SIX FLAGS--ANOTHER RECORD QUARTER

[The Interpreter]

Say what you want, the financial performance is there:

http://www.businesswire.com/news/home/20151019006503/en/Record-Quarter-Flags

[Joncars05]

That $25 per car parking fee is working well for them! 

[The Interpreter]

It is indeed.

See also Disney.

At Flags, you can buy a Gold Pass the year before which includes admission AND parking to all Six Flags parks for as little as $51.

A comparable Cedar Fair Pass starts at about $180, IF you are renewing.

[themuska11]

Im sure Lonnly Tunes are helping them out too regarding children. Loonly Tune episodes are still being produced according to IMDB. On the other hand, The Peanuts gang isn't known by lot of children until their parents show them, and most Charlie Brown episodes only air during holidays on major television networks.

[The Interpreter]

A major motion picture should help Cedar Fair in that regard soon.

[Italian Job 2005]

^Which is already readily advertised on Kings Island's FunTV's.

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[RollerNut]

It is indeed.

See also Disney.

At Flags, you can buy a Gold Pass the year before which includes admission AND parking to all Six Flags parks for as little as $51.

A comparable Cedar Fair Pass starts at about $180, IF you are renewing.

Would it be a fair assumption to assume that aggressive in park advertisements justifies the lower season pass prices?

[The Interpreter]

Well, the two chains have very different philosophies. Six Flags has lower season pass prices, higher parking and general admission prices and typically invests (these days) smaller amounts of capital over a larger number of parks.

Cedar Fair does do in park marketing, but apparently has more trouble getting long term relationships. See SafeAuto, Red Gold, &c.

[BeeastFarmer]

The Interpreter, just curious. Does the pricing strategy you reference degrade the pricing integrity?

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[The Interpreter]

One company has made a huge deal in the past about pricing integrity. It also had a CEO who was obsessed with nickels. And laundry.

[Ride On_17]

Honestly, I'm don't think most of the general public cares whether they see an ad or banner on a fence inside a park. The times I've gone to parks with non-enthusiasts, they never seem to mention anything about it and instead only focus on the rides, even ad-heavy Six Flags parks. I feel like it's just enthusiasts who always complain about them, specifically with SF parks. However, I do think think they detract from the "magical" experience of being inside an amusement park. But hey, obviously it's working for SF (or at least something is with their strategy if they keep setting records).

[The Interpreter]

See also stock performance, dividends, EBITDA....

[BB1]

One company has made a huge deal in the past about pricing integrity. It also had a CEO who was obsessed with nickels. And laundry.

Hey keep a few nickels and you will get a dollar. Save a few dollars and you might have enough to buy a coaster. When you buy the coaster, you could call it The Spin Cycle and do your laundry while you wait in line!

BB1, saving up some nickels

In all honesty, if SIX keeps going up, I might be spending some nickels and dollars on their stock. BUT that comes with the realisation that to bring me in they have to have a steady rate of growth and an anticipation to do exactly what they just did and not stop here.

[The Interpreter]

The time to buy was when things perhaps looked bleakest. (But not just before the bankruptcy).

Americans have an unfortunate tendency to buy high and sell low.

Proven records have success built into the price.

Reward comes only with risk. Sure things seldom are.

[gad198]

I'm a little late to this discussion but I wanted to comment on this.

 

I work in the financial services industry.  I've read a lot of reports on both Six Flags (SIX) and Cedar Fair (FUN).  All of those reports focus are focusing mainly on balance sheet items and cash flow.  They're financial reports and they should indeed do that!  Having said that, I've yet to see one of these reports answer the one question I always ask myself after reading these reports: Have any of these analysts actually been to the parks to see what life is like inside the gates?

 

A lot of what's driving the SIX and FUN stock price up recently have been positive developments as far as attendance, earnings, and the increases in the dividend yield.  All of these financial reports mention these items.  What many of them also tell you is that most of their attendance growth is due to a large uptick in season passes and memberships.  Season pass/memberships account for half of the attendance at SIX parks.  I'll post a link to the season pass numbers chart at the end of this paragraph.  Cedar Fair is around 40%.

 

Six Flags season pass/membership chart link: http://marketrealist.com/analysis/stock-analysis/consumer/theme-parks/charts/?featured_post=272568&featured_chart=272569

 

Why is this important?  Six Flags has said in their investor presentations that they're pulling back large discounts on admission.  Oh really?  So then the $60 all-park, parking-included season pass I purchased back in September was clearly an aberration.  One-day admission offers are available all over the place (granted, these discounts are coming off of a higher regular general admission price).  SIX still offers some bring-a-friend free days for passholders.  It's pretty easy to see why attendance is going up, because it costs relatively little to get in to a SIX park.  SIX is clearly using their low-cost season passes and memberships to drive attendance.  Let's examine this in a bit more detail.

 

THE GOOD: "The company’s Active Pass Base, which represents the total number of guests who have purchased a season pass or who are enrolled in the company’s membership program, increased 25 percent from September 30, 2014 to September 30, 2015.  The significant increase in the Active Pass Base is in line with the company’s overall strategy to upsell guests to multi-visit passes.  Season pass holders and members are the company’s most valuable guests since they generate higher revenue and cash flow for the company than a single day guest, and also provide an excellent hedge against inclement weather throughout the season."

 

This is directly from the earnings release that the Interpreter posted in the initial post.  I don't disagree with anything here.  Let's see the other side of the coin here.

 

THE BAD: "Total guest spending per capita for the third quarter was $42.87, which was down $0.92 or 2 percent as compared to the third quarter of 2014, over half of which related to changes in foreign currency rates and the balance to a substantially higher mix of season pass holder and member attendance as compared to the same period last year.  Admissions per capita decreased 2 percent to $25.22 and in-park spending per capita decreased 2 percent to $17.65, also primarily due to adverse foreign exchange rates and a higher mix of season pass and membership attendance.  For the first nine months of 2015, guest spending per capita declined 3 percent.  On a constant currency basis, third quarter and year-to-date guest spending per capita decreased $0.30 or 1 percent and $0.73 or 2 percent, respectively."

 

This is also directly from the earnings release posted earlier.  So essentially what they're saying here is that the 9% bump in attendance is almost exclusively driven by additonal pass sales.  Unfortunately per caps were down.  This isn't newsworthy since most of us know that season pass holders spend less than one-time guests.

 

Here's where I would worry if I was a SIX stockholder (which I'm not).  The current trend right now is unsustainable.  A key reason why the pass numbers are so high right now is due to the relatively low cost of the passes.  What is SIX going to do when they want to raise the cost of the passes?  They're clearly trying to keep their attendance numbers up, because as it stands right now their attendance gains are outweighing the downward trend in their per caps.  That's not going to last forever.

 

I truly believe their current capital expenditures strategy is going to come back to bite them in the tail.  Just as a basis for comparison, despite having fewer properties 7 fewer properties (18 for Six Flags and 11 for Cedar Fair) Cedar Fair spent nearly $30 million dollars more in capital expenditures in the last year.  Cedar Fair has said that they're going to bring their capital expenditures down in the future, but wow, that is a huge difference.  They've been skating by on a lot of very inexpensive additions across all of their parks just to claim something "new" each year, but doing something just for the sake of doing something isn't good long-term strategy.  

 

SIX has said that they're going to continue to follow the same pattern for the foreseeable future.  They're also trying to continue to cut costs, which means that while SIX parks are much more pleasant-looking than they were five years ago the operations, food service and guest experience haven't improved.  It reminds me a lot of the end of the Paramount days at Kings Island.  I doubt many would argue that Cedar Fair parks by and large are much better places to visit now than when Cedar Fair initially acquired the Paramount parks, but I'm not sure I can say the same thing about most SIX parks.

 

SIX to me right now is putting lipstick on a pig.  Cedar Fair does everything better than SIX except for two things - their Flash Pass system and their easier-to-use season pass system.  A friend of mine said it best earlier this season after visiting a SIX park: "I never really completely enjoy a visit after coming here.  There's always something goofy that you have to deal with at a SIX park."  I truly wonder if any of the investment analysts would feel the same way if they personally visited any SIX park during a normal operating day.    

[The Interpreter]

Really?

A. Ever see the never discounted parking price charged the Six Flags non-gold season passholder?

B. Ever compare the food offerings at both chains? The food "service?" At one of these two chains I have no problem with either the food or the food service. At the other, I typically throw my hands up in the air in frustration and leave the park.

C. One of the two chains is doing something for every park, every year. Locals typically don't give two hoots what other parks in the chains get.

D. The real enemy of both park chains is cost of debt. Both have bet the parks on long term low cost debt. I doubt this is a smart strategy.

[gad198]

D. The real enemy of both park chains is cost of debt. Both have bet the parks on long term low cost debt. I doubt this is a smart strategy. 

 

I agree entirely.  Both parks have been very fortunate that the economy has been kind to their financing strategies for nearly a decade now.  Gas prices have come down and interest rates are still at rock bottom.  It's not going to be pretty when things revert back to more normal levels on both ends.  Then again, I highly doubt we'll be worrying too much about amusement park stocks if the economy does an about face since there will be much bigger things to deal with!

 

Regarding the other 3 points:

 

I am familiar with the $20-$25 parking fees at each park.  I'd be curious as to how many of their patrons actually pay that charge compared to patrons at the Cedar Fair parks.  I do question how much higher SIX thinks they can raise prices before they run into pushback.  It doesn't seem to have been an issue thus far so it'll be interesting to see how this trends. 

 

The food.  I've only eaten at a few different locations inside any Six Flags park in the last few years.  I've intentionally tried to stick to places I know are good, like JB's Smokehouse, as my experiences with other things at SIX parks haven't been good (burgers, pizza, chicken strips, etc.).  Having said that, I much prefer the food offerings at Cedar Fair parks by and large.  I can name different places at each Cedar Fair park I can eat at and enjoy, whereas outside of the aforementioned JB's Smokehouse I can't think of anything - perhaps outside of the offerings at Great Adventure - that appeal to me.  My experience with both chains regarding the speed of service has generally been - let's say - less than good.  Both chains have a lot of room for improvement in that area.  I think one area we both agree is that dining plans ultimately have a negative impact on the food experience because there's very little incentive to try and improve either the food quality or service.  They already have your money, so where's the incentive to improve?

 

SIX has been more proactive about putting things in each park for sure.  I also believe that they've been more creative with some of their additions (the RMCs, Justice League rides and the S&S 4D coasters).  They also won the Starflyer vs. WindSeeker battle.  The flip side is that SIX has decided to go with a lot of low-capacity additions that you have to run to first thing in the morning or be faced with an hour wait.  The Six Flags RMCs all have low capacity (New Texas Giant can move people with a good crew and maximum trains but they simply choose not to run 3 trains).  Justice League is an hour wait even on slow days at SF St. Louis.  Can you think of the last ride that Six Flags installed in the last five years that had even a decent ability to move people through its line?  X-Flight maybe?  Take a look at the reviews on Yelp or TripAdvisor and see how many SIX parks have negative reviews because of either crappy operations or long lines versus those at Cedar Fair parks.  I'm not saying I trust every single review but my experience at parks in both chains leans towards the average of all the reviews most of the time.

 

All of this without mentioning some of the other "smaller" items.  It consistently takes me longer on average to get into a SIX park than it does a Cedar Fair park, either when I'm parking or at the front gate.  Pass benefits, especially regarding gold pass early entry.  Each SIX park does something different and it seemingly changes on a day-to-day basis.  I've yet to go to a Cedar Fair park and them not do ERT if they claim it's offered as part of the pass.  I could go on.  Perhaps the way that SIX is conducting business will work out for them long-term, but I wouldn't count on it until they fix their core issues.