Smaller Six Flags Part, Detrimental to the Six Flags Brand Name?

Kind of off-topic. But at least Six Flags doesn't have a block brake in the middle that nearly brings the ride to a stop...

People seem to forget that Six Flags was already in trouble when it was acquired by Premier Parks. Doubling its size overnight only magnified that problem.

The SFWoA experiment perfectly exemplifies the problems of overly rapid growth. Dump millions of dollars into a park, add a bunch of new rides in one season, and if people still have a crappy time, they won't come back.

The GP isn't stupid when it comes to the value of a dollar. I'm sure regional park prices have gotten to the point where some families would rather save up for a big Disney trip than blow a more modest amount at the local Six Flags.

Also, you have to factor in target demographics. Six Flags generally caters to the *extreme* teenage thrillseeking crowd. There's a lot more competition for their money (or their parents' money) than there was 20 years ago. How about $50 for a day at the park, or $50 for a PS2 or Xbox game that you'll be playing for weeks and months? Hollywood's feeling the effects of the same thing... $11 for roughly 90 minutes of entertainment is even more expensive per minute than spending 10 hours at a park for $50.

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Beast Fan said:

However notice how around mid 2002, the stock takes a nose dive. It is almost comical because it reminds me of a first drop on a roller coaster. I am not sure if that was due to 9/11, or other factors. I am sure they blamed it on the weather and less traveling due to 9/11. It has been that low ever since and the company has not recovered.

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Highlights....

"After a few years of belt- tightening, theme and amusement park owners have spent big bucks improving their attractions following their strongest attendance period last year since the 2001 terrorist attacks slowed the $10.8 billion industry's momentum."

Seems like after 9/11, many people were scared to venture out in the world like they use to (not to even mention traveling).

"Parks nationwide have spent an estimated $750 million on new rides and upgrades for this year, a vast improvement over the $500 million spent last year, said Dennis Spiegel, president of International Theme Park Services Inc., a consulting group based in Cincinnati. "

Looks like the GP just recently got hungry for some thrills again! Hooray!!!!

"Alone, Six Flags Inc., the world's largest regional theme park company with 30 parks in North America, has spent $135 million on new attractions, nearly twice what it spent last year, in an effort to reverse an attendance slide from the previous year."

Read for more info: http://news.tbo.com/news/MGB9Z5LRQ8E.html

Six Flags also flagged three parks this year.

SplashTown water park in Spring, Texas becomes Six Flags SplashTown.

Waterworld USA water parks in Concord and Sacramento, California become Six Flags Waterworld – Concord and Six Flags Waterworld – Sacramento.

After 9/11, Six Flags went into slump. They tried to attract people back to their parks Look at Six Flags attendance over the years

1. Attendance at all parks is 46.576 million for 2001.
2. Attendance at all parks is 42.495 million for 2002 (8.8% decrease).
   
3. Attendance at all parks is 41.728 million for 2003 (1.8% decrease).
   

If 9/11 never happened, Six Flags will probably still be gaining significant growth since 1999, still acquiring SFWOA and the Euro parks. Must I say more.

Now that 2005 seems to be very good for themeparks, who knows what SF has planned next in the coming years, but its looking good.

"SF: New attractions for 2006; Hotel for The Great Escape." SFGAdv getting at Hotel and soon a destination park." Get OUT of HERE!!!! ;)

Hope this helps....

But if regional parks really did get slammed by 9/11, shouldn't Cedar Fair (the only other "pure" amusement park company) have seen the same performance? If you compare FUN (CF) with PKS (SF), both took a hit in late '01 (as did every other US stock), but since then they have sharply diverged.

http://finance.yahoo.com/q/bc?t=5y&s=FUN&l=on&z=m&q=l&c=pks

I don't think you can blame PKS' performance on 9/11, since it does not seem to have had a sector-wide impact. FUN's performance is evidence that it should have been possible to recover from 9/11 reasonably quickly.

SF critic:

I kind of see what your saying, but why did Cedar Fairs Stock do much better and never took the nose dive that Six Flags had. It might have been down a little that year, but bounced right back up and has continued to grow.

Six Flags hit rock bottom and is still there. Other parks seem to be doing better yet Six Flags still is struggling. I think I looked at a graph of Holiday World attendance over the last 5 years. It is a continued climb and probably will break a million for the first time next year with Voyage.

I think Six Flags has to realize that other chains and parks experience growth and prosperity during their same lousy strech. It would make more sense if the industry as a whole was doing bad and not just Six Flags. Not really the case, just look at Cedar Fairs Stock, Holiday Worlds attendance growth, among other parks.

Paramount Parks also are doing well. Paramount Kings Island last year had 3.5 million guest, a 7 % increase in attendance. Also Paramount Canada's Wonderland had 3.4 million a 30 % increase in attendance.

Now look at Six Flags Great Adventure attendance. It had 3.5 million in 2000, and in 2004 was 2.8 million. Although it was flat for 2004, it took a big drop. I just think there is a reason for that and it has to do with Six Flags lack of emphasis on quality and guest experience. Also the brand name no longer is as highly thought of since they made every park they own basically with 5 coasters or more a Six Flags Park.

While of course financial performance (attendance, revenue, etc.) drives stock price, I think the biggest issue that affects SF's share price is their unfavorable revenue-to-debt ratio. Yearly, it requires the total revenue of several parks just to service their existing debt. Combine that with falling revenue and it really spooks investors...

On the other hand, CF keeps a tight reign on corporate debt, and manages that aspect of their business extremely well.

Joel

Every time I have been to a park recently acquired by SF, the local residence say the same thing. Its cool SF built this new roller coaster but the quality of the park has dropped.

SF takes over parks because they know how to cut park operation costs while building a big ride that attracts lots of new people.

Their short term profits are pronounced, but the long term effects of have created a bed rep. and it is hitting them in the pocket book. SF will not change their business strategy. They have no relationship with local residences in the parks they recently acquired. Decisions are made in a corporate office far removed from the public.

SF will do what they know how to do and that is build coasters. Eventually when SF looses their shirts and sells some parks, maybe some other chain will take over these big parks with big coasters and match it with some big customer service.

You have to think of the share price changes in its true context--the fickle market. In the dot-com days, companies with aggressive strategies were rewarded with skyrocketing prices, regardless of profitability (or total lack thereof).

When SF stock was flying high, CF was buying theirs back, scratching their heads and wondering what the heck was going on.

Then the dot-coms became dot-gones and fell all over each other like dominoes. The changed market pummeled SF for the same things they previously praised them for and CF-style management became the new 'fashion.'

-CO

True: stock price is not the only indicator of success, and there are reasons other than rational ones why one stock outperforms another.

But, my recollection is that PKS vs. FUN attendance numbers show the same divergence, even accounting for GL's miserable year-over-year performance last year.

One reason Cedar Fair stock does so well is because they continuously increase their cash distribution. Cedar Fair stock has a very high distribution rate which means stock holders get a lot back in dividends making the stock much more worthwhile.
Cedar Fair spends money at a steady pace and spends what it can afford to spend. Six Flags spends large sums all at once and I am not so sure they can pay it off. It seems like they take a lot of risks.