How good was Six Flags' financial performance last year?
International licensing revenue helped drive Six Flags to an eighth straight year of record financial performance, the company announced today
Here are some interesting (to me) take-aways:
Cumulative attendance for the Six Flags parks was 30.4 million in 2017. But that was up just 300,000 visitors over last year, despite the chain opening two new water parks. For reference, while Six Flags attracts more visitors than Cedar Fair or SeaWorld/Busch Gardens do with their parks, Six Flags' 30.4 million is less than the cumulative attendance of the Magic Kingdom plus just one of the other three Walt Disney World theme parks.
Sixty-three percent of the park's attendance comes from passholders. Six Flags said the number of people holding passes was up 10 percent last year. (But I couldn't find that Six Flags actually reported the total number of its passholders.)
Guest spending per capita at Six Flags is $41.61, which was up 54 cents from 2016. Admissions revenue was up 61 cents per visit last year, so in-park guest spending was down seven cents a visit. If your strategy is discounting admission to gain money on in-park spending, that seven-cent decrease is not a good trend.
Nevertheless, Six Flags says that its passholders generate double the cash flow of a single-day guest over the course of a season. The company also points out that emphasizing pass sales provides an excellent hedge against bad weather, which can cripple single-day, walk-up ticket sales.
Nine million of the company's $17 million in revenue growth in the fourth quarter came from an increase in international licensing fees. Six Flags in China and Dubai are paying off for the company before they even open.
Six Flags is reporting a modified EBITDA margin of 41.1 percent, which it claims is the highest in the industry. That would make it seem like the company is swimming in cash (which maybe it should be spending on new rides?), but Six Flags also reports $1.94 billion in debt, which it says represents a net leverage ratio of 3.7 times Adjusted EBITDA. So that might explain the lack of expansive major new coasters or dark rides from the chain this year.
Theme park fans with accounting degrees, take it from here, please.
I am not an accountant, but Six Flags' business strategy reminds me a bit of that of a gym. Sell a lot of memberships by making buying a pass look like a great deal. But then count on the experience of visiting not being quite alluring enough that it leads to people using their memberships enough to inflate your operations costs.
Robert- Best. Analogy. Ever.
I'm glad Six Flags can do well despite practically giving away their season passes. For two years running, we paid $50 for season passes to La Ronde, our Six Flags park here in Montreal. Maybe some people don't go that often, but we get tons of ride mileage out of ours. And the meal deal, at about $100, is a bargain, too.
We have had Six Flag Great Adventure Season Passes for the last few years. Additionally, we buy 2 meal passes. It is an outlay of about $440 for a family of 4.
So true Robert, and Six Flags is even selling what it calls a "Membership" now, which is essentially a season pass broken out into monthly installments (BGW just ended sales of traditional season passes to convert to "Memberships" too).
"Nine million of the company's $17 million in revenue growth in the fourth quarter came from an increase in international licensing fees."
Just goes to show that good marketing and pitching a dining plan in at the right price can work really well ... Cedar Fair can also take credit.
"Nevertheless, Six Flags says that its passholders generate double the cash flow of a single-day guest over the course of a season. The company also points out that emphasizing pass sales provides an excellent hedge against bad weather, which can cripple single-day, walk-up ticket sales."
My understanding is that most regional theme parks balance their operational costs against their season pass revenue. Any revenue generated above that (single day tickets, in-park spending, parking, and other up-charges) is applied to either service debt or fund future additions/expansion. It's probably far more complicated than that, but the economics of it make sense, especially for a chain like Six Flags that encourages guests to renew their season passes as soon as possible. By doing that, they know what their baseline operational budget will be for the year. They already have that money in hand by more or less forcing guests to buy their season passes at the end of the previous season. They can then use standard multipliers to ascertain what additional revenue will be generated outside of the season passholder base. The revenue generated by season passes is like a kid's allowance, which can be further supplemented by doing extra chores or going out and getting a part time job.
So Russell, does your information apply to Disneyland also? You talked about regional theme parks, does it apply to Disney? It would make sense if it does.
I'm not sure. I think Disney is a different animal, because they have so many other sources of revenue. Debt is probably handled completely different by a company like Disney (or Universal for that matter) because it's more than just a theme park company. I don't think Disney balances its finances at the divisional level, and it's perceived that even within the theme park division, losses from one park may have to be balanced by revenue at others (#thanksshanghai). I also don't know if say the theme park division is required to balance against the sports division (ESPN). I'm sure Disney, just like any other theme park company, has goals to generate a specific amount of revenue from season pass sales. However, whether that revenue is directly allocated to a specific line item (operations, R&D, expansion, transportation, etc...) is unknown. I just know that talking with some of the folks at Six Flags and Busch Gardens that it was a typical calculus for them to allow their marketing and sales staff to set clear goals for season pass sales. It doesn't necessarily mean that every dollar from season pass sales goes directly to operating the park, but it's a simplified way for them to balance their books and to set goals for the upcoming year by knowing what baseline revenue they already have in the bank to work with. Obviously that long-standing rule of thumb is not really applicable anymore since both are starting to move away from the up-front season pass model to the monthly payment membership model. They also don't have the problem that Disney has in trying to balance customer service against allowing the parks to be overcrowded. I don't doubt that Disney took careful note of what USH did when it overhauled its season passes prior to WWoHP (and subsequently rolled some of those changes back when the park was not gridlocked as predicted). I'm sure Disney has some sort of plan to address the elephant in the room before current passholders start renewing passes with terms that extend through summer 2019, or perhaps they will take the worst case scenario of putting Galaxy's Edge behind a paywall (or other type of restricted access).
Thanks Russell, you have a lot of insight. The point I was trying to get at, though, was how important annual passes were to Disneyland's revenue goals. Are they foundational, with single day passes considered to be supplementary? Or are single day passes more important? Or are they equal? It makes sense that the annual passes provide a known entity which Disney can plan their budgets around.
We've been hearing about a Six Flags in China for years. Have they even broken ground? What does the recent "retirement" of the CEO of Six Flags Corporate and the President of Six Flags International mean for what is happening or not happening in China?
All that cash and yet Six Flags suffers with many families because the parks seem insecure. At our last two visits to Discovery Kingdom here in the Bay Area we saw multiple fights, people getting wasted, foul language left and right-- we just didn't feel comfortable with the kids.
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