Debt load forced Cedar Fair's hand for sale

I should have specified Cedar Point for the attendance bit, although the continued reliance on per-cap says to me that attendance numbers weren't helpful/strong enough.In looking at the letter quickly - specifically attendance - that uptick is only because they went from 6 amusement parks (and 3 water parks, the ones next to/on the other park property I'm including with the park) to 12. Kings Island and CW added approx. 6 million on their own to the additional attendance, the rest of the Paramount chain added 4 million, or 1 million per park comparing 05 to 08. If you take the attendance over the 18 total properties for 2008 it comes out to about 1.26 million per park. For 05, the attendance over the 12 properties comes out to 1.06. So the addition of the Paramount Parks and additions across the chain have resulted in a roughly 200,000 person attendance increase per property over 3 years.

Compare that to 99-02. In 99 the average attendance per park was about 933,333. In 02 it was approx. 1.03 million. It increased about 100,000 per park with a little less than half of the parks to draw in more visitors and diversify their regional issues compared to 05-08. And just to include the entire range from 99-08, from 02-05 saw an increase of just about 28,000 per park.However, once again, you added two parks to the chain that on their own increased attendance by roughly 50%.

Almost doubling the size of the company and just doubling the already stable (aka stagnant) attendance numbers doesn't look much like growth to me. Of course, the real telling numbers will come over the next two seasons. Has attendance grown, or has it still remained flat? From what I observed and know about Cedar Point, and the reliance on that area of the country (KI, CP, and CW are responsible for approx. 9 million of the total attendance), I would confidently guess that the answer is that attendance will have been mostly flat overall.

As for operations and such, maybe working at the park played a factor in that decision. Certainly knowing how much position cutting was happening, when it was happening, and how permanent or not it was plays a part in my judgment of things.Food has also had a lot of negative discussion for a while on PointBuzz, and I've heard it here as well, so I don't think its just me saying that food has gone downhill. There seems to be a similar growing sentiment about the entertainment as well. And while all of this is largely contained to Cedar Point, the way that they tried to treat all the other parks like Cedar Point leads me to believe that things are similar across the board (they certainly are at KI).

For Carrie's last question: CBS/Viacom just didn't want to be in the park business anymore, from what I gathered. Just like GE was looking to get out of Universal's operation, so Blackstone stepped in and took half of Universal.

Carrie M. said:
There's just no way to determine that if the credit market weren't bad they wouldn't be able to recover from/correct those bad decisions and be successful OR that had those decisions not been made they would have been able to weather this bad credit market without an issue. That's all I'm trying to say.

And that's where I disagree. There are many examples we've discussed that had a negative impact on the parks, starting that first year when they mangled the season pass sale strategy.

Incidentally, why were PP being sold when they were yielding so well for CBS and Viacom before that? I'm just curious. It doesn't sound like it was a good decision to sell them given they were doing so well.

CBS didn't feel the parks were part of their core business, and they also felt it hurt the stock price because it was a non-growth business. The great irony is that Viacom spun off CBS because it viewed all of those units as non-growth. Go figure.

Well, no, I'm not disagreeing that the decisions discussed here have had a negative impact on the parks. But how do we really know the impact they've had on long-term financial success?

How much revenue was lost that first year due to the season pass sales strategy? Did they make up for it when they realized the mistake? Would they have continued to regain those sales over the next few years if the refinancing of the debt wasn't an issue?

That's one example, and I'll say again that I don't think it was any one thing, but the aggregate. The annual report or conference call or something after that first year said that they weren't able to "realize cost efficiencies" or some such nonsense. Translation: "We paid what we did because we banked on the idea that we could trim the fat, but there either wasn't fat, the fat (i.e., talent) contributed heavily toward profit and success, or the WWCPD approach failed miserably." I tend to think it was a combination of all of those things.

And that attitude about the old school Cedar Fair people knowing better was hammered home at all levels. Internal people transferring to the Paramount properties were practically brainwashed into thinking that there was nothing of value, from a business execution perspective, in the new parks. People who remained from PP were given the clear signal that Sandusky knew better than them. It was a culture mesh failure of epic proportions.

And I'm not saying that some things changed didn't make sense. That they had an internal video production unit, small as it may have been, seemed like a luxury expense. And against all odds, Gate Central did make its way around the company (and from what I hear, that was hard to sell to the old regime).

Still, there are a hundred stories among long-gone PP folk about how their programs and actions were proven winners from an ROI and general execution perspective, that were dismissed because they weren't how things were done at Cedar Fair. I believe that if these people and programs that were contributing to the bottom line weren't eliminated, they'd stand a fighting chance to meet their debt obligations, even in a soft economy. There was no strategic vision or acceptance of anything out of PP aside from Gate Central, and even then, I think the only thing that made it through was the notoriously awful pass processing and the need to join systems across parks in the same region.

Remember when the price of gasoline hit $4.00 a gallon? That was the straw that broke the camel's back and sent the park attendance into a tail spin and the economy with it.

Excellent point, Trackwalker. We've recovered somewhat from that, but $2.50-$3/gallon is still awfully expensive compared to the $1.50 before that shock hit.

Funny thing, apparently Gate Central made it through, I still felt like I was playing 'platinum pass roulette' every time I approached a Cedar Fair gate last summer...!

--Dave Althoff, Jr.

I had a discussion with some people in a Cedar Fair marketing department right after Cedar Fair purchased paramount parks. They were amazed at how much nicer and more expensive the marketing tools that PP used. Of course, CF made all those budget cuts to the PP parks so all of a sudden a lot of their nicer items got slashed so that much I can agree with what folks were saying. So small budget cuts were defiantly found but not enough to make what they expected.

Anyone catch Dilbert the other day? :)