Six Flags reports August attendance growth, revenue decrease

GoBucks89:

Anyone visiting more than 5 times would result in no additional revenue after the 5th visit

I wasn’t clear. They would need to adjust the average gate per visitor, not the revenue realized. If I paid $100 for my pass, at 1 visit they’re recording $20 admission for the visit. If I attend 9 more times, that number drops to $10 per visit. But if I never visit again, because I’m a sucker, it goes to $100 per visit after the adjustment.

They don't need to look at it on an individual basis. Total revenue from admissions divided by number of visitors is admissions per cap. Total in-park revenues divided by number of visitors is in-park per cap.

I am not suggesting they have to look at it on an individual basis.

Assume Happyland has two customers, who both have an annual pass that they paid $100 for. One of them, Brutus, visits on the first of the month in May, June, July and August. The other, Scarlet, visits on the first day of May and finds that she has to wait in line behind Brutus, who bought his pass during the sale when it included the Waiting is for Little People upgrade for free. Annoyed, Scarlet never visits again.

On May 31, Happyland reports their per cap admission as $25, expecting 4 visits per passholder. On June 30, same. On July 31, same. They are still expecting Scarlet to make 3 more visits at that point.

The park closes for the year on August 30, because they can’t find help once The Happy State University reopens. On August 31, they again report their per caps. At that point, they recognize all the revenue from both passholders.

From a revenue perspective, August looks great! They record $100 in revenue for Brutus’s one actual visit, and the remainder of Scarlet’s pass value, since the season is over and the value of the pass has been exhausted.

From a per-cap perspective, which they have been reporting all along at $25, they now have a total of $200 in admission revenue over 5 visits, so their actual per cap is $40. So they have to adjust what they would have reported the day before.

super7*:
I emailed their client relations and they replied back that the season passes are recognized over the first five uses, one fifth at a time. It had to do with the average use of a season pass. I would assume if it was used less than five times it would be fully recognized at year end.

I wonder if this is different for season passes and "memberships" whereby with memberships you pay a little each month?

They aren't "adjusting" per caps from one reporting period to the next. They are calculating anew each time. Second quarter admission per cap is admission revenue for first 2 quarters divided by attendance for first two quarters. When reporting admission per cap for the third quarter, they do not start with second quarter per cap and make adjustments to it. They look at 3 quarters of admission revenue divided by 3 quarters of attendance.

In terms of memberships, footnote from Six Flags financial statements indicates that revenue from memberships is recognized on the same basis as non-membership, multi-use products (so based on an expected number of visits) for the first 12 months and thereafter its recognized on a straight-line basis (so amount of monthly payment in month 13 and beyond).

Your determination to correct me seems almost pathological at this point. Have fun.

PhantomTails:

The weather was godawful during the summer for most of the country. May and June were extremely wet and July and August were extremely hot.

Found the next board chairman!

Could you maybe integrate synergies into that statement as well?

In all fairness, it was unbearably hot for those few months. I postponed a few theme park trips during that time. I went to Hocking Hill State Park for the first time ever and it was too hot to go outside and enjoy the scenery. I recall people on social media saying that the parks were dead those days as well.

I was shocked that this time, it honestly seemed like it really was the weather.

The problem with blaming the weather for poor financial performance is that they don’t do anything to improve this. The high majority of the parks lack infrastructure and attractions to entertain guests comfortably in rainy conditions or extreme heat Plus, I think in recent years, they have trained their customers not to come on a questionable weather day because of the way they operate on those days In the past operations was better on those days

It’s just not a good business plan to depend on perfect weather to make money. if it’s not raining it’s too hot these days. And there are more comfortable entertainment options.

Add to that all the water rides closing over the last few decades.

super7*:

The high majority of the parks lack infrastructure and attractions to entertain guests comfortably in rainy conditions or extreme heat

Even if a seasonal amusement park built a larger than normal number of indoor attractions that is still not enough for the average customer to avoid going to a primarily outdoor attraction on a subpar weather day.

Can anyone name a park outside of Disney with a significant number of indoor attractions to get people out of the elements?

...and even then, you have to get between them. Epcot's attractions are nearly all indoors, but I've still melted into the pavement getting between them.

Universal and Nickelodeon Universe have plenty of indoor attractions as well.

The show parks (BGW, Dollywood, SDC) also obviously have more ways to avoid the weather.

This is an interesting deep dive into the 'downfall' of Six Flags...

Walt S:

I wonder if this is different for season passes and "memberships" whereby with memberships you pay a little each month?

The email that i sent was to Cedar Fair regarding season passes.

Since memberships are continuous until cancelled it would make sense if they recognized the revenue monthly Thats a guess

That video is really stretching the reputation issue. Something that happened in the 80's at Great Adventure doesn't matter at Great Adventure, let alone the rest of the chain. The Dragster accident I doubt has any real bearing on attendence either.

Sure, the guest quality is an issue, but not for reputation reasons, it's the spending habit of cheap people attracted by cheap passes.

Oh, and they apparently didn't see the Peanuts renewal. Nice animation, but not really the most informed thing.

Thank you for saving us the time of watching .. these long-format opinion pieces can be so light on substance.

hambone:

Assume Happyland has two customers, who both have an annual pass and yadda yadda...

I don't get it. I bought a pass, they have my money. Whether I go every day of the season or I die the day before the season starts, the net result is the same. They already have the money.

One of the goals of the accounting rules is to match expenses with the revenues they generate. Provides a better picture of the financial results of a company (and is a big part of accrual accounting rather than cash basis accounting). In the example above, assuming the 2 customers are the only customers for the season, both buy season, meal and drink passes in January, the park is only open in the second, third and part of the fourth quarters and the park has no expenses when its not open (trying to keep things simple). If the park only reports annual operating results, no real issue with taking the entire amounts paid for passes into income when each is purchased. Annual results will show full year of revenue and full year of expenses.

But parks also report quarterly financial results. For the first quarter, the park would recognize 100% of the revenue for the entire year (if 100% of pass receipts are entered as revenue when purchased) with $0 of expenses. Its net income for the first quarter would skew high. In the second quarter, the parks would have 100% of revenue for the year and 1 quarter of operating expenses. Net income still skews too high. Same is true of the third quarter financial results. It isn't until 4th quarter earnings are reported that an accurate picture of financial results is available.

To give a more accurate picture of financial results, the park doesn't recognize any income in the first quarter (the passes aren't being used because the park isn't open). Instead, the park records the full amount of the pass receipts as deferred revenue. During the operating season, the park recognizes income (per its formula for recognizing income with respect to season long products). The quarterly earnings releases better reflect the financial results of the park (revenues recognition and expense incurrence with be better matched).

On wrinkle to all of that are passes sold late in one season that are good for the rest of that season and all of the next season. Do not recall seeing anything in the financial statements of Cedar Fair/Six Flags that indicates how they treat those passes in terms of recognizing income. Is there an expected number of times they expect the passes to be used in the season purchased with the rest being allocated to the following season? Do they stick with the expected number of visits over the pass and use that across the two seasons? Given they have been selling passes late in one season good for rest of that season and all of the next for some period of time, the parks should have good data on the expected number of uses for each pass.