Cedar Fair's Matt Ouimett Presents at UBS Global Media Conference

[Leland Wykoff]

Cedar Fair presented for the first time on December 3rd at the 40th UBS Global Media and Communications Conference. Matt Ouimet with 18 total months service, and near his first anniversary as CEO, expressed his firm belief Cedar Fair would close the year with a third strong record setting season.

Revenue guidance up 4% was confirmed, as was average guest per capita spending up 4%. Attendance flat, inline with previous year record attendance. Caution was suggested against focusing on simple attendance figures, rather the revenue generation per turn-style click was emphasized as the key metric.

Revenue management practices from the cruise line, hotel, and broader amusement industry were identified and evaluated as valuable management tools. More season pass sales can result in less per capita income as incremental admissions are essentially discounted. However, season pass revenues are captured up front and are resilient to downward pressures affecting daily admissions, such as adverse weather conditions.

Essentially strong revenue gains are being somewhat masked by the downward pressure of season pass sales which have the effect of discounting some marginal admissions. Given this reality, it is better news than it may appear at first glance, per capita spending was up a healthy 4%.

The staycation was identified as a permanent fixture rather than a short term trend limited by the recent economic downturn. Ouimet spoke again of the "genetic vacation behavior" where by what you did as a youth on vacation will have influence over those activities you enjoy with your children on vacation. Ouimet identified positive amusement park visits as an experience worth repeating as an adult. The pipeline feeding such legacy family visits was judged superior.

The importance of the Dinosaurs Alive attractions were explained as having the education component necessary to justify and capture the school market. The capital investment is low as it is a partnership in which the DA folks split the up-charge gate fees with Cedar Fair.

The defining nature of large rides, such as the new Gatekeeper Coaster and Gold Striker Coaster, were highlighted along with the superior returns they earn both at the turn-style and in promotional value. The YouTube Gatekeeper video was reported to have generated over two million hits to date.

Strategic investments in new rides, and corresponding editing out of old rides, was demonstrated by Gatekeeper at flagship park Cedar Point. The operating costs saved by removing two older rides provides 75% of the cost of operating the new coaster. Those rides had low ridership and high maintenance costs. Costs are thus limited, and controlled by new rides, while reducing the fixed base costs.

Evening lighting and music will continue to receive management attention and expansion as they have the power to retain guests on park longer resulting in lucrative dinner sales while simultaneously improving the value perception by guests.

Promotional activities will rely upon less discounting and more relationship building. Price integrity will be practiced and new pricing models, such as installment season pass purchases, will continue to be developed and nurtured. Dynamic pricing and advance purchase commitments will be the watchwords. Incremental customer acquisition will be guarded to assure pricing and revenue opportunities are maximized.

"Late to party" revenue opportunities such as sponsorships, marketing partnerships (such as the recently announced Coke deal), front of line passes, dinosaurs, premium parking, premium Halloweekends mazes and haunts, and improved e-commerce options, are and will be expanded and exploited.

Cedar Fair is committed to spending approximately 9% annually of revenues on marketable capital projects going forward. These investments are viewed as absolutely necessary to promote the value and desirability of the properties to guests. Wise deployment of this 9% capex budget will also have the benefit of trimming, containing, and/or reducing operating and fixed costs as new rides replace older rides.

The projected 4% annual growth in revenues was identified as coming three quarters from pricing and new products, and one fourth from new attendance.

Hotel refreshment is primarily driven by the desire to extend the stay by guests and capture the second and subsequent daily admissions as well as increased room revenues.

Cedar Fair has little interest in developing additional resort hotel rooms at this time. Campgrounds and other niche products may see growth. Ouimet supports the development of outside hotel rooms around or adjacent to Cedar Fair properties but is not interested, at this time, in expanding Cedar Fair hotel room inventories.

The sale of Soak City in San Diego was disclosed to have sold for "around $15 million." Proceeds will be devoted primarily to fund the hotel refreshment program. Soak City SD was not a primary growth asset and it made sense to redeploy the capital to the hotel refreshment program. Ouimet indicated the company did not have many other assets ripe for sale.

Cedar Fair will continue to be managed to provide significant returns to unit-holders via a sustainable dividend. Management and the Board of Directors is committed to increasing the dividend as the earnings of the company increase.

See this Conference Transcript for details and sourcing of information and brief quotes:

http://seekingalpha.com/article/1042371-cedar-fair-l-p-s-ceo-presents-at-40th-annual-ubs-global-media-and-communications-conference-transcript

Leland Wykoff

[TombRaiderFTW]

I generally like the sound of all of this. Sounds like Luminosity's on its way to other parks in 2013 and beyond. What concerns me:

"Late to party" revenue opportunities such as sponsorships, marketing partnerships (such as the recently announced Coke deal), front of line passes, dinosaurs, premium parking, premium Halloweekends mazes and haunts, and improved e-commerce options, are and will be expanded and exploited.

Did they start doing this this year at CP or something? (I've never been to Halloweekends.) I really dislike the idea of upcharge haunts... Hope this isn't the new trend. Or are they talking about the fact that Haunt isn't included with the standard pass?

[PhantomTheater]

All zones and mazes at CP were included with admission this season.

[coasterfanatic83]

He could have been talking about special events like Madame Fatale's Dead Inn Feast?

[kblanken]

Knott's had an upcharge haunt area.

[malem]

^^^^^ Thanks for that great summary!

premium Halloweekends mazes and haunts,

Did they start doing this this year at CP or something? (I've never been to Halloweekends.) I really dislike the idea of upcharge haunts... Hope this isn't the new trend. Or are they talking about the fact that Haunt isn't included with the standard pass?

Knott's had an upcharge haunt area.

Their upcharge Haunt this season intended for mature audiences only. It was intended as a more "extreme" Haunt, with greater interaction between scaractors and guests. This severely limits capacity, so groups had to reserve a time for a cost of $60/group.

For information on what that was like, there are plenty of reviews: http://www.ocregister.com/entertainment/trapped-374964-maze-room.html

I'd be excited to see such an attraction at KI's Haunt. There are a lot of things they could do with this that just aren't possible in a standard, high-capacity Haunt, such as actors touching guests or being asked to eat something disgusting. Assuming you can get into a group of 6, $10 per person isn't bad.

[Leland Wykoff]

Knott's Berry Farm featured a Scare Zone Maze requiring reservations and an up-charge fee. This first time trial was successful and Ouimet reported it more than payed for itself in the first year. The CEO stated "So we think there [are] other opportunities around the Halloween program, as [an] example."

This fits within the model of providing services and product tailored to the benefit oriented consumer. The requirement of holding a reservation to access the up-charge Maze is in essence a Fast Lane Pass to Haunt. It allows customers seeking a premium experience to better manage time on park.

These revelations further drive home the point: managements realization people standing in line are not spending money.

It will be interesting to see if Cedar Fair will adopt some more extreme adult versions of haunts. Read a review of such an activity in New York here:

http://www.blackouthh.com/reviews

[BB1]

Lucrative dining, I have an idea that maybe a true to the Point sit down restaurant may come sometime. I hope that this notion of sit down restaurants takes up with Cedar Fair, I have a feeling it may not be that bad if they were to set it in a good area ( near front of the park, possibly in the middle of the border of park and parking for yearly operation, see Rain Forest Cafe, Animal Kingdom) will bring in some more food related revenue. Its great to hear the great financial standing Cedar Fair is today.

[KIfan73]

A year round restaurant…why didn't they think of that before?

[Jr for Birdy]

Put a Pinks hotdog restaurant in the KI parking lot and Merry Christmas to me!

[PKIVortex]

Could the

I generally like the sound of all of this. Sounds like Luminosity's on its way to other parks in 2013 and beyond. What concerns me:

"Late to party" revenue opportunities such as sponsorships, marketing partnerships (such as the recently announced Coke deal), front of line passes, dinosaurs, premium parking, premium Halloweekends mazes and haunts, and improved e-commerce options, are and will be expanded and exploited.

Did they start doing this this year at CP or something? (I've never been to Halloweekends.) I really dislike the idea of upcharge haunts... Hope this isn't the new trend. Or are they talking about the fact that Haunt isn't included with the standard pass?

Could't the preminum mazes and haunts also refer to Fright Lane?

[The Interpreter]

He had already mentioned front of line passes, so I truly doubt it.

[CoastersRZ]

Because some people would pay for both the premium "paid" mazes/experiences and the Fright Lane passes. Thus, Cedar Fair would get even more income from these individuals. Sure, enthusiasts and people that post here may complain about such an offering, but if it proves to be a money maker for the company, then why not roll it out across more of their parks.

This is my 10,000th post. Hard to believe that I have made that many posts. I haven`t been on much lately as I have been working two jobs (and close to 70 hours a week). Right now I`m on a brief reprieve as I do my civic duty and am on jury duty.

[PhantomTheater]

A year round restaurant…why didn't they think of that before?

They did, CP has had one for years.

[Tanna]

I like the tiered idea of a premium Halloween. You get what you pay for, and to have more elaborate monster designs and interactions would intrigue me.

Of course I'm going to like the evening lighting and music, as I have a casual bet on Luminosity coming to KI (But the one in CP is sponsored by Pepsi- is the sponsor going to change now?)

I'd like more venues that would bring my sister to the park. She's only three years older than me, and we keep inviting her, but she always backs out. I think she thinks she's too old, but as stated in the article, your childhood vacation somewhat determines your adult likes in vacationing, and I know she'd love it if we could just get her into the gate. Her kids come to the park with me all the time, and have a great experience. I'm hoping that perhaps there will be a vacation/hotel package worked out where there's a set price for an overnight stay and two days at the park. I think that would influence her to return to the park.

[Maverick00]

It'll be Luminosity - Fueled by Marathon.

[Sonofbeast2.0]

I like the way the new CEO is going! I wonder if we will ever see rides at par with Disney/Universal?

[The Interpreter]

Highly unlikely. 130 days a year vs. 365. Highly variable weather in all but one park vs. glorious weather nearly every day. Deep pockets at Disney vs deep debt at Cedar Fair. And so it goes.

[shark6495]

I like the way the new CEO is going! I wonder if we will ever see rides at par with Disney/Universal?

Highly unlikely. 130 days a year vs. 365. Highly variable weather in all but one park vs. glorious weather nearly every day. Deep pockets at Disney vs deep debt at Cedar Fair. And so it goes.

Well may I ask why it would be highly unlikely? If you talk about rides at Universal well I dont see why you wouldnt see similar rides at a CF park. If not for the ability to Universal and Disney to have rides with movie/tv show themes, the rides could be similar. The old back to the future ride / simpsons ride is just a motion sensor ride right? Just a well done ride. just playing devils advocate.

[The Interpreter]

Money. A single attraction at Disney or Universal can cost what Cedar Fair or Six Flags spends on capex for all of their parks for a year. The necessary return on investment isn't there. Mr. Ouimet has made measurable return a priority. Fewer, more spectacular attractions and rides may be the future, but don't expect Tower of Terror level theming and attractions at regional parks.

Kings Island had Phantom Theater and Tomb Raider: The Ride, attempts to become the Universal of the Midwest. How'd that work out?

[TTD-120-420]

Hint for those who don't know the answer to Terpy's question: Not well.

[Vortex]

Paramount Parks had a hard time with keeping up the themed rides.

[The Interpreter]

So did Mr. Kinzel's company. See Disaster Transport.

[CoastersRZ]

I still maintain that is remarkable how much of Flight of Fear`s theming is still there. Yes, there have been some things that have come and gone with its theming over the years, but the ride will be 17 years old this upcoming season.

[The Interpreter]

The computer equipment is now incredibly obsolete.

[CoastersRZ]

Well, that is a given. But the fact that Kings Island`s Flight of Fear still has most of its original theming intact is impressive. Especially when compared to what happened to Kings Dominion`s Flight of Fear`s queue.

[coasterfanatic83]

What happened in KD's Flight of Fear queue?

[shark6495]

Money. A single attraction at Disney or Universal can cost what Cedar Fair or Six Flags spends on capex for all of their parks for a year. The necessary return on investment isn't there. Mr. Ouimet has made measurable return a priority. Fewer, more spectacular attractions and rides may be the future, but don't expect Tower of Terror level theming and attractions at regional parks.

Kings Island had Phantom Theater and Tomb Raider: The Ride, attempts to become the Universal of the Midwest. How'd that work out?

Hint for those who don't know the answer to Terpy's question: Not well.

While I am not sure what is up with Phantom Theater, wasnt Tomb Raider's issue more to do with being a giant prototype versus the theming of the ride? Unless you speak of turning off the water/fire then yes of course you are right on that.

[Browntggrr]

So did Mr. Kinzel's company. See Disaster Transport.

Comparing the themed rides, and thus the theming failures, between the two parks is apples and oranges (i.e. DT vs. AE, TR:TR, SDatHC, IJ:ST, Action Theatre, BB etc.)

KI marketed the park as a theme park ("Where the magic of the movies meet the thrills of a lifetime"), CP never has, to the point Mr. Kinzel was quoted on several occaisions that CP is not a theme park.

AR was lacking on thrills, erecting the building was a lame attempt re-invent the ride. Mr. Kinzel has also been quoted on several occaisions that DT was one of his worst decisions.

I understand you have a deep dislike for Mr. Kinzel, jumping on him for this one can be defined as grasping for straws as the head of any company is still human and does make mistakes. The theme here should be that the head of the company actually admitted a mistake.

[The Interpreter]

After the Tomb Raider installation (and Son of Besst, for that matter), Paramount Parks took a turn toward installing much smaller, less expensive rides and attractions. Those rides, both of which were very expensive, did not deliver the anticipated return on investment.

That's one thing to watch as Cedar Fair apparently goes down the road, at least for a while, of fewer but larger and more spectacular (but not too aggressive) rides and attractions. Both Mr. Ouimet and Mr. Witherow have referred to this strategy lately. A well rounded park is a balance of rides, attractions, food, etc. Some wild, some mild. Some for kids, some tweens, some teens, some for adults. Many love small flats. Others dark rides. Will there be room for all this in the future?

Management needs to take care to maintain a balanced strategy over time. Paramount Parks' latter day strategy of cheap and cheerful installations was already starting to have deleterious effects on the parks. Maintenance

of appearance and theme, as you have noted, is also very important.

As for Brown's comment, posted while I was still writing this, if Disaster Transport was such a mistake, note the theming on Top Thrill Dragster. The Disaster Transport mistake I see was allowing it to deteriorate...benign neglect or disdain. It was a fine ride when it first opened. It wasn't maintained thematically.

Also, I do not dislike Mr. Kinzel, but I detest many of his management actions his last decade at FUN. There is a huge difference.