Cedar Fair Reports Record Third-Quarter Revenues

[IndyGuy4KI]

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today reported record net revenues for its third quarter ended September 23, 2018 and announced a 4% increase in its quarterly cash distribution.

• Cedar Fair reported record net revenues of $664 million in the third quarter. The 2% increase over last year's third-quarter results was driven by a 2% increase in average in-park guest per capita spending and an 8% increase in out-of-park revenues, including resort accommodations.
• Preliminary net revenues for the 10-months ended Sunday, October 28, 2018, were up 1%, driven by a 1% increase in average in-park guest per capita spending and a 5% increase in out-of-park revenues.
• The Company reaffirms its expectations to achieve full-year net revenues between $1.32 billion and $1.34 billion and Adjusted EBITDA1 between $460 million and $470 million.
• Consistent with Cedar Fair's long-term commitment to increase the distribution annually, its Board of Directors declared a 4% increase in the Company's quarterly cash distribution to $0.925 per limited partner (LP) unit, payable December 17, 2018. The distribution represents an annualized rate of $3.70 per LP unit and a more than 7% yield at current market prices.
• Early sales from 2019 advance purchase commitments to date, including season passes, are showing strength when compared to the same time last year, driven by enhancements to the program.

More Here: https://ir.cedarfair.com/newsroom/press-releases/news-release-details/2018/Cedar-Fair-Reports-Record-Third-Quarter-Revenues-Increases-Quarterly-Cash-Distribution-By-4/default.aspx?fbclid=IwAR0Zx94uE8b3dKZbwPVu2q6npI9hzqpnl4VrnCdkOe8ofPUUftoOgfp9ncU

[SonofBaconator]

Quote

The increase in out-of-park revenues resulted from higher occupancy rates and average daily room rates at the Company's resort hotels, including the new 158-room tower at Cedar Point's historic beachfront Hotel Breakers.

This makes you wonder if the company will consider investing in more resorts in other parks throughout the chain. Hotel Breakers saw insane attendance this year as well as Lighthouse Point. I think it all depends on how the CW and CWS hotels do in my opinion. 

[CoastersRZ]

You hit the nail on the head.  They are opening hotels at Canada`s Wonderland and at Carowinds.  That should help increase their out of park revenues.  Especially as they stretch the season at their parks with Winterfest.  It would be cool to see a new hotel on property at KI.  But there is a lot of competition for hotel rooms just north and to the south of the park (they are building an approximately 8 story hotel down at Fields Ertel Road exit of 71 that can be clearly seen from the highway.

[Rivertown Rider]

I've always wondered what it would cost them to buy the Great Wolf beside the park.  The place seems to be busy year round.

[CoastersRZ]

Back when GWL was built, Kings Island had a small ownership interest in it in exchange for giving GWL the land.  I believe, and I will have to dig into this to confirm, but at the time Cedar Fair purchased the Paramount Parks, they did not purchase the ownership interest in the Great Wolf Lodge (Castaway Bay in Sandusky, owned by Cedar Fair competes with the Great Wolf Lodge Sandusky).  Eventually CBS, who owned Paramount Parks when they sold them to Cedar Fair, sold their interest in the GWL to Great Wolf.

In a weird bit of fate, Apollo Global Management, who almost took Cedar Fair private back at the end of 2009 and early 2010, eventually purchased Great Wolf Lodge and took them private.

[teenageninja]

2 hours ago, CoastersRZ said:

You hit the nail on the head.  They are opening hotels at Canada`s Wonderland and at Carowinds.  That should help increase their out of park revenues.  Especially as they stretch the season at their parks with Winterfest.  It would be cool to see a new hotel on property at KI.  But there is a lot of competition for hotel rooms just north and to the south of the park (they are building an approximately 8 story hotel down at Fields Ertel Road exit of 71 that can be clearly seen from the highway.

They are also currently building 2 several story hotels at Kings Mills Road as well.

[BeeastFarmer]

I've had the misfortune of staying at GWL in Mason and Sandusky.  I'd venture a guess that a stay at the Bates Motel would be more enjoyable.

[SonofBaconator]

2 hours ago, CoastersRZ said:

But there is a lot of competition for hotel rooms just north and to the south of the park (they are building an approximately 8 story hotel down at Fields Ertel Road exit of 71 that can be clearly seen from the highway.

 

20 minutes ago, teenageninja said:

They are also currently building 2 several story hotels at Kings Mills Road as well.

With the abundance of hotels being built in the area, you think Cedar Fair would want to throw their hat in the ring and establish a legitimate, chain owned, resort. If the chain had at least one hotel in the Kings Mills area, that's more out-of-park revenue for the company. 

If you look at Cedar Point's website, all the hotels and resorts listed on their website are owned by the chain. https://www.cedarpoint.com/stay

In contrast, if you go to Kings Island's website, all the hotels and resorts they list are owned by different properties. https://www.visitkingsisland.com/stay

I still think bringing back the campground would be a good idea since they attract more destination based guests who have RV's and campers. 

[Oldiesmann]

1 hour ago, jtro223 said:

I've had the misfortune of staying at GWL in Mason and Sandusky.  I'd venture a guess that a stay at the Bates Motel would be more enjoyable.

What's so bad about it? I've only stayed at the one in Mason (a few times for KIC holiday events) and thought it was a great place. I'm sure it would be more enjoyable if you had kids, but it was still a fun experience.

[BeeastFarmer]

1 minute ago, Oldiesmann said:

What's so bad about it? I've only stayed at the one in Mason (a few times for KIC holiday events) and thought it was a great place. I'm sure it would be more enjoyable if you had kids, but it was still a fun experience.

I was there with my niece...and even she thought it was bad.  From my adult perspective--not enough staff, very overpriced for what you get.  The rooms were loud (not insulated well at all for sound), dated, in poor repair.  They maximized space, which is a good thing, but the delivery of the experience was sub-par.  I'm not a water park person, so I can't comment on that except to say that my niece was disappointed.  Especially at Sandusky, the waterpark portion seems to be too small for the size of the resort.  The staff were surly and overworked.  The whole experience seemed more like a cattle herding experiment than a guest immersion experience.  

Granted, my experiences are very limited and it's possible that they did not represent the total GWL experience.  I just left both places feeling like I had paid Westin prices but got a Knights Inn experience.

[BoddaH1994]

2 hours ago, CoastersRZ said:

Back when GWL was built, Kings Island had a small ownership interest in it in exchange for giving GWL the land.  I believe, and I will have to dig into this to confirm, but at the time Cedar Fair purchased the Paramount Parks, they did not purchase the ownership interest in the Great Wolf Lodge (Castaway Bay in Sandusky, owned by Cedar Fair competes with the Great Wolf Lodge Sandusky).  Eventually CBS, who owned Paramount Parks when they sold them to Cedar Fair, sold their interest in the GWL to Great Wolf.

In a weird bit of fate, Apollo Global Management, who almost took Cedar Fair private back at the end of 2009 and early 2010, eventually purchased Great Wolf Lodge and took them private.

You are correct on all accounts.  It was a 15% stake, that I think CBS sold to GE Capital shortly after the acquisition.

So here's my take on the results, since I know @King Ding Dong is on the edge of his seat. 

Late season results were going to be the strongest they'd ever been under most circumstances, given the changes or "enhancements" to the season pass program this year.  Since August, people with access to the park through the season pass program were probably a larger base than ever before.  The 2018 season pass base (with both renewals and those who will be lost to attrition) as well as a very attractive incentive for current non-SP holders to purchase early.  Likely more people had access to the park than ever before during the month of October - which accounted for the strong attendance despite several hurtles such as late season weather, bad traffic during a POTUS visit, and growing competition in the Halloween themed events.  

What will be interesting is to see how the season pass program is promoted during the lead up and the early part of the 2019 season.  Many people planning to purchase a season pass for 2019 were highly incentivized to make their purchasing decisions earlier this year.  This could lead to weaker sales during Q2 of 2019.  Now, they may have simply taken this into account or the pricing strategy may have to be adjusted early next year.  I believe that you will see several flash sales as well as discount opportunities between January 1 and Memorial Day to help compensate for the uptick in early purchasing.  

One must also wonder if the remainder of the year being included in the following year's season pass will continue to be part of the program moving forward.  That was Paramount's strategy for many, many years.  It was quickly removed by Cedar Fair who had never had that benefit offered in a major market.   Both strategies are sound, but it would be difficult to switch back and forth between the two without creating confusion.  

One thing that surprised me was how elastic the demand is for some people.  I always thought families were Kings Island people or not, but I can not tell you how many how many tell me that they're waiting to decide if they renew based on what the park is offering the following year.  One can presume that the demand will be strong with the alleged announcement of a coaster coming late next year.  It would certainly be a year where the pricing and incentive strategies would be very simple.  If they continue the program then they are giving away the gate, if they do not then it will be something they can not have in their tool box in the near future.