ENTERTAINMENT

A sunnier forecast for theme parks

The Globe and Mail

The industry spends heavily on new attractions, such as the Leviathan roller coaster at Canada’s Wonderland, to keep visitors coming back. (Philip Cheung for The Globe and Mail)

The theme park industry has seen more ups and down than a roller coaster since the recession, as the industry’s largest companies struggled under massive debt loads that threatened to close their gates for good. Attendance slipped as cost-conscious consumers found less expensive ways to spend their time, putting more pressure on companies that built their empires on debt and found themselves facing bankruptcy.

Story continues below ad

But analysts and executives are counting on this season to turn around the fortunes of the industry’s largest companies, which have shifted their focus from one-time visitors toward low-cost annual passes targeted to customers within driving distance of their parks to ensure a steady stream of traffic this summer.

“We are particularly encouraged by the early season positive trends in season pass sales,” said Cedar Fair LP chief executive officer Matthew Ouimet, whose company owns and operates Canada’s Wonderland in Vaughan, Ont. “Overall season pass sales are up nicely when compared with this time last year, in terms of both units sold and average unit price.”

While Cedar Fair, based in Sandusky, Ohio, has posted three years of record revenue growth, it hasn’t been able to translate that into consistent profits. It reported a $109-million loss in the last quarter, although a third of that was from a one-time non-cash charge. Mr. Ouimet said the company expects to earn as much as $400-million in adjusted earnings before income, taxes, depreciation and amortization for the year.

Investors have decided to go along for the ride, driving its shares up 50 per cent in the past year.

Six Flags Entertainment Corp., which owns Montreal’s La Ronde theme park and cut its debt by over a billion dollars after emerging from bankruptcy protection in 2010, reported a $62-million loss in first quarter, even as attendance surged by 40 per cent. Investors have also latched onto its stock as the company, based in Grand Prairie, Tex., attempts to revive its fortunes – its shares are up 70 per cent in the past year.

“I think the really good news that I’d tell you is that we’re seeing growth in every single park; there is nowhere that we have not seen tremendous improvement,” Six Flags chief executive officer James Reid-Anderson said.

The industry spends heavily on new attractions to convince attendees to come back – last year Canada’s Wonderland invested $30-million to build the Leviathan roller coaster, which races around a 1.6-kilometre track at speeds up to 150 kilometres an hour. Mr. Ouimet said the park posted the strongest increase in visits of the chain’s 18 parks in 2012, although the company doesn’t break out specific numbers.

At Wonderland, season’s passes sell for $84 per adult, and $64 per junior or senior. A day pass at the gate will set a guest back $46.99. Parks across North America have also introduced payment plans to help spread out costs and last year introduced systems that allow visitors to cut in line for an extra fee.

“We come probably five, six, times a year and if you buy [a pass], it’s like two visits and it’s already paid for,” said Nick Doek, a visitor from London, Ont ., who upgraded to the fast-pass program. “We can usually walk on every one. We’ve gone on 34 rides in one day. That’s our record.”

While the industry’s biggest threat in recent years was the debt it incurred to consolidate parks and expand operations, its concerns are reverting back to the more traditional. Dennis Speigel, president of International Theme Park Services Inc., said operators will spend as much time watching the weather forecasts as their balance sheets this summer.

“Assuming that we have decent weather and [gas] doesn’t spike over $4 [(U.S.) a gallon], 2013 is shaping up to be a banner year,” he said. “We have been on a positive trend for the last three years after we came out of the economic doldrums and it looks like the space shuttle is on the launching pad. We’re really going to blast off in 2013.”

 

Follow us on Twitter: @GlobeBusiness

Companies & investments Mentioned In This Article (2)

Company Price Change Volume
Six Flags Entertainment Corp.
SIX-N
41.59 0.483 % 389,954
Cedar Fair
FUN-N
50.48 -1.213 % 101,489

Topics: