The future of the American amusement park in a Disney, Universal dominated world of thrills

The theme park enterprise, like many others, is consolidating and altering together with client habits.

In the wake of Covid-19, and as customers extra fastidiously select the place they’re spending their cash, smaller theme park operators have struggled to compete with the larger gamers in the amusement trade like Disney and Comcast’s Universal, which have seen huge gains from parks‘ divisions.

Addressing these challenges was one of the drivers behind the proposed $8 billion merger between Cedar Fair and Six Flags, introduced in November. The mixed firm would put over 40 sights, from iconic Knotts’ Berry Farm to Magic Mountain to Canada’s Wonderland, all beneath one possession, in addition to mental property from Peanuts, Looney Tunes and Marvel.

Cedar Fair CEO Richard Zimmerman mentioned at the time of the merger that the mixture can be “driving elevated ranges of demand and in-park worth and spending.” Six Flags CEO Selim Bassoui mentioned it could “unlock new potential for our parks.”

While the Department of Justice mentioned this week it has launched a review of the merger — which comes at a time when large offers are going through increased ranges of anti-trust scrutiny from regulators, traders and client curiosity teams — trade consultants and park aficionados say that is kind of mixture that the park operators want.

Smaller parks have struggled

In latest years, smaller parks have struggled to draw and retain visitors, particularly as the larger gamers chart out large plans. In October, Disney said it plans to speculate roughly $60 billion in its parks division over the subsequent decade. Universal mentioned in August it could be investing $17 billion in its Florida theme parks over the subsequent 10 years and is ready to open a new growth of its Orlando Park that includes a Super Mario attraction.

One signal of the difficulties: Cincinnati, Ohio’s historic Coney Island, meant to reflect the New York icon of the identical identify, shuttered at the finish of 2023 after serving park-goers since 1886. 

Coney’s closing ended an period for Cincinnati-based theme park guide Dennis Speigel. Speigel labored his first job at Coney Island and later discovered himself the assistant common supervisor of Kings Island, a park now in the Cedar Fair portfolio. After the success of that park, he was dispatched to Virginia, the place he oversaw the opening of a sister park, Kings Dominion.

Some of the pleasure about the deal from long-time trade gamers can border on hyperbole. “When you could have these two collectively, they’ll reshape the trade,” mentioned amusement park blogger Don Helbig, who holds the file for the quantity of rides on Kings Island’s basic coaster, the Racer, having ridden it over 10,000 occasions. (He additionally labored in public relations at Cedar Fair-owned Kings Island for 16 years till final June.)

Aside from Disney and Universal, they’re the two largest gamers, and Helbig mentioned that ought to imply extra shopping for energy that permits them to get higher pricing on every part from curler coaster observe to hamburger buns, and that ought to flow-through to the visitor expertise. He additionally pointed to Six Flags’ partnerships with a number of main tech corporations (together with Google, Dell and Snowflake) that may be leveraged all through all the parks. And there’s an underlying rationale for the deal associated to what’s occurred on the nationwide theme park panorama in latest many years.

“Larger firms purchase up smaller ones, and now just about all of the outdated household small parks on the market have gone since the Nineties and early 2000,” Speigel mentioned.

The combining of Six Flags and Cedar Fair is smart, he mentioned, calling it a merger of equals from an operational standpoint, however from a front-office standpoint, Cedar Fair brings stability to the union.

“Six Flags was not in a wholesome state; it was a ship at sea with out a captain for a number of years,” Speigel mentioned.

Cedar Fair, against this, is “a nostril to the grind-stone theme park operator,” he mentioned, that includes a extra seasoned roster of executives at the company and park working ranges. Six Flags has cycled by means of seven park presidents in 20 months and three CEOS in seven years.

Plans are for Zimmerman, present CEO and President of Cedar Fair, to retain the title at the new firm, whereas Six Flags CEO Bassoul will change into government chairman of the mixed board of administrators. Cedar Fair shareholders will personal a slight majority of new firm. 

Six Flags and Cedar Fair each declined to remark.

David Katz, a New York-based managing director at the funding financial institution Jeffries, agrees that Six Flags has lacked consistency these days, contributing to its sagging inventory costs and underwhelming efficiency.

“It’s been an inconsistently managed firm for a very long time,” Katz mentioned. Six Flags went by means of chapter throughout the Great Recession however emerged after which “had a good run for a whereas,” Katz mentioned. But round 2018 or 2019, he mentioned the firm wanted extra room to develop and began biking by means of methods, none of which caught.

“Salim and his crew haven’t demonstrated a agency command of how one can make the enterprise run effectively, effectively, and profitably in a method that expands worth for shareholders,” Katz mentioned.

In Six Flags’ 2023 third quarter earnings reported in November, the firm mentioned had 17.9 million visitors in first 9 months of the 12 months, representing 9% progress from the earlier 12 months. However, in the first 9 months of 2019, the firm noticed 26.7 million visitors go to its parks. Revenue for the first 9 months of 2023 in comparison with 2019 is down 9.77%, at the same time as visitor spending per capita is up 40.6%.

A extra constant trip at Cedar Fair

Comparatively, Cedar Fair has seen its attendance decline from 22.9 million guests in the first 9 months of 2019 to twenty.9 million in 2023. The firm reported its in-park capita spending was $61.73 in that 2023 interval, up from $48.73 in 2019. Revenues in that 2023 interval have been $1.4 billion, up from $1.2 billion in 2019.

Cedar Fair has, Katz mentioned, been a constantly run firm that has performed a stable job of deploying capital and working a steady, mature enterprise. He expects the focus to return to creating a steady portfolio of parks in North America.

But Katz thinks the impression on the large gamers can be totally different. Disney occupies a distinct area of interest in the journey and leisure orbit.

“If you known as up Disney and referred to them as a theme park, they might most likely be insulted,” Katz mentioned. Katz calls the bigger parks a “vacation spot expertise.” By comparability, theme parks are normally single-day journeys. But Katz mentioned they are often very steady investments and revenue facilities.

The mixed Six Flags and Cedar Fair entity will have the ability to drive loyalty and repeat enterprise in order that repeat guests cycle in and out, he mentioned. Six Flags has tried, with modest success, a loyalty program to drive income, and Katz expects the new firm to construct on that. “The largest impression theme parks can have is driving scale advantages,” Katz mentioned

“Loyalty packages might be massively efficient,” Katz mentioned. And whereas firm leaders have vowed to maintain park names unchanged, Katz mentioned they could have to seek out a solution to tie the two manufacturers collectively in one simply brandable identify.

Analysts at fairness agency Stifel suppose that the mixed firm will extra intently comply with Six Flags working technique, which has been to give attention to modestly rising attendance 12 months and solely slowly growing costs.

“SIX made a large change in their strategy about two years in the past: the firm determined to restrict attendance progress by pushing worth aggressively.” Stifel wrote in an evaluation. Six banked on fewer prospects keen to pay extra if the parks have been much less crowded and had nicer facilities however Stifel wrote “Our guess is the mixed firm would have a pricing/progress technique that’s extra aligned with FUN than SIX’s new philosophy.”

Carissa Baker can be no stranger to theme parks. She teaches about them at the University of Central Florida and might see SeaWorld from her entrance porch and Universal’s Epic Universe from her workplace. Although the merger of Six Flags and Cedar Fair stunned her, she thinks it is smart for the two firms.

“There are actually variations between the two firms, however their product is comparable sufficient that it may immediate some thrilling progress,” Baker mentioned. Baker factors out that each firms have executed important acquisitions and mergers in the previous (Paramount Parks for Cedar Fair and Premier Parks for Six Flags), in order that they have expertise integrating properties and merchandise, which is already underway at the two firms as they watch for pending regulatory approval.

Despite what can be a new trade big in the theme park enterprise, Baker thinks the impression on the bigger rivals of Disney and Universal can be restricted.

“I do not know that it’ll have a main impression on the two high U.S. gamers. The “common customer” is extra prone to go to their regional or native parks extra ceaselessly after which save up a number of years to go to the vacation spot resorts,” Baker mentioned.

Disney declined to remark. A Universal spokesperson couldn’t be reached by press time.

The deal might extra clearly outline the respective phase leaders throughout the home theme park market, with the consolidation leaving solely a few impartial trip parks scattered throughout the nation, whereas Six Flags/Cedar Fair doubtless personal the “‘trip/thrill park” class, simply as Disney, Universal, Seaworld and Legoland personal their respective classes.  

“Disney and Universal have theme parks in a number of world markets and are thought of vacation spot resorts,” Baker mentioned. She mentioned that Disney and Universal are larger attracts for worldwide guests and contain extra prolonged stays, increased capital expenditure, and bigger attendance regardless of having fewer theme parks. Disney and Universal properties, Baker mentioned, are clustered in massive inhabitants areas and have year-round working calendars, the place most of the Six Flags-Cedar Fair parks are seasonal. The merger, she mentioned, will create a firm with an expansive portfolio and extra important market share however most likely little impression on the Disneys of the world.

Dallas restauranteur Shannon Wynne’s tackle the merger is hopeful. In Texas, Six Flags reigns supreme.

“We do not thoughts, particularly in the event that they enhance the park,” Wynne mentioned.

Wynne’s father, Angus, launched the Six Flags model, opening a theme park in 1961 exterior Dallas. The unique six flags have been to have a good time the varied chapters of Texas historical past. Wynne mentioned the park was meant to be momentary, up for a few years after which torn down.

The plan was for the park to generate money movement for the household’s fledgling industrial park, Wynne mentioned. However, Six Flags took off in Texas and later opened parks in Greater Atlanta and St. Louis. It then started shopping for, branding, and reworking struggling amusements since beginning new parks from scratch was so pricey. But Six Flags improvements have unfold all through the trade. Wynne credit his father with creating the single-ticket idea, the place park-goers pay one worth for admission as an alternative of paying to go on every trip.

Wynne mentioned he had by no means heard of Cedar Fair till the October announcement, and he guesses that 95% of Texans have not both. But he needs the merger success.

“I hope the house owners deal with it with respect and make it higher,” Wynne mentioned, including that he and his household hadn’t been concerned in Six Flags in fairly a while. His father handed away in 1979.

“It’s like mixing households,” mentioned Elizabeth Ringas, president of the American Coaster Enthusiasts, who has ridden over 700 coasters in 140 theme parks and gala’s over the previous few many years. “There are some issues every does effectively and a few issues they do not as effectively. If the new firm builds on the finest of each, it may very well be a phenomenal expertise for the visitors,” she mentioned.

Ringas would not have a favourite between Six Flags and Cedar Fair, saying that the experiences fluctuate tremendously by park. But her favourite coaster is the Beast at Kings Island. The Beast is licensed as the longest wood coaster in the world, providing a 4-minute trip over hovering heights and thru roaring tunnels.

Helbig expects visitors to see some of Cedar Fair’s signature touches popping out on high in the mixture.

“The very first thing Six Flags visitors will discover is the disappearance of lids and straws to drinks,” Helbig mentioned, pointing to at least one of Cedar Fair’s hallmarks — no straws or cup lids at their properties. But one factor that he would not anticipate to alter is the expertise. Of going to the amusement park. “It by no means will get outdated, it is at all times an escape, it is at all times enjoyable,” Helbig mentioned.

Disclosure: Comcast is the mother or father firm of NBCUniversal, which owns CNBC.