Friday, February 15, 2019

Heard On... Cedar Fair's 2018 Year End and 4th Quarter Conference Call

Yesterday was Cedar Fair's 2018 Year End and 4th Quarter earning release, in which the company reported another successful year that saw record revenues of $1.35 billion.

Between the release and the usual earning conference call, there was plenty to be told about the company's year.  Let's dig in.

•  Looking at 2018 in total, revenues were up 2% to 1.35 billion, with a 1% increase of attendance (189,000 visits) to 25.9 million guests, per capita revenue was up 1%, and a 6% increase in out of park revenues to a total of $152 million.  Full year EBITDA was down 2% however, to $460 million.

•  The 4th quarter for the company was an especially good one.  During the period revenues hit $250 million, up 9% from last year, and record EBITDA for the period was achieve at $68 million, up 11% from last year.  The company had one more park started Winterfest this year, which helped the quarter greatly.

© Cedar Point
•  Season passes continue to be a focus for Cedar Fair, along with all park operators.  Right now season pass sales are up 25% over last year at this time.  During 2018 more than 50% of park attendance was from season pass holders.

•  Since 2012 the company has started stretched out payment options for passes along with utilizing a strong customer relation management system to increase pass sales.  Since that time the annual revenues from season pass sales have nearly doubled, with more room to grow in their opinion.  The current season pass base across all parks is around 2.5 million people.

•  This season a couple parks (not sure which) will roll out a rewards program for season pass holders.  It will let them redeem rewards at the parks and even some when the parks are closed.  2019 is a test of the program, will a full rollout planned for 2020.

© Carowinds
•  The company is pleased with their out of park revenues, which were a record.  Higher occupancy rates at their hotels, along with higher room rates, were the reason behind the results.  No new announcements have taken place aside from the hotels at Carowinds and Canada's Wonderland, but they're still focused on expanding in this area.

•  A new long term strategy has been set in place to achieve a yearly goal of $575 million in EBITDA by 2023 - which is about 4% growth each year.  The company will get there through three areas of focus - broadening the guest experience through new activities and events, expanding their season pass program even further, and increasing market penetration through focused marketing.  For example, Knott's has 49 million people living in the market around it, and they only get 2% of those as guests.  If they add even 1% more that's equal to 500,000 more guests at the park.

•  A lot of discussion on capital spending took place.  It seems in reaction to guests looking for "multidimensional entertainment" Cedar Fairs parks will push hard for more events, festivals, and special time-limited offerings.  They will leverage their existing inventory of thrill rides to space out larger investments, meaning more years in between the big rides, and focus each year on "interactive and immersive family attractions."

© Knott's Berry Farm
•  Knott's Berry Farm is the example of this method, where all their events - marketed as 5 seasons of fun - have pushed annual attendance up over the six million mark.  This year the company will roll out the 'seasons of fun' message to more parks.  They also cite Cedar Point's Forbidden Frontier and the addition of Winterfest at Canada's Wonderland as examples of how to build upon this plan.

•  This is not to say that rides will not be built, (even Knott's, as the example of the plan, got a big coaster this year) but there will be a stronger mix of other interactive and special events in between them.  Cedar Fair plans to spend around $140 - $150 million a year on capital, with items like hotel developments above and beyond that figure.  In 2019 they are spending $140 on marketable additions, and $30 - $40 million more on the two hotels at Carowinds and Canada's Wonderland.

•  Also worth noting is that the company feels they have accomplished some heavy capital plans that took years to finish, such as renovating group catering facilities at all the parks, investing in wifi (the last two parks will get it this year), etc.  With that behind them, they have created a new plan for the future focused on splitting between big rides and interactive attractions and events.

© Carowinds
•  And interesting quote was given on capital plans - they will "continue to place an emphasis on building to scale in all of our projects, as we believe it differentiates our parks and helps protect the integrity of our business models for years to come."  That can be taken different ways, and I wish they had elaborated more on it.  Still, they also said they will make sure they have something that they can market for each park each year... but that's not to say it is a new ride like Six Flags does.

•  In the next couple weeks they will be announcing some sort of new event that is designed to drive urgency and visits during the early season.  They would not give details, but reference the Boysenberry Festival at Knott's when speaking about it.  That event has created some of the busiest days at the park for the entire year when it takes place, and it sounds like they want to duplicate it (though not in focus on boysenberries) at the other parks.