Vail Resorts, today announced its calendar 2013 capital expenditure plan. The Company’s 2013 capital plan includes a high-impact new lift, significant terrain expansion, a new restaurant and the fourth generation of EpicMix, as well as $25 million in spending for the first phase of its new summer operations and nearly $10 million in upgrades for each of the recently acquired Afton Alps and Mt. Brighton, resulting in the largest number of planned improvements in the Company’s history. The Company currently anticipates it will spend approximately $130 million to $140 million in resort capital expenditures in calendar year 2013, including approximately $47 million to $52 million in maintenance capital, which is necessary to maintain the appearance and level of service appropriate to resort operations, including routine replacement of snow grooming equipment and rental fleet equipment. All of the proposed capital projects are subject to applicable regulatory approvals, including U.S. Forest Service approval.
Highlights of the calendar year 2013 capital expenditure plan include:
Epic Discovery – This first phase of Epic Discovery, the Company’s summer mountain activity plan, includes approximately $25 million to transform the summer experience at six of its mountain resorts (Vail, Beaver Creek, Breckenridge, Keystone, Heavenly and Northstar). Plans for each mountain, include a selection of zip lines, ropes courses, signature climbing walls, Forest FlyersTM, summer tubing, expanded hiking and mountain biking trails and education centers. Each of these new activities will capitalize on the existing summer visitation at each resort and leverage existing infrastructure, creating the opportunity for high-impact and high-return projects. The Company expects these activities, in total, to generate approximately $7 million of incremental Mountain Reported EBITDA in their first full summer of operation.
Improvements at Afton Alps & Mt Brighton – The Company is planning major enhancements and upgrades to the newly acquired Afton Alps near Minneapolis, Minn., and Mt. Brighton near Detroit, Mich. The Company plans to invest nearly $10 million at each resort to bring a completely new ski experience to these markets, which are home to more than 450,000 skiers and riders. The Company’s plans include dramatic improvements in snowmaking to extend the season and provide a more consistent and high quality snow surface, the creation of state-of-the-art terrain parks with extensive new features, animation and dedicated lifts; upgrades to base area facilities; the addition of EpicMix, EpicMix Racing and lift ticket scanning to personalize the guest experience and better promote the Company’s western resorts to these skiers; and improvements to guest safety and quality across the ski areas. These improvements are being announced along with new season pass plans for the resorts and a more dedicated sales effort in those markets to drive a stronger connection between those guests and the Company’s Colorado and Tahoe resorts. The Company believes that following these plans, future capital spending at each resort will be more limited in scope.
Peak 6 terrain expansion at Breckenridge – The Peak 6 terrain expansion includes two new chairlifts and 543 acres of new terrain, a 23 percent expansion to the resorts skiable acreage. Peak 6 will offer an intermediate “bowl” skiing experience, with the opportunity for a wide variety of guests to ski this new high alpine area that sits above tree line. Peak 6 will become another iconic feature of Breckenridge, and will better disperse skiers and improve the guest experience across the resort, which is perennially the #1 or #2 most visited mountain resort in the United States.
New Red Tail Camp restaurant at Beaver Creek – In advance of the 2015 World Alpine Ski Championships, the Company is building a new 500 seat restaurant at Red Tail Camp, located at the finish of the men’s and women’s downhill courses, which more than doubles the existing restaurant’s capacity. Red Tail Camp will offer gourmet dining options in an upscale cafeteria setting and will add a second high quality and high capacity dining venue for Beaver Creek, better positioning the resort for continued growth in visitation. The new restaurant will follow on the success the Company has had with the Tamarack Lodge at Heavenly, the Zephyr Lodge at Northstar and The 10th at Vail.
Replacing Vail’s Chair 4 (Mountain Top Express) with a high speed, six-person chairlift – Vail’s Mountain Top Express (#4) is one of the most recognized and highly utilized chairlifts in North America- serving both a critical skiing pod for the mountain and an important transportation lift from Lionshead and Vail Village to the Back Bowls and Blue Sky Basin. The new six-person chairlift will increase capacity by 33 percent, dramatically reducing lift lines and building on this year’s success of the newly built Gondola One. The new chair will continue to build upon Vail’s preeminent position in delivering the best experience in the ski industry worldwide.
EpicMix Academy – EpicMix Academy will be the fourth generation of the groundbreaking and award-winning EpicMix application, following the introductions of EpicMix Photo and EpicMix Racing. With EpicMix Academy, the Company’s ski school instructors will be able to certify the attainment of certain skills and ski levels for any of the students in their classes. Children and adults in both group and private ski lessons will be able to earn permanent recognition and review their accomplishments online. Parents will be able to track the progress of their kids and the Company’s ski schools will immediately know the ability level of every student before the start of each lesson. EpicMix Academy will offer special certified digital pins, which can be easily shared through Facebook and Twitter along with pins for vertical feet, photos and racing medals.
The Company has historically invested significant cash in capital expenditures for resort operations and believes the calendar 2013 capital plan maintains the high-quality standards for which Vail Resorts is known and invests in improvements across the Company’s resorts and new growth opportunities. All discretionary capital improvements are evaluated based on an expected level of return on investment. The Company plans to utilize cash on hand, borrowings available under its Credit Agreement and/or cash flow generated from future operations to provide the cash necessary to execute its capital plans.
Commenting on the resort capital expenditure announcement, Rob Katz , chief executive officer, said, “The 2013 capital plan is unprecedented in its size and underscores our operating philosophy of continually reinvesting in our resorts to offer the absolute highest quality experience to our guests and highlights several of our unique growth opportunities in Epic Discovery and newly acquired resorts. Our commitment to continually investing in our resorts to enhance the guest experience grows our season pass programs that create customer loyalty, supports our premium pricing strategy, drives new visitation, and increases guest spending. This year’s plan represents the culmination of many years of hard work with recent regulatory approvals allowing for projects such as Epic Discovery and the Peak 6 terrain expansion at Breckenridge, as well as a focused acquisition strategy that allows for a stronger connection to skiers and riders in Minneapolis and Detroit.”