Cedar Fair Corporate Development Discussion Thread (FUN)

[A.J.]

I'll be the first to be proven wrong if their reimagining of Ghost Town Alive is a hit at Cedar Point. There's no passholder base there that can really get into it because they're almost entirely built on day trips and the occasionally longer weekend style stay. There's no Disney competitor to try and draw away people from due to cost or crowds. Cedar Point is the regional 800 lb gorilla there.

Yeah, I would bet that the Cedar Fair parks that are closer to the big cities (Carowinds, Kings Island, et al) probably have better season pass performance than Cedar Point. Even if you're on the opposite end of Cincinnati you can get to Kings Island in 45 minutes or less, from the east side of Cleveland to Cedar Point can be as long as an hour and a half.

 

I personally would be questioning my decision to renew my Walt Disney World annual pass if I lived more than a half-hour's drive away.

[bill_s]

My impression as a frequent KD vistor was it was more case of 2017 being weak than 2018 being strong. Going back to 2010 and I305, again 2010 wasn't all they hoped but 2009 was very weak, worse even than 2017. This supports getting a coaster less often, but still getting them. I don't know what it would take to increase attendance and profit higher than ever before, but if they want to keep business from dropping off, big attractions are still periodically needed. Maybe it's just that in the old days the new ride made people think "fun" and now they think long wait times and crowds. It's hard to push it beyond that.

[Too Fast For Comfort]

Personally, I think that looking at attendance is a very lazy person's way of judging the financial health of a park and its parent company. Remember, your scoresheet is the financial statement that you send out to investors, or the distributions that you are able to take if the company is very closely held by a small number of investors. The scoresheet is not the attendance figures.

 

Yes, higher attendance does mean that you have a better potential for revenue, and ultimately turn a higher profit, but attendance and profit are not one in the same. Arguably, you turn a much higher profit compared to the equity in the company by having fewer guests, but making sure that the profit per guest is high. You can give away tons of dirt cheap season passes or a lot of dirt cheap tickets to flood the park with people, but you're running a business -- not a charity. The object isn't to fill your park, its to find a way to reach your hand into the pockets of the guests, and take the money out of their family's wallet, and put it into your family's wallet (sorry for being crude, a Wolf of Wall Street reference).

[coasterbill]

Personally, I think that looking at attendance is a very lazy person's way of judging the financial health of a park and its parent company

 

I agree wholeheartedly but the revenue numbers suck too.

[DirkFunk]

Yes, higher attendance does mean that you have a better potential for revenue, and ultimately turn a higher profit, but attendance and profit are not one in the same. Arguably, you turn a much higher profit compared to the equity in the company by having fewer guests, but making sure that the profit per guest is high.

 

You turn a much higher profit when the amount of money you are generating far exceeds the expenses related to generating that profit. If Cedar Fair doubles their per cap spending overnight while losing 50% of their audience and increasing their personnel and supply expenses to create a better environment, they will see a decrease in profit. Now while the percentages were obviously quite different, this is basically what happened to Mark Shapiro and Six Flags and why it went bankrupt under him.

 

Not every retailer operates the same way with the same margins. You can't run a supermarket like a mattress store. You can't run a regional amusement/theme park with the same mentality of Disney World and their ~30,000 hotel rooms.

 

You can give away tons of dirt cheap season passes or a lot of dirt cheap tickets to flood the park with people, but you're running a business -- not a charity. The object isn't to fill your park, its to find a way to reach your hand into the pockets of the guests, and take the money out of their family's wallet, and put it into your family's wallet (sorry for being crude, a Wolf of Wall Street reference).

 

A lot of people have been trained via really bad theme park business analysis on the internet that somehow "cheap" season passes lead to less money extracted from people's wallets. Oddly, CEO after CEO at regional chains says the exact opposite on these earnings calls, and while they've been doing it, they've been running excellent profit margins, paying out healthy dividends to investors, and running the stock prices up to 3/4/5x what they were during the recession. A lesson should be learned from that, but since it doesn't jive with what people have been told about per cap spending being the end all-be all, they ignore it or argue that it's somehow wrong.

[firebird81]

You turn a much higher profit when the amount of money you are generating far exceeds the expenses related to generating that profit. If Cedar Fair doubles their per cap spending overnight while losing 50% of their audience and increasing their personnel and supply expenses to create a better environment, they will see a decrease in profit. Now while the percentages were obviously quite different, this is basically what happened to Mark Shapiro and Six Flags and why it went bankrupt under him.

Not every retailer operates the same way with the same margins. You can't run a supermarket like a mattress store. You can't run a regional amusement/theme park with the same mentality of Disney World and their ~30,000 hotel rooms.

 

While I agree with your general statement and I can't speak to how Six Flags managed the rest of its chain during the Shapiro years, I can say that they weren't doing much to create a better environment at their flagship park...Magic Mountain. In fact, they focused so narrowly on becoming Cedar Point West that they actually neglected every other aspect of the park. They marketed MM as the eXtreme park. The result was it became known as the teenager park. Most families stayed away because there wasn't much to do when your kid was scared to go on Goliath.

 

I think that all of the most successful parks worldwide build a balanced experience. Of course, you have to know your audience and not many parks have a food in their history that is unique and desirable like the Boysenberry. Cedar Fair in particular actually does own the rights to a very large IP that they barely take advantage of. The Peanuts. That last movie grossed over 200 million. Snoopy is a cultural icon that is timeless. They could do so much more with that to draw in visitors than they are.

[DirkFunk]

While I agree with your general statement and I can't speak to how Six Flags managed the rest of its chain during the Shapiro years, I can say that they weren't doing much to create a better environment at their flagship park...Magic Mountain. In fact, they focused so narrowly on becoming Cedar Point West that they actually neglected every other aspect of the park. They marketed MM as the eXtreme park. The result was it became known as the teenager park. Most families stayed away because there wasn't much to do when your kid was scared to go on Goliath.

 

I'm not going to speak for everyone, but I'm sure there's some here who might disagree with that claim. In any case, Six Flags has over the last few years seemed to primarily focus on building more coasters at Six Flags Magic Mountain, usually to replace old/bad infrastructure. I don't see any evidence at all that they've been harmed by this.

 

I think that all of the most successful parks worldwide build a balanced experience. Of course, you have to know your audience and not many parks have a food in their history that is unique and desirable like the Boysenberry. Cedar Fair in particular actually does own the rights to a very large IP that they barely take advantage of. The Peanuts. That last movie grossed over 200 million. Snoopy is a cultural icon that is timeless. They could do so much more with that to draw in visitors than they are.

 

They're not going to draw tourists away from Universal and Disney in Southern California, and the locals seem to be willing to go bankrupt before they actually drop their annual passes to Disneyland. They're going to do a mix of stuff - classic dark rides, Wild West area, and modern rides both thrilling and family oriented - because that's what Knott's has been since the 1970s and was most successful as. It certainly isn't a recipe you can replicate at Michigan's Adventure or something.

[Jew]

Personally, I think that looking at attendance is a very lazy person's way of judging the financial health of a park and its parent company. Remember, your scoresheet is the financial statement that you send out to investors, or the distributions that you are able to take if the company is very closely held by a small number of investors. The scoresheet is not the attendance figures.

 

Yes, higher attendance does mean that you have a better potential for revenue, and ultimately turn a higher profit, but attendance and profit are not one in the same. Arguably, you turn a much higher profit compared to the equity in the company by having fewer guests, but making sure that the profit per guest is high. You can give away tons of dirt cheap season passes or a lot of dirt cheap tickets to flood the park with people, but you're running a business -- not a charity. The object isn't to fill your park, its to find a way to reach your hand into the pockets of the guests, and take the money out of their family's wallet, and put it into your family's wallet (sorry for being crude, a Wolf of Wall Street reference).

 

You need to get people in the door in order for them to spend money on the things that actually have high yields---which is everything but the price of admission (Front of Line and VIP not withstanding of course).

[Too Fast For Comfort]

Personally, I think that looking at attendance is a very lazy person's way of judging the financial health of a park and its parent company. Remember, your scoresheet is the financial statement that you send out to investors, or the distributions that you are able to take if the company is very closely held by a small number of investors. The scoresheet is not the attendance figures.

 

Yes, higher attendance does mean that you have a better potential for revenue, and ultimately turn a higher profit, but attendance and profit are not one in the same. Arguably, you turn a much higher profit compared to the equity in the company by having fewer guests, but making sure that the profit per guest is high. You can give away tons of dirt cheap season passes or a lot of dirt cheap tickets to flood the park with people, but you're running a business -- not a charity. The object isn't to fill your park, its to find a way to reach your hand into the pockets of the guests, and take the money out of their family's wallet, and put it into your family's wallet (sorry for being crude, a Wolf of Wall Street reference).

 

You need to get people in the door in order for them to spend money on the things that actually have high yields---which is everything but the price of admission (Front of Line and VIP not withstanding of course).

 

Thing can have as high yields as you want them to. If you want to trick people to come into your park so that you can gouge them while they're in, that's one strategy that you can take. If you want to charge a high cost for admission, and keep the margins on the in-park items low, that's another strategic decision that you can make. But that's another discussion. Personally, if I'm trying to judge the financial health of a company, I'll look at the audited financial statements, not look at one arbitrary metric that has nothing to do with their financials. Would you judge a company like Wal Mart by how many people walk through the door, as opposed to audited financial statements?

[DirkFunk]

Would you judge a company like Wal Mart by how many people walk through the door, as opposed to audited financial statements?

 

Wal-Mart lives and dies off volume. Their margins are so low that if I saw an appreciable decrease in foot traffic, I'd run, not walk, from investing in them.

 

Every business model is different. We have a pretty fair idea what the business model for Cedar Fair is. Clearly attendance is a relevant metric, especially as we see revenue increasing at roughly a similar rate.

[Too Fast For Comfort]

Would you judge a company like Wal Mart by how many people walk through the door, as opposed to audited financial statements?

 

Wal-Mart lives and dies off volume. Their margins are so low that if I saw an appreciable decrease in foot traffic, I'd run, not walk, from investing in them.

 

Every business model is different. We have a pretty fair idea what the business model for Cedar Fair is. Clearly attendance is a relevant metric, especially as we see revenue increasing at roughly a similar rate.

 

But you still need to look at the audited financial statements. Number of customers means nothing unless you look at the facts and figures. Its a business, not a charity. They're in business to make money.

[DirkFunk]

But you still need to look at the audited financial statements. Number of customers means nothing unless you look at the facts and figures. Its a business, not a charity. They're in business to make money.

 

I don't understand what is difficult to understand here. If your business model is built off volume sales, and the volume of customers decreases, the only way you aren't going to see a decrease in revenue is if the remaining customers increase their rate of consumption at a rate equal or greater than than the number of customers departing. If it's known that you aren't raising prices appreciably in order to spur exactly this kind of change on, then the only way you aren't going to see drops in revenue is if independently of everything your customers simply change behavior to spend more. That's a crap-ass bet to make.

[Stealth1]

As far as the festivals drawing people into the parks. It may work for some Cedar Fair parks. I know at my home park of Wonderland the food fests don't seem to do well. I rarely saw people buying food from any of the vendors. The Fire and Ice fest at Cedar Point was the same. Hardly anybody was buying any of the offerings.

 

All that said if the coasters don't draw the people like they used to and festivals don't draw a lot either. What needs to be done to draw people through the gate

[KICoasterkev]

Maybe work on dark rides, make them more impressive instead of just shooting at things?

[Jew]

But you still need to look at the audited financial statements. Number of customers means nothing unless you look at the facts and figures. Its a business, not a charity. They're in business to make money.

 

I don't understand what is difficult to understand here. If your business model is built off volume sales, and the volume of customers decreases, the only way you aren't going to see a decrease in revenue is if the remaining customers increase their rate of consumption at a rate equal or greater than than the number of customers departing. If it's known that you aren't raising prices appreciably in order to spur exactly this kind of change on, then the only way you aren't going to see drops in revenue is if independently of everything your customers simply change behavior to spend more. That's a crap-ass bet to make.

 

Usually we disagree, but you are spot on here.

 

Disney & Universal can increase ticket prices to increase profits since they are the "premium" brands in the industry.

 

Cedar Fair? Not so much. They absolutely need positive attendance trends to drive ancillary revenue.

[DoinItForTheFame]

... A question for those who live near CP, KD, CGA, and KBF: How much advertising did you guys get for your new additions? A part of me wonders whether poor marketing could be partially responsible for disappointing numbers....

 

Idk... I live almost 19 hours away from CP and I got a SH!T ton of advertisements (in the mail) through out the year from the park about not only SV, but various events the park was doing...

 

I don’t think marketing is the issue here. At this point, with the presence of social media, parks don’t really need to do that much advertising for word to get out. Any new addition is going to end up all over Facebook, Twitter, ChapSnat, and every other social media platform... Which is more “marketing” than a park can do themselves.

[kenban]

First quarter 2019 investor call transcript is out.

 

https://www.fool.com/earnings/call-transcripts/2019/05/08/cedar-fair-lp-fun-q1-2019-earnings-call-transcript.aspx

 

Only one line stood out to me. According to the CEO,

 

Knott's is coming off a year where they did over just over 6 million people last year.

 

That is a LONG way off the estimates from 3rd parties. Cedar Fair announced chain wide attendance was 25.9 million last year so 23% of attendance is Knott's alone. Makes me wonder what the real attendance is at the other big parks in the chain.

[loop-de-loop]

^Makes you wonder how accurate the TEA attendance report is every year. Their 2017 report lists Knott's at a hair over 4 million. If Hangtime brought in an additional 2 million people that is one hell of an investment.

 

http://www.teaconnect.org/images/files/TEA_268_653730_180517.pdf

[coasterbill]

If Hangtime brought in an additional 2 million people that is one hell of an investment.

 

The park is investing heavily in new special events and festivals. They seem to credit a lot of the success they've had at Knott's to that. I'm sure Hangtime brought people in, but let's not act like Hangtime was the sole reason for the jump.

 

PS: Yeah, the TEA numbers are fun to look at but I don't put too much stock into them.

[Jew]

Depends on what the source of the TEA report goes by. Haunt is roughly 1 million on its own, so if they don't count that plus other things like private events, I can see where TEA's estimate came from.

 

Also, are we sure it's Knott's and not Knott's+Soak City?

[ytterbiumanalyst]

Knott's is always the lion's share of their attendance. Year round operations, a location in the middle of a huge city, and a 10 minute drive from Disneyland. If it were NOT the bulk of Cedar Fair's attendance, they'd have screwed up royally.

[Hilltopper39]

Ive always been a little skeptical of the TEA attendance report but the numbers they publish, in the past atleast, have usually been the exact numbers that most individual park chains (six flags, cedar fair, Disney, Sea World etc.) publish in their annual financial reports. I guess if they're accurate enough to report to investors then they're probably pretty close.

[Jew]

Is Cedar Fair reporting Knotts resort or just Knotts Berry Farm?

[kenban]

Ive always been a little skeptical of the TEA attendance report but the numbers they publish, in the past atleast, have usually been the exact numbers that most individual park chains (six flags, cedar fair, Disney, Sea World etc.) publish in their annual financial reports. I guess if they're accurate enough to report to investors then they're probably pretty close.

 

Because they publish months after the annual reports so they just copy the chain wide from available data. Those numbers are accurate since they come from the chains. I suspect TEA then just makes up the rest to try to reach those numbers. They have still not published the 2018 report.

 

Honestly neither Knott's or Magic Mountains numbers have ever made sense to me, why would a Six Flags park in LA open most of the year (they have not published numbers from a time when it was open all year) get lower attendance then Kings Island, Cedar Point, or Canada's Wonderland all open around 140 days a year?

[Jew]

To answer your Magic Mountain question: Los Angeles is much more crowded market than those other places. Entertainment dollars can go to sporting events, other theme parks, concerts, etc.. The average person in Los Angeles probably goes to Six Flags every 3-5 years if they don't have a pass, or not at all if they don't like coasters.