Good day, and welcome to the Vail Resorts Third Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rob Katz, CEO. Please go ahead.
Thank you. Good afternoon, everyone. Welcome to our fiscal 2021 Q3 earnings conference call. Joining me on the call this afternoon is Michael Barkin, 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 and 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, June 7, 2021, 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 Relations section of our website at www.vailresorts.com. So with that said, let's turn to our fiscal 2021 Q3 results. Given the continued challenging operating environment as a result of COVID-nineteen, we are very pleased with our overall results for the quarter and for the full 2020 2021 North American ski season.
Results continue to improve as the season progressed, primarily as a result of stronger destination visitation at our Colorado and Utah resorts, including improved lift ticket purchases relative to the fiscal 2021 Q2 results. Excluding peak resorts, total visitation at our U. S. Destination mountain resorts and regional ski areas for the 3rd quarter Was only down 3% compared to the Q3 of fiscal 2019. Whistler Blackcomb's performance continued to be negatively impacted due to continued closure of the Canadian border to international guests, including guests from the U.
S. And was further impacted by the resort closing earlier than expected on March 30, 2021, following a provincial health order issued by the government of British Columbia. Whistler Blackcomb's total visitation for the Q3 declined nearly 60% for the Q3 of fiscal 2019. While visitation and Lyft revenue trends improved throughout the quarter, our ancillary lines The business continued to be more significantly and negatively impacted by COVID-nineteen related capacity constraints and limitations, particularly in food and beverage and ski school. We maintained disciplined cost controls throughout the quarter and continued operating our ancillary lines of business at reduced capacity.
Now, I would like to turn the call over to Michael to further discuss our financial results and fiscal 2021 outlook.
Thanks, Rob, and good afternoon, everyone. As Rob mentioned, we're very pleased with our overall results for the quarter and for the full 2020 2021 North American ski season. As a reminder, in the prior year, we announced the early closure of the 2020 North American ski season for our ski areas, lodging properties and retail rental stores as a result of the COVID-nineteen pandemic beginning on March 15, 2020. These actions had a significant adverse impact on our results of operations for the 3rd fiscal quarter of 2020. Additionally, the ongoing COVID-nineteen pandemic and the resulting limitations and restrictions on our operations Continued to have an adverse impact on our results for the 3rd fiscal quarter of 2021.
Net income attributable to Vail Resorts was 274.6 of $152,500,000 or $3.74 per diluted share in the prior year. Resort reported EBITDA was 400 $2,200,000 in the 3rd fiscal quarter, which compares to Resort Reported EBITDA of $304,400,000 in the same period in the prior year. The increase was primarily due to strong North American Pass sales growth for the 2020 2021 ski season, Including the deferral impact of approximately $120,900,000 of past product revenue and $2,900,000 of related deferral costs from the 3rd fiscal quarter of 2020 to fiscal 2021 as a result of the passholder credits offered The 2019 2020 North American Pass product holders as well as improved non pass visitation due to the company operating for the full U. S. Season in the current year with particularly strong demand at our Colorado and Utah destination resorts.
Resort reported EBITDA margin for the 3rd Quarter was 52%, exceeding both the prior year period of 43.9% and fiscal 2019 Q3 of 50.2%. These results reflect our rigorous approach to cost management as well as a higher proportion of lift revenue relative to ancillary lines of business compared to prior periods. Now turning to our outlook for fiscal 2021. Net income attributable to Vail Resorts Inc. Is 2021 will be between $530,000,000 $570,000,000 and we expect the resort reported EBITDA margin For fiscal 2021 will be approximately 28.9 percent using the midpoint of the guidance range.
Our guidance assumes all of our operations are open and aligned With current health and safety protocols and capacity restrictions, current demand trends continue. We experienced normal weather conditions throughout the Australia's ski season and North American summer season and there is no impact from potential COVID-nineteen related shutdowns or lockdowns. The guidance specifically assumes no impact from potential demand or operational disruptions associated with the current lockdowns in Victoria, Australia. We continue to maintain significant liquidity. Our total cash and revolver availability as of April 30, 2021 Was approximately $2,000,000,000 with $1,300,000,000 of cash on hand, dollars 419,000,000 of U.
S. Revolver availability under the Vail Holdings Credit Agreement and $203,000,000 of revolver availability under the Whistler Credit Agreement. As of April 30, 2021, our net debt was 2.8 times trailing 12 months total reported EBITDA. We remain confident in the strong cash flow generation and stability of our business model and we will continue to be disciplined stewards of our capital with a focus on high return capital projects, continuous investment in our people and strategic acquisition opportunities. While we are not reinstating the dividend this quarter, we remain committed to returning capital to shareholders and our Board of Directors will continue to closely monitor the economic and public health outlook on a quarterly basis to assess the appropriate time to reinstate the dividend.
I'll now turn the call back over to Rob.
Thanks, Michael. We're very pleased with the results for our season pass sales to date, with guests showing strong enthusiasm for the enhanced value for the upcoming 2021 2022 North American ski season increased very significantly as compared to the sales through June 2, 2020 for the 2020 2021 North American fee season due to lack of any spring sales deadlines in 2020 as a result of COVID-nineteen, taking the year over year comparison to the spring 2020 results not relevant for performance trends. Compared to sales for the 2019 2020 North American season through June 4, 2019, Past product sales for the 2021 2022 season to June 1, 2021 increased approximately 50% in units and 33% in sales dollars. Past product sales are adjusted to include Peak Resorts Pass sales in both periods and eliminate the impact of foreign currency by applying an exchange rate of $0.83 between the Canadian dollar and U. S.
Dollar in both periods for Whissel Blackcomb. As a reminder, past product sales for Full selling season through December 6, 2020 as compared to the full selling season through December 8, 2019 Increased approximately 20% in units and approximately 19% in sales dollars. Relative to season to date past sale product Relative to season to date, past product sales for the 2019 2020 season through June 4, 2019, We saw very strong unit growth with our renewing passholders and even stronger unit growth in new passholders, which includes guests in our database We previously purchased lift tickets or passes, but did not buy a pass in the previous season and guests who are completely new to our database. We saw our strongest unit growth in our destination markets, particularly in the Northeast and also had very strong growth across our local markets. Compared to the period ended June 4, 2019, effective pass price decreased 10% as compared to the 20% price decrease we implemented this year.
We believe this highlights how our lower pricing has increased the propensity of pass holders to spend a portion of the new discount to purchase higher valued pass products. We expected that the price reduction would result in higher pass renewal rates, increased trade up of higher value passes and drive incremental guests to our network. We are encouraged that each of these trends is evident in receiving today's top sales results, which we believe supports our expected results for next year as well as the expected long term benefit of increasing guest lifetime value. The past results to date exceeded our original expectations for the impact of the 20% price reduction. However, we still have the majority of our past selling season ahead of us and it is not yet clear if these trends will continue through the fall.
We will provide more information about our pass sales results, including comparisons to pass sales results for the 2020, 2021 North American Sea Season in our September 2021 earnings release. In addition, we are very pleased that ongoing sales of the EPYC Australia accounts, which end on June 15, 2021, are up approximately 43% in units through June 1, 2021, as compared to the comparable period through June 4, 2019, representing significant growth following the acquisition of Falls Creek and Hotham in April 2019. Given the recent COVID-nineteen related lockdowns in Victoria, Australia, we will be monitoring any impacts on the Epic Australia Pass Off. Our commitment to reinvesting in our resorts and the guest experience remains one of our highest priorities. As previously announced, this summer in fall, we will be completing Several signature investments subject to regulatory approval.
In Colorado, we are moving forward with a 250 acre lift served terrain expansion in Breckenridge to serve the popular Peak 7, replace the Peru lift at Keystone with a 6 person high seat chairlift and replaced the Peachtree lift at Crested Butte with a new 3 person fixed grip lift. At Okemo, we plan to compete a National investments, including upgrading the Quantum Lift from a 4 person to a 6 person high seat chairlift and relocating the existing 4 person Quantum Lift to replace the Greenridge 3 person fixed script chairlift. These investments will greatly improve Uplift capacity, further enhance the guest experience and complete our $35,000,000 capital plan for Triple Peaks. We remain highly focused on investments that will further our company wide technology enhancements to support our data driven approach, guest experience and corporate infrastructure. As part of these efforts, we are continuing to invest in resources and technology to improve our customer service experience, including significant staffing increases in our call centers and self-service technology that will provide our guests the ability to better manage their own accounts.
We will also continue to invest in ongoing maintenance capital to support infrastructure across our resorts. As we head into next year, we know that talent and staffing will be critical for our success as it always is. And we have announced that we will Raising our minimum entry wages in Colorado, Utah, Washington and California to $15 per hour, while also making material increases in the entry ranges of our Eastern resorts, which will be set based upon their local market dynamic. This will be our largest discretionary investment in operating expense for an AUM, which we believe will be offset by a portion of other savings we will carry from this year into next year. As we transition to summer operations at our North American resort, I would like to take a moment to thank all of our employees for their passion and tireless dedication for delivering a safe and exceptional experience to our guests during full 2020 2021 North American ski season Despite the incredible challenges of the COVID-nineteen pandemic, I am deeply grateful for the commitment our teams continue to demonstrate throughout These unprecedented circumstances.
At this time, Michael and I would be happy to answer your questions. Operator, we are now ready for questions.
Thank We'll take our first question from Shaun Kelley with Bank of America.
Hi, good afternoon everyone. I just wanted to start on obviously the past sales. Rob, there are a couple of data points in there that were really interesting. I wanted to start with the product mix. If you could talk a little bit about the meaning of sort of that effective Price statistic you gave, the 10% and how that sort of lines up versus the kind of down 17% GAAP that we see?
Is there sort of a like for like Difference in that or could you just help explain that a little bit more clearly?
Yes, it's really just I think when you do the percentage, right, so if you take Our units up 50%, right, and then take an EPP down 10%, you wind up with revenue up 33%. So that's a little bit how the math works. But what I would say is that I think what we saw was something that we did expect, which is that people trading off from lower priced product to higher priced product. And we saw a material increase in kind of what I would call like the net trade up. So every year we have people who trade up from OnePath product to another or trade down from 1Path product to a lower pricedPath product as they renew.
And this year, we saw a material increase in that Number which does not surprise us and that obviously significantly ameliorated The decline, the 20 percent kind of price reduction and the revenue effect.
Got it. And Just the other question I have is the sort of cadence on the balance of the season from here. Sometimes you give a little color, but it's obviously very early in The period that we have remaining, could you just help us think through some of the puts and takes on kind of what's coming when you think about The sort of bigger deadline that you had set last September, the introduction of some of the new products and that has made things a little bit more back half loaded. Just kind of how should investors sort of be prepared for these numbers to balance out across the season? And then Specifically, your remark on the majority of the past selling season ahead of you, is that just a comment in days, like literally there's the majority of the days left?
Or is that in terms of relative to your Historic mix, you actually sell more than the majority of your products in the remainder of the period?
Yes, I think it's actually I haven't counted the days, but I think it's both potentially, but it's definitely more focused on historically we do more passfail pass Memorial Day than before. What I would say though is, yes, on the balance of the season, obviously, last year we had a very significant Labor Day or it wasn't exactly Labor Day, but in September deadline. I think this year, when we report results in our September earnings release, we will largely be comped from last year. Now I think last year certainly we had another driver right of those sales in September, which was that The credits that we issued to people last year expired. So if you are a renewing pass holders who had a huge reason to renew last September and this September, there'll be a price increase or there were spring pass sales, which gave you spring benefits, but probably for many people not as significant as the Credit that was there last year.
So that'll be something that's not exactly comped even when we get to the end of September. I think the new information that we've The new products that we put out, I do think, yes, will in order to the benefit of the second half of the season, especially the more The limited resort option on Epic Day Pass. And I do think last year as we talked about at the end of the year, we did a lot of new business in Epic Day Pass. These are folks that typically tend to buy in the fall. We definitely see that be the predominant selling season for Epic Data.
So again, I think that offers an opportunity as we go to the fall. As we go to the fall. And I think maybe the only other thing is obviously the price reduction created a fair amount of enthusiasm in the spring and How much of that may have pulled some sales either renewals or even new people into the spring? Yeah, we won't know Until we actually get through the fall, but I think there are some trends that go both ways as we head into the rest of the selling season.
Thank you very much.
Thank you, Brent. Yes.
Thanks, Tom.
Thank you. We'll take our next question from Ben Chaikin with Credit.
Hey, how's it going? On M and A, you guys saw a lot of growth from in the past outside of just returning customers, I would guess presumably from some new geographies as well. Does this inform your view of M and A in any way that's worth highlighting? Obviously not like whether you want to do it or not, More so like are there any geographies that are any more or less compelling after getting a look at the most recent past data of up 15 units?
I think we feel like the dynamics that we can glean from the results today that I think Support our approach in the past around pastels. But yes, as you mentioned, I think when we've done M and A before and we open up new Obviously, we're bringing on that resort historical pass sales, but then typically we can grow on top of that, right? And I think You've seen that pretty clearly from most of the acquisitions that we've done in part, it's also because we're picking our markets very selectively Knowing where we believe we can have an impact by having a local resort, knowing the market that's there. So I don't think that means that Any resort we buy necessarily has that intact, but we're pretty thoughtful about it and different about it. So I would say that our results to date, I think, just really reconfirm that strategy that we've had.
And our approach to M and A remains the same, which is We absolutely are aggressively looking for opportunities in different markets that we think will add value, but we're going to remain disciplined And only do things that we think will really make a difference.
Got you. Okay, that's helpful. I just felt
like it sounds like there was a lot of strength from passes sold in the Northeast. I didn't know if that made if you're even that much more convicted on the geography or not. That's kind of where I was going with it.
I mean, yes, I would say we certainly have a lot of conviction on the geography. At the same time, yes, I think we also have a lot of resorts in the geography. So I think we're always looking at which resort would be additive versus Just as look at it, where would we see the incremental opportunity? And it doesn't mean that you should buy more resorts in exactly the same geography. So In our minds, right, it's important to be selective.
And so yes, there's no doubt that we have a lot of conviction about the Northeast and the Mid Atlantic for that matter. And we feel like they've added to our efforts greatly. And at the same time, yes, we've got to pick the right opportunity.
Got you. That's super helpful. And then one more if I may. Just break it sounds like there was a lot of strength in both the returning past customers as well as the new pass holders side of things. On the new pass holders, is there any way to break this down, Like how much came from basically new to the database entirely as well as returning old past customers versus the conversion from single day to pass.
That didn't make sense. I can try and say it differently.
No, no, no. I understand. Obviously, yes, we have that data and we have that insight, but we're not providing specifics on that. But I would say, I think we saw, Yes, a lot of strength across all of those pieces, right? So I think we saw strength on lapsed pass holders, People who once were path holders for us coming back, I think we saw strength on people who were lift ticket buyers previously, either last year or before that.
I think we also saw strength What we might call prospect, somebody who's not on our database. So I think that a lot of strength in Which was terrific to see especially in the spring because typically we see more of that strength in the fall. And so it was great Here, whether some of that again, like I said earlier, we pulled forward or we'll be additive to what we do in the fall is not yet clear, but either way, it's Positive for us because we always want to move folks as early into the selling cycle as we can.
Thank you very much. Appreciate it.
Yes. Thank
you. Thank you. We'll take our next question from Jeff Stanchal with Stifel.
Hey, great. Thanks. Afternoon, everyone. Thanks for taking our questions. I wanted to follow-up on the question right there on the new pass holders base, specifically on the customers that are completely new to your database.
Just curious, what have you learned What about this new cohort as they enter the database? Are there any interesting differences here versus the existing path holder base? Just any high level color there would be helpful.
Yes. At this point, I mean, I think, yes, We're not going to share breakdowns on the kind of demo details on those folks. But I would say it was fairly broad based in terms of the strength That we've seen. And I think we'll probably have more information on that by the time we get to the selling end of the selling season and Maybe even more information as we go through the season itself and see how their behavior translates throughout the season. So, at this point, don't think there's any specific thing to share, but just, yes, the broad based strength that we saw in that Overall cohort of new people coming in.
Okay, great. Understood. And then for my follow-up, I recognize this likely depends in part on how Past selling season trends this year, but I wanted to just get some initial thoughts on how you might think about pricing for the Epic Pass next season and beyond. Now that sort of reset the baseline with the 20% cut. Do you think that you might return to more ratable, call it, mid single digit Price inflation moving forward on this new lower base?
Or do you think based on some of your recent learnings that something more tempered, maybe inflationary or Like that might better drive this next lab of advanced commitment conversion?
Yes, I think we definitely saw this the price decision this year as a discrete opportunity and we felt like we It was a substantive change and one that aligned to the data that we were looking at. And I think we've also candidly we do believe in the long run that having a ratable approach to pricing does make sense. And I When you look over the previous 12 years that we've had the Epicast, that certainly was our approach. And I don't think the pricing decision this year Thoroughly changes that view. I think it was more, yes, that we had new data and we felt like we could have a reset.
And yes, I'm not that's a broad takeaway, but of course, yes, we're not committing at this point to what our pricing will be in the future. But yes, I don't think that people should read the decision this year necessarily takes us away From our longer term approach of providing more ratable and price stability to our guests and to the cost.
Okay, great. That's really helpful color. I appreciate it. Thanks, guys.
Sure.
Thank you. Our next question comes from Brent Sorry, Montour with JPMorgan.
Hey, good afternoon, everyone. Thanks for taking my questions.
So my first question is
just on the competitive Landscape, I mean, I think it's I think we're all sort of assuming at this point that ICON isn't going to match your price cut. And I know your retention data that you have so High end, maybe a little bit on the margin, what's your sense from the data?
Yes, very hard to tell. I think there's been an opportunity over the last number of years that as ICON came into the market, I think the past market grew quite a bit and I think it was a real positive for the overall industry. And I'd like think that obviously our decision this year ultimately will bring even more people into the past market, providing more stability to the overall industry. After ICON came in and launched, we continue to see very strong growth in pass sales in our own product. Obviously, I have no insight into how they performed this year.
So I think what I would say, we feel good. I think we feel like we made real progress In almost every category that we were hoping to and aligned with all of the strategies and opportunities that we felt were there when We first launched the new approach. And so, we feel good all about that, but yes, it's hard for me to comment On market share dynamics because I'm not aware of their trending.
Okay. Thanks for that, Rob. And then just on the balance sheet, you have $1,300,000,000 of cash on hand. What are the priorities for this excess cash and what does the Board Need to see before we are reimplementing the dividend, is it temporarily hindered or tied to potential M and A opportunities like in terms of just keeping Plenty of dry powder or is there how should we really think about that?
Yes, thanks. I think our capital allocation priorities Continue to be quite consistent, which is continuing to reinvest in the business. And in our comments, Rob outlined Some of the ways in which we're investing in the resort and technology in the coming year, which we'll continue to prioritize. I think certainly second is strategic investment opportunities. And so we do feel like we will Continue to be aggressive on acquisitions as Rob said.
And I think we also feel like With the current state of the balance sheet and the liquidity that we have, and the access to the capital markets, we certainly have a lot of flexibility, to pursue those acquisitions. So, Feel like we're in a very comfortable spot with that. And I think as I mentioned earlier, we're going to be focused on the dividend As we look at the outlook and obviously we feel very good about the business's performance and the outlook as we've described it, But we'll continue to monitor that with the Board as we go into the next quarters and evaluate that relative to the dividend.
Thank you. We'll take our next question from Chris Woronka with Deutsche Bank.
Hey, good afternoon guys. I guess given where you appear to be on volume, given your Initial past sales update, and I know it's early and you have a lot more to go, but it sounds like it's well ahead of your own internal expectations. Is there any Refresh thoughts about having to move to some kind of more permanent reservation system or Any other thoughts on how this is going to impact capacity next season?
Yes. I don't no, it doesn't Really change our view. We don't assuming that nothing changes on COVID-nineteen, we're not anticipating having a reservation system for accessing our mountain. And no, we feel very good about the experience for next year. We do have a lot of things that will be in the works and we'll be talking more about as we get into the fall around how we manage capacity better, a lot of things that we learned over this last year.
But I think it's Always important to remember that a lot of the folks that are that we're seeing the growth from, of course, are coming from people who We're previously paid lift ticket holders, are renewing pass holders. We're also seeing growth people just upgrading their path in terms of buying a higher value path. So all of those things are critical. We also see pathholders spread their visitation out to see them, especially some of our key time periods. Of There's limitations when it comes to lodging and other pieces.
So what we tend to see is that people with passes will adjust their vacation even at Christmas, Right. Moving to the 23rd or 24th 25th or moving from the ending on the first to ending on the second or third, Those things are all hugely incremental to us and great opportunities. And so and I think are actually positive for the resort and positive for the entire ecosystem and the community, Just to try and continue to spread the capacity out throughout the season. And so, no, we feel very good about this and are feeling good about Absolutely, the experience for next season and a lot of things, including new lift and new process improvements that we're going to have that I think will make it, Yes. The experience for lifetime, which is of course our commitment to everybody.
Okay, great. And you've Given pass holders a really nice value proposition on lift ticket, but any opportunity to take pricing on some of the List pricing or menu pricing on things like ski school or dining given how strong the consumer and the economic environment should still be in the fall?
I think we yes, we price all of these products independently and for many of the products They're priced really at the resort level based on the local unique dynamics that each resort has. And I think that Even if sometimes we lean in and are a little bit more aggressive on price in some areas, we still try and keep to my earlier comments a more ratable, More consistent approach to price increases. We feel like that's important. We don't want to see huge gyrations. And certainly there are other products out there, certainly like the room rates on our hotels that will move quite a bit, right, week to week, month to month, day of the week, based on the season that we're in and of course we're following the rest of the hydel market in that respect.
But a lot of our other products, we tend to, yes, kind of search certainly in a strong economic environment will be a bit more aggressive, But nothing that would gyrate, because we don't think that that's good for the overall consumer experience.
Okay. Very helpful. Thanks guys.
Great. Thanks.
Thank you. We'll take our next question from Patrick Scholes with Truist Securities.
Hi, good evening. A couple of questions here. In light of Mount Snow now instituting paid parking or parking lots that were formerly Free for the upcoming season. I have two questions in this regard. Will you be expanding the paid parking initiatives to other resorts?
And along those lines, will there be any other initiatives for parts of the ski experience that may have been Free in previous seasons, which could now become a tack on charge for the skier visits. Thank you. Sure. I think each one of our resorts goes through their own assessment, as I just mentioned, certainly on pricing. And I think with parking, that is a component that we do think is sometimes important for certain resorts at certain And to help ration capacity, I mean, it's not in the end of the day, we want to incent people to carpool.
We want to incent people to take Other forms of transportation when they can, and we do use that at a number of our some of our resorts have paid parking at the base, Some of them don't. I'd say more and more you're seeing not just us as the resort operator, but many of our communities Instituting paid parking, I think you're seeing that outside the resort environment in many cities. So to us, it's really just one component. Park gain for us is not a it's not a big moneymaker whatsoever. So in terms of it being material to our overall financial Performance or valuation of the company, it's not at all.
It's really something that is used by the local resort to assess how to best manage You know the capacity. And so we take it on a resort by resort basis. Okay. Thank you. I guess what I With more meaning that this is sort of a new tack on charge, will there be other tack on charges For this coming season that you're working on, not just that resort, but items that maybe had again in the past Been free for usage.
Again, every resort looks at each of their Dynamics, it makes decisions that are important to manage the capacity at their own unique resort. Obviously, to the extent that we're making changes, we always like to try and get those out As early as possible. And yes, so to the extent that those come up, obviously, we'll communicate them when we do. But again, not really materialize into the overall Performance here, not something that I would see that is no, it's definitely not a strategy of ours at any corporate level. It's really Local kind of unique decision by decision and even on parking, we have parking lots across all of our resorts.
Some of them, yes, may add a charge for parking to help manage Some of them remain free. So we take a kind of situation by situation approach. Okay. I was just curious if this was some part of like the Macro strategy to make up the discount pass price by adding on additional items? No, no.
Unfortunately, that's not going to do it. And yes, we're really We're focused on all the things we talked about upfront in terms of how we drive that base. Understood. And then just a quick question here. You had mentioned instituting a $15 minimum wage at some of your resorts.
What was the comparable wage Last season for those resorts? There was very different. Yes. Some of the resorts We're I think it's obviously California, we probably were the highest in Washington, a little bit below California and Colorado and Utah, somewhere around the mid 12.50 an hour was our lowest entry wage. So especially for those 2 resorts, it's a pretty meaningful increase.
And No. Again, it will be resort by resort in the East, but they'll also see some pretty meaningful increase in non entry wage as well. Okay. Thank you for the update. That's it.
Thank you.
Thank you. We'll take our next question from David Katz with Jefferies.
Hi, afternoon. Thanks for taking my question. Congrats on the quarter. Covered a lot of ground already with respect to passes. And I wanted to just touch on M and A and specifically the international piece of it, because it does come up Pretty frequently about Europe or Asia, which the discussion goes back a long time.
What are the Sort of puts and takes or gating factors aside from just finding the right partner, the right price at Getting some international exposure going and the follow-up to it is whether there how much leverage there would be Toward your domestic business or North American business as a result of it?
Yes, I think it is I think many people probably forget, but it was similar in the U. S. When you go back 10 or 20 years in terms of The challenge of trying to do M and A even here in North America and I think we stuck at it and we're pretty Discipline and diligent about it, I think we're able to make some real progress. I think the same is true internationally and in some cases even more challenges given Some of the local connection to many of the resorts and of course so much of the national pride Just like we have here in the U. S.
That exists for these resorts. And so it's important, I think that you find the right person who wants to partner or sell the resort That we are the right buyer or partner for that resort and we have the right plan that goes forward. And I would say, In part also been quite busy right in the U. S. And of course in Australia over the last decade.
And so while there's no doubt that we've been Having these conversations, of course, they haven't been as front and center as some of the opportunities that we were trying to pursue and then of course integrate here and then COVID hit. So I think coming out of COVID, I feel like we have we still have this opportunity. It's very critical to us where we know that it's a critical strategic Direction and especially because there's unique specific opportunities that still exist in North America is obviously less of today than 5 years ago. We know that that's an area that we want to focus on, I think, and yes, quite confident that we will get there. But again, we're going to be disciplined about that and make sure that we use our capital and our time widely around it.
In terms of incrementality, I think no doubt doing something in Japan We would have immediate benefit, I think, to our connection between Australia, Japan, Canada and the U. S. And so I think that would be a stronger immediate boost. In Europe, I think less so because we don't see those same visitation patterns. On the other hand, the market in Europe is much bigger.
So the longer term opportunity I think in Europe is quite strong, but of course it will take more time to get going. And it is more about creating a unique Platform in Europe on a standalone basis that has been some overlap as we've highlighted with the UK and the U. S. And even in certainly in South America and other growing parts of the world economy. So, yes, very much still on the radar and obviously, just hasn't been front and center as much as some other things over the last couple of years.
Got it. Thank you very much.
Yes. Thank you.
Thank you. Our next question comes from Arendt Vasilescu with Exane BNP Paribas.
Good afternoon. Thanks for taking my question. I wanted to follow-up on Patrick's question with regards to the minimum wage increase. Curious to know what you're seeing in the labor market. Is there enough talent out there to hire?
And do you anticipate that the U. S. Border will reopen and you can potentially Hire foreign talent as well for the upcoming season.
I think it's definitely a challenging labor market right now. I think in some respects, right, it was before COVID hit. And so I think you're seeing some of that Pickup as we come out of the pandemic. I think for us, it's certainly a concern for the summer. It's not a bigger concern, of course, as it is for us in the winter.
We are hopeful that we will be able to return to bringing in workers from abroad Our J-1 student visa program and the H2B program for certain select positions, as we did in the past. But obviously, we're also very committed to continuing to grow and improve all of our Including efforts in the U. S, that was something that I think was critical even with the staffing challenges of the couple of years before COVID. We continue to improve our both our competitiveness and the way we went about recruiting and that helped us quite a bit as we went into The 2019 2020 ski season. And I think we're going to be leveraging a meeting on that again as we go into next year and obviously Felt that it was critical for us to have a more aggressive entry wage and increased wages even above that level.
So, yes, not only are we getting Talent for getting the best talent and getting kind of out front of the current trend.
Very helpful. Thank you. And as a follow-up, I wanted to ask about Australia. I think your guidance specifically assumes no impact from The lockdowns, just curious to know boots on the ground there, what you're seeing with your 3 resorts across Australia? And why was there no impact assuming guidance for 4Q?
In terms of unit growth, I think the passes were up 43% on a 2 year stack. Anything interesting you like to share with regards to that, just the breakdown of the consumer, is it also similar to what you saw in the U. S. So far?
Yes, I would say, 1, I think, Perisher opened. And so, I think we're seeing Good enthusiasm and engagement in New South Wales and the Sydney market to Perisher. And so I think feeling very good about that. And I think it's hard to say, obviously, I don't want to prejudge what's going to happen in Victoria and in the Melbourne market, but They did relax some of the restrictions for the rest of the state outside of Melbourne. And right now, We are planning to open on schedule.
Of course, yes, subject to as things unfold there, but We're optimistic. I think we feel like there's a good opportunity for us to have a very good season all across all three resorts. And I think the, yes, broad based strength. So I would say that, obviously, with that kind of Unit growth, we're seeing growth across, yes, lots of different markets and consumer segments. And yes, feel good.
I think it's Similar in some ways to the pent up demand that you have here, I think you also were very competitive in terms of the way we price our products in Australia like we are here. And obviously, the border in Australia is closed, so travel outside of Australia is more limited. And so we're anticipating stronger domestic travel for the country at least for the time being.
Very helpful. Thank you very much and best of luck. Yes.
Thanks.
Thank you. We'll take our next question from Paul Golding with Macquarie Capital.
Thanks so much for taking my question. The first question I have is around ancillary services coming back. I'm just wondering if you could Give some color on how the experience either for dining or other ancillary services has been made Maybe more efficient or the user experience has been digitized. Just trying to get a sense of what margin impact could look like conscious of The ancillary service is being lighter through COVID, but margin this quarter coming in where it was. And then I have a follow-up on labor after that.
Yes. I think on margin, it's important to I'm right that part of the margin improvement this year was of course by us being disciplined around costs. Some of it was also because we did really well in the Highest margin business, which is lift tickets, had more challenges than lower margin businesses. Now our ancillary businesses are actually all high margin businesses, they're just lower margin And the flow through that you get from ticket sales. I think we've absolutely learned quite a bit, particularly about, I'd say, our signing business, our F and B business, and absolutely intend to implement a number of improvements and opportunities as we go into next year.
I'd say around Efficiency, not really around necessarily cost efficiency, but around process efficiency. And I think using having the reservation That we did have for all of our dining or most of our dining establishments this past year, I think gave us a lot of insight on a lot of factors that we didn't know before. So I think we can use that even if we don't use the reservation system in the same way again. We can actually use that data as we go into next season. So we feel very good about that.
And I think we certainly saw, I think on eSchool, obviously, that business operated more close to we couldn't have the capacities and we didn't have the opportunity for Class sizes, we didn't have the opportunity for lunch with the instructor in most cases. And so I think Those were takeaways from the guest experience unfortunately for this year, but I think we but I would say the business the experience itself is much closer What it has been historically. So I think good takeaways and insights on that, but probably not as much Given the huge disruption that we saw on F and B.
Thanks for that, Rob. And then On labor with the current backdrop, just wondering if the bulking up on Customer Experience Staff, is that more transitory trend where you're going to plateau just because of how many new Past members are on boarding in the COVID disruption or is that something that you see just for the business just Sort of sticking around long term?
Yes. I think the commitment to it and the investment in it is obviously going to stick around. I We're not going to go backwards to where we were before. And because I feel, yes, We were understaffed and under resourced in a lot of different areas. And of course, this past year was a unique year that in terms of the complexity with Credit and with COVID and unique Epic coverage situations, all of which I think made it more challenging.
But as we've been clear and as I've been clear, obviously, we I'm behind on that and that was a mistake that we have to correct. So I think going forward, yes, we likely will not see the same complexity hopefully because the Environment will be more stable, but there's no doubt that we operated over this last pass going deadline, which is Quite strong and a lot of people obviously coming into the deadline. And we had great response times, both on the phone and on our Chat rooms and so that I think bodes well for us to go to the future and we don't want to move backwards on that. We want to make sure that we stay within Well within industry standards and best practices on that. So yes, that's not something we're going to give up on.
All right.
Thanks so much.
Yes. Thank you.
Thank you. Yes, we'll take our next question from Ryan Sundby with William Blair.
Yes, hi. Good afternoon. Thanks for taking the question here. Rob, maybe as an example you can lean on for a resort that sees bad weather for a couple of seasons. But When you look at the challenges that Worcester states in the past, I guess, year and a half now, with the border restrictions, the early reserve closures, do have any concern about getting cash back to that resort as of next year or beyond?
And I guess you start to see resort lease any sharp mind or relevance It's Peter. Is it campus for season 2?
Yes, really no concerns about that at all. I think Whistler is, yes, one of the most spectacular resorts in the world. And With an experience on so many levels that's really unparalleled that and a long No, we feel very good that with the border opening and obviously with good weather, which by the way, of Of course, unfortunately, we didn't have a border that people could cross, but the snow quality this year was certainly better than the previous year. Yes, we feel quite confident actually in Whistler's long term future and in both the resilience of the resort And in the strength that Whistler will continue to show, I think again, it's not obviously the mountain, it's the largest ski mountain in North America. It's the community itself and the vibrancy and uniqueness of that community is also another huge draw for people in terms of why they come.
And yes, the access that people have from different markets outside the U. S. And certainly Asia and Australia, we don't see that moving at all. I think, again, prior to COVID, they were also making good inroads in Mexico, something that we were helping to support And South America. So it's just truly one of the gems, right, anywhere in the world.
And now it's Not something we're not concerned at all that it's going to miss a beat once we really get past the current challenges of COVID. Great.
Yes. I just want to make sure there were any kind of
long term impact there. Thanks for the question. Thank
you. We'll take our next question from Alex Maroccia with Berenberg.
Hi, good afternoon guys. Thanks for taking my questions. My first question pertains to the resumption of the capital projects you outlined. There's plenty of headlines about supply chain and employment constraints these days. Have you seen major price increases in material and labor costs that could Impact the CapEx assumptions you outlined earlier this year?
And then do you think it could impact your budgeting for next year?
Yes, I don't think yes, we're not I think that those dynamics that you're highlighting are real and There's something where we're looking at, but I don't see that as at this point as something that's going to impact the overall budgeting that we gave for this year. I think as we go into next year, Possible, like we obviously, we don't know yet until we get there. But I think in the end for us, it's something that we're still going to be aggressive I'm reinvesting in the resort and there's no doubt that as we come out of COVID, there's going to be opportunity continued opportunity for us to improve lifts in restaurants, Add new terrain where we can, improve the experience, all of that. And I think, if we do see some inflation, that could be an impact, but That won't deter us from continuing to make these investments.
Okay, understood. That's helpful. And then secondly, a less discussed topic is your Real Estate segment. Obviously, the housing market is pretty robust right now and Folio and these types of cycles?
I think we certainly love to see that the current strength in these markets Will help, our we have, by the way, a number of projects that where we have sold the land to developers and Those developers are now working on either getting approvals for their project or actually working on construction or getting their projects off the ground. And so We are hopeful that the current market will absolutely help with that. And yes, I think to the extent that there are other projects that fit out there, we could absolutely Use the current market to attract and engage with new developers. Obviously, we're not going to really go into the development business on our own. We also think it's critical to continue to invest in Affordable housing, we think each of our communities, this is another issue that I think is a barrier for many of our communities and some of these projects can certainly have Debate about whether where they should be or how they should be done, but our hope is and our we remain committed So putting capital behind and real focus on also getting affordable and employee housing projects done to ensure that the resorts remain Livable and accessible to a wide range of people.
Okay. That's great. Thank you, Rob.
Thank you. At this time, I would like to turn the call back over to Rob Katz for closing remarks.
Thank you, operator. This concludes our fiscal 2021 Q3 earnings call. Thanks to everyone who joined us today. Please feel free to contact me or Michael directly should you have any further questions. Thank you for your time today and goodbye.
This concludes today's call. Thank you for your participation. You may now disconnect.