Cedar Fair net revenue up 2%, attendance up 1% in 2018

Posted Wednesday, February 13, 2019 9:27 AM | Contributed by Jeff

From the press release:

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today reported record net revenues for its full-year and fourth-quarter 2018 results. The Company also announced a new long-term Adjusted EBITDA growth target.

Highlights

  • The Company reported record full-year net revenues of $1.35 billion , up 2% from 2017.
  • Attendance at Cedar Fair's parks in 2018 was a record 25.9 million guests, a 1% increase from 2017; average in-park guest per capita spending in 2018 also increased 1%, to a record $47.69 .
  • Higher occupancy rates and average daily room rates at the Company’s resort properties contributed to the record out-of-park revenues of $152 million , a 6% increase from the prior year.
  • Continued demand for the Company’s award-winning Halloween events and the expansion of its WinterFest events in the fourth quarter of 2018 resulted in a 9% increase in net revenues over the prior-year quarter.
  • Sales to date on 2019 advance purchase commitments, including season passes, are up more than 25% from the same time last year, driven by expanded season pass offerings, a strong capital program and immersive new events scheduled to debut in 2019.
  • The Company announced new long-term growth initiatives and a 2023 Adjusted EBITDA 1 target of $575 million , representing a 4% CAGR over the next five years.

CEO Commentary

Cedar Fair President and CEO Richard A. Zimmerman said, “I am proud of our exceptional team and all that we accomplished in 2018. In particular, we ended the year strongly, achieving new highs in attendance and net revenues for both the fourth quarter and full year. Guests of all ages continue to delight in our immersive entertainment offerings including our Halloween Haunt and WinterFest celebrations. The success and expansion of these events has created momentum heading into 2019 as we are seeing strong sales activity in our advance purchase channels across all categories and all parks.

“As we look to the future, we remain committed to providing a compelling entertainment experience throughout the year for guests of all ages and we are confident we will entertain a record number of visitors again in 2019,” continued Zimmerman. “The FUNdamentals of our strategy are to broaden the guest experience through immersive new entertainment offerings that create urgency to visit our parks throughout the year; expand our season pass platform into a long-term relationship-based program to increase lifetime value for, and from, our guests; increase market penetration, particularly among the most attractive and growing audience segments within our markets; and pursue value-enhancing development opportunities adjacent to our parks. These initiatives will help us to achieve our new long-term Adjusted EBITDA goal of $575 million by 2023, and serve as the foundation for future growth well beyond the next five years.”

2018 Full-Year Results

For the full year ended Dec. 31, 2018 , Cedar Fair generated record net revenues of $1.35 billion , an increase of $27 million , or 2%, compared with the prior year. Driving this increase was a 1%, or 189,000-visit increase in attendance to a record 25.9 million visits; a 1%, or $0.39 , increase in average in-park guest per capita spending to a record $47.69 ; and a 6%, or $8 million , increase in out-of-park revenues to a record $152 million .

The Company attributes the increase in 2018 attendance to its strong second-half performance, including its successful Halloween Haunt and WinterFest events. Six of Cedar Fair’s 11 amusement parks remained open in November and December of 2018, and Canada’s Wonderland near Toronto will add WinterFest to its 2019 calendar of events.

Average in-park guest per capita spending improved as a result of increases in both pure in-park spending and non-season pass admissions pricing. The food and beverage category again led the increase in pure in-park spending driven by the continued growth and popularity of the parks’ all-season dining and beverage programs. This is a reflection of the Company’s focus on offering its guests a variety of culinary choices ranging from grab-and-go street fare to more uniquely branded menu items created by each park’s executive chef.

The 6% increase in out-of-park revenues was driven primarily from the Company’s resort accommodations. The increased revenues were the result of higher occupancy rates and average daily room rates, combined with a 158-room expansion to the historic Hotel Breakers located on Cedar Point’s mile-long beach. These gains more than offset the revenue lost with the removal of the 187-room Sandcastle Suites hotel at Cedar Point after the 2017 season.

Operating income for 2018 was $291 million , down 2% when compared with 2017. The 2% increase in revenues was offset by an increase of $30 million , or 3%, in operating costs to $892 million and an increase of $2 million , or 2%, in depreciation and amortization to $156 million. The increase in operating costs, which the Company anticipated, was largely attributable to increased labor costs due to increases in market and minimum wages and, to a lesser extent, increases in operating supplies for personnel-related costs and for the new WinterFest event at the Company’s Kings Dominion park in Virginia.

Interest expense for 2018 was comparable with the prior year. The net effect of swaps resulted in a $7 million charge to earnings for 2018 compared with an immaterial impact to earnings in 2017. The difference reflects changes in fair market value for these swaps. During 2018, the Company recognized a $1.1 million loss on early debt extinguishment in connection with amending its 2017 Credit Agreement, as compared with a $23.1 million loss on early debt extinguishment related to its debt refinancing in the first half of 2017. The Company also recognized a $36 million net charge to earnings for foreign currency losses compared with a $29 million net benefit to earnings for 2017. Both amounts primarily represent the re-measurement of the U.S. -dollar denominated debt held at the Company’s Canadian property from the applicable currency to the legal entity’s functional currency.

A $35 million provision for taxes was recorded for 2018 to account for the tax attributes of the Company’s corporate subsidiaries and publicly traded partnership taxes, compared with a $1 million provision for taxes in 2017. The increase in the 2018 tax provision relates primarily to the prior-year implementation of the 2017 Tax Cuts and Jobs Act.

Net income for full-year 2018 totaled $127 million , or $2.23 per diluted limited partner (LP) unit, compared with net income of $215 million, or $3.79 per diluted LP unit, in 2017.

Full-year Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, was $468 million , down 2%, or $11 million , when compared with last year. Adjusted EBITDA declined as attendance growth was more than offset by higher operating costs and expenses primarily attributable to planned seasonal labor rate increases. Although the Company reported record attendance in 2018, attendance growth was lower than anticipated due to disruptive weather patterns during the first half of the year and into the peak vacation month of July. This lower-than-anticipated attendance growth was partially offset by a record August and strong growth in the fourth quarter. See the attached table for a reconciliation of net income to Adjusted EBITDA.

Long-Term Outlook

Introducing the Company’s new long-term strategy Zimmerman stated, “Our mission is simple: To make people happy by providing fun, immersive and memorable experiences. Behind the scenes, our employees are dedicated to creating an experience so extraordinary that our guests want to return again and again, driving sustainable and highly profitable growth. This commitment is fundamental to our culture and will continue to be the foundation of our success.”

The Company is targeting $575 million in Adjusted EBITDA by 2023, which implies a 4% compound annual growth rate over the next five years. To achieve the Adjusted EBITDA target, Cedar Fair will focus on the four most compelling opportunities to accelerate its growth and profitability:

  • Broadening the guest experience - Leverage the Company’s management expertise and assets to offer a broader entertainment experience at a quality and scale no other regional entertainment venue can match.
  • Expanding the season pass program - Promote advance purchase commitments that create more consistent visitation patterns and reduce the impact of disruptive events such as bad weather. The Company’s season pass program will continue to evolve with a focus on affordability, retention and increased visitation.
  • Increasing market penetration through targeted marketing efforts - Utilize consumer and market research and data analytics to identify the most attractive and growing audience segments within its markets and determine the best communication and distribution channels for which to reach them.
  • Pursuing adjacent development - Expand the Company’s out-of-park revenue streams and maximize the value of its existing portfolio through further development adjacent to its parks.

“I am excited about our direction, optimistic about our growth potential and confident in our strategy. Our new long-term strategy will drive continued value creation through a balanced approach of investing in our business and returning capital to our unitholders through an attractive and growing distribution,” said Zimmerman.

Read the entire press release from Cedar Fair.

Thursday, February 14, 2019 1:57 PM

Many of you seem to be assuming that these visits are from open to close. Or that I will leave the park and drive for hours. Or that I'm doing this for credits. That's not the case. Since most nights will not have rooms booked until that day, I will have the freedom to leave parks when I feel like it, drive as far as I want after I leave and will do most of my driving in the morning. I have been to most of the parks on that trip and just happen to enjoy them or got a really good deal on admission.

While it was definitely more of a drain on me when I did a similar trip on my own, this trip will have a 25 year old, extremely eager coaster enthusiast with me who lives in Europe. He and I are very excited to do this trip and we won't have any Negative Nancys with us...lol. We already did an 18 day, 5,000 mile trip hitting 6 national parks, 2 amusement parks, many scenic spots and spent 10 days camping in the desert at Burning Man last summer. Now, THAT was a crazy, extreme but awesome trip. This amusement parks tour is going to be a walk in the park compared to the Burning Man Adventure. Not too boring for someone who turned 50 last summer. That is why I have to hang out with people half my age and even they have a hard time keeping up.

Last edited by zoug68, Thursday, February 14, 2019 2:02 PM
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Thursday, February 14, 2019 2:42 PM

It's not the grind of the theme park trip that I'm not on board with. It's that grind in the name of only hitting up theme parks and doing so at that quantity. I've been on plenty of vacations where I came home needing recovery days and sometimes that level of grind is what I need to unplug from reality (NYC in the summer and WDW trips come to mind). Now, the Burning Man/national park trip sounds like a lot of fun. Like many have said, to each his own.


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Thursday, February 14, 2019 2:50 PM

On a conference call with analysts yesterday, Zimmerman indicated that they may stretch the time between major new rides at some parks ("stretching the cadence of the more significant investments"). Noting that they can leverage Steel Vengeance and Fury for "many years in our marketing campaigns." Analysts expressed some concerns about what that means going forward to which Zimmerman responded "we are not walking away from those investments."

It isn't totally clear what those statements meant. Though they have to operate within the realities of owning (mostly) seasonal parks and parks in regions with differing growth rates.

BTW, I don't understand being critical of how someone else enjoys visiting parks. If it works for them, why do you care? Unless I suppose you live in fear that someone is doing it better than you or seek validation for your choices.

Last edited by GoBucks89, Thursday, February 14, 2019 2:53 PM
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Thursday, February 14, 2019 3:36 PM

I'm not trying to sound critical and more than one of us has said "to each his own". If I were that insecure about someone else's vacation choices, do you think I would post my own for scrutiny?


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Thursday, February 14, 2019 8:29 PM
Jeff's avatar

Horrified as enthusiasts might be, I don't find parks to be different enough in most cases to justify visiting more of them. This was especially true when I lived near Cedar Point (most of my life). There are a few with a lot of character, admittedly, but most aren't different enough to travel all over for, in my opinion at least.

I feel like Cedar Fair already spreads out their big cap ex projects at about the right timing, now that they've mostly caught up to have appropriate portfolios at most parks (Dominion still has kind of a weird collection of big rides). Clearly Michigan's Adventure and Worlds of Fun can go long periods without new rides. I wonder what happens now at places like Kings Island and Canada's Wonderland that are in big markets with really great rides established. When do you next spend $25 million on a ride just because it's marketable?


Jeff - Editor - CoasterBuzz.com - My Blog - Phrazy

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Thursday, February 14, 2019 9:48 PM

Touchdown said:

Im no longer about counts, and prefer to go to parks that have complete packages

I'm all about complete packages.

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Thursday, February 14, 2019 9:53 PM

Jeff said:

I wonder what happens now at places like Kings Island and Canada's Wonderland that are in big markets with really great rides established. When do you next spend $25 million on a ride just because it's marketable?

Well, for KI that's obviously 2020, but then that's already in the pipeline. After that who knows. Zimmerman's comments are paralleling other Cap Ex discussions in other sectors. It's almost like folks are hinting of a severe slowdown without actually calling it out.

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Friday, February 15, 2019 11:16 AM

Given the 2018 numbers and the uncertainty of what the economy will do under our current unsteady administration, I'd say there is nothing wrong with that approach.

I feel like one thing they need to figure out is how to at least shift a fraction of October guests to what has now become the very light pre-July 4 season.

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Monday, February 18, 2019 4:38 PM

If Cedar Fair doesn't fix their FL system, I will start going once per year starting in 2020 with the $45 ticket that includes parking, admission and a meal with a drink. At least with that deal, I won't feel like I'm being screwed out of my money as badly when they put 14 (58%) FL users on Steel Vengeance or fill up the front train on Dragster with them. I'm going to take the nearly $1,000 that it costs me to go to Cedar Fair parks and go to parks with better rides which I will get to ride more times per visit. I know I'm only one person, but, last year, I took 6 paying guests who only went because I took them.

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Monday, February 18, 2019 5:18 PM

You realize, of course, that without Fastlane those guests would have still likely been in line in front of you anyway. Unless the person at the merge point really doesn't know what they are doing, I have yet to feel inconvenienced at Cedar Point with Fastlane. And if I'm waiting 20 minutes for Raptor instead of 17 minutes because of Fastlane, then I get those 3 minutes back when I use mine every year when I renew.

The only place where I feel like the "skip the queue" system can make the regular line significantly longer is at Walt Disney World, where there can be times where only one group from the standby line passes the merge point every few minutes. Ironically, it's also the one place where the "skip the queue" system is free.

I'd also like to know how you spend $1,000 a year on visits to Cedar Fair parks (unless I am reading this wrong and that figure counts for more than one person). Rounding my Platinum Pass up to $200, I can't imagine I spend $800 on incidentals in the parks over the course of a season, which includes several visits to several parks.

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Tuesday, February 19, 2019 8:33 AM

Routinely I hear people say there will be an uptick in bankruptcies/workouts in the next 18-24 months (based at least in part of expectation of a recession). But I have heard the same thing for at least the last 5 years. I think playing the timing game in terms of predicting a recession is a fools' game. And making long term commercial decisions based on such predictions doesn't make a lot of sense. Though I don't think that is what is behind the Cedar Fair plans.

Any time a business makes a decision which is viewed to be in the best interests of that business, some people won't be happy. That such people exist does not mean the decision business decision is wrong; just that you can't please anyone. Businesses certainly can, and do, make mistakes and get it wrong. Sometimes what makes sense when implemented does not continue to make sense. But the parks have a lot more info than we do. Absent additional info, I go with the decisions the parks make as being well founded.

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Tuesday, February 19, 2019 10:33 AM
ApolloAndy's avatar

BrettV said:

The only place where I feel like the "skip the queue" system can make the regular line significantly longer is at Walt Disney World, where there can be times where only one group from the standby line passes the merge point every few minutes. Ironically, it's also the one place where the "skip the queue" system is free.

On busy days the ratio is 10:1 FP to SB. On slower days its 4:1.


Hobbes: "What's the point of attaching a number to everything you do?"
Calvin: "If your numbers go up, it means you're having more fun."

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Tuesday, February 19, 2019 11:49 AM

GoBucks89 said:

I think playing the timing game in terms of predicting a recession is a fools' game. And making long term commercial decisions based on such predictions doesn't make a lot of sense.

There are people literally employed to help make these predictions. No, they're not perfect, and they don't claim to be. But they use the current economic conditions and data to determine a short-, mid-, and long-term economic analysis. There's usually several scenarios generated, at the least "best-case", "worst-case", and "expected".

These most definitely should be used to make commercial decisions for a business. If not, you're reacting, which isn't a great strategy *at all*. Yes, there will always be surprises in corporate finance -- no one expects their CEO to go on a drug-fueled tirade -- but you should mitigate that as much as possible with your current strategies.

If CF is acknowledging a slowdown in their large coaster investments, it could signify one (or a couple) of the following (not an exhaustive list):

1) They're happy with their current portfolio and see no need to improve

2) They don't have or are worried about future access to available capital to invest in a new ride

3) They don't or are worried about the availability to pay any credit used to make the new investment

Suffice to say, CF didn't just put dozens of possibilities in a hat and draw one out. This decision was made on purpose and with reason, whether or not it was mentioned.

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Tuesday, February 19, 2019 12:24 PM

ApolloAndy said:

On busy days the ratio is 10:1 FP to SB. On slower days its 4:1.

When I was a Cast Member (back with the paper Fastpass tickets) we would have our ratios based on how backed up the Fastpass queue was. On a rare occasion (usually after a downtime) we would get a call saying not to allow standby in for 5 minutes. Those were always pleasant guest interactions.

I think the issue that has inflated wait times at WDW is the new system has created artificial demand for attractions that never utilized the legacy Fastpass tickets. People eating attractions like Pirates, Haunted Mansion, and Spaceship Earth now have to accommodate Fastpass+ guests, stopping the standby line when it never did in the past. This (to my best guest at least) is why on a "standard" day, these attractions now sport 30-40 minute waits when they would often be walk on/15 minutes in the past.

As for Cedar Point - the only attraction where it was noticeable was Steel Vengeance. If you were in line during Early Entry, you would notice a significant slowdown at 10am/11am when FL+ guests started merging in. But the thing to remember is that if you get in line at, say, 12pm, the number of FL+ guests going through would still have been in line without FL+

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Tuesday, February 19, 2019 2:06 PM

The execution of FastLane in 2018 was maddening to me. I don't necessarily take issue with paid line cutting, but this was definitely the first year that I felt like FL significantly impacted my experience.

On Millennium Force, there were times when the ratio of FastLane to standby guests being directed onto the ramp felt like Disney numbers. While this is a bit of an exaggeration if the Disney ratios mentioned above are true, but I do believe it was 1:1 if not slightly favoring FastLane. My wait from the closest queue "section" to the ramp ended up exceeding an hour without any operational delays; I recall 45 minute waits from all the way back to the vending machines before FastLane was a thing. (I believe the posted wait time was 30 minutes.)

On Steel Vengeance, each train seemed to have the same numbers: two cars for exit passes, two cars for FastLane, and two cars for the regular line. This made both the regular line and FastLane line move excruciatingly slow, and meant that standby shmucks like me made up a whopping 1/3 of total capacity.

While both my math and knowledge of economics are limited at best, I do recall one concept quite well: the supply and demand curve. If they are pricing FastLane at $130+ and are selling so many that the FastLane lines are huge, why don't they raise the price to decrease demand? The park would make the same amount of money, and the impact on guest satisfaction would have to exceed the few self-entitled people who can no longer afford to cut in line.

While it's true that reducing FastLane would lead to more people in the standby line, I disagree that everyone who currently uses FastLane would use the regular line should FL no longer be available. As part of my season pass renewal I get a free FastLane at the end of the year, which I used to get several rides on Steel Vengeance. As much as I like that ride, I'd never wait 2+ hours for it; the decrease in wait time afforded by FL essentially created artificial demand for me to ride, thus making the regular line even slower than it would have been had FastLane not been available to me.

Last edited by PhantomTails, Tuesday, February 19, 2019 2:09 PM
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Tuesday, February 19, 2019 3:06 PM

PhantomTails said:If they are pricing FastLane at $130+ and are selling so many that the FastLane lines are huge, why don't they raise the price to decrease demand? The park would make the same amount of money, and the impact on guest satisfaction would have to exceed the few self-entitled people who can no longer afford to cut in line

This exactly.

I always thought of this logic with say, drinks as well. Instead of selling 5,000 units per day at $4.50, if you can sell 14,000 units per day at $2... Why not?

I know they likely have done their research (you know, them bean counters are good as that), but makes you wonder what if...

Price Fastlane at say, $200 minimum... Sell less, but try to make just as much as you did before. Increase "normal guest' happiness by not making them feel like everybody else is cutting them and making them wait longer.

Last edited by SteveWoA, Tuesday, February 19, 2019 3:07 PM
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Tuesday, February 19, 2019 3:29 PM

I think enthusiasts tend to overstate the "normal guest" negative view of the impact of skip the line passes.

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Tuesday, February 19, 2019 5:34 PM
ApolloAndy's avatar

This was seen at Spaceship Earth and Pooh. The phases (colors) represent the busy-ness levels.

BrettV said:

I think the issue that has inflated wait times at WDW is the new system has created artificial demand for attractions that never utilized the legacy Fastpass tickets. People eating attractions like Pirates, Haunted Mansion, and Spaceship Earth now have to accommodate Fastpass+ guests, stopping the standby line when it never did in the past. This (to my best guest at least) is why on a "standard" day, these attractions now sport 30-40 minute waits when they would often be walk on/15 minutes in the past.

I can't tell if this is what you're saying, but there is definitely artificial demand for those rides. I never would have waited 15 minutes for Spaceship Earth, Figment, Pirates, Buzz, etc. etc. etc. but if I can use a FastPass...sure! Let's do them all!


Hobbes: "What's the point of attaching a number to everything you do?"
Calvin: "If your numbers go up, it means you're having more fun."

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Wednesday, February 20, 2019 12:20 AM

yawetag said:

There are people literally employed to help make these predictions.

There are people literally employed to help forecast the weather and to construct investment portfolios to beat the market. How much are you willing to bet on the 10 day forecast or that any given investment portfolio will beat the market this year or over the next 5 or 10 years?

No, they're not perfect, and they don't claim to be.

On the spectrum of not perfect to not very good, they are closer to not very good.

But they use the current economic conditions and data to determine a short-, mid-, and long-term economic analysis. There's usually several scenarios generated, at the least "best-case", "worst-case", and "expected".

10 days from today in Cleveland, it will either rain (worst-case) or if its cold enough, snow (expected) or be dry (best-case). Assuming you are planning to be in Cleveland that day, what will you do with that info?

These most definitely should be used to make commercial decisions for a business. If not, you're reacting, which isn't a great strategy *at all*.

In either the best case, worst case or expected (you can pick), a recession "will" happen in the next year. In terms of capex planning, what do you recommend for a regional amusement park? Delay for a year? What happens when that recession doesn't happen in 12 months? Delay another year? Capital planning typically is on 5 year cycle for the large regional parks. Average US recoveries in US last 5-6 years. By the averages, the current recovery should have ended 4-5 years ago. You may miss out on an entire capex cycle waiting to avoid the next downturn.

Yes, there will always be surprises in corporate finance -- no one expects their CEO to go on a drug-fueled tirade -- but you should mitigate that as much as possible with your current strategies.

So the only surprises in corporate finance are internal?

Suffice to say, CF didn't just put dozens of possibilities in a hat and draw one out.

Do you think someone here is suggesting that Cedar Fair put a dozen possibilities in a hat and drew one out? I don't think anyone would have suggested the Kinzel did that.

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Wednesday, February 20, 2019 8:47 AM

I can't tell if this is what you're saying, but there is definitely artificial demand for those rides. I never would have waited 15 minutes for Spaceship Earth, Figment, Pirates, Buzz, etc. etc. etc. but if I can use a FastPass...sure! Let's do them all!

The artificial demand (to me at least) comes from the fact that guests (myself included now) see an ability, therefore a need, to book a Fastpass for these attractions because it is available, which then fills up the hourly/daily Fastpass inventory, which then significantly slows the standby line down. When Fastpass wasn't an option on these attractions in the past, you could cruise through the constantly moving standby line. Even an attraction like Buzz Lightyear, which had Fastpass on the old system, didn't see a *ton* of Fastpass usage before because everyone arriving in the morning still had an equal shot at big ticket Fastpasses like Space, Splash, or Big Thunder Mountain. Now those attractions can sometimes have Fastpass inventory gone days ahead of time (and rides like Seven Dwarfs or Slinky Dog at the Studios are gone at the 30 day mark) so folks then gobble up Fastpasses for the C and D ticket stuff simply because they can, causing those standby lines to really suffer.

As a local (who has a pass again after taking a 2+ year break) I do like the fact that I can surf the app and book a Fastpass for Soain' or Tower of Terror for some random evenings, use them if I go and cancel them if I don't. But if I was from out of the area planning my once a year/decade/lifetime trip to WDW - or even looking to do a full park day as a local, I really don't think I would like the current system at all. But I know many others swear by it and think it's the best thing WDW has ever done. And there are definitely ways to still use it to your advantage.

edit: For someone who never has been to WDW or used the new system, imagine if Cedar Point had the ability to book 3 rides up to a month in advance. Cool, right? But when Steel Vengeance and Millennium Force run out of inventory days or weeks ahead of time, some folks will wind up having Blue Streak, Corkscrew, and Gemini as their 3 picks. Imagining the WDW ratios were in use, these three rides that typically sport shorter wait times even on moderately crowded days would suddenly see 30-40 minute standby wait times on a regular basis. Even if you got in early and got your 3 reservations for the big name rides, while you wait for your times everything else would have a significantly higher wait time.

Last edited by BrettV, Wednesday, February 20, 2019 8:50 AM
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