Six Flags’ Future in Dubai Is Now Uncertain

In a drawback to its international expansion plans, a Six Flags theme park that was supposed to open late next year in Dubai is now under review by its struggling owner, executives from Six Flags Entertainment said Wednesday.

DXB Entertainments, which owns the Dubai Parks and Resorts complex where the new Six Flags is under construction, has posted losses as attendance failed to meet expectations. The resort already includes a Legoland, water park, and theme parks based on Hollywood and Bollywood films.

Earlier this year, the Dubai operator said it would move forward with the Six Flags park, but the company said later it would review its expansion plans.

Wednesday was the first time Six Flags officials addressed what that could mean to the project — though they had few details other than saying that an on-time opening in 2019 was unlikely. Executives addressed the issue during an earnings call that included a few pieces of bad news; shares fell 16 percent.

“We cannot speak for our partner,” said Jim Reid-Anderson, president and CEO of Six Flags Entertainment. “They’re trying to work through what they do next. We don’t have an answer. I wish I could give you an answer to say, ‘This is what will happen.'”

Reid-Anderson and Chief Financial Officer Marshall Barber said the Dubai operator is up-to-date on payments to Six Flags. The company has said in the past that international licensing fees, one of its key growth initiatives, represent $5 million to $10 million a year in earnings before a park opens and $10 million to $20 million a year once parks are operating.

The Dubai park would fall on the low end of that range, Reid-Anderson said.

“The risk, for us, is minimal,” he said. “And I would tell you that this was our smallest park in terms of our expectations with regard to revenue and [earnings before interest, taxes, depreciation, and amortization], in terms of the outlook. So whilst we would never want the park not to go ahead, if it happens, it’s something we would manage through very
successfully.”

Latest Roadblock

This isn’t the first hurdle on the path to international expansion. DXB Entertainments was in arrears on payments earlier this year, and a project with partners in Vietnam ran into trouble last year. Projects in China and Saudi Arabia are still moving forward to open over the next few years.

“Our strategy remains an important opportunity for the long term,” Barber said. “There’s always a potential for short-term challenges when working in emerging markets.”

The Dubai discussion came as the Texas-based theme park operator reported that third-quarter revenue increased 7 percent year-over-year to $620 million, driven in part by a 5 percent jump in attendance. During the quarter that ended Sept. 30, 13.6 million people visited the company’s 25 parks, including five that were recently acquired.

Also fueling growth: revenue for international agreements, which increased 42 percent to nearly $36 million.

Profit increased 2 percent to $3 million, while earnings before interest, taxes, depreciation, and amortization — called EBITDA — was up 2 percent to $307 million.

‘Slammed by Weather’

Despite the increases, Reid-Anderson said bad weather was a “net drag” on attendance during the quarter, estimating that hundreds of thousands of visits were lost.

He cited “the worst third-quarter weather” in his nine years at the company as a reason for the sluggish growth in earnings, which missed analyst expectations. The company also said meeting its goal of $600 million in modified earnings this year would be “more challenging” due to the weather hit.

Shares fell 16 percent to close at $53.30 Wednesday.

“I feel like we have been slammed by weather,” Reid-Anderson said. “We have the right imperative. I wouldn’t change a single thing in terms of what we’re doing. …  But it’s
realistic to say that the growth to date in EBITDA hasn’t been at the level that we would’ve liked to have if weather had cooperated.”

Barber said the operator’s fundamental growth drivers were still sound and pointed out that revenue and adjusted earnings had reached record levels for the first nine months of the year.

“We’re doing what we need to do to drive the business,” he said. “And the weather will improve. It’s not going to be worse than average forever.”