Ups and Downs of Investing in Theme Parks

[The Interpreter]

http://www.usatoday.com/money/perfi/columnist/krantz/2011-07-25-investing-in-amusement-parks_n.htm

[Magm&MForce24/7]

Thanks terp! That was really interesting and I'm glad you found that. If I would invest I would probably invest with Disney, but if I would choose with a seasonal operator it would probably be Cedar Fair. I feel that they use their money better, and it would scare me to invest after bankruptcy with Six Flags. Though would invest when the company's growing would probably be a good idea, but I can't invest yet so others probably know A LOT more than me.

-MagmMForce247

[kingsrattler]

It will be interesting to see the view of investors come next year when the Cedar Fairs changes hands. I know I will be keeping my eye on it.

[RailRider]

Thanks for posting the article Terpy.

I am a unitholder of both FUN and DIS and it has been quite the ride with both. I hold a few other related stocks and have formed my own kind of amusement industry mutual fun, hahaha

I bought in to FUN when it was hovering between $12 and $13 a share prior to reducing and then cutting off dividends. Today the stock is hovering around the $20 to $21 range and the dividend has been reintroduced.

I bought in the DIS when the stock was around $23 and currently it is in the low $40s.

Owning park stock changes your perspective on how you view parks, their opperations, and the business aspect of things. You not only want to see parks do well because of your love for them, but also because you have a real vested interest in their success. You take a little more pride in the parks and enjoy your time more, but I have also become more critical when I see things that do not make sound business sense. I say if it is something you love why not own a piece of it.

[Leland Wykoff]

Amusement and Theme Parks are generally considered mature industries and thus with limited growth potential. The capital costs of opening a new park is astronomical. Available land suitable to large markets is limited and tends to be prohibitively expensive. Zoning creep and planning departments make siting new parks impossible in many instances.

These negatives are also where the potential of park investing exists. Many parks are located on large desirable tracts. Ripe for sale and redevelopment. While this "land bank" possibility is not, given current real estate markets, a big factor, times will change and the real estate wheel will turn. Amusement parks, when tightly managed, can be cash cows. Example: Cedar Fair's stable of parks. Poor park management can lead to razor thin margins, or worse, huge annual losses. Example: Six Flags.

Savvy operators of large resort parks, such as Disney and Comcast/Universal, are active across so many business divisions it is difficult, if not impossible, to isolate park earnings and revenues from the rest of the company. Thus it can be difficult to "invest" in those company park assets.

Much upside potential exists. Six Flags, recently fresh from bankruptcy has shed much of the traditional capital costs associated with the carrying cost of parks. Thus it will be relatively easier for them to achieve profitability [note; prior to bankruptcy Six Flags only had two profitable quarters over its entire history].

Growth will be achieved by wrenching more revenues from the existing infrastructure and locating/creating new revenue streams and ancillary product and service offerings. Examples: line jump passes, adjacent hospitality offerings such as hotels, restaurants, water parks, resorts, arena shows, sport parks, catering, river and lake excursions, sponsorship revenues, timeshare sales, video game offerings, content/character creation, merchandising, cuisine sales, meeting sales, cruise line development, weddings, and shoulder season creation.

This is a tall order requiring a multitude of management expertise and abilities. Cedar Fair, having hired a new CEO in waiting, and Six Flags with a crack management team under considerably less debt, may be able to pull off these tasks.

One thing we know for sure: private equity firms have entered the business as they are certain growth opportunities exist in what is mistakenly viewed as a mature industry. The growth likely will come from new technologies and product offerings which successfully exploit the captive audiences enjoyed by amusement park operators.