From Wild to Woozy, Theme Parks Are a Good Fit for Your Portfolio
Kaitlyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Profiting from the sun and heat bearing down with record-breaking temperatures, theme parks are soaking in the sun and the crowds this summer. With more people being drawn to theme parks instead of costly overseas vacations, parks around the country are profiting from thrill seekers and their families.
Six Flags Entertainment (NYSE: SIX) has recovered nicely from a disastrous whirlwind of events which resulted in bankruptcy late in 2009. Six Flags hosts 17 locations in the United States, a location in Mexico and a theme park in Canada. Recovering under the leadership of James Reid-Anderson, the company issued a 2-for-1 stock split in April and a quarterly cash dividend of $0.90 per share. But how has Six Flags fared compared to Cedar Fair (NYSE: FUN) and Seaworld (NYSE: SEAS)?
Increased park revenue
Seaworld, a newbie to the Wall Street trading game, went public in April of 2013. Since then, the company has been providing stable returns by increasing revenue and shrinking operating losses. Seaworld saw growth of 12% for total revenue in the first quarter due to a different pricing structure and yield mix. The parks also saw a 10% increase in total revenue per capita (defined as total revenue divided by total attendance) from $62.15 to $68.19 and an 2% increase in attendance for the quarter.
Seaworld benefited from in-park per capita spending (defined as food, merchandise, and other revenue divided by total attendance) increasing by 6% from $23.17 to $24.63 due to improved economic conditions, targeted price increases, and increased offerings. Attendance benefited from the placement of Easter and New Year's Eve, increasing traffic into the park for the holiday seasons.
Restructuring for 2013
When economic times got rough, theme parks suffered with lost revenue and low traffic. Six Flags chose to file for bankruptcy, while Seaworld and Cedar Fair chose restructuring the balance sheet.
Cedar Fair owns and operates 11 amusement parks, four outdoor water parks, one indoor water park and five hotels. Cedar Fair is also a limited partnership which means that they distribute a bulk of their earnings in exchange for favorable tax treatment. With hefty cash distributions at $2.50 per share, this is a great stock for income investors with a 6% return with current share prices.
In 2012, Cedar Fair chose to sell off Knott's Soak City to SeaWorld. This money was reinvested back into Ohio operations as Cedar Fair opened more rides in 2013 to attract more customers. "GateKeeper," a ride that boasts a 164-foot drop, 4,164 feet of track and speeds of up to 67 miles per hour, adds to the company's collection of steel coasters at its Cedar Point park in Ohio. Great America in Santa Clara, California, added a wooden coaster known as the "Goldstriker," and Kings Dominion expanded "Planet Snoopy" which is the world's largest PEANUTS-themed children's area. Revenues increased due to a new pricing structure which combines two parks for the price of one at Worlds of Fun located in Kansas City. These park additions have resulted in a 5% increase in revenues compared to sales from last year.
Six Flags has increased revenue by 32% over the prior year, due partially to the expansion of 11 new roller coasters at different theme parks around the country. Attendance in the first quarter increased 41% to 1.8 million guests because of spring break scheduling for some schools. This was achieved to better pricing mixes and increased revenue from season pass holders.
The Foolish bottom line
With entertainment and amusement parks being hardest hit by the recent economic recession, all three of these theme parks have survived a tough season and came out swinging with better returns and increased traffic. With better pricing models, a better mix of products, and revenue for the income investor, all three of these parks are good for any portfolio.
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Kaitlyn Tokay has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!