Leland Wykoff

This article, from a couple of weeks back, really hits hard and explains much of the turmoil at Disney. It is worth noting Cedar Fair announced Matt Ouimet's departure from the FUN Board five days prior to the CNBC story breaking. A departure I predicted, at the time, may be related to management issues brewing at the Magic Kingdom. While this article is a rather long read, clocking in at about 12,000 words, it has more plot twists, excitement, and villains than most recent "block buster" Disney film releases. Read. Think Ouimet. Tragic, or magic? https://www.cnbc.com/2023/09/06/disney-succession-mess-iger-chapek.html

This sudden move should have everyone thinking one name. Disney. Ouimet played significant roles at Disney in his earlier career. He developed Disney Cruise Line, oversaw the refreshment of Disneyland in preparation of its 50th anniversary, and was involved in the development of Disney time-share products. Currently Disney is facing challenges galore. Speculation circulates Disney may even be broken into two companies--one comprising the Parks/Resorts, retail, licensing of merchandise, and other similar business lines. Should this come to fruition Disney will be searching for executives to lead the spin-off businesses. Skill sets Ouimet is uniquely qualified to fill. Following Ouimet's tenure at Cedar Fair as an extremely effective and transformative CEO, he was tapped to serve on the Board of Directors in a role created to allow him to seek out development and acquisition opportunities to grow Cedar Fair. In this new role Cedar Fair failed to make any significant park acquisitions until 2019 when it was announced two Schlitterbahn Waterparks and Resorts in Texas would be acquired. Quickly thereafter Cedar Fair announced the acquisition of Sawmill Creek hotel, golf course, and marina in the Sandusky area. These acquisitions are minor when compared to the sale of Great America property in California with only an 11 year operating sale-lease-back agreement in place. Read this quote from the Cedar Fair announcement of Ouimet's departure carefully: “I am extremely grateful to have been a member of the Cedar Fair management team and board of directors,” said Matt Ouimet. “I have great confidence in the Company’s current leadership team and will enjoy following their future successes.” Could Ouimet be foreshadowing a similar future role with another company overseeing acquisitions and development of entertainment, waterparks, amusement parks, and resorts? A position in which he would be looking for strong management teams overseeing portfolios of desirable cash flow positive properties ripe for application of Intellectual Property assets to leverage value, attendance, and profitability? If so, Ouimet would be keen to "enjoy following [Cedar Fair's] future successes" and possibly being a part of that bright future.

You are correct. This policy reminds me of two business tactics from years ago. On point, Dollywood offered in special "After 3:00, Next Day Free" ticket. This promotion ran successfully for many years. It had a triple advantage: 1. It created a sense of a bargain, 2. It increased on-park expenditures, and, possibly most importantly, 3. It reduced crowding by shifting a significant number of park visits to the slower evenings thus improving guest perceptions and reducing operating costs. Some years ago Walmart realized people were not buying snow sleds, dishes, and other winter recreation gear as they were waiting for a big snow event. So Walmart instituted a snow guarantee--buy the merchandise before a certain date, and if no snow arrived over the winter you could return the equipment for a full refund. It worked out extremely well. Early sales increased dramatically thus freeing up display for other merchandise and few items were actually returned. SeaWorlds Weather-Or-Not policy works in much the same way, it reduces the hesitancy to purchase tickets on dicey days, overcoming objections by guests to commit to purchase. As a sales technique it is quite clever.

SeaWorld recently introduced weather guarantees where by guests can get a make-up day in park should extreme heat or rain interrupt or spoil a guest visit. Now it is expected other chains will soon follow with similar guest friendly policies: https://www.planetattractions.com/news/SeaWorld-‘laying-down-a-blueprint’-with-industry-leading-extreme-heat-policy/2738

Cedar Fair disavows negligence in Top Thrill Dragster incident, seeks dismissal of suit, or failing that, a jury trial: https://www.themeparktribune.com/cedar-fair-denies-negligence-in-response-to-top-thrill-dragster-lawsuit/

https://www.wtol.com/article/news/special-reports/11-investigates-cedar-point/wtol-11-dark-side-cedar-point-national-murrow-award/512-21cfa4f2-a8cc-4fa7-b30e-2d9b4934af71

Here is an expanded version:

The City of Sandusky seeks a fresh new tax levy upon citizens to fund a Recreation Center. Problem is, taxpayers were sold this Recreational opportunity as part of a tax package agreement with Cedar Point in an earlier agreement. Now Sandusky City officials seek to double-dip, pulling the wool over taxpayers eyes, making them responsible for paying once again for the same class of projects. This is on top of the recent sale by Cedar Point of the Sports Center operation to Cal Ripkin Sports group which benefited from the earlier tax package agreement. Cedar Point has done well under the earlier agreement getting new causeway improvements, fire and police upgrades, street improvements connecting to Cedar Point, and a host of other direct benefits from the earlier tax package. It appears taxpayers may be getting soaked for a Recreation Center already funded: https://sanduskyregister.com/news/464111/sanduskys-rec-center-needs-levy/ The earlier agreement, struck in October of 2021, called for the new Amusement and Parking Taxes to fund the Recreation Center (as reported by the Sandusky Register): "Building a new recreation center for city residents, with a focus on youth programming, somewhere in Sandusky; Cedar Point will receive the naming rights." Published along with this story, a table indicated a $700,000.00 per year allocation, for a period of 20 years, to developing and operating the Recreation Center. Please see article, tables, pie-charts, and a review of the $100 million dollar agreement at the link to the Sandusky Register from October 21, 2021 below: https://sanduskyregister.com/news/349690/cedar-point-city-strike-100m-deal/

https://www.ocregister.com/2023/05/17/disneyland-lays-out-theme-park-expansion-plans-for-next-30-years/?utm_email=A41CE4C5C43CE481D40E345403&g2i_eui=DI%2bVyPv5d8wqc5f%2b5%2f9%2fy3v8FGBw2ML3&g2i_source=newsletter&lctg=A41CE4C5C43CE481D40E345403&active=no&utm_source=listrak&utm_medium=email&utm_term=https%3a%2f%2fwww.ocregister.com%2f2023%2f05%2f17%2fdisneyland-lays-out-theme-park-expansion-plans-for-next-30-years%2f&utm_campaign=scng-regional-parklife&utm_content=curated

SNL Weekend Update killed it with a segment roasting DeSantis, Disney, and Six Flags. Enjoy:

Cedar Fair managed the indoor amusement park at the Mall of America for many years. Lessons were learned, and FUN gave up the contract, when it ran out. This may, or may not, give us clues as to the viability of operating indoor amusement parks in malls. Upon Cedar Fair's exit from the MOA the Camp Snoopy branding was removed as CF would not license rights to Peanuts to the new operator.

Universal has discussed plans to open separate gate amusements such as year round Halloween Haunts, such as in Las Vegas, smaller children's themed parks such as recently announced in Texas, and a host of other opportunities both domestically and internationally. This represents a stolen opportunity which was open to operators such as Cedar Fair which has been quite reluctant to open or acquire second gates near parks and resorts they currently operate. An excellent example of FUN failing to extend the brand and operational know-how of attractions management is abundantly clear in Charlotte, North Carolina, where Cedar Fair has overlooked the opportunity of operating the NASCAR Museum in tandem with its Carowinds Park. Such a bolt-on exhibit opportunity would tie into NASCAR theming at Carowinds and extend marketing dollars by allowing for combination ticket sales at little to no additional expense. Ripley's Entertainment as well as Merlin Entertainment has grabbed the opportunity to operate second gates adjacent to popular destinations thus lowering marketing spends and capturing audience and revenues from competing operators both big and small. The move by Universal will capitalize on the markets FUN and others have created. This is, of course, a disappointment to investors who see the opportunity costs of failing to expand the brands to fully capture the revenues available adjacent to big draws such as theme parks. https://www.dailybulletin.com/2023/02/01/universal-studios-to-expand-regional-theme-park-concepts-in-u-s-and-worldwide/

Interesting questions about possibility Disney may be behind the purchase of CGA: https://www.themeparktourist.com/features/20230121/33238/could-californias-great-america-have-been-bought-disney-heres-what-were

Thank you DiamondbackFan for posting the above artist conceptions, news, and report from Storyland Studios. Quite interesting. While this project was ended due to the sale of CGA it gives us clues to the direction of Cedar Fair in place-making, theming, new food and beverage outlets and products, and an overall plan to refresh and renew areas of existing parks. Again, thanks for posting this article and information. Great catch!

Spinning off real estate assets into a REIT could be a smart move. For several reasons. If the REIT is spun off to the shareholders of Six Flags it is an even better possible move. Shareholders are rewarded with market rents on land, building, and ride assets (by collecting lease rent payments on the assets) and are generally receive dividends for the capital investment. Additionally, the surviving Six Flags operating company is placed into a position to earn proper returns on long lived assets such as land holdings. In the absence of such an arrangement SIX management is given an easy out on earnings. Since they do not have lease payments on valuable assets the earnings of the company are overstated while the actual returns are discounted by essentially subsidized "free" rents. What can happen when such a situation exists over a long period of time? Saks Fifth Avenue gives us an excellent example to answer this question. Saks owned over 40 Legacy department store locations, including the New York Herald Square store. With no "rents" the company appeared to be returning 6% to 10%. However, had Saks been paying market rents on the legacy owned locations it is likely the company would have been loosing money for many years. Accounting standards in the US allow for long lived assets such as land and buildings to be carried at book value when purchased so the financials falsely report the true value of the company. In Saks case, such shenanigans drastically undervalued the company. Along comes Hudson's Bay Company department stores from Canada. They purchase Saks for pennies on the dollar of the true value (due to the accounting quirk, which is not legal in Europe) and soon after acquisition of Saks finances the Fifth Avenue flagship store for an appraised amount $3.7 billiion. Or $800 million dollars more than the $2.9 billion price they paid to acquire the entire chain, one of the worlds most recognized brand names, a thriving eCommerce division, and 40ish owned locations. To say shareholders got taken to the cleaners is an understatement. I was one of those shareholders who was robbed of the proper monetization of the asset classes held by Saks. Despite having asked management, for almost ten years, to spin off the land and building assets into a REIT to shareholders. Management was reluctant to do so, in my opinion, as it would have made their jobs much more difficult: they would have had to start producing adequate real returns on the invested assets. Instead, they retired, and oversaw the sale of the company on the cheap with all the rich properties attached. Hudson Bay was reported to be planning to spin off Saks.com into a separate company with a valuation of approximately $6 billion. Six Flags is in the same position. A poorly performing company. With the advantage of "free" rent on many properties masking even poorer performance. The separation of the land, buildings, rides, etc. will force management to make better decisions, or to close non-productive parks and deploy the assets elsewhere. I am all for a transaction which separates the land and other assets from SIX in a manner benefiting current shareholders. This will help the company become stronger, focus on real earnings, and reduce the risk of shareholders being liquidated out of the hard assets should things go South. https://archive.nytimes.com/dealbook.nytimes.com/2014/11/24/a-deal-mortgaging-the-store-values-saks-at-3-7-billion/

Some speculation has circulated that Bob Inger will attempt a merger with Apple during his limited two year re-run as Disney CEO. Inger and Disney are busy deigning, and dismissing, these reports as idle rumors. Time will tell: https://variety.com/2019/digital/news/disney-apple-merger-bob-iger-steve-jobs-1203341956/ https://www.forbes.com/sites/dereksaul/2022/11/28/disney-ceo-iger-shuts-down-apple-merger-rumors-sticks-by-hiring-freeze/?sh=45343ab59ec2

The timing of this announcement suggests all is not well at Cedar Fair. I placed a telephone call to Investor Relations representative Mr. Michael Russell seeking additional information about these departures and the appointment of the new board members. I left a voice mail message seeking a return call from Mr. Russell concerning the BOD changes. Later I received a call from someone in Investor Relations who mistakenly thought I was calling concerning tax information. She then acknowledged the mistake, saying she returned the wrong call, and that Mr. Russell had my message and would be calling me at some murky unspecified time in the future. She cited it may be a few days as he was "busy returning other calls" as I might imagine. Hum. Not inspiring of confidence. A couple of issues make these departures and appointments concerning: First, it is the Unit-holders responsibility to elect board members, not managements duty to appoint them (unless, of course, in cases such as sudden incapacitation, death, or removal due to cause or malfeasance). Cedar Fair held its Annual Shareholder Meeting just a short time ago on May 18th and that was the proper opportunity and time to replace directors. Second, what transpired in the ensuing four odd months to require the sudden and unexpected departure and replacement, by appointment, of these board members? Cedar Fair provides little guidance on these issues in their News Release. Why? Perhaps timely responding to investor inquiries would help quell concerns. Third, why did Cedar Fair fumble the New Release, quickly requiring an updated document retracting the effective dates of the departures and appointments? First release indicated the effective date was October 3rd, then this was corrected to October 1st. Sloppy. Suggests turmoil in the corporate offices. How could such a vital fact have been wrongly reported? Did no one proof read the first sentence of the News Release? Forth, why has Cedar Fair not released information addressing these unsettling departures and appointments? These do not have the appearance of being "business as usual" type transactions. Given the unsavory history of misleading announcements concerning the departure of former executive Jacob (Jack) Falfas this becomes a more salient transaction. Recall, FUN was found to have lied about the circumstances of Falfas's departure by both courts and arbitration judges. Fifth, it is odd newly appointed BOD member, Ms. Michelle McKinney Frymire, holds expertise in the areas of Audit, Board and Corporate Governance, Nomination, and Compensation. She would be aware it is the duty of such committees and directors to look forward and present viable candidates to stand for election at Annual Meetings. That this did not occur in this instance suggests something is off kilter. It will be interesting to track Ms. Frymire's tenure on the FUN board. Six, newly appointed Director Jennifer Mason has an impressive history of finance and risk management duties at Marriott International. "Capital allocation, financial risk management, insurance, financial strategy, capital allocation, financial risk management, insurance, claims, business continuity, and global safety and security" are all pointed out as skills she brings to Cedar Fair in the News Release. Interesting the release failed to explain how those specific skill sets would benefit the company. Has a problem involving a deficit in these areas been identified by Cedar Fair? Again, the silence from FUN is deafening. Seven, why are calls and messages not being returned by Cedar Fair in a timely manner? Other than my calls yesterday to Cedar Fair additional calls have gone unanswered. Including the request for an email address for an executive. The unprofessional behavior is concerning and leads to a loss of confidence in the management and directors entrusted with the care of our company. This lack of attention and transparency leaves the impression Cedar Fair may be hiding something concerning. Perhaps Corporate Director of Investor Relations Michael Russell will carve out the time to return calls and address these questions.

https://www.barrons.com/articles/six-flags-six-stock-new-ceo-analysts-51636999062

The sudden and unexpected departure of Cedar Fair chief council Milkie has ruffled feathers at Sandusky City Hall. The Sandusky Register has a surprisingly frank story delving into the concerns and dissatisfaction by city officials. The article touches upon concerns about corporate positions shifting to the Charlotte office. https://sanduskyregister.com/news/326168/city-wants-sit-down/

Cedar Point's Castaway Bay indoor water park resort, along with the recently acquired Sawmill Creek Resort are to remain closed throughout the 2021 season. Renovations to both properties were underway following the 2019 season. However, work was slowed or suspended during the covid closures and crisis. It is unclear why hotel renovations were not completed or saw substantial progress during the covid pause. The delay in completing refreshments on these properties will depress off park revenues and earnings in 2021. https://www.cleveland.com/entertainment/2021/03/cedar-points-castaway-bay-wont-open-this-year-as-renovations-resume.html Additionally, the work scheduled to begin at the announced hotel at Canada's Wonderland was halted and the permitting process was abandoned by Cedar Fair. This shall delay the progress of pivoting CW into a Resort property with extended seasons. WinterFest at CW was exceptionally well received indicating the real posibilities for additional season extending festivals and events. In another blow to FUN some partners who provided and produced recent events, such as Feld Entertainment with the Monster Truck production, have not survived the economic covid crisis. These bankrupt partners may effect offerings in the coming season as events are paired back. Cedar Fair has made much of the learning they have come out of the lost covid year. The implications are FUN learnt a thing or two about the successful operation of food and other festivals independent of full park operations. This suggests more special event offerings may be on the table which will take place without rides and all attractions being open and full park operations underway. Such partial resort operations would substantially cut opperating costs while providing new cost effective revenue streams. Hotel operations being curtailed will necessarily hamper these efforts. It seems very short sighted of FUN not to have taken advantage of the 2020 pause and completed hotel and other renovations.

The deadline for responsive proposals to the City of Gilroy for development opportunities upon excess land at Gilroy Gardens had been extend approximately three weeks, until February 12th. The proposal deadline extension suggested the City might have been engaged in chasing a particular developer, or developer group, negotiating an answer and submission to the Request for Proposal. The City of Gilroy received one responsive proposal from Imagine That Design and Production, LLC. Due to pandemic related city office closures it is possible other proposals may have been submitted. Once the mail has been checked and vetted Wednesday any additional submissions will be recorded. It is not expected other responsive proposals were likely received. Jimmy Forbis, Gilroy City Administrator, has confirmed the receipt of the response from Imagine That Design and Production, LLC. In addition, Gilroy has removed the RFP from its website as the opportunity to respond has officially closed. As more details emerge I plan to report them here.

Gilroy Gardens to open May 22 under the continued management of Cedar Fair: https://patch.com/california/gilroy/gilroy-gardens-announces-2021-reopening-date

Herschend set up an acquisitions and mergers branch before the epidemic arrived. Heavy hitters involved. Included was a stated intent to locate investment partners. Cedar Fair took simular action several years ago setting up former CEO Matt Ouimet in a position and office to oversee acquisitions. Then absolutely no transactions occured for years. The pandemic may accelerate, or act as a deceleration to acquisitions. Much will depend upon both healthy access to capital along with depressed asset prices, mixed with available funding for operators to restart operations. Here is a story about Herschend moves in the Growth Department: https://www.knoxnews.com/story/money/2020/11/24/dollywood-new-president-looks-to-expansion-smoky-mountain-cabins-dreammore-res/6405205002/

The Orange County Register has published an interesting report which delves into why Disney has moved to end its season pass programs. The likely culprit seems to be a concern millions of season pass holders will swamp Parks reservations soaking up all available visitations due to covid required crowd reduction efforts It helps to think about Park capacity much as an airline or hotel conceptualizes seat and room inventory. Once the airplane leaves the runway with an empty seat that revenue can never be recaptured. The seat was as perishable as a Boysenberry left to rot on the vine. Ditto a hotel room. If it fails to sell tonight that room night of revenue can never be sold and captured. The sun set and rose on the opportunity to sell the inventory. The room revenue potential is forever lost. Perished in the daylight. Now think about Park visits in the same vein. No longer able to just squeeze one more visitor in the gates due to covid capacity limits, your product has become much more like an airline seat or hotel room. Both industries the management of occupancy or seating capacity is referred to as yield management. The goal is to achieve some level of revenue on every seat or room every day. Some seats will be sold at a discount, if necessary. Same for the hotel room. At the end of the day the airline or hotel achieves increased revenues. Doesn’t that sound an awful like an amusement park with covid crowd restrictions? Yield management to the rescue. Suddenly, the Park must make each seat count. Maximum revenue must be obtained from each admission. See the problem with unlimited season pass admissions? On many days they are capable of soaking up every available space but at highly discounted prices. Best for Park industry to start selling the limited capacity at premium rates—just like cruise lines do. With suddenly limited capacity at Parks the value and revenue stream from each ticket becomes much more critical to company health and profitability. Indeed, it becomes paramount. The best, highest spending, guest must be placed in the Park first and foremost. Then unsold space can be discounted and put on clearance to harvest additional revenues. Just like an airline seat. These are the concepts the Orange County Register newspaper report hints at but fails to spell out in simple terms. Fram a revenue perspective Amusement Parks are now much more like hotels than a festival ground, which can almost always accommodate just-one-more guest. https://www.ocregister.com/2021/02/04/disneyland-seizes-opportunity-to-reboot-annual-pass-program

More details on the plans: https://gilroydispatch.com/year-in-review-2020-gilroy-seeks-developers-to-advance-recreational-goals/