Six Flags is going beyond the typical theme and water park offerings with kid-focused and adventure options in China, and it makes sense to bring those concepts to other markets. But it's also wise to make sure the parks are delivering what customers want before investing in building them elsewhere.
Last year, Six Flags Entertainment announced it was trying some new things with a development partner in China: theme parks built especially for families with young kids, and an adventure park featuring “high-energy outdoor thrills.”
On Wednesday, CEO Jim Reid-Anderson said during an earnings call that the kid and adventure parks would continue to be part of the company’s strategy to expand “into emerging markets where the middle class is growing and entertainment options are limited.”
“We have also developed two new innovative park concepts, Kids World and Adventure Park, in addition to our theme park and water park brands,” he said. “This allows us to develop entertainment complexes, providing additional value and more quickly expanding our global footprint. This should supercharge revenue growth.”
Asked by an analyst whether the concepts might come to North America, Reid-Anderson said yes — but not anytime soon.
“You could bring them here. That’s certainly something that we would consider,” he said. “My philosophy and the philosophy of the team is absolute focus. And so we want to make sure that once we get those parks opened, that they do what we anticipated they will do in China. And then we would look at adding them elsewhere.”
The comments came as executives discussed generally good results for the second quarter. Revenue was up 5 percent to $445 million, higher than analysts expected. And profit jumped 43 percent to $94 million, though that increase was due in part to the positive impact of tax reform and a one-time charge in 2017. Adjusted earnings before interest, taxes, depreciation, and amortization increased 3 percent to $170 million.
The company said revenue growth was driven by a 3 percent attendance increase, 2 percent increase in per-capita guest spending, and 9 percent jump in sponsorship, international licensing, and accommodations revenue.
Attendance for the quarter that ended June 30 was up thanks in large part to a higher base of season pass holders and members as well as the addition of five parks to the company’s portfolio. Six Flags paid $23 million to acquire the lease rights to operate the parks, a transaction that closed June 1.
Executives would not say whether attendance would have been up without the five new parks, which include water parks, a frontier-themed attraction, and a complex with a theme park, water park, and hotel. Those parks generate lower per-person spending than other locations in the portfolio.
In all, guest spending per capita for the quarter was up 2 percent to $42.63, through in-park spending per person dropped 2 percent to $18.02.
Chief Financial Officer Marshall Barber said that memberships, which come with extra benefits, cost significantly more than regular tickets but can keep spending down in parks.
“Members have parking included with their monthly membership fee and receive discounts on items they buy in the park, which has the effect of increasing admissions revenue while putting downward pressure on in-park revenue,” he said.
Because part of the spring holiday leading up to Easter fell during the first quarter this year but second quarter of 2017, executives said they thought it was more meaningful to look at trends for the first six months of 2018.
Through June, the company reported a 10 percent increase in revenue to $574 million. Adjusted earnings rose 16 percent to $151 million, and overall guest spending per person was up 3 percent. Attendance jumped 7 percent to 12.1 million, due to the five new U.S. parks as well as two water parks in Mexico and California that the company also bought. Another boost to attendance: Six Flags Magic Mountain changed its schedule to stay open daily this year.
Reid-Anderson said he was “extremely positive” about the shift to 365-day operations at the California park, which has led more people to sign up for memberships.
“It’s been a pleasant surprise to see how well it has done,” he said. “And I think I’ve mentioned before that we are looking at a couple of other parks to see if we will execute that change there.”
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Photo credit: CraZanity, a pendulum ride that just opened at Six Flags Magic Mountain, is pictured. Six Flags Entertainment Corp. reported second-quarter earnings on Wednesday. Jeremy Thompson / Flickr