of years like this, really bad weather conditions, what have you seen in terms of the impact of that overall funnel? How does that play into pass sales? And sort of has that factor in your expectations for this year?

Yes, there is no doubt that reduced usage, whether it's lift tickets or passes, affects the situation. The question is how much of this is due to people simply choosing not to ski. Sometimes, this affects individuals who may not renew, purchase less frequently, or something similar. However, in years like this, it often relates to life events. For example, if someone gets injured, their skiing could drop to zero, but that won't impact the following year if they recover. Life events, such as having children, also play a role and are generally understood to be outside the typical considerations of whether someone enjoys skiing or how often they will ski. There’s certainly a connection there. We feel positive about the measures we've taken this year regarding broader marketing, increased investment, and new outreach channels, including discounts for young adults and the Epic Friends discount. We have also promoted our "Turn In Your Ticket" initiative throughout the season, which is new for us, as we typically didn't do that. We see these efforts as advantages, despite the conditions and visitation being a challenge.

That's great. And then maybe switching gears over to Angela or Rob, whoever wants to take this on the operating expenses side of things, can you just remind us how much of the expense base here is utilities and just how to think about sensitivity in the model to higher energy costs given everything going on from a geopolitical perspective? And that's all from us.

We haven't revealed the exact percentage related to utility or energy costs. We do incur utility expenses at all our resorts, and as we move into this season, energy costs are significantly decreasing. Additionally, we have secured several long-term contracts at many of our resorts. Therefore, we don’t anticipate that energy costs will affect our updated outlook for the year, and we will keep an eye on this as we approach next year.

We'll move next to Arpine Kocharyan with UBS.

My question is about the pricing of the pass product for the upcoming season. It appears that the actual price increase is around 7% if you compare it on a like-for-like basis after taxes. I understand there was a difference last year because taxes were included. Meanwhile, it seems that most of your recent initiatives are focused on pricing strategies, primarily targeting discounts for both lift and pass offerings for the upcoming season. I'm trying to gain a clearer understanding of the 7% like-for-like pricing. Is there a segment of your consumers who are not very price sensitive, allowing you to better differentiate between more price-sensitive consumers by increasing the overall cost to the core consumer by the 7% range? This seems similar to the pricing increase from the previous year.

Yes. First of all, we are offering a significant discount to many of our pass holders through the new Young Adult pricing program. It's important to note that pricing isn't the same for everyone. Some guests are experiencing a considerable reduction in prices, particularly those aged 18 to 30, who are our most price-sensitive customers. This approach allows us to segment our customer base effectively, and it aligns with the performance trends we've observed over the past four years. Additionally, we do charge tax on all of our products; in the past, as our network grew, we hadn't incorporated it, but we believe it's the right time to do so. Many consumers are starting to view tax as an expected part of any purchase, especially in travel. Overall, we feel confident about the decisions we've made as we approach the upcoming pass selling season for next year.

Helpful. And then you mentioned there's greater variability in your guidance. Could you zoom on that a little bit more? What is driving that variability on the guidance that you just issued? What needs to happen for you to come in at the higher end versus lower end of that guidance range?

Yes. At this stage of the season, I believe that the lower snowpack has made the conditions more unpredictable compared to previous times. Looking back over the last decade on this same date, when the snowpack is higher, the conditions tend to remain stable from now until Easter or early April. However, if we experience a storm, it could significantly enhance the conditions. Conversely, if there's no storm and the temperature rises by 5 degrees, that could negatively affect the conditions. This is a unique situation for the Rockies, creating more uncertainty about what we can expect for the remainder of the year.

So it's entirely weather driven. There's no sort of current macro or geopolitical...

No, no. All weather driven.

We'll take our next question from Ben Chaiken with Mizuho.

Rob, in the past, we've kind of talked about adding benefits to the pass, both ski and non-ski to reduce weather dependency and drive year-round engagement. Clearly, you've been moving fast product side with the Friend ticket, the Advanced Purchase, the lift ticket conversion. As you sit here today, using your words, arguably the worst Rocky Mountain season ever, does that accelerate or change your thinking on pass benefits? Or do you feel the product is largely where you want it?

We are always considering adding benefits to our passes, and this is definitely something we will evaluate as we approach next year. There are certainly additions we may implement for next season and for the fiscal year '28 passes, which will go on sale in March of '27. Nonetheless, I want to emphasize that while additional offerings could be nice, the main focus of the pass will remain on winter experiences. Our research indicates that most customers prioritize improving their winter season through benefits and perks they receive, including pricing and discounts. While we understand there may be interest in summer benefits as well, any enhancements we introduce are unlikely to shift the overall focus from winter to summer in how our customers perceive the pass.

Understood. And then as you think about the overall structure of your pass, is the young adult cohort largely a single-day guest today, again, on kind of a relative basis as you think about the buckets? Meaning do you expect this purchase to be largely an incremental pass sale?

Well, sorry, you mentioned that they are a single-day guest, but they are definitely not; they ski quite frequently. I wouldn't categorize it that way. However, regarding whether we believe this new pricing will attract new participants to the program, absolutely. We think it will have a positive impact. We believe that being more aggressive with this particular group, especially at this moment, can significantly enhance the number of people we welcome into our program and into the sport.

We'll move next to Laurent Vasilescu with BNP Paribas.

It's Xian on for Laurent. Could you talk a little bit more about what went into the decision in terms of getting to the 20% discount for Gen Z? Like maybe talk a little bit about elasticity kind of studies that you were looking at with that cohort? And then maybe more broadly also, how do you think about the pass pricing relative to lift or window ticket pricing?

Yes. The good news for us is that we have extensive data on our guests' behavior, including lift ticket sales, pass purchases, and visitation across all of our resorts. We've been analyzing this for quite some time. We're essentially examining the price sensitivities of different groups and cohorts to identify pricing that we believe will maximize our total revenue. In our analysis, we consider not only lift revenue but also our ancillary revenue and the impact of pass sales on guest return rates, which contributes to the long-term value we are creating. This informed our decision on the discount. It's not just a guess; we invest significant time to pinpoint what we perceive as the best opportunity. And sorry, what was your second question?

About kind of maybe how you're thinking about pass pricing versus the lift ticket or...

Yes, we think there is definitely a gap there, right, that was created, I think, back four years ago in terms of when we reduced pass pricing 20%. So it has given us some room to move lift ticket pricing down without, in our minds, really affecting pass pricing or pass demand. But I think in this cohort, yes, I think we were really more looking at what the pass prices were for this cohort over the last four years and what we saw in terms of their demand and performance over the last four years. That's really what drove that decision, less about actual lift ticket pieces. But we do think, yes, that obviously, some of the other things that we're doing, including Epic Friends tickets and our 1-month advance ticket, all of that also, we think, are good opportunities for this cohort as well.

We'll take our next question from Brandt Montour with Barclays.

So Rob, you described young adults being a big chunk of your guests. It seems like you're expecting a fair amount of elasticity to come from this program. That would, to us imply perhaps a mix shift toward a lower value guest. Even if it's a higher LTV, it's perhaps a lower value guest near and medium term. So is that true, right, one? And then two, how should we think about how sensitive the model might be to that shift?

Yes, I would say there are indeed young adults among our guests. This is common across the travel industry, as people in their 20s typically have less disposable income than those in their 40s, 50s, and 60s. However, this doesn't mean they aren't valuable to our business model or eager to participate in our programs and sports. We aren't focused on the yield per guest because, in a fixed cost business, adding more guests can significantly benefit us, especially since we operate some of the largest mountains in the world. Our priority is optimizing our approach for each age group. Looking at our model for the future, we believe this addition will enhance it rather than detract from it. While it’s true that younger guests may spend less on the mountain compared to others, that does not negate their overall positive contribution.

The cost of the business is incremental as we add more staff to the mountain, but we are restricted by the current infrastructure capacity. The concern is whether we can manage an increase in visitor numbers from this program. If next winter turns out to be similar to 2021 and 2022, which experienced challenges due to COVID, and we have limited space, how do we ensure we still provide a quality experience for our high-value guests? Specifically, can we implement measures to limit access for non-pass holders to protect that experience, especially if more lower-value units are sold next year? I hope that all makes sense.

Yes. It's important to emphasize that in 2021 and 2022, the issue was not that we had too many employees, but rather that we didn't have enough. The impact of COVID and the global labor shortage played a significant role, particularly around Christmas, which was peak demand. While it's possible to experience lines on busy days, we view that as temporary. Our mountain has a lot of excess capacity, and we see this increase in visitors as a positive development without pushing other guests out. It's not a zero-sum game. Additionally, other pricing aspects of the vacation, like lodging, tend to stabilize the situation. During peak weeks like Christmas, everything tends to be more expensive, so more price-sensitive guests usually visit at other times. Over the past couple of decades, the pass program and the expansion of participants have helped smooth out visitation patterns without significantly increasing peak times. We believe that if we manage this properly, it will enhance our revenue opportunities rather than detract from them.

We'll take our next question from Chris Woronka with Deutsche Bank.

Not to reiterate, but regarding the Gen Z Young Adult pricing strategy, is there any concern about potential cannibalization of customers who would have purchased a pass anyway? Additionally, do you have any worries that for younger skiers, especially those taking destination trips from places like Colorado or Whistler, the overall cost might be a factor? This could include factors like airlines and hotel discounts. Are you considering whether this pricing will be enough to encourage them to buy a longer duration pass?

Yes. I would say two things. First, we closely analyze potential cannibalization when we offer discounts, knowing that we might lose revenue from those who would have purchased anyway. We need to offset that loss with increased volume elsewhere. However, it's important to remember that this dynamic also works in reverse. When prices increase, some customers may choose not to pay the higher rates. You're correct in noting that this happens at the margins; not everyone suddenly decides to stop buying, but it does affect a certain subset. Based on historical data, we have been able to assess the pricing dynamics. If we notice customers leaving from a specific segment while prices have risen significantly over the past four years, we recognize that this could impact our numbers. While some aspects of vacation costs may not have dropped, many have remained consistent over the last four to five years. From our experience over the decades, we've found that pass pricing is generally quite elastic. There is a segment of customers who may be less affected by price changes, especially since prices have generally declined from around $1,600 two decades ago to potentially $2,500 today. However, our historical changes in pass pricing have shown fluctuations in volume. This year, for instance, we observed price elasticity in lift tickets as well. This shouldn't be seen negatively; having price elasticity doesn't indicate a lack of pricing power. Instead, it highlights the need for constant optimization to set the right prices, which is a strategy we implemented when we first introduced the Epic Pass.

Thank you for your question. As a follow-up, I'm curious about customer research. When considering why some people might not be taking ski vacations this year, while weather is certainly a factor, there could be additional reasons. Do you analyze the cruise industry to gather insights? Are you concerned that you might be losing customers to that sector, possibly due to factors beyond just weather, such as pricing and family travel trends?

Yes. I think the cruise industry has performed well. However, when I examine the visits to ski resorts last year, they were actually quite strong, marking one of the best years on record. So, while the cruise industry is fully operational, I don't view it as a direct competition affecting us. It seems more about overall factors like weather, vacation costs, and people's general willingness to ski. I wouldn't say that the cruise industry is specifically taking customers away from us. That said, our sport needs to remain competitive and proactive. One aspect where the cruise industry excels, and something we observe closely, is their effective marketing strategies with diverse offers tailored to different segments of the market. They excel in cross-selling and upselling through innovative technology. We’ve seen impressive results from companies like Royal Caribbean, and I believe there are valuable lessons for us to apply as we adapt our company strategy.

We'll take our next question from Stephen Grambling with Morgan Stanley.

I realize most of the questions have been around pricing. But when we think about what's in your control from a customer experience standpoint, what initiatives are you most excited about, Rob, as we get ahead of next season?

I am most proud of our talented team members at the resorts who are doing an outstanding job. Their efforts are evident in the results we're seeing, significantly enhancing the guest experience. This improvement began with our investments in frontline wages in 2022. We have also become more selective in our recruitment process, leveraging technology across our HR system to attract candidates who align with our values. As a result, we've observed higher seasonal employee return rates, engagement scores, and retention rates. After several years of effort, it's all coming together nicely. Looking ahead to next year, I see a substantial opportunity for us. Additionally, I believe there is significant potential in guest-facing technology, particularly with rentals, the My Epic App, and our digitized engagement in ski school, as well as added commerce features on the app. We are ahead of the curve with innovations like Mobile Pass, which allows access through smartphones instead of needing a lift ticket. We are developing a comprehensive ecosystem and bringing our employees along in this technological advancement. Although we still have a few steps to reach our goals, the results we are seeing are promising. Despite the challenges this year, we've achieved record guest satisfaction scores across the system, which is quite unusual. Guest satisfaction scores in Colorado and Utah are also up, and even in Park City, which faced a strike last year, we're seeing improvement compared to two years ago. This trend shows that even under tough conditions, our system is functioning well, thanks to the dedicated team members who directly connect with our guests.

And Rob, you mentioned the technology side. And I think last quarter, you flagged content management system being rolled out as well and kind of alluded to it on this call. But is that fully implemented? And how do you think about the path to offering more personalized, not only pricing, but even some of those experiences and promotions? Are there still systems that need to be implemented? And/or is there an iteration that we should be thinking about over a couple of years?

Yes, the new content management system is being implemented now. It will be in place by the capital year 2026 but will be operational for the 2026/2027 period. This will enable us to provide much greater personalization and agility in managing the system. We are also adding new functionality to the app, which will enhance our ability to personalize experiences for users. We have a few more steps to take; for next year, we plan to include lift tickets and passes in the app's commerce section, and ultimately, we aim to add rentals and ski school options. Currently, those are separate features, and we want to create a more cohesive guest experience, which will include an FAQ bot in the early stages to help answer questions. Next year will be a significant step forward, and in two years, we expect to be in an excellent position.

This concludes the Q&A portion of today's call. I would now like to turn the call back over to Rob Katz for closing remarks.

Thank you, operator. To wrap up, this season reinforced the resilience of our model and the importance of staying focused on what we can control. We remain confident in the long-term outlook and our balance sheet strength. And I again want to thank our frontline teams for their exceptional dedication and execution this season. Thank you all for your interest and for your time.

This concludes today's Vail Resorts Fiscal Second Quarter 2026 Earnings Conference Call and Webcast. You may disconnect your line at this time, and have a wonderful day.