Vail Resorts, Inc. (MTN) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Vail Resorts Fiscal 2013 Second Quarter Results Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, March 6, 2013. And I would now like to turn the conference over to Rob Katz, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our fiscal second quarter 2013 earnings conference call. Joining me on the call this afternoon is Michael Chao, our Vice President of Finance, who will be reviewing our financial results in more detail. Also available with me to answer questions is Mark Schoppet, our Interim 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 morning, along with our remarks today, are effective only today, March 6, 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 quarterly report on Form 10-Q filed this afternoon 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, at times, we will discuss results that exclude certain acquisitions we made in fiscal 2013 and fiscal 2012, including Kirkwood, Skiinfo, Afton Alps and Mt. Brighton, and which we will refer to collectively as "the acquisition." So with that said, let's turn to our second quarter fiscal 2013 results. We are very pleased with our performance in the second quarter of fiscal 2013, which was notable with 2 distinct dynamics. The first was our results through the middle of December, which was marked by unusually warm and dry weather in Colorado that limited the terrain we could open, leading to lower than expected results for our 4 Colorado resorts. The second dynamic began with the Christmas and New Year's holidays as weather conditions in Colorado returned to more normal patterns, leading to strong visitation and significant consumer spending in our ancillary businesses, producing a record holiday season. Subsequent to the holidays, this momentum continued with solid results through the end of January. For the 3 months ended January 31, 2013, excluding the acquisition, lift revenue, excluding season pass revenue was up 11.9%, compared with the same period in the prior year. In addition, we saw growth in ancillary revenue with dining revenue up 11.7%, retail/rental revenue up 10.7% and ski school revenue up 9.5%. And Mountain reported EBITDA, excluding the acquisition, increased $16.6 million or 13.7% for the quarter, compared to the same period in the prior year. Our Lodging result benefited from higher visitation during peak holiday periods and higher demand for luxury rooms. Despite the slow start to the season for our Colorado properties, revenue at our owned hotels and managed condominiums increased 5.5%, contributing to a 43.4% increase in Lodging reported EBITDA compared with the same period in the prior year. Regarding Real Estate, we are continuing to see increasing levels of buyer interest and are encouraged by the rate of sales we saw at both of our development projects. During the quarter, we closed on 4 Ritz-Carlton Residences, Vail and 3 One Ski Hill Place units in Breckenridge. Real Estate Reported EBITDA improved 26% for the second quarter of 2013. Net Real Estate cash flow for the second quarter was $8.9 million, and for the year-to-date was $14.4 million. Subsequent to the end of the quarter, we closed on 2 additional Ritz-Carlton Residences and 5 additional One Ski Hill Place units. Turning now to our season to-date metrics through March 3, 2013. Our ski season-to-date's metrics are measured from the beginning of this ski season through Sunday, March 3, 2013, compared to the beginning of last season through Sunday, March 4, 2012. The results have been adjusted to reflect Kirkwood being owned in both periods. The reported ski season metrics do not include the results of Afton Alps or Mt. Brighton in either periods. The following is interim period data and subject to fiscal quarter end review and adjustments. The growth in season-to-date visitation, lift revenue and ancillary revenues reflects the continued strong performance of our business, despite a challenging start to the season. In fact, all of the season-to-date metrics have accelerated from our mid-January metrics release. Visitation is now up 3.8% and lift ticket revenue is up 10.3%. Guest spending continues to be strong, with dining revenue up 12.5%, ski school revenue up 11.8% and retail/rental revenue up 10%, compared to the same period in the prior year. Our balance sheet remains in a very strong position. We ended the quarter with $136.6 million of cash-on-hand and no borrowings under the revolver component of our senior credit facility and our net debt was 1.7x trailing 12 months total reported EBITDA. I'm pleased to announce that the Board of Directors has decided to increase our quarterly dividend by 10% and declared a quarterly cash dividend on Vail Resorts' common stock of $0.2075 per share payable on April 9, 2013, to stockholders of record on March 25, 2013. The decision to increase our dividend was due to the results we are seeing this season, the strength of our business model and balance sheet and the confidence we have in our future growth prospects. Now I'd like to turn the call over to Michael to further discuss our financial results and outlook for fiscal 2013.

Thanks, Rob, and good afternoon, everyone. Today, we released our financial results for our second quarter of fiscal 2013 ended January 31, 2013, and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission, which you can now find available at vailresorts.com. Now turning to the highlights of the quarter. Our second quarter fiscal 2013 financial results reflected an improvement in Resort reported EBITDA of $20.7 million or 17.0%, which included the incremental contribution from the acquisition. For the quarter, our Mountain net revenue increased 14.5% to $361.7 million. These results were supported by increased visitation and higher Effective Ticket Prices, as well as higher spending per skier visit. Lift revenue increased $22.0 million or 14.3% for the quarter, resulting from a $15.1 million or 17.9% increase in lift revenue, excluding season pass revenue, as well as a $6.9 million or 9.9% increase in season pass revenue. The increase in lift revenue, excluding season pass revenue, was driven by an increase in visitation, excluding season pass holders of 14.3%. Effective Ticket Price, excluding season pass holders and excluding the acquisitions increased $5.46 or 7.6%, compared to the same period in the prior year. Increases in guest spendings supported revenue growth across our ski school, dining and retail/rental businesses. Dining revenues demonstrated the largest growth, with an increase of $5.1 million or 20.6% in the second quarter of fiscal 2013, compared to the same period in the prior year, with the acquisitions contributing $2.2 million to total dining revenues. Ski school revenue increased $4.5 million or 12.0% in the quarter, compared to the same period in the prior year, with the acquisitions contributing $0.9 million to total ski school revenue. Retail/rental revenues increased by $9.9 million or 13.4% due, in large part, to increases in rental revenue, strong growth in retail sales generated from our recently acquired online retailer, O2 Gear Shop, and increases at our stores in our Tahoe resorts which saw significantly better snowfall and weather conditions during the current fiscal year quarter, compared to the same period in the prior year. Other revenue increased $4.4 million or 16.5%, primarily due to incremental Internet advertising revenue from Skiinfo of $1.9 million and higher strategic alliance marketing revenue. Mountain operating expenses increased $25.5 million or 13.0% for the quarter. Excluding incremental operating expense from the acquisitions of $12.0 million, operating expenses in the quarter increased 6.9%. Labor and labor-related benefits, which is the single largest component of Mountain operating expenses, increased $5.6 million or 7.7%, excluding the acquisitions and was impacted by normal wage adjustments and an increase in staffing levels to support higher business volumes, primarily in ski school and on Mountain dining operations. Mountain operating expenses increased at a lower rate than Mountain net revenue in the quarter, compared to the same period in the prior year. Lodging results benefited from increased demand for luxury rooms as Lodging reported EBITDA increased 43.4% to $1.7 million in the quarter. Revenue at our owned hotels and managed condos increased $1.2 million or 5.5%. Average daily rates, or ADR, increased 6.4%, partially offset by lower overall transient guest visitation, due to the challenging conditions in the early season at our Colorado resorts. Turning to Real Estate. Our Real Estate net revenue is primarily determined by the timing of closings and the mix of Real Estate sold in any given period. As Rob mentioned, during the second quarter of fiscal 2013, we closed on 4 units at the Ritz-Carlton Residences, Vail and 3 One Ski Hill Place units in Breckenridge. Net Real Estate cash flow for the second quarter was $8.9 million and was $14.4 million year-to-date. Real Estate Reported EBITDA was a negative $2.6 million in the second quarter of fiscal 2013, compared to a negative $3.5 million in the same period of the prior year. The 2 additional Ritz-Carlton Residences and 5 One Ski Hill Place units that closed subsequent to quarter end generated $9.2 million of incremental net cash proceeds. Looking at the bottom line, net income attributed to Vail Resorts, Inc. increased 30.5% to $60.6 million. Earnings per share was $1.65 per diluted share in the second quarter of fiscal 2013. Turning to guidance, we are reiterating our fiscal 2013 guidance issued on January 15 of this year. Our guidance calls for fiscal 2013 Resort Reported EBITDA to be $244 million to $254 million, representing approximately a 19% to 24% increase over fiscal 2012. Our fiscal 2013 Real Estate Reported EBITDA guidance range is negative $9 million to negative $17 million. Included in the Real Estate estimates is a positive $15 million to a positive $25 million of Net Real Estate cash flow, which is defined as Real Estate Reported EBITDA plus noncash Real Estate cost of sales plus noncash stock compensation expense, plus change in Real Estate deposits less investment and Real Estate. Net income attributed to Vail Resorts, Inc. is expected to be in the range of $39 million to $49 million in fiscal 2013, up more than double from last year's result. Before turning the call back to Rob, I wanted to mention that in April, we will again announce certain season-to-date ski season metrics, which will include the spring break and Easter holiday period. Now back to Rob.

Thanks, Michael. Earlier today, we also released our resort capital expenditure plans for calendar year 2013, which includes the largest number of planned improvement in our company's history. We anticipate spending 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 our 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. This year's plan is highlighted by several new businesses and critical improvements to our Mountain. First is Phase 1 of Epic Discovery, our summer Mountain activity plan, which includes approximately $25 million to transform the summer experience at 6 of our Mountain results: Vail, Beaver Creek, Breckenridge, Keystone, Heavenly, and Northstar. Plans for each Mountain includes a selection of zip lines, ropes courses, signature climbing walls, Forest Flyers, 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 leverages the existing infrastructure, creating the opportunity for high-impact and higher return projects. We expect these activities, in total, to generate approximately $7 million of incremental Mountain Reported EBITDA in their first full summer of operation. Second, we are planning major enhancements and upgrades to the newly acquired Afton Alps, located near Minneapolis and Mt. Brighton, located near Detroit. We plan 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. Our plans include: one, a dramatic improvement in snowmaking to extend the season and provide a more consistent and high-quality snow surface. Two, the creation of state-of-the-art terrain parks, with extensive new features, animation and dedicated lifts. We're also going to upgrade the base facilities and have the addition of EpicMix, EpicMix Racing and lift ticket scanning to personalize the guest experience and capture and better promote our western resorts to these skiers. Finally, there will be improvements to guest safety and quality across the ski areas. These improvements are being announced along with new season pass plans for the resort and a more dedicated sales effort in those markets. We believe that following these plans, future capital spending at each resort will be more limited in scope. Third, the Peak 6 terrain expansion at Breckenridge, which include plans for 2 new chairlifts and 543 acres of new terrain, representing a 23% expansion to the resort's 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 in the United States. Fourth, we plan to build a new 500-seat restaurant at Red Tail Camp at Beaver Creek, 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 and visitation. The new restaurant will follow on the success we've enjoyed with the Tamarack Lodge at Heavenly, the Zephyr Lodge at Northstar and The 10th at Vail. Fifth, we plan to replace Vail's Chair 4 with a high-speed 6-person chairlift. Vail's Chair 4 or Mountain Top Express 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 6-pack [ph] chairlift will increase capacity by 33%, 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. Finally, we will be launching EpicMix Academy, the fourth generation of the groundbreaking and award-winning EpicMix application following the introductions of EpicMix Photo and EpicMix Racing. With EpicMix Academy, our 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, and parents will be able to track the progress of their kids. The 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 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. Our commitment to continually investing in our resorts to enhance the guest experience grows our season pass program 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. We are excited about the strong momentum in the business, including the return in visitation and the growth in guest spending across our operations. These trends have us well positioned as we enter March, our historically largest revenue month of the year. As we look forward to spring break and the Easter holiday, our mountains in Colorado have tremendous conditions with numerous storms over the last several weeks and more forecasted for the upcoming week in Colorado and Tahoe. At this time, we're happy to answer your questions. Operator, we are ready for questions.

[Operator Instructions] Our first question comes from the line of Felicia Hendrix with Barclays Capital.

Rob, just kind of following your very thorough overview of the capital spending plan. And not to kind of get ahead of our ourselves here, but your current plans are obviously very thorough but knowing you, you're always looking out into the future, so just wondering what else is on your wish list?

You mean from beyond this calendar year?

Yes.

We just announced this year.

No, I think -- I don't want to be greedy, but just kind of...

What I would say is, I think as we look ahead, I think the capital plan, certainly, for our existing resorts and for the winter business, I think, becomes a little bit more limited in scope after these projects are done. I think there's probably some additional capacity enhancements in lift, potentially at Beaver Creek as we see that resort continue to grow and probably a restaurant or 2 at best as we look out over the next 3 to 5 years. I'd say a lot of our capital, though, will ultimately be focused on the summer. And so what we announced, obviously, a little while back was that the full plan, for instance, at Vail would be $25 million in total, with similar plans at Heavenly and Breckenridge, smaller plans at the other 3 resorts. This year, we're announcing a $25 million plan across all 6, that's kind of a downpayment the first phase of all of those efforts. So what I would say is I think we will continue to see that summer spending because we, really, are big believers in the opportunity to drive high ROIs through those types of projects. And then, selected improvements to our resorts, of course, but probably, tailing off as we look towards 3 to 5 years from now.

Okay. That's helpful. And then, on your -- it was really nice to see the kind of pickup in the One Ski Hill Real Estate sale. So I'm just wondering, what do you think has stimulated that? What's changed and do you think that that's a trend of continued sales at the property right now?

What we did was we decided to take a handful of the units and become a little bit more aggressive on our approach to them in terms of the benefits we're offering, some of the pricing opportunities, and use that to really spark interest in the overall projects. And what I would say is that, that -- it wasn't a huge change of candidly [ph] relatively modest, but it actually spurred a lot of interest. We shifted how we're selling the project in total in terms of some of our strategy there and who's selling it and everything else. And again, we've been very, very pleased. It's actually -- the success at One Ski Hill Place has been beyond our expectations for the season. And I would also say that I think the market, in total, is getting better. And so I think we're seeing continued strength, both in Breckenridge and in Vail. I think you're seeing that at our projects, I think you're seeing that on the retail market, I think you're seeing that when you look at inventory numbers, both in those counties and candidly, I think outside of our communities, just the real estate market nationally. So I think it all plays currently very well and we're pleased seeing the momentum.

And final question for Mark. Just on the margins in the quarter, your flow through on Mountain revenues were a little bit lighter than we were looking for, but we might have just been too high. So as I'm just thinking about first of all, other than the poor early season snow and some of the labor-related increases that you talked about, was there anything in your operations that you think could have improved further? Or might have inhibited from higher margins?

I think probably on retail, we could have seen a better flow through there. We had lower margins, gross margins than what we originally expected. So certainly in that area.

Okay, And then...

And obviously -- this is Robert. And we're reporting the 2 segments, those 2 businesses together in the Mountain division.

Yes. And then, so as we think about the next quarter, just given the strong snow and obviously, trying to take into consideration some of the labor issues, is the retail continuing -- or basically, what I'm trying to get to is there any reason why you might not get close to prior record Mountain EBITDA margins in the next quarter? Or this current quarter that you're in?

Yes. I would say, yes. I think, again, it's always important to remember one of the things there -- we have different mountains now in the mix. So first of all, Northstar which has a lease which depresses the EBITDA margin a bit. So what I would say is, if you looked on a like-for-like basis, we would not expect retail to depress margins in the same way that it did in the second quarter. And so we would absolutely see increases and expect increases. But when you look back over the last few years, there are some structural changes to the business that will drag down the margin even if we're as effective we were back then.

Our next question comes from the line of Shaun Kelley with Bank of America.

Rob, I wanted to start with a little bit of discussion on the acquisitions that you guys made back in December. We've gotten a lot of feedbacks from investors on it, but I just wanted to get a sense from you. Could you just walk us through the strategy in terms of acquiring some smaller mountains and exactly how you view both the expense that you made there, as well as the future plan here. And I guess, what I'm trying to get at is how much are you thinking about this as a marketing strategy in terms of customer acquisition? And how much are you thinking about it in terms of the, I guess, the overall strategic portfolio, because we've often thought of Vail as largely big core mountains that we could probably identify or name and these were not of that same kind of pattern?

Sure. Absolutely. I think when you step back and look at it strategically for our company, there's no question that our goal is to create a better connection between our Western resorts and the skiers and riders in those markets. And I think as we did our homework on the U.S. ski industry and really started to delve down into where everybody travels from, the best market for taking trips out west is the Midwest. And that's probably not something that everybody focuses on. When they think about our company, that there are more trips from those markets -- probably in the Midwest for these -- as destination visitors. When you think about 450,000 skiers between the 2 markets and you start to do a little bit math on how many skier visits that likely represents, even if you take percentages of that and think about how much a business that could represent out to the western part of the country, there's no question that we view the opportunity to make a connection, to get data, to provide an experience, to better promote, to put on our season passes to all of these folks, we've added just a very unusual and very compelling opportunity for our company as we look towards the future. With that said, we absolutely feel like there's an opportunity to create a better experience at these smaller results than what exists today and to take an approach to focus on what these smaller resorts do really well, which is terrain parks, which is learning how to ski and certainly, racing. And so we felt like we could put investments into the resorts, and make all of those things better to help garner more market share and attract more skiers and riders in those markets to our resort. But we're also making an investment in things like scanning, IT systems, EpicMix to capture data and be able to provide a communication path from us to the skiers and riders. So what I'd say is, we feel like when you think about a market like Minneapolis, we feel like the combined expense of both what we spent to buy the resort and now this $10 million upgrade, and we think about that over the next 5 to 10 years. We think this is actually a very high-return investment for us, because candidly, we also announced our season pass plans today. One of the pieces of it, which was in a separate press release, was that the child price for the season pass at Afton Alps was the same price as the child's price for the Epic season pass. So we will now be offering in Minneapolis a child season pass, that not only offers access to Afton Alps, but all 7 of our resorts in Tahoe and Colorado. And our assumption is that will be quite attractive for families out there and once their kids are on our passes, when it's time for that family to choose where to go for a vacation, we think that it's highly likely that they might choose where their kids will ski for free. Whether -- even if the adults didn't buy a season pass at the beginning of the season. I mean, that's just one example of many of the different tactics and approaches we intend to use. Now will this all happen in the first year? No, of course not, it will take some time. But we really feel like this is a unique way for us to broaden the reach of our company and really leverage the sophistication and data capabilities that we have.

That's helpful, and then, I guess maybe taking it sort of 1 step, on kind of a higher level -- that's really good color on the children's season pass kind of strategy. So I guess, taking it to a higher level, I mean, should we think of more of this kind of, I mean, if -- I'm not trying to characterize it in an incorrect way but maybe like almost a hub-and-spoke model, is there more of this to come as you kind of build out your strategic vision here? Or do you let these deals season for a couple of years before you move on because, again, what I'm kind of getting at is, historically, we've always kind of thought of looking at the more named chunky resorts that I think we would have thought of and just trying to understand if there's going to be more of these to come, as you can kind of build out and try and capture -- I think what you're saying is try and capture that extra trip.

Yes, I think, well, 2 things. One is I think when you think about what we're spending I mean, obviously -- and I guess what I would probably share is this, there's risk in anything that you do and every time we spend any money, there's always risk into whether or not it will pay off the way we hoped. I would look at the costs for getting into these as often, candidly, a better opportunity over the long haul than even some of the list and other upgrades we make to our Mountain, which candidly, I think are great projects as well. But obviously, these are really broadening and branching, yes, in a bit of a hub-and-spoke approach. But when you think about the investment that we have across our -- we have a couple of billion dollars or more, really, in investment in ski assets in the 7 Western resorts. So to add $10 million or $20 million to branch out into our primary market, when you look at this on that framework it's not that we're trying to buy another resort like Vail, we're trying to buy a conduit or a pathway to better feed our resort on Vail where we know that -- and maybe that the spending in Afton Alps, obviously, is not going to compare and the ticket prices won't compare. But when they come out to our Western resort, obviously, that offers a huge opportunity for us. What I would say is, yes, I do think we would intend -- as the opportunities present themselves, to expand the strategy. Though I would caution or confirm that it won't compare to the investments that we have out west. And there's only so many markets, right? We're targeting high-volume, high-capacity markets. And so as you can well imagine, obviously, it has to be -- they have to have snow, there has to be cold temperatures. So it's not hard to look quickly at and assess that there's really only a few of these out there and we'll continue to -- like we do with our primary acquisition strategy, we'll continue to monitor what's available and what makes sense. And so I think if something becomes available, I think, it's something we would pursue. But I think it's important to realize, it's not a strategy that we want to own 50 ski resorts in North America. It's that we want to better support the iconic, large destination resorts we already own.

Okay. That's helpful and pretty clear. So last question would just be -- and I think, maybe, kind of thinking about some of the Real Estate stuff just to say on the big strategic thing, obviously, the sales have picked up. Does this kind of -- any thoughts about dusting off some of the plans? And I know you guys have actually probably been active so dusting off is not really the right word for it. But thinking more about Ever Vail or Keystone and some of the expansion plans for those places or do you kind of remain more focused on real tactical stuff like Beaver Creek and on-mountain?

Yes. I think, no, we're not dusting plans yet. But I think that we -- and I would say that I think projects like in Keystone or more likely at Breckenridge at One Ski Hill Place where we are already kind of far down the road on most of the infrastructure that's there, of course, like Peak 8. I think that, that -- those are probably the next things to come. Obviously, a project like Ever Vail, given its size and scope requires a market that is further ahead and a velocity that, even though it's picking up, we're still quite a ways away from the rate of sales we were seeing in 2006, 2007, 2008. So I think we're still -- before we really pursue a big broad development projects, we're going to have see an even further increase to what we're looking at today.

Our next question comes from the line of Will Marks with JMP Securities.

Rob, Mark and Mike, 2 questions. I guess, first, I don't think you mentioned anything on the CFO search and I don't expect a long dialogue, but it just -- it continues or do you feel like you have an announcement to make in the next month or any thoughts?

Both, I think. It continues and yes, I'm hopeful to make an announcement relatively soon.

Okay. I just wanted to hear a comment from you because I know people are going to ask.

I can assure you, I've not forgotten about it.

It wasn't quite what I meant, but anyway, the Epic pass pricing, it looks like $689, the easy math says 4.55% increase, does that sound right? Other -- I can read this, but on an average, can you tell us if there are passes up around 4% or 5% for different products?

Yes. And what you're reading, we actually have not announced the broad plans for Colorado and Tahoe. What you're looking at is the announcement for Detroit and Minneapolis. But yes those prices would translate and you're only going to make that -- and yes, the price increases that you're talking about are consistent. The only reason I make the other point is, we may have some other things to announce in terms of new products, for instance, in Colorado and new announcements in Tahoe. So what you're looking at isn't the totality of our program yet. That will be announced, probably, I think it's going to be next week or so and certainly, something we'll be able to talk in more detail about at the investor conference.

Okay. And I see it, yes, I was reading that the Afton specific press release. But for example, it mentions these 6 Buddy Tickets. Did you have anything like that last year for early buyer of the pass?

We did. That's actually a comparable program to what we had last year. And we'll have that, I think, available again in this year's program.

Okay. A few other things. On modeling the Epic Discovery, can you give us any guidance on -- you talked about $7 million in the first, I guess, full summer? What kind of margin would that be? I really have no idea where to start on the revenue side, if you care to discuss?

I don't think -- I mean, well, we could talk about that in more detail at the investor conference. But I think it's a very high margin.

Okay.

As you can well imagine, because obviously, the primary cost there is, it's the capital cost to put it in, not the operating cost going forward. So -- and we could talk about that in more detail but, yes, at this point we're not announcing our revenue targets for those projects yet.

Fair enough, okay. And then, I want to ask you about Tahoe being out here on the West Coast as opposed to just the west. The snow this way hasn't been so good since Christmas as you obviously know, and I know you don't break out things by ski area or region but can you just comment a little more on any weakness, if you're seeing that in Tahoe?

Yes, I think again, I think, on the margin per se, there's no question that Tahoe had a strong start and had -- and then, softer since it hasn't seen more recent snow, where Colorado had a weak start and then, a stronger performance. It tends to have -- the diversification theory has helped a bit there. And what I would say, though, is I think we're actually getting some good snow this week and so we actually feel like we're setting up nicely for March. But you're right, that I think that strong beginning to the season hasn't continued on the same pace. And that's been a partial drag. On the other hand, Colorado has set up quite nicely over the past month.

Our next question comes from the line of Tim Hamby with Janco Partners.

Just a quick follow-up on some of your comments about the Real Estate market, specifically in Colorado. I know not too much has changed as far as your overall approach to long-term projects, but has the overall strength you've seen there done anything to change kind of your more near-term outlook for Real Estate sales at One Ski Hill Place than Ritz?

I think it certainly makes us pretty bullish on -- we came out with some estimates on what we thought net cash flow would be from Real Estate, there's no question that I think we feel pretty good about those numbers since I think we're on the other side of our estimate already. So I think that would be the kind of place where, I think, we're seeing momentum. And candidly, for us, I think it probably makes us more bullish as we look towards next year and the year after in terms of the pricing. But I'd also say that we have an interest in keeping good momentum after these projects because every person who buys in one of these developments becomes a permanent customer, them, their immediate family, then it becomes their extended family, their friends, I mean, so there's no question that we're still incented to maintain this momentum and -- but note -- but it definitely, I think, bodes well as we think about Real Estate pricing and flow-through next year.

So will you just kind of continue using some of the incentives and things like that, that you already used so far this quarter, to drive sales there?

Yes, although, there's no question -- we're actually, and we already have started to ratchet them back. So in other words I think our approach at One Ski Hill Place is to be more aggressive with the first few units and then, start to step back. And we're already doing that. My only point is that, from an investor perspective, I'm just saying I don't know that, that those steps will be material over this year, and we still want to pick up folks to go into these projects and help drive our total business.

At this time, I'd like to turn the conference back to Mr. Katz for any closing remarks.

Thank you, operator. This concludes our fiscal 2013 second quarter earnings call. Thanks to everyone who joined us on the conference call today. Please feel free to contact me or Michael directly should you have any further questions. Thank you for your time this afternoon, and goodbye.

Thank you. Ladies and gentlemen, this concludes the Vail Resorts Fiscal 2013 Second Quarter Results Conference Call. We thank you for your participation. You may now disconnect.