Profits and revenue at the world's largest regional theme park company took a hit in the second quarter partly because of the company's new strategy and double-digit declines in attendance.
Six Flags Entertainment said it had 6.7 million visitors to its 27 parks throughout North America during the quarter that ended July 3, a 22% decline, or 1.8 million guests, compared with the quarter in 2021.
The Arlington, Texas-based company has been changing its business plan under relatively new President and CEO Selim Bassoul to focus on increasing how much each guest spends rather than maxing out park capacity, and the company succeeded in doing just that in the second quarter. In the past, Six Flags would offer free or discounted tickets in an effort to get as many people into the parks as possible, but it turns out those people did not spend much money at the parks.
“This is a transitional year for Six Flags, as we reset the foundations of our business model to focus on delivering a premium guest experience, while at the same time, correcting for decades of heavy price discounting,” Bassoul told investors during Six Flags' quarterly earnings call Thursday. Bassoul said it was better to "pull the Band-Aid off" with customers right away rather than remove those discounts slowly. Under Six Flags' new regime, the company has dealt with the departure of five park presidents and some senior executives.
The decline in attendance comes as many of Six Flags' regional rivals have reported better attendance this year compared to spring 2021, when the impacts of the pandemic were more severe. Dennis Speigel, founder and CEO of International Theme Park Services in Cincinnati, who has tracked the amusement park industry for decades, summed up Six Flags' results in one word: abysmal.
But performance at regional parks is expected to soften in the third quarter as rising interest rates, inflation and uncertainty in the economy continue to chip away at the pocketbooks of the average middle-class family, Speigel said.
"The third quarter is going to be soft throughout the industry, except for Disney and Universal and those destination parks," Speigel told CoStar News. "We expect it to be down across the board in the industry for the regional parks."
The softening seen in regional amusement parks began Fourth of July weekend and is expected to continue for the foreseeable future. That has Six Flags and others banking on the outcome of Halloween, which they have already begun marketing, he said.
For the second quarter, prior to the Fourth of July holiday, Six Flags reported its total revenue decreased by $24 million, or 5%, compared with the same period the prior year. This was driven by lower attendance and a $5 million reduction in sponsorship. Net profit dropped 36% to $45 million in the quarter compared to last year.
Ditching Discounts
The rising inflationary environment offered a good time for Six Flags to remove the deep discounts it offered its guests, including an unlimited meal plan made famous in TikTok posts of people eating all of their meals at the park and saving hundreds of dollars a month. Prior to the dining plan being pulled, it offered guests two meals, a snack and unlimited beverages as an $80 add-on to the Six Flags season pass.
"We've taken away freebies — bring a friend, the dining plan, free drink bottles — and we are pleased with the dollar revenues based on the number of fans," Six Flags' Bassoul told investors. Bassoul started leading the company in November and previously was president and CEO of Middleby Corp., a food service equipment provider.
For the quarter, Six Flags reported a 23% increase to $63.87 in guest spending per capita compared with the same period the prior year, driven by increases in admissions and in-park spending per guest.
"Our guest spending per capita has increased more than 50% versus pre-pandemic levels," Bassoul said. "We are pleased with the dollar revenues generated despite the huge drop of attendance in the first half of the year. We are not going back to heavy discounts and freebies, but we will be making minor tweaks over the long term with more opportunity for pricing going forward."
Speigel, the amusement park analyst, said that per capita increase in guest spending is likely from the hamburger or hot dog costing more per item — pushing per-consumer spending — rather than the consumer buying more items. The industry has "never seen a more difficult operating environment," Speigel said.
Indeed, Six Flags plans to keep increasing prices to keep up with inflation and catch up with its competitors by elevating the guest experience, Bassoul said, adding that was the company's "biggest opportunity."
Bassoul said he believes the company's "initial progress validates the potential of our new strategy and provides a very healthy earnings base from which we can grow.”