Six Flags looking at selling parks as revenue dips

Witherow declined several time in the investors Q&A session of the call to ID which parks were overperforming and which ones were at risk, but he eventually did say that its parks in Toronto (Canada's Wonderland) and Southern California (Knott's Berry Farm and Six Flags Magic Mountain) were core to the company's long-term future despite their immense potential real estate value. So I think we can make those three as safe.

Dang, that leaves a whole lot of the other parks in the maybe category. Living over here on the East Coast now, I've heard nothing but bad reviews of the parks over here... especially Six Flags Over Georgia which everyone says is horribly run and to avoid at all costs. I imagine that one won't survive as it will need a lot of investment at this point to fix not just physically but reputation as well.

It's going to be Valleyfair, Michigan's Adventure, La Ronde, Darien Lake, Great Escape, Frontier City, etc. clearing out the smaller parks that both companies largely neglected pre-merger. Probably a lot of their water park portfolio as well. I don't think any of those parks represent a lot of real estate potential, but I think the chain is trying to focus all resources in making CW, CP, SFMM, SFGAdv, etc. perform to the full potential of their local or regional catchment.

Shrink to grow. SF in particular was guilty of pumping up quantity over quality and cutting the bloat will help make all parks feel tighter and better managed.

"However, following Labor Day weekend, we saw a downturn in demand trends as attendance for the month of September declined approximately 5%, or roughly 160,000 visits, from September last year"

See, this is one of those details where SF could legitimately use United Parks' typical excuse of "calendar shift" to explain this decline since Labor Day (the traditional end of weekday operations at regional theme parks) was the earliest possible day in September compared to last year, when it feel on the latest possible day.

It's interesting that when pressed last quarter, SF stated that aside from SFA and Great America, the chain was not looking to divest any of their assets aside from potentially selling the land beneath some parks (driven mostly from a group of activist investors). I do think there's still quite a bit of redundancy within the chain, but parks are not necessarily underperforming because of that redundancy, in fact the markets that are served by multiple parks are probably set up to perform well next season because of the "MVP" sale that customers bought specifically so they could visit multiple parks in the same region that have enough different rides to warrant separate visits in the same year.

I think the parks that are being referenced here are the smaller parks that are located either in less populous markets or are far from their core market. I feel that either Worlds of Fun or Six Flags St. Louis would fall into that category, and while they are located in the same state, they are almost 4 hours apart, and both have to compete with Silver Dollar City. I think for these 2, SF would need to look long and hard at the performance of these 2 parks and the land available to see if perhaps attractions could be consolidated to bring the best of both parks together in one of the 2 locations. I have to think that both Darien Lake and Great Escape underperform, and given the former's proximity to Canada's Wonderland (though across an international border) and the latter's lack of any truly thrilling attractions potentially put both New York parks in jeopardy. Given the lack of investment, Michigan's Adventure, far from a major urban market (3+ hours from Detroit), and Valleyfair, which has to compete with Nickelodeon Universe, are probably also questionable to survive an asset dump.

While SFoG doesn't get the greatest ratings, the park's overall lineup and continued investment in the Atlanta-area park suggests to me that it must not be doing too terribly financially, so it is probably safe unless the chain is extremely desperate for cash (this park's real estate is probably pretty valuable compared to others in the chain save for Knott's, CW, SFoT, and LaRonde, which are all located closer to urban centers).

The biggest takeaway here though is that this is another major theme park company reporting either a decline or flattening results. Given the economic headwinds expected over the next 1-3 years, this does not bode well for the overall health of the theme park industry. Again, I'll go back to the TEA Annual Report that shows estimated attendance numbers that still have not fully rebounded from the Pandemic. As the regional parks enter their off season, it could be a very cold dark winter for the industry as a whole.

I listened to the call this morning. Last time they made it a point to distinguish each legacy side of the company and how it's doing. This time, they said it without saying it several times because people kept asking. To paraphrase, the parks that are doing well are the ones with good reputation and loyal guests who visit every year at least once, and spend in the park. So, essentially Cedar Point, Kings Island, Knotts, Canada's Wonderland, and a couple others...probably without the name Six Flags in front of it, are currently carrying the company financially. I'm not going to say that all the legacy Six Flags parks are financial barbells around the neck...a few likely are doing ok, but as a collective they are not holding up their end of the couch.

The good news is that the Cedar Fair guard is essentially running the show. They understand the problem, they have a solid plan and know how to implement it, they have the cash to carry out the plan, and they have a while before they have to refinance some of that debt everyone is worried about, with interest rates trending down for the forseeable future. The plan, restore the lost reputation of the big market legacy Six Flags parks through improved ops, wiser investment into rides and visuals, and level up the overall guest experience. Basically, take the philosophies that work well at places like Knotts and Cedar Point and Kings Island...etc, and do it in Chicago and Atlanta and NY/NJ, and St Louis and Texas, and SoCal, and others, and actually get some people from these big population centers to show up and spend some money. Going to take a little time, because as long as the parks have the name Six Flags in front of them, they are going to have to overcome some of the sins and shortcomings of past leadership and rebuild the brand's image and get people to care.

About the possibility of cutting more parks. What I heard was that they were going to give the remaining properties some time with the new systems in place to see if they can become profitable. They closed SFA and Great America because and the land value far exceeded the operations even at their best. None of the other parks that would be on the bubble currently have that problem. So it comes down to getting them in the green and doing so without immediately having to plow lots of cash into them. I'm guessing they are going to take a good look at the end of next year's progress before considering banishment of any of the parks to "noncore" status. If I were a park in St Louis, or NY, or Mexico, or Michigan, or one of the many waterparks, I'd find another gear and get things going in the right direction.

I keep saying let these guys cook for a while. They know what they are doing. People want it done good and fast, but that's not in the current budget, because, debt. Others want it to happen cheap and fast, but then it won't be good. Gotta go with good and cheap, and that takes a little time.

If Witherow's goal is maximizing asset sales, the ones that make the most sense to me would be the two Texas Schlitterbahn parks, which don't really fit within a expanded portfolio of thrill parks, and the Great Escape, which would be a much better fit within the expanded Herschend Portfolio.

I don't know if there will be any cost savings in leaving the contracts to manage the EPR projects, LaRonde or Six Flags Mexico. But tightening up the portfolio may be necessary. If not those one or more of Discovery Kingdom, Valleyfair, St. Louis, Worlds of Fun, Michigan's Adventure, Dorney & New England will likely have a for sale sign in the future.

"If Witherow's goal is maximizing asset sales, the ones that make the most sense to me would be the two Texas Schlitterbahn parks, which don't really fit within a expanded portfolio of thrill parks,"

Let's not forget that Cedar Fair really bought Schlitterbahn for their R&D/technology, not necessarily for their parks. I'm not sure how that fits into SF's future business plans. Personally, I've always felt that Cedar Fair didn't leverage the Schlitterbahn brand as well as they could have by rebranding all or parts of many of their water parks with the Schlitterbahn name and theming.

The national branding potential of the Schlitterbahn name evaporated in 2016.

Sounds like the larger Six Flags properties are performing quite well but the smaller ones aren't making enough to justify what Six Flags is putting into them. That's not all too surprising given that the chain has essentially doubled in size without doubling their resources. I did find a couple quotes rather interesting, namely the following...

"Yeah, I think when we look at the portfolio of parks, and we talked about this all the way back to when we completed the merger, that as a combined company of this scale, the ability to sell off and monetize parks that were not going to contribute a great deal of growth. Maybe nice parks from a standpoint of what we would consider little mini cash cows, so to speak, parks that do not require a lot of capital, generate a nice amount of EBITDA and throw off cash flow. Those had a home, I think, in both standalone portfolios. In a bigger company where we’re trying to narrow our focus and shrink our capital needs as well as our risk or our liability exposures, getting the portfolio smaller and more nimble is a priority. We’re going to look at the parks where our returns are the greatest, where the opportunities for growth are the highest, and we’re going to focus on those parks. The other parks we’ll look to monetize and use those proceeds to reduce debt."

"As we said in our prepared remarks, as parks, as we roll into 2026 and we see how parks perform, there may be a need to pivot in a park that we consider core right now."

"As we look ahead, our roadmap for the underperforming parks centers on two primary pathways: migrating those parks toward the performance profile of our best parks within the portfolio, or classifying them as non-core and divesting them where it makes strategic and financial sense. We are reevaluating pricing strategies, operating cost structures, capital allocation plans, and long-term market potential."

To me, these indicate the chain is more interested in parks that they can grow into larger revenue generators and less interested in properties that generate small but steady revenue, even with minimal investment. It also seems to indicate that there are some properties they're still uncertain about and are willing to try to make work, but that they may need to alter plans on and divest if they aren't seeing the growth they expect over the next couple years. Thus, I'm going to speculate using three tiers as follows...

Safe Parks: Canada's Wonderland, Carowinds, Cedar Point, Dorney Park, Fiesta Texas, Great Adventure, Great America (IL), Great Escape, Kings Dominion, Kings Island, Knott's Berry Farm, Magic Mountain, Mexico, New England, Over Georgia, Over Texas, St. Louis, Worlds of Fun

Most of these are larger parks and/or are located near large population centers that drive steady attendance. Additionally, fourteen of them were surveyed last month regarding future developments. The obvious outliers here are Great Escape and the Missouri parks, however the former is located in a tourist area and sees a higher proportion of day visitors while the latter two seem to be in a flux state where future plans exist but haven't been solidified. Six Flags has mentioned a "core fifteen" in the past, and I'd guess all of those are on this list.

Endangered Parks: California's Great America, Darien Lake, Discovery Kingdom, Frontier City, Michigan's Adventure

We know that California's Great America is on borrowed time, and with the statements made I strongly expect next season to be the last for that park. Based on moves being made right now, it feels like Six Flags is giving Discovery Kingdom an opportunity to pick up that crowd, but if the Bay Area residents don't go for it, I expect Six Flags to cut their losses and exit the NorCal market (Discovery Kingdom was also the only park surveyed I'd consider not safe). Darien Lake and Frontier City aren't owned by Six Flags, so if they're not bringing in enough I could see the company deciding to terminate their operating agreements with those properties. Lastly, Michigan's Adventure is exactly what was referred to as a "cash cow" park, which sounds like the sort of property Six Flags wants to get rid of. It's not that it doesn't turn a profit (in fact, that park has a very high profit margin), but more that it doesn't generate enough of a profit to justify the expense when those resources could be better used elsewhere.

Wildcard Parks: La Ronde, Valleyfair

These are the two I go either way on. La Ronde is another park operated but not owned by Six Flags, so I could see them dropping it, but at the same time I've heard the park also makes a ton of money relative to the cost of running it. Valleyfair is getting a pretty major waterpark addition for next season so it seems like they'd intend to keep it, but being located in a declining city could mean if they don't see the desired return from the project they cut it loose.

What often gets lost in the profitability discussion is the economic headwinds the theme park industry and the entertainment industry in general is dealing with. Six Flags parks target audience is mainly the middle class, and that demo has less disposable income these days. It is not that the new Six Flags is not trying. They have been slowly making improvements across the chain, mainly on the legacy SF side, cleaning up the parks and refreshing theming, improving food quality and operations, etc. These efforts are not going unnoticed. Fixing decades of neglect and poor management takes time.

The Great Recession was brutal on the theme park business and no company seemed to be hit harder than Six Flags as the company had to declare bankruptcy. Unfortunately the old SF under poor management squandered the opportunity to thrive when the economy improved in the early to mid 2010s. Just when it seemed like the park was beginning to move in the right direction, boom, comes the pandemic.

Agreed the new Six Flags will have to lose in order to gain. As for which parks to divest, very few parks are actually company owned but rather are under lease and management agreements. SFStl is one of the few parks in the portfolio which is company owned. Would they sell it? Tough call as this park serves a large metropolitan area, with SDC being hours away. Is the land valuable enough to sell it? Eureka, MO is not exactly in the St Louis metro area, but in the distant suburbs. Again, tough call. La Ronde has a lease agreement with SF through 2065. Unless that park is losing money, that park will stay. SF Discovery Kingdom is a decent park; not a great park, but decent. That park suffers from a height restriction of 150ft so adding headline grabbing rides there will be tough. But with CGA on the chopping block, that will leave SFDK as the only NorCal theme park.

Another avenue the chain will likely explore is selling off excess land, or even the land under the park(s) itself. This carries risk though, in return for short term cash.

Naysayers can say what they want about the SF company, but they are in a tough spot and not all the blame can go towards the company. They are, in fact trying.

Six Flags is basically one of those bad sports teams that fires the GM and coach every 3-4 years and is in a constant state of rebuilding.

They could have saved a lot of money by Not building The Six Flags Dubai...

Eff the Middle east.

There is no Six Flags in Dubai and the one in Saudi Arabia is a licensing agreement where Six Flags gets paid to design the park and then gets paid every year by the developers for the rights to use the name. Its free money for Six Flags.

(Not justifying it or saying I would have done it, just correcting your inaccurate information. They didn't pay to build it, don't own or operate it, and they get paid for it).

Sorry - Six Flags Qiddiya City, The Dubai was canceled.

Everybody has an opinion about which parks are "safe." I'm telling you none of the parks are safe if what I've seen this year is how they will run in the future. Cutting staff, food options, live shows, hours (winterfest during the day and fewer lights is a sure fire way to run away any customers) is beyond my comprehension for a "successful" business plan.

The merger ultimately bought and brought together a glut of underperforming and/or smaller parks that will be forever a millstone around the Board's neck. The sensible business decision is to sell them, concentrate on the main performing parks with a strong reputation and customer base and invest in them. I'd rather have 10 strong parks bringing in stable profits than try to keep everybody happy haemorrhaging money. The scythe is coming. Time to streamline, consolidate, invest, and generate profits.

@ProfPlum - I would tend to agree, but SF knew that when they merged with CF, and they thought the combination of the 2 companies would bring enough efficiency to make those underperforming parks successful. Maybe it was hubris, pride, or just plain stupidity, but this changed tune from the company could potentially undermine any success gained from streamlining the chain. If SF does want to trim the number of parks, they can't just sell them to random developers - I really think they need to be sold to owners who will keep them as theme parks, because it would have a carry-on effect to the rest of the chain and a constant feeling among both guests and employees that their park is the next one to go. In markets with redundancy, you can probably consolidate, but in smaller markets where there's not another SF park within 4+ hours' drive, SF could further damage their reputation and negatively impact their remaining parks.

I actually agree with CF's management here that divesting small parks is a good idea, and it always should have been since long before the merger. They are bad at running them and the locals don't like them. The amount of people that have told me over the decades "I used to like Elitch Gardens/Kentucky Kingdom/Great Escape until Six Flags bought them" etc...

To counter point Russell's post, my biggest fear about this announcement is that SF has no incentive to sell to people who are going to continue to operate them as parks, what good does it do them? You can talk about reputation, but does anyone not go to CP because Cedar Fair bought Geauga Lake and then closed it? Lets be serious here "reputational damage" is not in Six Flags/Cedar Fair's vocabulary.

Russell, when you look at the quality of some of CF parks which SF now have it was a very good merger for them and gives them a very solid top 10 as their foundation as well as significantly increasing its brand. I can't believe they merged expecting to retain all of the parks. They would have had a phased hit list well before the merger. During due diligence they would have easily identified the top third of "keeps", the bottom third of "sells" with the only decisions to make over the middle third. Some may be saved but some will go.

SF will sell to the highest bidder on those parks being axed regardless of the new owners' intentions for the properties. There are very few ethics in business and retaining them as theme parks won't even be part of the negotiations.

It will be interesting to see what SF's brand and profitability are in three years' time.

I don't think there was ever an expectation for SF to not sell any parks, but I don't think there were that many that the combined chain felt were redundant. If you look at the locations, there's surprising little overlap geographically and the combined chain actually has excellent distribution across all of the major markets around the country with just a handful of parks that are duplicitous. Great America and SFA clearly overlap in markets where other parks in the chain exist, and I would argue that if Cedar Fair still owned the land underneath Great America, it would not be on the chopping block as it's a solid 2+ hours from SFDEK and in what could be categorized as a different region though with some overlapping with SFDK.

The reality is that the parks we're talking about here are ones that were poor performing parks BEFORE the merger, and the legacy owner was probably working on ways to address the poor performance before the merger was ever contemplated - or simply propping them up with revenues from the top tier parks. The merger hasn't changed the outlook on these parks one iota, so either Six Flags thought the merger would magically fix these parks or that combining resources would suddenly offset the losses from 2 sets of underperforming parks. BOTH chains were in the same boat before the merger, yet they are just now realizing that these bad parks still suck?

The problem is that they could sell these underperforming parks, but where will it get them? There are SF parks that have significant value, even if they're not operated as theme parks, but the problem is that most of those parks are the ones that are actually successful. Ultimately, an asset is only worth what someone else is willing to pay, so if SF thinks selling these underperforming parks will suddenly infuse their parks with needed capital, they're crazy. The reality is that selling these parks would probably yield very little benefit to the chain, and if they were to sell to developers not interested in keeping the properties as theme parks, SF could potentially spend any profits on moving attractions to other parks. In fact, some of the underperforming parks might yield so little profit that it might actually cost SF money to dump them, so the only benefit of selling would be cutting "dead weight".

That's what I don't understand here, because if any of these parks had value, SF or CF would have sold them long ago because both chains were already overextended and could have benefitted from some streamlining before the merger. These parks just don't represent a lot of value from a real estate perspective, and there just aren't any other companies out there that would pay top dollar for these underperforming properties to operate them as theme parks.