Despite a nasty recession over the past few years, amusement parks have held their own in the face of high unemployment, rising energy prices, and consumer belt-tightening. One of the biggest names in this corner of the entertainment sector is Six Flags Entertainment (NYS: SIX) , a company that has effectively reinvented itself since first filing for bankruptcy four years ago.
Amusement parks visits, like most leisure activities, are probably among the first expenses to be cut by struggling families during economic downturns. For this reason, I expected to see that these entities had done somewhat poorly over the past few years but would be ready to bounce back with renewed vigor now that the economy is beginning to warm up a bit. In actuality, these parks have had their ups and downs, but overall they fared better than I thought they would have.
Despite a strong showing early in the 2011 season, many parks saw flat or only slightly elevated attendance rates this past summer. Some park analysts blamed the soggy spring and excessive summer heat for the falloff, though Cedar Fair's (NYS: FUN) CEO credited new rides and special events for keeping the park's foot traffic steady throughout the summer. The company's year-end numbers showed increases in both attendance and revenue from the year previous, and the company managed to reduce its debt load in 2011 -- an ongoing project, according to the company's president.
Six Flags, which has staged an amazing comeback since emerging from bankruptcy two years ago, saw a setback last year from Hurricane Irene, but still managed to increase third-quarter gross earnings by 5% year over year, all while reducing its debt load. Last December, the company restructured much of its debt, expecting the change to save $13 million per year. In a recent interview with Bloomberg, CEO Jim Reid-Anderson discusses the company's cash flow, now equaling $3.80 per share, as well as payment of a $0.60 dividend.
Though parks and resorts make up only about 10% of Disney's (NYS: DIS) business, that sector gave the company a 10% boost in its first-quarter earnings report. The company was hush-hush about its park attendance last year, only saying that it had increased. Comcast (NAS: CMCSA) saw attendance jump 20% last year at its Universal Studios' Islands of Adventure locations, according to fellow Fool Rick Munarriz.
I think that a sputtering economy, coupled with rising gas prices, might actually be helpful to this sector. After all, people won't do without vacations indefinitely, and pent-up demand might make a season's pass to a local amusement park look mighty attractive to families looking for an alternative to pricier, more far-flung vacation destinations.
Also, many parks are taking the initiative and offering new attractions this year to entice visitors. This is the year that Six Flags unveils its Superman roller coaster in Vallejo, Calif., as well as the Goliath in Massachusetts. Universal's Transformers ride debuts this year, Disney has broadened its Fantasyland exhibit at its Florida location, and Cedar Fair has expanded its waterpark, as well. It's early yet, but I foresee a summer of fun and increased profit for amusement parks this year.
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At the time thisarticle was published Fool contributorAmanda Alixowns no shares in the companies mentioned above.Motley Fool newsletter serviceshave recommended buying shares of Walt Disney. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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