Cedar Fair reports net loss of $590 million in 2020

Is that a new official sign? I haven't seen that used on here before.

And seriously, I could go buy several Ferraris right now. Its not that I have been priced out, its just that I don't see the value in it as compared to having a house and food and retirement.

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Shades said:

In this situation I think there is no argument that if Disney charged the same $100 to get into a park with a capped capacity of 35% as they do with no reduction in capacity we would all sign up for that. But that is not going to happen - the price will go up to get that exclusivity. Will people pay $1 more, $2, $200, $2,000? At some point you get priced out whether that is because you simply cannot afford it or you don't see the value in it.

Well, there's kind of two questions here. One is a "private party" scenario which, other than actual private parties, I don't think parks have really tried. Would there be a market for limited capacity, "First Friday" events at, let's say, 3x the regular ticket price? Maybe, but it seems like a tough marketing challenge, and I wouldn't want to be the guy in Marketing who championed First Fridays and had 400 people show up. Disney might be able to do it but I doubt Cedar Fair can.

The other question is about whether it makes sense to sell season passes that some folks will use every week at roughly 2x the single-day ticket price (or less!) That price point makes no sense to me at all. Giving away the gate and making it up by selling front of the line passes makes even less sense. They're essentially selling the same experience at the same price, only more complicated and worsening the experience for the people paying the most. (And the front of the line pass doesn't help at the taco stand or just walking around crowded midways.)

Surely the sweet spot for pass pricing is somewhat above what the typical repeat customer would pay in a year's worth of visits. If that person would usually visit three times a year at $60 a visit, then the pass should be somewhere north of $200 I'd say. Six Flags and Cedar Fair are nowhere near that right now.

Yes, that last part! I remember just before the turn of the century, I would calculate my ROI based on the number of visits at the regular gate price to break even. I seem to recall a Cedar Point pass, plus the parking pass, was about four visits, and I would characterize those as "all day" since that's what you do on a day ticket. Four hours in an evening would count as a half-day at best.

Right now you're looking at 2.5 visits, if you scored the $100 gold pass (and I think their $40 day ticket is low by a few dollars). If the average number of visits per passholder is 4 or more, yikes, that feels like leaving a lot of money off the table. The balance seems out of whack.

I am not sure a dive into the results indicates their decision to give away the gates only through season passes only at one (albeit their largest park) is biting them in the ass overall as a company. I actually think they had a lot of room to absorb additional volume at Cedar Point. Through the mid-2000's and early 2010's at the tail-end of the Kinzel era, they couldn't drive volume if they tried and solely relied on squeezing higher per caps which didn't work.

In a year of a pandemic with no capital investment and very limited park ops and virtually no group business and the open parks reliant on season pass base particularly Kings Island, season pass visits as a percentage of overall attendance only increased from 52% in 2019 to 61% in 2020. I would have guessed 6 months ago, it would have increase substantially more. Even with that increase and giving away the season pass at Cedar Point, per capita spend only decreased 4% - from $48.32 to $46.38, which the significant driver to that decrease was the lack of premium product sales like Fast Lane in 2020. Even more surprisingly, with increase season pass visitation, they were able to drive substantial F&B and merchandise & games per capita spend - up 14%..... and were able to drive admission per cap on non-season pass up 7%.

If you are able to drive volume substantially.... while only decreasing overall per cap 4% with no premium products like Fast Lane, increase F&B and merchandise per cap spend by 14% and non-season pass admission per cap by 7% - I think you take that all day.

Of course then there's people like me who bought platinum passes for my family at somewhere around $200 each, bought a couple meal plans at $130 or whatever it was, a couple drink plans at $30, and only went to the park one weekend, bought a couple shirts, bought John Hildebrandt's book, etc. So my family's per capita spending was through the roof this year compared to any other year. I suspect there are a lot of others like me that skew that number way higher despite their stupid gold passes - at least this year. I didn't feel too awful about not getting much use out of them this year since they made the passes good for next year and with all the safety measures, half capacity, masks, etc just didn't sound fun to me even if they were the right thing to do.

We'll probably need an accountant to explain how they calculate per capita spending next year when most of the season pass visits contribute $0 to the numerator. Or did they already account for that with their number this year (kind of doesn't seem like it)?

Selling all those gold passes may have enabled them to borrow less money to make it through this mess of a year in better shape. But I still agree that it's going to be a rough ride the next few years financially at CF.

The defer a portion of the price of a pass and recognize it as income over the time period the pass can be used. In this earnings release they noted that deferred revenues at 12/31/2020 were $194 million which was up $33 million from 12/31/2019. CF's annual statements describe how they defer/recognize revenue related to passes. Based on historical average uses. Not sure what they did this year in terms of that though. May include a description of what they did in 2020 with the annual report.

I have to wonder to what degree the whole 'cheap gold pass' promo at Cedar Point was a change in strategy versus a 'stunt'. It's no secret that they've been having some attendance issues of late, some of that brought on by perceived value issues, many of which have been addressed...but fixing the problems that chased your audience away won't bring them back in the gate. The 150th season promotion gave them a great opportunity to pack the park for a season and try to win back some of those...maybe not lost, but perhaps 'misplaced' customers. Traditionally the season pass has been about the price of three gate admissions, and that seems reasonable...although that value gets reduced a little by the fact that they do aggressively discount the gate admission. Somehow a $80 ticket at $25 off is a better deal than a $60 ticket at $5 off.

Of course with 2020 doing what it did, everything is kind of messed up, but my expectation has always been that the next time they offer a gold pass (presumably for 2022 at this point...) the price is going to be a lot more reasonable (=expensive) that it was in 2019. After all, I didn't get a discount like that on my platinum pass (which I didn't use at all in 2020)...

The point is, I don't think we're going to see Cedar Fair, Cedar Point in particular, completely give up on the integrity of their pricing; I'm pretty sure the crazy-cheap passes they sold in 2019 was a calculated stunt that from the beginning I doubt they are planning to repeat.

--Dave Althoff, Jr.

^ Correct. The gold passes for 2021 are back up to $129, platinum passes are $202.

The risk for Cedar Fair financially is not their season pass pricing 1 year at 1 park, particularly at a park they needed to drive volume - especially if you can meaningfully drive volume while only drop overall per cap spend by 4% with no premium product offerings - and drive 14% F&B/merchandise per spend spend and 7% non-season pass admission spend.... you take that all day.

The risk for Cedar Fair financially is their decision to buy the land under Great America for $150M in June 2019, virtually all financed by debt. They did it so they can post EBITDA gains as the rent paid to Santa Clara was a pre-EBITDA expense. And interest expense is not included in EBITDA calculation. I've never understood that decision other than artificially making the EBITDA number look a heck of a lot better. To a lesser extent, the debt taken on to acquire two seemingly inconsequential waterparks in Texas. Cedar Fair's interest expense increased 51% this year - from $100M in 2019 to $151M in 2020. And fully understanding they did what they had to do this year to have cash on hand, their debt did increase from $2.15B to $2.95B as of 12/31/20.

$129 still strikes me as low, at least for Cedar Point. Maybe not some of the others. But what do I know. But I'll grant it's higher than Six Flags where my season pass, including all parks, waterparks, and parking, is about $100 a year. (Due to some combination of laziness and optimism I am still paying on it monthly. It's complicated.)

Surely the purchase of the Great America land was about more than accounting tricks? That might have been a significant factor, but it seems to me they were basically at the point where they had to decide if they were in business at that location or not.

When they bought the Great America land, Cedar Fair issued $500 million of 5.25% notes. $150 million (for the land purchase) at 5.25% is about $7.9/year in interest. At the time they were paying $6-7 million/year in rent. So the rent versus interest is about a wash. EBITDA addback for interest helps but I don't see a $500 Million EBITDA company letting that be the deciding factor.

As they pay down the notes, interest/year will decrease. After 10 years, there is no more interest. Rent increases over time and runs to the horizon.

The biggest risk at that time was buying the water parks. Cost of Schlitterbahn was $260 million. Given the relative purchase prices, the water park had a bigger impact in the EBITDA interest addback. Water park interest is about $13.5 million/year.

In terms of the overall increase in interest expense in 2020, the company noted:

Interest expense for 2020 was $151 million, up from $100 million in 2019, due primarily to incremental interest incurred on the Company’s 2025 senior secured notes issued in April 2020, its 2028 senior unsecured notes issued in October 2020, and the 2029 senior notes issued in late June 2019.

April issuance was $1 billion at 5.5%. Half years interest on that is about $27 million. October issuance as $300 million at 6.5%. 3 months interest on that was about $5 million. As you note, those were issued for liquidity purposes.

Chicago07 said:

If you are able to drive volume substantially....

But that's just it, volume has limits. Hildebrandt talks about this in his book. Economy aside, the biggest two levers for volume are weather and the ability to market a unique, big deal attraction. The weather you can't control, so that's a roll of the dice. The big capex you can't do every year, and few projects really deliver the bodies like the most enormous of coasters.

To Matt's point, maybe you can mitigate this to an extent with packages/subscriptions as spending commitments, but then you have to get the math right to make sure you don't trash the integrity of your margins.

As I said, we've seen this movie before, and it didn't end well for Six Flags. I generally feel like Cedar Fair has a good team in place, but what they're attempting feels more derivative than innovative. I'd much rather see the Holiday World approach, which "feels" better as a consumer anyway: Jack up the gate, a sure, predictable thing, and then give me "free" soda or something. Your gate becomes more predictable and customers feel like they're getting something for nothing. That has worked out exceptionally well for them.

I noticed the Cedar Point 2021 calendar was published today. 11am openings now instead of 10am. Weekday operations only run from Memorial Day thru the second week of August. Seven day a week 10pm closures only go for about six weeks. It's a noticeable change.

Sound like they are finally acknowledging their staffing shortfall in late August. It was always a big challenge to keep the park operating those last two weeks and the limited staff they had on hand was worked like dogs. I suspect this will be welcome, at least to the employees.

It’s like the schedule of the 60’s. When I was a kid the park opened on Memorial Day weekend and closed on Labor Day. (Ok, Boomer...)
And truthfully, this schedule puts it more in line with many other parks in the country. As we travel we find parks that open late morning and close mid evening. Even Disney and Universal have days with what I would consider short hours, especially in the “off” season.
The haven’t checked the CP fans sites, but I can imagine this news isn’t going over well. And I can assure you the unhappy group includes the many that complained whenever rides weren’t ready to open by 9A.

Even in the best of times, Universal's hours suck some parts of the year. 6pm closings make it impossible to go during the week if you have a day job.

I also feel like the strategy is to try and reduce costs during the "off season" (in CP's case, May and June) and then go into spending mode for Halloween season.

And yes, the UO offseason hours suck. Even an 8pm close would be nice

CP calendar now says 10am openings. Presumably just a mistake rather than change?

That would be my assumption. And I imagine further adjustments are on the way...a 10pm close on Independence Day? I suspect there will be adjustments.

I still say, I think opening and closing later has certain benefits. Mostly because nighttime is magical at most parks, but also because staying open later could drive resort stays. Nothing to do with the fact that I generally hate mornings anyway and rarely get to my local parks before Noon.....!

--Dave Althoff, Jr.

If the park is trying to get people to pay more for a more premium experience, then I'm baffled by the $99 gold pass. For me, the extra $60 ($80?) the platinum pass was over the standard Cedar Point pass was worth the extra cost simply for parking and the hour of early entry. Then comes the $99 gold pass. Now, the only advantage at Cedar Point that the platinum pass has is an extra half hour of early entry. Additionally, the hour platinum pass and resort guests have is devalued a bit with more people in the park. I have some recollection they were going to change early entry somewhat, but then COVID hit.