Cedar Fair attendance down at former Paramount Parks with elimination of comps

Posted Thursday, September 13, 2007 5:34 PM | Contributed by Jeff

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that combined 2007 revenues at its parks through September 3, 2007, were $828.4 million, on 18.5 million guest visits and average in-park per capita spending of $40.30. The 2007 results include the operations of the Paramount parks, which the company acquired from CBS on June 30, 2006.

On a same-park basis, excluding the effect of the newly acquired parks, total revenues through the Labor Day weekend were up 2%, or $7.8 million. The increase in same-park revenues is the result of a 5% increase in average in-park guest per capita spending to $39.54, offset somewhat by a 3% decrease in attendance, or approximately 319,000 visits. Out-of-park revenues on a same-park basis were up slightly through the Labor Day weekend.

Including results from the acquired parks, revenues for the month of August, including the Labor Day weekend, decreased 1%, or $2.6 million, from a year ago. The decrease in revenues for the month is attributable to a 5% decrease in attendance, or 315,000 visits, substantially offset by a 4% increase in average in-park per capita spending to $40.11. Out-of-park revenues during this same period increased 3%, or $573,000. The decrease in attendance and revenues during the month is primarily attributable to a significant decrease in complimentary tickets and season pass visits at the newly acquired parks.

“During the month of August we eliminated approximately 120,000 complimentary tickets that had been issued in prior years at the newly acquired parks,” said Dick Kinzel, Cedar Fair’s chairman, president and chief executive officer. “We also experienced a decrease of 110,000 visits from season passholders at the same parks, which resulted from increasing season pass prices at the new parks to bring them in line with the Cedar Fair pricing strategy. The resulting decrease in season pass visits, combined with the elimination of complimentary tickets, accounts for more than 70% of the year-over-year decrease in August attendance.

Read the press release from Cedar Fair.

Thursday, September 13, 2007 5:39 PM
I agree with the statement in the press release that they're trying to establish gate integrity at the new parks, but man, I don't think Wall Street will be OK with that.

The question is, what kind of revenue did those comp tickets bring in? If those 150,000 guests each spent forty bucks, well, you do the math.

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Thursday, September 13, 2007 6:02 PM
Yeah, I agree with you there.

But they seemed to hold their own quite well without them.

It'd be nice if they added the Bonus weekend back in November at KI, but I think those days are over.

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Thursday, September 13, 2007 6:17 PM
It might have been wiser to slowly phase out the comp tickets. What is done is done. Who knows though if those 150k more people would have spent even a dime in the park, after all they were comp tickets. They werent even paying for that.

I am not saying that they would not have but I am not sure that they would have contributed as much as one might think to the bottomline that would have offset the comps on the tickets in the first place.

If the ticket is $45 but they only spend $40 you are still losing $5 per cap by giving the gate away. In other words they may have spent $6 million but you still would have lost $750k due to the difference in the cost of the ticket versus the ammount they might have spent. By my math they saved that $750k by not having the comp tickets.

If Wall Street dont like this then I just see this as an opportunity to buy stocks in Cedar Fair at a discounted price.

edit: added more comment - *** This post was edited by beast7369 9/13/2007 6:19:42 PM ***

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Thursday, September 13, 2007 6:34 PM
There hurting themselves in the long run by doing this IMHO. The year Mantis was new, I went to CP and the ticket person called me MF for giving her a hundred dollar bill. All I got is "It will be taken care of sir, We hope you enjoy the rest of your day."

My visits have declined significantly as well as my view of CP since then, A comp or refund would have made me feel they truelly cared that I had a recieved such treatment.

PKI's attendance was down way more than three percent, This might be offset by PCW's and Carowinds but that lot's been empty compared to the recent past years.

Then again, Jeff and the crew there would be giving out comps for a ride braking down. Which is normal.

Chuck, who hopes it works for them, I did enjoy my day at KI this year. I hope it stays that way.

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Thursday, September 13, 2007 7:01 PM
Are you forgetting about Kings Dominion and Great America there?

Watching the parking lot is NOT a valid way of measuring attendance. Every time I've been there this year, the park has been very busy, and every day there's been a large amount of buses and cars parked in the Boomerang Bay lot.

There's no way attendance is down much here.

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Thursday, September 13, 2007 7:02 PM
It did not work very well for six flags. They can't even get people into there parks without a free ticket.

Even with a maxx pass, I still spend money in the parks....More so than I did before I had the pass.

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Thursday, September 13, 2007 7:29 PM
Kings Island's parking lot was full when I was down there for the AVP tournament. I'm sure the park is doing fine. Your baseless and anecdotal measurements are not an indication of how the park is doing, Chuck. This press release is. You make it sounds as if your distaste for the park is the reason attendance is down at all, which is not a good theory.

Ultimately, these results beg the question that Gonch asks frequently: If you get more on average out of fewer people, and the net revenue is higher, are you in a better place? I'd be OK with that if the results were out pacing inflation by a little more.

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Thursday, September 13, 2007 8:19 PM
I can't see how they're screwed 'for the long run' if they've already bit the bullet. Those programs are already gone, the wors has already happened and there's nowhere to go but up from here.

On the other hand...the numbers are a bit of a shell game. In and of themselves, they may account for 70% of the loss...but that's assuming each and every individual previously given a ticket never showed up. Didn't they say that they put other programs in their place on the last conference call? Either those programs were absolute and total failures or there's actually more to it than meets the eye. Can't have it both ways.

-'Playa

EDIT: Removed a redundant phrase*** This post was edited by CoastaPlaya 9/13/2007 8:20:53 PM ***

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Thursday, September 13, 2007 8:21 PM
Whatever Jeff. When every saturday in July and August cars are parked in the grass because all the lots are full (This year they weren't but maybe once. When your brother visits 17 times and his longest wait is 20 minutes for Firehawk. When I visited once and on the day after HWN A day which was normally pretty busy had everything walk on. When managers in the park tell you the last two years have been slower.

Well?? Im not saying there hurting, Im not saying it's all bad. I can see them handing out less comps like at No Coaster ect.

And whats my perception of the park? Didn't I say I had fun? It's CP I lost a lot of respect for when employees cuss at you and they say OH! Were sorry bout that but IT HAPPENS.

Chuck

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Thursday, September 13, 2007 8:58 PM
Parking lots and line length is not an accurate gauge of attendance.

There could be a lot of buses or full cars there. It could be a hot day when a lot of people are packed into the waterpark which leaves the ride lines shorter. The ride could have just come back up from a breakdown and hasn't had time to build up a line again.

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Thursday, September 13, 2007 9:03 PM
Did that one kid earning minimum wage seriously ruin your day?

Edited this out cause its exatly what pkidelirium said.

About the press release, those free tickets will end up coming back and paying full or coupon price pretty soon. I seriously doubt that the frebies resulted in the ticket price back in spending either.

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Thursday, September 13, 2007 9:36 PM
If the average per cap spending across the whole chain is around $40, you can't expect many people getting in on comp tickets and repeat season pass visitors to spend that amount once in the gate. Doesn't per cap in park revenue include admission too? If it doesn't, then I have no idea where CF is getting its numbers.

Here's another way to look at it, the acquired parks had 315,000 fewer visitors, but revenue decreased only $2.6m. That comes out to only $8.25 a person.

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Thursday, September 13, 2007 9:57 PM
To me, this is the interesting quote from Dick Kinzel (bold mine):

"As I have mentioned in the past, the 2007 operating season is a transition year for the Company. We continue to build integrity into our pricing structure and have been able to reduce our operating costs at the same time."

Two points:
1) 2007 is a transition year. Whatever they are doing they have not finished.
2) They are reducing costs.

Yeah revenue is down 1%. If they reduced costs by more their net income will be up. If not, they better hope that they transition to a more cost-effective model.Whatever they are doing seems to be working (to some degree) at CP, KBF, DP, VF, WOF, GL and MiA--total revenue at those parks were up 2%.

On the downside, they seem to have had good weather this year, so all other things being equal, attendance should be up this year. Since the "legacy" parks' attendance was down 3% in August despite favorable weather, either their plans really hurt attendance or weather is much less important than other factors.

Overall, when they aquired the Paramount Parks they said little affect on earnings until the 3rd year. I hope they are right.*** This post was edited by Captain Hawkeye 9/13/2007 10:01:54 PM ***
*** This post was edited by Captain Hawkeye 9/13/2007 10:04:01 PM ***

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Thursday, September 13, 2007 10:30 PM
I wonder how Great Wolf Lodge has done this year for the park.
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Thursday, September 13, 2007 11:22 PM
They extended the operating season at Canada's Wonderland. They are open every Saturday & Sunday for the rest of September and are open every Friday, Saturday & Sunday in October 'till the 30st.
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Thursday, September 13, 2007 11:34 PM
"When your brother visits 17 times and his longest wait is 20 minutes for Firehawk."

It’s not my desire to throw more gas on the fire here, but this statement really means nothing. My kids have been to KI over a dozen times each, on different visits, totally maybe 30 visits, and each time they waited 45-60 minutes for a ride on Firehawk. What does this tell me? Nothing. Anecdotal evidence is useless in these cases. It goes back to the “on any given Sunday” idea. On any given Sunday the Browns might beat Indy, but overall, it will be a while before they consistently beat anyone.

I do suspect that attendance will be down from last year. Why – the season was shorter. What the current numbers don’t reflect is that KI is sold out five of the next six operating days. I don’t know how they count those days attendance or per cap wise, or how many of the other parks have similar situations. But in any case, buying out the park for a day must require at least a guarantee of the same revenue that would have occurred when open to the public. Plus, per cap looks to be up $1.50+ per head.

If you take last year's attendance (which only had 6 months of PPI) as a gage, project out to this year with a 5% decrease in attendance, but also a decrease in operational expenses, I suspect that EBITA will be higher even when adjusted for only 6 months of PPI in 2006. The $1.50+ extra will make up the difference in lost attendance during the open days and the decrease in variable operational expenses during the shorter season will make up the rest. I am not a finance guru, but I remember enough of it to know that in a situation like this, a flat year (percentage wise) is an awesome thing.

The overall income will be higher. How much higher will depend on the Halloween events – if the Cincinnati area weather is indicative of what will happen, KI will be very busy this year. Now I am guilty of anecdotal evidence with that statement. :)

The odd thing about this discussion over the past 12+ months is that the overall rating of Cedar Fair has not changed. Wall Street varies between buy and hold, the same as before. Having debt is a good thing in business. It tells investors that you will be giving them something back rather than putting all profits in the business.

I know it sounds wrong, but business finance and personal finance are different. A person with no debt is a good thing, a business with no debt is either private and lucky, or public and asking to be the victim of a hostile takeover.

I don’t expect everyone to believe me on this. If you doubt it, or want more information about what I am talking about, do some research on leverage and debt/equity ratios. Too much debt bad, but too little debt bad too. Cedar Fair is on the too much side, but not too far.

For comparisson sake, if you look at SIX, FUN looks like prime rib and SIX looks like store brand SPAM. FUN debt/equity ratio 5.52 – SIX 15.88. Leverage FUN 7.6, SIX 19.4. (You can find any of this information on the internet.)

edited to put the paragraphs back - I hate cut and paste sometimes. *** This post was edited by CoasterDad64 9/13/2007 11:35:36 PM ***

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Thursday, September 13, 2007 11:47 PM
For a park that had no new attraction, and significantly reduced marketing, I can tell you that Wonderland's attendance did not suffer one bit. Wonderland didn't do nearly as many give-aways with thier season passes as the other parks did, but I would agree that thier season pass sales were slower for 2007.

Every single day I was at the park this year, I remember saying that I'd never in my years going there, seen it so busy. I used to stop into the park for a couple of hours on weekday nights and be able to get in several rides leading up to park close. This year, the park was still jammed during these nights. Daytimes and weekends? Same story. No wonder they extended the season, cash in on the high attendance wherever they can.

With Halloween events coming up at almost all the parks, I wouldn't count out the attendance drop yet. There may be a huge upswing on it's way.

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Friday, September 14, 2007 1:44 AM
Attendance down. Per Caps up. Transitional year.

At first I thought I accidentally clicked a link to a SF report. ;)

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Friday, September 14, 2007 8:07 AM
The only park in the country that I think can actually thrive on the "attendance down/per cap up" model is Discovery Cove (Sea World's exclusive park).

Otherwise, I still say they are going to have to right the ship eventually.

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