Cedar Fair Restamps Kinzel's Hand

[The Interpreter]

Cedar Fair Restamps Kinzel's Hand

By Rick Aristotle Munarriz

December 22, 2006

This isn't the way that Motley Fool Income Investor selection Cedar Fair (NYSE: FUN) CEO Dick Kinzel wanted to go out, so -- to put it bluntly -- he won't go out. Originally set to retire at the end of next year, Kinzel has signed a new deal that will keep him at the helm for another four years.

The market's reaction has been pretty blase, and let me tell you that it pains me to use such a pretentious word. However, it fits this time. Last weekend's filing, detailing the news, should have sent units of the regional amusement-park operator rocking one way or the other. Instead, trading has been light and ineffectual in moving the units.

Good move, bad move for Cedar Fair

It's easy to see why Kinzel didn't want to hang his legacy on his company's recent performance. Attendance growth has been running stagnant over the past two seasons at the company's flagship parks, and this year's purchase of the Paramount Parks chain from CBS (NYSE: CBS) has been proving as tricky in the digestive process as a jalapeno burger.

The units are trading lower than they were two years ago, and that's even if you tack on the company's generous quarterly distributions.

Kinzel's story is an inspiring one. He joined the company in 1972 as a supervisor in food concessions and kept climbing the corporate ladder until he was named CEO in 1986. In those two decades, Cedar Fair has grown by acquiring several regional parks while transforming its peninsular Cedar Point attraction into an industry-acclaimed coaster haven.

However, if you go by the active thread of Cedar Point enthusiasts posting over on the PointBuzz message board, the cheers for Kinzel's longer stint aren't unanimous. Some feel that Kinzel has been slow to adapt to technological enhancements that have improved the guest experience at rival parks. Others were hoping that COO Jacob Falfas would get a shot at bringing the company up to speed come 2008.

As it stands, Kinzel's tenure isn't paralleling that of Disney's (NYSE: DIS) Michael Eisner, where a few tough bogeys in the back nine threatened to soil his initial mouth-to-Mouse resuscitation of the family entertainment giant, for now. Yet the same cynics that may have given Kinzel a free pass for the recent malaise, because they knew he was a lame-duck CEO, now have every reason to arm themselves with stickpins and skewers if Kinzel doesn't deliver during the critical 2007 season. In other words, Teflon suits are no longer fashionable in the Kinzel wardrobe.

High stakes in low tech

Is Cedar Fair really so far behind the technology curve? Yes. Is it necessary to be on the cutting edge these days? Not necessarily. The fastest-growing park in the country over the past few seasons is Holiday World in Indiana, with all of its throwback charm, while General Electric's (NYSE: GE) Islands of Adventure, the high-tech park in Florida that bills itself as "the theme park for the 21st century," has been crushed at the turnstiles recently.

This doesn't mean that Cedar Fair can afford to live in the past. A few summers ago during a coaster-hopping trip, I had to shake my head at how far behind the curve Cedar Point was in terms of line reservation systems. Disney has machines spewing out free FastPass tickets, while many of the Six Flags (NYSE: SIX) parks have premium offerings with electronic Q-bot gizmos that get scanned at ride entrances. At Cedar Point? Hands were getting stamped while the washrooms were crowded with thrill-thirsty patrons, scrubbing away at expired stamps so as to snag some more.

Another popular complaint is that Cedar Point, like most of Cedar Fair's parks, lacks central boards with estimated wait times for marquee attractions. It's a no-brainer for the national year-round parks, yet Cedar Point doesn't get to skate here given the park's size, iffy ride uptime, and the fact that it still doesn't have a firm handle as to why the turnstiles are clicking more slowly despite new rides and lower ticket prices.

Yet it's about more than just viewing this from the consumer's angle. In fact, some park guests actually dread queue-reservations systems or structured direction. However, it's undeniable that Cedar Fair could be doing a better job in monetizing its properties by denying technology its due. That is where investors have every right to demand more out of Cedar Fair, including my fellow Fools who have bought into the company after it was recommended to Income Investor subscribers.

Cedar Fair should be digging into the digital-photography solutions creeping into the Disney game plan, where guests can have cards swiped at various photo stations and then order a DVD or share digital snapshots with friends once they return home. Stickier websites are also a given. Cedar Fair will never be able to bankroll the kind of Virtual Magic Kingdom community site that Disney has conjured, yet regional parks are leaving money on the table by not reaching out to their younger audiences with watered-down social-networking experiences that keep their fan base close and the online advertising streams closer.

On the licensing front, Six Flags is positioning itself for a nice family-oriented bounce in 2007, given recent deals with Thomas the Tank Engine and The Wiggles. Disney is going gaga over its now fully owned Pixar fleet. It's time for Cedar Fair to extend throughout its chain the more popular characters from Viacom's (NYSE: VIA) Nickelodeon that it inherited with the Paramount acquisition. Merchandising spurts and young family magnetism lie in the balance.

So good luck, Kinzel. Let's hope that you don't regret your move to skimp on early retirement. You've never been the recipient of a lot of unitholder grief, but if you rack up another bad season, you may discover that the only FUN you find is in your company's ticker symbol.

http://www.fool.com/investing/general/2006...sit=y&npu=y

[trueTEXAN1990]

i think this is great news he is a great leader!

[The Interpreter]

And like all great leaders, by his results will he be judged.

If Cedar Fair greatly succeeds and pays off its debts and continues to pay earnings to the unit holders, he will be seen as a hero.

If not, perhaps less so...even all the way down to being seen as a zero, should the Paramount Parks acquisition drag down the entire limited partnership.

The times, they are interesting. And all this while there is perhaps an even larger drama going on over at Six Flags, with its new leaders who have come to the "rescue." The huge difference is that Six Flags was already in a lot of debt and trouble when Snyder and Shapiro came on the scene.

Mr. Kinzel has taken a riverboat gamble in acquiring Paramount Parks at the price the partnership paid. This could have many possible outcomes, from paying off in spades to disastrous consequences.

[jzarley]

I don't think it would be much of a ego boost to read that the market was pretty "blase" about you sticking around a little longer

Great line here: "It's time for Cedar Fair to extend throughout its chain the more popular characters from Viacom's (NYSE: VIA) Nickelodeon that it inherited with the Paramount acquisition. Merchandising spurts and young family magnetism lie in the balance."

[trueTEXAN1990]

Well the article is right if they can extend nick to all their parks they will be more succesful than with the peanuts. (sorry snoppy!)