Effects of New Thrill Rides on Attendance and Revenue --Per CF/Six Flags

Last year, when TT2 didn't open, we had an extended discussion about the likely impact on CP and, in general, whether new roller coasters have an impact on attendance and revenue. Oddly (to me), there was actual debate on whether parks built rollercoasters to increase attendance and/or in-park spending, with some citing Kinzel's long-ago musings that these rides had little to no impact. That seemed wrong to me --and economically irrational (because why in the world would you invest $25-$30million of capital on a ride if you didn't expect a timely return on investment? If attendance was a variable independent of new ride investment -- then why do it?)

Anyway, CF/Six Flags just made an investor presentation and during that presentation showed a slide entitled:

"New Thrill Rides Have Consistently Driven Growth," which presented summary data from 2008 to 2019 (based exclusively on Cedar Fair parks) establishing the net effect on new thrill rides. Specifically:

Overall in it showed on average (Year 1):

• ~10% increase in attendance
• ~15% increase in revenue
• ~20% increase in adjusted EBITDA
• ~30% cash-on-cash return on investment

You can see this presentation and data on Slide 15 here: https://investors.sixflags....fault.aspx

Proven Synergy Execution Underway
~$180M
in synergies with tangible progress building confidence in execution.

I worry about that statement from Slide 9. 180 million is a lot to synergize, synergies or whatever buzzword you want to use here. What it really boils down to is firing a bunch of people. Or outsourcing critical functions to third parties. Easy to rationalize as a C-Suite executive, but really really s**** for the employees left holding the bag. I've seen this many times in my corporate career (Although I don't work in the amusement industry, i work in large corporate america)

veritas55:

because why in the world would you invest $25-$30million of capital on a ride if you didn't expect a timely return on investment? If attendance was a variable independent of new ride investment -- then why do it?

As far as I recall, this completely misrepresents the counterargument. The opposing argument was that periodic marquee ride investments are made to maintain attendance over time, not that attendance is independent of investment.

I think the reality lies somewhere in the middle.

An appropriate analogy might be a sports team.

When you're an expansion team, every year you can add talent can significantly drive attendance.

But once you've become a contender and your roster is fully developed, you're adding pieces every year to maintain the level of success you've built. The stadium went from half empty to mostly full.

Go back to the era when Magnum and Raptor were built. They were significant drivers of attendance, and the peninsula wasn't nearly as developed as it is now.

But now that the park has developed and mostly maximized the bulk of its real estate, and its attendance figures are hovering in the general vicinity of what I would think is maximum theoretical attendance capacity, major new attractions are likely to maintain attendance numbers as opposed to generating a 1994-like percentage spike.

djDaemon:

eritas55:

because why in the world would you invest $25-$30million of capital on a ride if you didn't expect a timely return on investment? If attendance was a variable independent of new ride investment -- then why do it?

As far as I recall, this completely misrepresents the counterargument. The opposing argument was that periodic marquee ride investments are made to maintain attendance over time, not that attendance is independent of investment.

Look, I'm not seeking to re-argue that thread and I'm sure I didn't adequately give the nuance of the counterargument. That said, I also did not "completely" misrepresent the counterargument. It's in our glorious 66-page thread and begins around July 25/26 (and onward) where I wrote things like:

"I seriously doubt CP management is just shrugging their shoulders and muttering "it's no big deal.. this will all be forgotten soon enough," like others here are. They invested a ton to get decent ROI THIS year on this thing. Sure, they probably still got a healthy uptick in season passes, but the reason you invest $20 million-plus (my guess) is because you expect the ride to give you a good attendance boost."

And others responded with statements like:

"I and others have explained to you why this isn't the case, with evidence. Attendance and guest spending are the business, and these are not affected by one ride, as attendance trends show."

"Attendance will not suffer from the lack of Top Thrill 2, let alone harm the larger company"

In any event, the data says what it says, and I think it points toward the following general propositions:

1. New attractions like TT2 are intended to increase attendance and/or revenue
2. They do indeed generally have an upward effect on attendance Year 1
3. They likely have a disproportionate effect in Year 1 (but they didn't present data beyond Year 1, so that's a guess)
4. This is why they invest in these attractions

It’s the main problem with public companies. They always need to grow. It’s never good enough to just earn money and keep the same level of attendance. Eventually there will be no room to grow in some capacity and then everyone freaks.

A couple tidbits from the investor day webcast.

It was mentioned that CP has had close to 4 million guests over the past couple of years. This is indeed higher than the Raptor year, but I think the cheapo season passes likely have more to do with it than any ride (or lack thereof). CP and all park passes are literally selling for less in the offseason now than they did in 2004. They do raise them quite a bit as the summer approaches, but the fall sales are cheap.

It was also mentioned that Cedar Point has had record EBITDA years the past two years. So at least in the short term, at their flagship park (Zimmerman did refer to CP as their flagship park near the end), their strategy of crowding the park, running things poorly, and selling a lot of Fastlanes is working.

I'm skeptical that it can be maintained for the long haul though.

If you look at Slide 46, you can see the Cedar Fair strategy in using alcoholic drinks to grow revenue:

”Adult Beverages a Key Component of the F&B Growth”

“Growth in adult beverage revenue 100% over two years. $20M incremental over two years”

”Enforcement of outside beverages prohibition rules. Eliminate and reduce opportunities for guests to provide their own beverages via means of backpacks, bushes, or camelbak”

so no more tall boys in the bushes folks. Sorry.

Thanks for pointing out slide 46, it gives me hope that several of the "dry" areas of the park will soon be taken care of. Most notable of the dry zones is the one that stretches all the way from Summer Brews by Gemini to the Last Chance Saloon or the Farm House in Frontier Town. This is about 800' of parched dry land from one drink location to another. With the addition of canned alcohol sales at Happy Friar the distances can be shortened a bit depending on which side of the midways you choose to walk on.

The other area that needs serious attention is Frontier Trail. This can be especially tricky to navigate and if the Trail Tavern is closed I would avoid Frontier Trail altogether. The dry distance on the Frontier Trail from Engine House 13 down to the Red Garter Saloon can be about 1600'. If the Trail Tavern is open that takes about 500' out of the dry zone but I would only recommend venturing short distances down the trail from either end until one can determine how quickly they will need another drink.

There are a few other areas I am researching for designation as a dry area near the front of the park, these might be able to be taken care of with a drink stand just prior to the main security checkpoint and one at the entrance to the Boardwalk. Please do not take this as official though as these areas remain under review.

Your research is invaluable. You should apply for some kind of grant so you can be funded. I’m sure six flags would sponsor this research as they are attempting to grow the alcohol business by 20M$. I’ll buy you a drink (tall boy) next time we meet up 😉