What a difference three months have made. Back in early May 2022, all the major North American theme park chains posted their financial performance results for the first three months of the year. Anticipation was high, the buzz was good and, for the most part, season pass sales were also looking good. All the parks were preparing to have a stellar year ahead.
After all, everyone was starting to feel like the world was finally on the other side of the COVID pandemic. Mask regulation were gone, and reservation systems previously put into place to limit park capacity were going to be a thing of the past. Everyone was hoping for a return to normalcy, provided that the next three months would perform as well as they had hoped.
They didn’t. Or rather, I should say that for most, things did not go quite as well as they had planned. Perhaps it was the soaring gas prices? Maybe it was inflation? How about the rising cost of necessary goods and basic necessities? How about ongoing and generally unexpected supply chain issues affecting both home and business needs? One might even be tempted to place some blame for various disruptions on the war in Ukraine.
In the end, perhaps it was just a combination of all these factors and more that caused the perfect storm.
Theme park performance so far
Dropping into some parks between May and 4 July I could see that in most locations, attendance did appear down. Even for parks that opened successfully earlier in the year to successful crowds levels, attendance at most parks just seemed a bit mild. The weather can always be a factor here, causing disruptions in one region but not another. Yet for the most part, about the only major trend I recall seeing was that the summer season got hotter a little sooner than expected in many locations.
As I said earlier, not everyone had issues to deal with. In particular, Disney and Universal theme parks reported having excellent results for the quarter.
Both of these theme park groups are part of larger multi-media empires, featuring various television, movie-studio, streaming, sports, merchandise and various other divisions all groups together. So, we rely on how they choose to present the performance data of each division in the company to the investors to determine how well the theme parks performed.
The big players
Comcast, the parent company of NBC/Universal, reported its Q2 2022 earnings on 28 July and was quick to tout the success of its theme park division. The presenters went on to say that the theme parks continued to show a successful recovery with revenue now up by a whopping 65% (to $1.8 billion) compared to the same quarter in 2021. They are seeing higher guest spending at both US theme parks as well as Universal Studios Japan.
On top of this, the parks reported having the highest earnings EBITDA on record for any quarter, increasing from $411 million to $632 million. Even better, attendance levels were now reported as being above what the parks saw in Q2 2019, prior to the pandemic.
Comcast’s stock price (CMCSA) did take a hit following the release of the report. But this was due to some performance issues elsewhere in the company.
The Walt Disney Company (DIS) released its Q3 2022 results on 10 August. Due to a different reporting system, this is essentially the same general time period as everyone else’s Q2 results. Disney was a little more restrictive about what information it shared. However, it did confirm that overall revenue was up 50% over the same quarter in 2021.
It also said that the demand for the theme parks was in excess of the self-imposed attendance caps. So, in other words, attendance at Disney’s theme parks could have been even higher if they had stopped using the reservation system put in place during COVID. Another indication of the theme parks’ performance is in the overall sales from Disney’s Parks, Experiences and Products Division. This is said to be a whopping $7.4 billion, up 70% from what it was in 2021.
Performance at regional theme parks
This is exactly the kind of success that I think everyone else had in mind for Q2 2022, building upon the initial success that many parks experienced during 2021.
Perhaps it was the fact that many of those planning big trips to Disney and Universal theme parks had booked them well in advance of the various issues that emerged later in the year. Meanwhile, the other park chains represent a more regional audience. For these parks, many visits are an impulse buy style decision, with little pre-planning.
Cedar Fair (FUN) reported its Q2 2022 results first on 3 August. For the most part, the news wasn’t half bad. Net Revenue was up to $509 million for the quarter. However, operating expenses were also up due to increases in the price of goods, as well as higher wages paid to ensure proper staffing levels.
Severe staffing issues were a major thorn in the side of Cedar Fair parks throughout the 2021 season. Therefore, it was good to see the problem addressed in 2022. Cedar Fair also managed to streamline or reduce a number of other costs for the year, which included not really adding much in the way of new attractions for the year. The few new attractions that did open were meant for 2020 or 2021 and were delayed by the pandemic.
Through it all, the company reported record revenue for the quarter. It was able to make significant strides in paying down debt levels. Cedar Fair even bought back a quarterly dividend payment to its unit holders for the first time in two years.
Guest PerCap spending levels had increased significantly. With a record number of new season passes sold (3.2 million) so far in 2022, the company is expecting a strong finish to the year with the popular Halloween and WinterFest events still to come.
The only major piece of bad news was that overall attendance was just 7.8 million guests for the quarter. This represents an 8% decline compared to the Q2 2019 pre-pandemic levels. In the end, the company price has remained fairly stable. It listed at $42.15 when the report was released and now sits at a slightly increased price of $42.90.
SeaWorld reports
SeaWorld Parks and Entertainment (SEAS) released its highly-anticipated results next on 5 Aug. Throughout the pandemic, the chain has received a lot of criticism for various reasons. This includes its extremely high turnover rates for upper executives – even including a few CEOs who came and went.
The chain also held back a large number of highly anticipated attractions that were meant to open way back in 2020. Many were delayed until the summer of 2022 despite the fact that they could have opened in 2021. The gamble seems to have paid off when it comes to theme park performance, however, as the company reported Net Revenues of $504.8 million for the quarter. This is up 14.8% from Q2 2021, and up 24.3% from its pre-pandemic performance in Q2 2019.
Guest spending PerCap was up a total of 6.4% vs Q2 2019 levels, with in-park spending in particular up 8.2%. Overall chain-wide attendance was 6.3 million, up 7.8% over Q2 2021, but down 3.1% from pre-pandemic Q2 2019 levels. The drop in attendance was clearly felt mostly in Q2, as it also pointed out that six-month attendance numbers for 2022 resulted in 9.7 million guests; up 20.5% over the first six months of 2021.
SEAS didn’t report making major strides in paying down debt levels this year. But it was able to repurchase 7.1 million shares of its own stock for $390.1 million during the quarter. The company also approved a future purchase of another $250 million stock to happen when it felt the pricing was right.
Much like Cedar Fair, the stock price has slightly increased since the report. It started out at $52.71 and is currently sitting at $53.49. A few investment reports have also pointed out that the company has been a huge win for long-term investment strategies. Those who purchased five years ago while the stock was still reeling from the Blackfish effect and held on all this time have been rewarded with seeing their share prices grow 308%.
It is also worth mentioning that the company is also under the influence of Hill Path Capital, LP. At the last report, Hill Path Capital holds 40.23% ownership in SEAS. Plus, its CEO, Scott Ross, also serving as the Chairman of the Board for SEAS.
A new tactic at Six Flags
For the regional theme parks, thus far the natural performance trend has been a decline in attendance, but one that is being offset by increases in guest spending from those who are still coming to the parks. So, it’s a bit ironic that Six Flags announced in its Q1 2022 report that the company was setting out to actually do just this very thing.
Six Flags felt that its parks were traditionally overcrowded to the detriment of the overall guest experience. Therefore, it set about making a plan that would cause a reduction in attendance of 10-15%. This meant removing a variety of passholder and membership benefits and perks, increasing ticket and pass pricing and cancelling the dining-plan option, as well as overall pricing increases, both at the gate and for items inside the parks.
One might say that Six Flags’ plans went a little too well. SIX released its Q2 2022 earnings report on 11 August, shocking many a stockholder by reporting a Net Revenue of $435 million. This is down 5% from its Q2 2021 performance figures. Attendance took the biggest wallop, dropping down to 6.7 million for the quarter. That is a staggering 22% decline from Q2 2021 attendance levels and 35% down from pre-pandemic Q2 2019 levels.
As planned, however, guest spending PerCap figures did go up overall by 23% compared to Q2 2021. This is due to a 27% rise in admissions spending and an 18% rise from in-park spending. The market took an immediate dislike to the performance. The stock price plunged nearly 23% from $25.81 at the start of the day to $19.91 by the end. Over the following days, the price mostly recovered the lost momentum and is sitting at $24.06 at this time.
Theme park performance: wait until next quarter
We don’t exactly know what tack Six Flags is going to take from this. The company has also been at the centre of a few controversies between then and now as well. This has included a social media movement asking for the CEO to step down. There have also been severe cutbacks at the park level that have resulted in cuts to operational hours. Plus, the chain has been closing certain attractions, or in some cases, entire lands full of rides, for the rest of the season.
At Six Flags Discovery Kingdom, the park apparently has certain days of the week where virtually every ride is not open. During these times, the park is offering its animal exhibits and shows as the only open attractions. There have also been reports of company-wide layoffs that included several upper executives and park presidents.
There is also the matter of comments from the CEO, Selim Bassoul. He who went on record to say that their parks had become “a cheap daycare center for teenagers during breaks and summers” for far too long. Bassoul also claimed that Six Flags wanted to upgrade the quality of its guests from “Walmart and K-Mart” shoppers to Target shoppers.
The impact of these colourful comments is interesting. On one side of the coin, the comments resulted in heavy social media backlash from existing guests and passholders. On the other side, these comments also seem to have resonated rather positively with some of Six Flags’ biggest investors.
Just days ago Six Flags’ majority investor, H Partners Management, purchased another half-million in company shares. This brings its total stake to 12.5%, in a show of support for the Six Flags CEO and his plans.
Cutbacks and safety incidents
In the meantime, those operational and staffing cutbacks might be about ready to bite the company in the rear end. A recent incident on Six Flags Great Adventure’s El Toro roller coaster has hit the media like an out-of-control wildfire. No official results have come from the investigation yet. But that hasn’t stopped the mainstream media from fanning the flames under social media conspiracy theories. Many are saying that staffing cutbacks and layoffs could be partially to blame.
As reported by the New York Post, employees at the park have shared concerns about the impacts of the cutbacks, in the wake of the accident: “a Reddit user who claimed to work in the maintenance department wrote that the company has been “going through a crazy staff shortage,” adding that “many of the team members working [at El Toro] were recently trained or don’t work the ride very often so they don’t [really] know the ride any more than how to operate it and what to do during breakdown procedures.”
In the below video, CBS New York speaks with a park employee who is familiar with the El Toro ride following the incident.
Looking ahead at future theme park performance, how the next quarter will turn out is anyone’s guess at this point. Especially where Six Flags is concerned.
