Six Flags [FUN] Corporate Discussion Thread

[SoCalJasonland]

Question for DirkFunk or anyone that follows the financials of the park chains:

 

Is there any business logic that could be driving SF to switch a majority of their pass holders over to memberships? I'm referencing SF getting a smaller, yet steady sum of money monthly w/ memberships vs getting a huge influx of cash at Labor Day, then minimal amounts from pass sales over the rest of the year.

 

It seems that the memberships will probably net a higher amount of cash per pass holder per year vs the current system. I'm just curious if there is a tax break or something that would drive them to spread that cash out over all four quarters of the financial year instead of getting the current lump sum in Q3.

 

Thanks for doing a Business for Dummies session here

 

A membership requires you to take the effort to cancel it. An annual pass requires that you take the effort to renew it. Six Flags, like a gym, knows that people don't like taking extra effort, so they will likely increase their retention rate as people will be too lazy to quit. I think they will need to continue to offer both memberships and annual passes for the time being. I don't see people at some of the northern parks being happy about paying over 12 months for something that can only be used for 6 of the months. My local Six Flags park, Magic Mountain is open 365 days so there is no issue with paying all year and memberships will likely go over better at that park.

[ComeRideWithMe]

That was my issue with the membership. SFOT is closed the majority of Jan and Feb. March and April open on weekends except spring break week. And if the weather gets below 40 degrees most major rides are closed and during the summer it's just too damn hot to go. I went ahead and got the membership back in October but happy I did since they're now doing the better levels and I can upgrade.

[ytterbiumanalyst]

A membership requires you to take the effort to cancel it. An annual pass requires that you take the effort to renew it. Six Flags, like a gym, knows that people don't like taking extra effort, so they will likely increase their retention rate as people will be too lazy to quit.

This is very true, but to add to it, Q1 revenue streams too. There are not a lot of ways to bring in money when the parks are closed, but memberships are being paid for throughout that time. Shareholders are going to understand revenue is down in Q1, but they'll really appreciate any attempts to mitigate the losses. They may even be profitable in Q1 due to no seasonal employees and lower overhead in the offseason.

[FeelTheFORCE]

A membership requires you to take the effort to cancel it. An annual pass requires that you take the effort to renew it. Six Flags, like a gym, knows that people don't like taking extra effort, so they will likely increase their retention rate as people will be too lazy to quit. I think they will need to continue to offer both memberships and annual passes for the time being. I don't see people at some of the northern parks being happy about paying over 12 months for something that can only be used for 6 of the months. My local Six Flags park, Magic Mountain is open 365 days so there is no issue with paying all year and memberships will likely go over better at that park.

 

That's a really good point, and I'm surprised it took them this long offer a system like that. They even built in the early cancellation fees and contractual length obligation as well.

[DirkFunk]

Question for DirkFunk or anyone that follows the financials of the park chains:

 

Is there any business logic that could be driving SF to switch a majority of their pass holders over to memberships? I'm referencing SF getting a smaller, yet steady sum of money monthly w/ memberships vs getting a huge influx of cash at Labor Day, then minimal amounts from pass sales over the rest of the year.

 

It seems that the memberships will probably net a higher amount of cash per pass holder per year vs the current system. I'm just curious if there is a tax break or something that would drive them to spread that cash out over all four quarters of the financial year instead of getting the current lump sum in Q3.

 

Thanks for doing a Business for Dummies session here

 

While I was off getting wasted in border towns, yeah, I think everyone did a pretty good job with the two fundamentals (spreads out cash flow throughout a 12 month period, less likely to cancel). One other aspect to it is that people are turned off by a single purchase in the three digit range, but will often be totally OK if you offer them the opportunity to finance that price sans interest in payment plans. $9 a month doesn't sound bad to a budget minded consumer compared to $100, even though the 12 month cost is nearly 10% higher.

[WolfBobs]

I live in Ohio, no where near a Six Flags park. However, I choose to have a membership cause I don't really notice the $9/month coming out of my account. I make sure to visit a SF park at least twice a year to get my monies worth. If they only have an annual pass option I wouldn't invest the large up front cost and hope I can get to a park. I'm probably not the only one who views it this way.

 

5-6 maybe more years ago CF sent a survey out on the possibility of a membership program. At the time (even with GL/WWK open) I didn't see the value in it and said so in the survey. But now, after using the SF membership for about 3 seasons I think I would reconsider it for CF if they were to offer a program. I like the easy pay 6 payment plan option, but it would be nice to divide up the cost evenly over 12 months.

[DirkFunk]

5-6 maybe more years ago CF sent a survey out on the possibility of a membership program. At the time (even with GL/WWK open) I didn't see the value in it and said so in the survey. But now, after using the SF membership for about 3 seasons I think I would reconsider it for CF if they were to offer a program. I like the easy pay 6 payment plan option, but it would be nice to divide up the cost evenly over 12 months.

 

Same here. Another part I'm fond of is that if I get a membership, yeah, you're locked into those first 12 months. But if the next year, I decide to hit some SF parks in the first half of the year and know I'm not making my way out to another one again, I can keep the membership, pay about as much as I would for a one day ticket, get my perks, and then cancel.

[prozach626]

I'll never be interested in a monthly payment option as long as the annual season pass is offered. We're above average with our finances. 10% saved is 10% saved, but we'd probably still pay up front even if there were no savings. I realize we're probably in the minority, but we don't do monthly payments as long as we can avoid them. Clearly we're not the target market for these memberships, but as long as it appeals to a worthwhile amount of people I think it's pretty smart business. I just hope this doesn't eventually phase out season passes which can be paid all at once.

[FeelTheFORCE]

I like their "buy a season pass late in the year, and it'll be good for all of next year too" pitch. With the parking, it pays for itself in one visit. I did that for SFGAm in September, also used it for SFSTL later that month, and now have free admission and parking for all of 2018 as well. I don't have any SF parks close by, but I'll probably make a trip to one sometime this year I wouldn't have otherwise made.

[ComeRideWithMe]

If you go to sporting events or concerts near SFOT, and they're open that day, you can park in the far back lot and walk to Rangers Stadium or ATT Stadium (Jerry World) so it's a huge bonus with seaseason parking here

[bgtlover]

I prefer a month to month rate on annual passes, hence why I've had a BGT/SWO pass on EZ pay for only $10 a month since 2007 (same pass to start over would be over $18/month currently). Even if we don't get to either park during the year, it's not that big a deal as there are some years we go numerous times to either so it evens out for us. Monthly payments definitely are better when you have a fixed income. This year we got CF Platinum Passes with 9 month payments, which is a lot easier to do than fork out $260 with Fun Pix, tax & fees all at once for me.

 

The one time I had a Six Flags season pass was in 2008 and paid it all at once (and not during any special sale either). I was only able to use it one time at SFOG on a busy Saturday in May. I rode 3 coasters with 2-3 hour waits for almost all the coasters. I had injured my knee (torn MCL) pretty bad about a month after that visit and wasn't able to visit any parks for a while. I had plans of going to Texas to SFOT & SFFT that year too. It's the most wasted pass I had that year (I also had a Carowinds pass that was used on 3 trips in addition to the SW/BG pass). Had there been a monthly option, the blow might not have been as bad, even though I was still paying the same in the long run. Monthly payments definitely are better when you have a fixed income.

[joelwee]

I like their "buy a season pass late in the year, and it'll be good for all of next year too" pitch. With the parking, it pays for itself in one visit. I did that for SFGAm in September, also used it for SFSTL later that month, and now have free admission and parking for all of 2018 as well. I don't have any SF parks close by, but I'll probably make a trip to one sometime this year I wouldn't have otherwise made.

That's a great selling point for me, too. I love being able to visit SFMM and have everything already paid for. I'm planning on taking advantage of it this June by taking a trip over to SFGAm after Coastermania, as well.

[bert425]

I'll never be interested in a monthly payment option as long as the annual season pass is offered. We're above average with our finances. 10% saved is 10% saved, but we'd probably still pay up front even if there were no savings. I realize we're probably in the minority, but we don't do monthly payments as long as we can avoid them. Clearly we're not the target market for these memberships, but as long as it appeals to a worthwhile amount of people I think it's pretty smart business. I just hope this doesn't eventually phase out season passes which can be paid all at once.

 

I agree with you here, we prefer Season Pass.

 

but based on our 1st trip of the year to SFFT? I'm guessing this is the final year for Season Pass option.

1st thing we noticed (different from our trips in Dec 2017). . the 3 gates that had been for Season Pass entry, are now for "Membership" only.

 

Season Pass entry is now on the standard gates with the day tickets and groupon vouchers. So you have to get in the longer line while the Memberships get the preferential treatment. the Membership cards are nicer too.. more like the old Season Passes (which are now flimsy cards).

 

so yeah. . they are weaning folks off the Passes.

 

SFFT was open until Jan 7, and re-opened on Feb 24. . . so they actually were open every month of the year. So yeah, I can see them discontinuing Season Passes, and justifying a monthly membership.

[CoasterAuditor]

Just curious? Why are theme parks moving more towards "memberships" than season passes? Is there some kind of ulterior motive?

[AndrewA86]

I just purchased a Six Flags membership for the first time. I'm reading the fine print and it says "Voucher will be scanned first at the toll plaza and then again at the turnstiles to add parking benefits. Voucher alone does not provide parking benefits."

 

So does that mean the very first time I pull into SFGA they are going to charge me to park?

[anonymouscactus]

First time parking with the barcode it's free. You can't use it again to park until you get your actual pass, in which case it's added. It is worded funny but you will not need to pay to park if you have a pass that includes parking.

[AndrewA86]

Thank you.

[WolfBobs]

Just curious? Why are theme parks moving more towards "memberships" than season passes? Is there some kind of ulterior motive?

 

Few reasons as stated prior in the thread, but I'll highlight a few.

 

-Constant cash flow throughout the year. This looks better on the books and to investors. Having cash coming in even during months the parks are closed.

-Higher rate of sign ups. We keep seeing SF report growth in their membership sales. Personally the closest SF park to me is about 6-7 hours away. I still have a membership due to the low monthly cost. Psychologically it's easier for someone to part with $9/month then $200+ up front. (depending on park, used $200 as an example)

-Higher retention rate. Memberships force people to go through a cancelation process. Compared to just NOT renewing it. I'm sure they have thousands of membership holders who may not even remember they have a membership.

 

That's just a few examples, I'm sure there are tons more with the financial numbers to back it up.

[CoasterAuditor]

Just curious? Why are theme parks moving more towards "memberships" than season passes? Is there some kind of ulterior motive?

 

Few reasons as stated prior in the thread, but I'll highlight a few.

 

-Constant cash flow throughout the year. This looks better on the books and to investors. Having cash coming in even during months the parks are closed.

-Higher rate of sign ups. We keep seeing SF report growth in their membership sales. Personally the closest SF park to me is about 6-7 hours away. I still have a membership due to the low monthly cost. Psychologically it's easier for someone to part with $9/month then $200+ up front. (depending on park, used $200 as an example)

-Higher retention rate. Memberships force people to go through a cancelation process. Compared to just NOT renewing it. I'm sure they have thousands of membership holders who may not even remember they have a membership.

 

That's just a few examples, I'm sure there are tons more with the financial numbers to back it up.

 

Interesting. That all makes sense to me being an accountant. I've even considered setting up Six Flags and Busch Gardens memberships because of how cheap they are. It's also a lot more likely to get people into the parks since they don't have to pay $70 or so once to get one person in.

[Manic Monte]

Honestly, it's more convenient for me to see $12 a month coming out of my account then to go through the hassle of renewing every year. If you're busy, you just don't have time to remember to do it until it's too late. Just like Netflix (which I believe started all of this), just take your money every month and leave me alone.

[Trackmaster]

Just curious? Why are theme parks moving more towards "memberships" than season passes? Is there some kind of ulterior motive?

 

Few reasons as stated prior in the thread, but I'll highlight a few.

 

-Constant cash flow throughout the year. This looks better on the books and to investors. Having cash coming in even during months the parks are closed.

-Higher rate of sign ups. We keep seeing SF report growth in their membership sales. Personally the closest SF park to me is about 6-7 hours away. I still have a membership due to the low monthly cost. Psychologically it's easier for someone to part with $9/month then $200+ up front. (depending on park, used $200 as an example)

-Higher retention rate. Memberships force people to go through a cancelation process. Compared to just NOT renewing it. I'm sure they have thousands of membership holders who may not even remember they have a membership.

 

That's just a few examples, I'm sure there are tons more with the financial numbers to back it up.

 

Interesting. That all makes sense to me being an accountant. I've even considered setting up Six Flags and Busch Gardens memberships because of how cheap they are. It's also a lot more likely to get people into the parks since they don't have to pay $70 or so once to get one person in.

 

I feel like from a reporting standpoint, it wouldn't matter if cashflow came in over the winter months or not. The nature of the industry would be factored into the stock price, and financial analysts and accountants would understand the reason behind the spikes in the cashflow. They're not stupid enough to get excited over the same or less cash spread out over 12 months instead of 8-9.

 

And from an installment standpoint, the revenue recognition would be the same for the client. It doesn't matter if a season pass is paid for all at once, over 12 installments, or over 9 installments, the revenue would be recognized evenly over the operating year of the park.

 

Initial entry:

Cash xx

unearned revenue xx

 

Monthly close entries:

unearned revenue...... xx

Revenue ............................ xx

 

 

They just offer the installments so that people won't think that it costs as much when it sounds like $10 payments every 12 months, instead of $115 up front (even though they're paying more with the installments. But you'd have to calcuate the net present value with a 10% discount rate to figure out if you come ahead with the extra time that your money could be in the stock market.

[anonymouscactus]

It's not done after 12 installments, though. Yes you can cancel, but it doesn't end unless you actively cancel it. Thats where the $$$$$ comes in. Not just the fact your paying a premium over the course of the year. People will simply keep it going because it's so cheap, where if it's yearly, they have to actively buy it.

[coasterbill]

Exactly. It's cheap enough and cancellation is annoying enough that a lot of people will simply forget or not bother to cancel it. It's basically the Planet Fitness business model only with more funnel cakes and crappier pizza.

[ytterbiumanalyst]

figure out if you come ahead with the extra time that your money could be in the stock market.

I agree with most of what you've written, but I do take issue with this last statement. For the vast majority of people, their only interaction with the stock market is a 401(k). They don't have the option to invest in the stock market for a bit then pull their money out when they want. Once it's in there, it's in there until they retire. So they're going to be weighing between paying all at once and having the peace of mind from no obligation beyond that, or paying a bit at a time and having greater flexibility that comes from not having to come up with all the money at once.

[DirkFunk]

I feel like from a reporting standpoint, it wouldn't matter if cashflow came in over the winter months or not. The nature of the industry would be factored into the stock price, and financial analysts and accountants would understand the reason behind the spikes in the cashflow. They're not stupid enough to get excited over the same or less cash spread out over 12 months instead of 8-9.

 

Short answer: no

 

Long answer: By distributing money over a 12 month period rather than just the three month peak summer run, it insulates the company from risk related to poor weather or events that might cause tourism shock (terrorist events, for example). It also helps the companies in their financial reporting as right now increasing revenue in Q1, 2, and 4 year over year can be seen as offsetting any potential losses in the usually most important quarter (3, July-September). Is the market that stupid? Kinda sorta.

 

Additionally: If I hand you $100, you might want to budget your spending or saving of that $100 over a long time frame. But these are publicly traded corporations. That money shows up on the quarterly ledgers and federal reports. They in turn have to describe what it is to their shareholderst that they will do with the money, whether it's dividends to shareholders, capital expenditures, or paying down existing debt. Six Flags could try to pile up cash on hand, but there would be an investor revolt right now if that happened.