Over the years, the theme park community has lost several
parks.
Astroworld.
Geauga Lake.
Hard Rock Park.
Freestyle Music Park.
Six Flags New Orleans.
Six Flags Kentucky Kingdom
In addition, many parks have
changed hands.
Six Flags Europe.
Busch Gardens Theme Parks.
Sea World Ohio.
Six Flags Worlds of Adventure.
Kennywood.
So what do these cases have to do
with each other? They were divestitures, which is the topic for this month's Strategizing Fun.
Companies use divestitures for
several reasons. It could be that the asset is worth more to a different
company (such as the land under Six Flags Astroworld), or it could be that the
asset is eroding away overall company performance (such as the case for the
amusement park side of Geauga Lake). In any of these cases, divestiture was the
only option.
Of course, no theme park operator actually intends to shut down a park, or to
see a park shut down by another operator. But what they are counting on is a nice influx
of cash to pay off high debt. You see, without shareholders making a return on
their investments, they will either sell their stock, or vote in a new
leadership team poised to lower costs – at any cost (forgive the play on
words).
Either one of those scenarios is far worse to theme park enthusiasts
than selling individual parks. Plus, the economics of the matter is that if
another operator believed it could profitably run a divested park, it would indeed
purchase it. Outside of the owners of Holiday World making a play to operate
Kentucky Kingdom, that has failed to materialize in any of the parks in that
first list. But for the second list, the outcome was far more fortunate.
Another operator indeed felt the asset was lucrative enough to continue
operating as a theme park.
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| Former Astroworld Park (Credit: Jakizle, TPR) |
But back to that first list. To
local residents, it’s a bitter pill to swallow to see a park close down – no
matter how good that decision might be from the perspective of shareholders.
For example, many Houston residents might not ever make it to another Six Flags
park after the closure of Astroworld. Although the land was sold to developers, a planned multi use master planned community has not been realized. As recently as last year, the land was used as spillover parking for a special events.
Similarly, there are some in Cleveland who wouldn’t be willing to make
the 1 hour and 9 minute drive to Sandusky, OH, to enjoy rides at Cedar Point.
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Helicopter images of SBNO rides at SFNO.
(Credit: The Mystery World) |
It’s an even worse thing for residents
of New Orleans. Although they’ve certainly had other things on their mind the
past few years – between the costliest natural disaster in U.S. history
(Katrina), and the largest accidental marine oil spill in the history of
petroleum industry (the Deepwater Horizon oil spill) – the loss of Six Flags
New Orleans in 2005 means the nearest park is 1 hour and 24 minutes away, in
Baton Rouge (i.e., Dixie Landin’). An even more extreme case is for residents
of Memphis, TN. After losing Libertyland in 2005, the nearest park is 3 hours
and 11 minutes away, in Hot Springs, AR (Magic Springs & Crystal Falls).
But at the end of the day, most of
these divestitures allow the company to continue to operate. Ask any one of Six
Flags’ nearly 24 million guests, or Cedar Fair’s 23.4 million guests, and
they’ll say they are happy that they can continue to visit their local
parks.
