Opinion: The Cedar Fair and Six Flags merger implications

[This is a repost from my personal blog, and as an observer of this business for two decades plus, I think it's relatively informed, if not necessarily accurate.]

Thursday, Six Flags and Cedar Fair announced a merger agreement. I've had a few folks ask me about it since then, and what I think. I've been kind of doing drive-by posts about it on CoasterBuzz and PointBuzz, but I haven't really offered any fully formed opinion, maybe because I don't have one. But let me put something together here, and see if it makes sense.

It's helpful to talk about the two companies individually first. Six Flags, under the leadership of Selim Bassoul, has been a constant train wreck. He eliminated huge parts of the corporate staff, and I've heard he micromanages the GM's at the parks. It's absurd how many direct reports that he has. He has pursued a race to the bottom for gate pricing when there was no one else in the race. He said he wanted to upgrade the customer base from "Wal-Mart" to "Target," but the long-term pricing around annual passes has not really embraced that idea. Attendance, income, revenue and margin has been in free fall. I don't think he knows what the **** he's doing.

On the Cedar Fair side, the observations are more nuanced. They're not completely bad, but they're not good either. Richard Zimmerman as the successor to Matt Ouimet has been a mixed bag. Admittedly, I've always had a professional crush on Ouimet, in no small part because I had an unusual amount of access to him for a few years. A lengthy conversation that we had in the middle of Cedar Point's Gatekeeper media day had a profound effect on how I look at career, money and goal setting. Almost no one, professionally, has had that kind of impact, and that's not even counting the half-day I spent interviewing him, or his invitation to a roller coaster factory, or random interactions on the midway.

Matt resigned from the board a few months ago, shortly after renewing his three-year term. It's not hard to imagine why that happened (and to be clear, I have zero first-hand understanding why). I don't think he was a fan of this merger. If he was, unless there was some personal reason we'll never know about, he would have stuck around. But there are other clues there too. Operations at the parks, the process of servicing guests by way of fast ride loading, "streetmosphere," and peripheral soft touches that improve the experience, have all disappeared since his departure as CEO. I visited Cedar Point spring last year, and it was disappointing, especially in ride operations. On the flip side, the entire culinary operation was next level, so it's reasonable to assume that the good parts are where the strongest personalities lie. No joke, they're killing it in a way that's akin to the Busch (SeaWorld) parks in the early aughts. The summary judgment is that the trust and empowerment that Ouimet instilled has diminished, and the park GM's are largely order takers from the corporate level. They've also sort of pursued an unnecessarily cheap run at annual passes in the hope of making it up on in-park spending. The real result has been a drop in both attendance and per capita spending. It's not as bad as Six Flags, but it ain't good. The reason that's so disappointing is that we've seen this movie before, in the pre-bankruptcy Six Flags under Dan Snyder. The Kieran Burke era of Six Flags was great by comparison.

So really we're left with speculation about what the future might look like. If there's a positive, it's that the Cedar Fair people are going to lead the new company. Bassoul will be executive chair, but he's not going to have real influence on day-to-day. Some other Six Flags guy will be the "chief integration officer," but he doesn't know **** about what CF has in place (generally solid ERP, retail and ticketing systems), so he'll be more nuisance than anything for a year or two before he's tossed out. I don't imagine that he can do too much damage when Zimmerman is his boss.

The potential negatives, and what I suspect are the reason that enthusiasts are not enthusiastic about, are as follows:

• The CF execs might be in charge, but they've been looking at the world as transactional. I mean, the press release about the merger refers to guests as "consumers." If you don't see them as "guests" in the context of a hospitality business, you're already doing it wrong.
• The gate integrity thing hasn't been as bad on the CF side as it was in SF, but I'm not sure if they've actually learned anything from it. In the history of amusement parks and theme parks, giving away the gate and hoping to make it up on per cap spending never works. And why would it? If you're looking for people who want a break on getting in, why do you think they'd spend more once inside? The big themers, Disney, Universal and SeaWorld are certainly not operating this way. Don't race to the bottom when no one else is even in the ****ing race.
• The soft "experiential" parts to operating amusement parks are the things that make you love them. This means adequate staffing operations to get people on and off attractions quickly. It's the random street performers, resort experiences and entertainment that you're not expecting, but enjoy. It's the random employee that makes your visit better when you don't expect it. The cost cutting of existing Cedar Fair execs kills all of that, and the press release suggests that there's an absurd billion and a half to realize by combining the companies. Mark my words, because I will say "I told you so," that savings does not exist.
• My contacts in the company suggest that Cedar Fair has reverted to a world of micromanagement. The empowerment that Ouimet enabled is gone. GM's are order takers. It might be a billion-dollar corporation, but the markets that each park operate in are different in terms of culture, demographics, income, etc. You can't simply apply one paradigm from a park to others. Former CEO Dick Kinzel did this to disastrous effect after the Paramount acquistion. Furthermore, you don't want to chase out the people who "get it" and can make day to day decisions on the fly, in context to their market. The Zimmerman tenure appears to have done just that.

On the surface, what I'm really saying is that the overall Cedar Fair operation is superior to the Six Flags operation, and it's clear from the press release that it's the CF side that's really going to run things in the combined company. But the foundations of that Cedar Fair management are not where they should be.

Here's my overall take on the hospitality business, specifically with theme parks. There is no direct, same-industry competition, for the most part. But you will absolutely compete with a hundred other things, whether it be sports events, Taylor Swift, movies, mini-golf... whatever. To that end, it's your product that attracts people, and more importantly, keeps them coming back every year for the important recurring revenue. (ARR is clearly not a consideration in this industry.) If the product does not instill happy happy joy joy feelings, there is no recurring revenue. You lose to the non-industry competition. It doesn't come for free. You may take a hit to your margin to staff the things that instill those feelings, but you don't actually have a choice. Demanding a premium price requires delivering a premium experience that you can't get elsewhere. And let's be clear... your total addressable market doesn't change. Heck, in most markets it's shrinking, not expanding, as people move to warmer climates.

Disclosure: I own 10 shares of Six Flags, which are down 46% since I bought them. I bought them in the emergence of the pandemic, feeling they would likely improve (same for some cruise stocks and Disney, but they're all under by about the same amount... buy index and mutual funds, kids!). Disney, NBCUniversal and SeaWorld Parks seem to have all done the right things post-Covid, but the two biggest regionals, Six Flags and Cedar Fair, have not.

Thanks for taking the time to write this. I appreciate your perspective. One point of follow up:

Jeff:

the press release about the merger refers to guests as "consumers." If you don't see them as "guests" in the context of a hospitality business, you're already doing it wrong.

A day ago, I posted this in the main thread and you "liked" my post:

Anyone who refers to guests as "consumers" doesn't understand the hospitality industry or the experience economy.

We all get influenced by other things we read, and stuff buried deep in our brains often emerges disguised as original thinking. I get that and empathize. At the same time, it doesn't feel great to see my words under your name without any reference or attribution. Even a generic one (e.g. "As someone said...") would suffice in settling my uneasiness.

Hope this doesn't come across like I want credit; I truly don't. Yes, I like knowing my tiny observation had some meaning and value for others. But more importantly, I like having a place to freely share random thoughts about the industry in conversation with thoughtful readers (as opposed to shouting hot noise in search of likes, retweets and eyeballs from the masses). Acknowledging those community members would help reinforce that, I think.

Anyway, thanks again for sharing your take. I enjoyed reading it and your thoughts will undoubtedly shape my perception about this merger. Peace.

It does come off a little... weird. I've been watching this industry for more than two decades, worked in it briefly, been deeply influenced by people who did and still work in it. It's hardly a novel idea. Furthermore, as someone who has worked for Internet companies just as long, I have always been uncomfortable with the way humans can be reduced to product, especially since it's the thing that has ruined the potential of independent publishers to thrive on the Internet.

So, sure, yes, you said it yesterday. You win, credit to you.

I want to believe this merger will deliver an overall improvement to the park experience at both parks chains. That the challenging economic climate ahead will force them to listen to their consumers to ensure loyalty and a return trip. But we've seen examples of bad decision making that hurt an organization, even when the right answer is obvious.

Jeff, I've read a few of your posts now and it seems like the reason there was something of an improvement over the Ouimet era is that he actually focused on the people in the region the park was in. What we love about Cedar Point in Ohio isn't what folks love about Carowinds in North Carolina. I think you told a story about a potential switch from Knott's Berry Farm to just Knott's. I'm hoping they aren't going to attempt a McDonalds method of making all the parks mostly the same experience no matter location. They should continue that higher level of listening to local markets.

I brought up my reaction to something in an earnest, non-accusatory, and respectful way. You responded in a defensive, dismissive, and sarcastic way.

For anyone looking to learn from this, a simple acknowledgement would have been fine:

“Yeah, I could see why you feel that way. I get input from a lot of places, including Coasterbuzz.”

Done.

I realize nobody comes here for drama and I don’t want to add to it, so I’ll let my comment speak for itself and head for the high road.

I'm old enough to remember the merger of the New York Central and Pennsylvania Railroads. All the business school grads that instigated it said that this was going to be the wave of the future. A few years later the whole shebang filed for bankruptcy, with the taxpayer having to sort out the the mess with the formation of ConRail. The bankers that were calling the shots were quickly over their heads. Not saying that this is a similar situation, but when there are mergers of this size the end results can be iffy.

Solid perspective, Jeff. From my experience, Matt Ouimet had a way of making you feel valued and appreciated, so I understand your take on him. You’re spot on!

Jephry:

...the challenging economic climate ahead...

I see this sentiment all of the time, in future and present context. Where does it come from? Inflation is cooling, and is still outpaced by wage growth. Unemployment hasn't been this consistently low since the 60's. The economy can't grow at this rate forever, but it doesn't mean that it's going to suddenly start shrinking. Interest rates are annoying, but the Fed has probably made the right choice keeping them high to reduce inflation. Everyone keeps bracing for the worst, but I don't see it.

Someone else in the other thread mentioned the CMO and market research around park names. I hope that's true as well, and observed in the new world. Nobody wants to say Six Flags Kings Island.

Jeff:

Nobody wants to say Six Flags Kings Island.

That has me wondering - what do people call their local Six Flags park? Six Flags Great America as an example. Do people say let's go to "Six Flags Great America" or "Great America" or simply "Six Flags"?

I think the current financial climate is very much a case of your mileage may vary. My household is at a point that we are doing fine. I see people around me who are not. I have friends who decide whether or not to go places based on how much gas money they have left for the week. One of my adult children just got engaged and will be looking to move out this coming year. The apartment rental market in our area does not look pleasant. Electric rates in our area were recently raised substantially. I forget the exact amount but I think for some they nearly doubled. Some people are doing fine and others not so much. How this will affect spending on amusement parks next year I don't know. For my household park visits are a priority. For others it may be one of the first things they cut back.

As a lifelong Dallas resident, the local park has commonly been referred to as "Six Flags" and I imagine that's the case with many other parks. By contrast, the other two parks in Texas that had a life prior to being purchased by Six Flags, have been referred to as Astroworld and Fiesta Texas.

This has little basis in knowledge or experience, but I wonder if many people have uncertainty about the economy because an expected collapse in the real estate market post-COVID never really materialized. I know kept thinking the crazy market was unsustainable. I know interest rates have slowed things down to some degree.

Paisley:

My household is at a point that we are doing fine. I see people around me who are not.

Same... but that has always been the case, right?

The housing market is a good point to bring up though, because in some markets it is certainly insane. The market didn't collapse because the demand hasn't subsided. Where I live, the rent is still high despite constant construction going further and further out, and my house value has doubled in six years. So with housing the largest expense anyone has, I definitely see why some are struggling, but I don't know, as a percentage of people, what that means.

I think it speaks to how the companies and the parks grew up. I think Jeff mentioned earlier that Cedar Fair was merely a combination of the two original parks- Cedar Point and Valleyfair, and the name wasn’t meant to be a brand that rolled off of everyones’ tongues. As parks were acquired they each came with their own name and that’s what people were used to. The only way a guest would even connect Cedar Fair to, say, Michigan’s Adventure is if they take the time to read the plastic bag that their merchandise comes in that lists all of the CF properties rather than make specific bags for each park.
On the other hand, Six Flags started in the 60’s as a series of new-builds and they all had the name Six Flags Over Whatever State. The company clearly planned to make the brand as strong as they could by overlaying the name Six Flags atop every road sign, ticket booth, t shirt, and drink cup as they acquired parks. I can think of a few examples where that effort was less than successful- people in Houston always said (and always will say) Astroworld. Great America and Fiesta Texas are other examples where the original is the stronger brand name. I don’t know what the New Englanders prefer to say but when I was there I didn’t hear a lot of “Riverside” but heard more “Six Flags”. And all that aside, the fact that they are all owned by Six Flags is not a mystery to the locals like it seems to be here in Ohio with Cedar Fair. I still encounter life-long Ohio residents that don’t realize that CP and KI are owned by the same company let alone what the name of that company is.
I’ve occasionally thought about this but never considered the weird dynamic until a merger presented itself. Maybe the CF/SF higher ups aren’t as concerned about it as we are. But I think I’ll pledge to live the rest of my life calling my parks Cedar Point and Kings Island without a care as to how they might or if even they’d like to change my mind.

Shades:

That has me wondering - what do people call their local Six Flags park? Six Flags Great America as an example. Do people say let's go to "Six Flags Great America" or "Great America" or simply "Six Flags"?

Having lived in a few markets for work, my experience is that parks originally branded (SFOT and SFOG) were just called "Six Flags", parks that were branded after were occasionally called "Six Flags" but more often referred to by their original name.

I lived near SFMW when it was called that and pretty much heard it referred to as Marine World. At the time PGA was always referred to as Great America, and never heard it referred to as "Paramount's". Oddly, a couple of times I heard it called "Marriott's" by older people.

^^^Yes, that may normally be the case I guess more specifically there are people in my circle who were doing OK a year or so ago and are not now or feeling a big enough pinch it is affecting their spending habits. Also if inflation slows down it doesn't change the damage it did to some peoples' budgets. Unless prices go backwards or their income increases they are still farther in the hole than they were a year or two ago and having to adjust their spending.

Jeff:

I see this sentiment all of the time, in future and present context. Where does it come from?

Yeah, I should have added more detail. I agree that there is a pessimism about the economy that the data pretty much doesn’t mirror. People feel like the economy is bad, but it’s actually doing quite fine.

I mean the economic climate for regional amusement parks. As people crave more experiences and immersion the likes of Universal, regional parks will have to find a way to pull crowds and increase their spending within the parks.

Jeff:

(Made an awesome post that I wish I could plus a few times.)

I don't think we need to worry about the merger. Each chain has something good to offer the new company, and I see them being smart about what to change, and keeping what their current guests find familiar the same. Six Flags parks can add some of Cedar Fair's awesome food and faster ride operations, and Cedar Fair can replace their Fast Lane with a reservation system like Six Flags' Flash Pass, for example.

I think the new company would be smart to keep familiar names. It won't be named Six Flags Kings Island. It will be Kings Island (A six Flags Company). Millennium Force will never change to Superman or Joker, because the guests already know it is called MF. There is no need to change it. ...But If the new company didn't want to renew a license, like if they saw Peanuts was not popular, as an example, retheming all the Snoopy stuff to Loony Toons would be possible.

I read somewhere that this merger was in the plans since January, almost a year ago.

If I said something in this post that someone else already said, I give you full credit for saying it first. (Backing away slowly with my open hands held in front of me.)

LostKause:

because the guests already know it is called MF

I think you hit the nail on the head.

IMO. It doesn’t seem anything good will come of this for the “consumer” as far as the quality of experience. Those in charge of Six Flags are inept and those at Cedar Fair only have short term vision of keeping the bottom line on the financials pumped up any way possible (noticeable cost cutting = lesser experience = future attendance decreases). SEAS is ran the same way recently.

Jeff:

My contacts in the company suggest that Cedar Fair has reverted to a world of micromanagement.

As I think about the effects of the merger, this is the thing where I think it could go horribly wrong. It's hard enough to manage a chain of 14 parks, or 27 parks, or whatever the numbers are. Managing a chain of 40+ seems nigh impossible. The only way to do it well, it seems to me, is to hire good managers and give them a lot of free rein, and measure them by results (and probably not 1-year results). Obviously you can run your websites off the same server (although even there, letting the parks have their own personality would be an improvement). And have everybody ordering the same chicken tenders or whatever. But micromanaging a chain this large seems like it would go off the rails quickly.