Mike T
11-11-2007, 03:56 PM
BLADE BUSINESS WRITER
SANDUSKY — Though he’s 66 and white-haired, Richard L. Kinzel, Cedar Fair LP’s chairman and chief executive, still loves nothing better than an exhilarating roller-coaster ride.
That’s good, because the amusement park company he has led since 1986 has taken the Toledo native on a twisting, looping, heart-pounding financial jaunt this decade with its billion-dollar acquisition of Paramount Parks, battles against a sour economy, and attempts to cope with up-and-down attendance.
To be sure, the company has had slip-ups, such as its struggles to fix Geauga Lake Park near Cleveland. But the company is constantly changing, and it listens to its customers, though not always granting them what they want.
Through it all, Mr. Kinzel, who resides only a five-minute walk from the front gates of the company’s flagship Cedar Point park in Sandusky, remains confident that in a few years customers and investors will find a Cedar Fair that is better, if not bigger, than ever.
Before that happens, Cedar Fair, owner of 12 amusement parks and seven water parks in the United States and Canada, needs to digest the properties it bought from Paramount Parks for $1.24 billion in June, 2006.
Geauga Lake, is to become solely a water park. Its rides are to be moved to other Cedar Fair sites.
The Lake Erie-side company cut costs and imposed its model on running its five new parks: Kings Island near Cincinnati; Kings Dominion near Richmond, Va.; Carowinds, near Charlotte, N.C.; Canada’s Wonderland in Toronto; and Great America in Santa Clara, Calif.
But the changes were not well received. Attendance at the new parks dropped by nearly 200,000 visits.
“The pattern that we tried to use worked very, very successfully at every acquisition we had made prior to that time,” Mr. Kinzel said. But none of those was as expensive or large, and Cedar Fair always had more time to integrate new parks.
Specifically, Mr. Kinzel said, he failed to notice that customers at those new parks love season passes. Cedar Fair gets about 10 percent of its attendance through season passes. Paramount got about 40 percent.
Although spending per person rose enough to offset the attendance drop, “you don’t have to get hit in the head with a two-by-four twice,” the CEO said. The season pass program will return next season, he added.
The company’s revenue for the first nine months this year was $871 million, which was on target but didn’t come in the way it was expected. SkyRider, is a signature attraction at Canada’s Wonderland. That park, part of the Paramount purchase, is in Ontario, the province that is home to about 70 percent of Canada’s population.
Attendance declined in August, traditionally one of the company’s biggest months. But customer numbers soared in September and October, when the seasonal parks are open only on weekends.
Because of the surprising numbers in September and especially in October, when revenue was up 11 percent, or $8.6 million, Cedar Fair now estimates its full-year revenue will be between $960 million and $980 million. Previously, the estimate was $950 million to $980 million.
A poll of analysts by Thomson Financial estimates Cedar Fair’s full-year sales to be about $962 million.
Kit Spring, an analyst with Stifel Nicolaus in Denver, stated in a recent report that the firm appears to be on pace to exceed $980 million in revenue. He estimated earnings per share this year at 63 cents and predicts 83 cents next year.
The analyst said his main concern was whether the planned $88 million in capital spending for next year is high enough. Typically, capital spending has been about 13 percent of the amusement park company’s annual revenue, and the $88 million is 8 percent, he wrote.
The August drop and the September-October surge spotlighted other issues for the entertainment firm, such as trying to forecast customer interest.
Some past customers have stopped coming, a byproduct of the nation’s sluggish economy, especially in the Great Lakes region where the company has four amusement parks.
Attendance at Cedar Point hit 3.6 million in 1994, but the numbers have declined each year, falling to 3 million this year. Mr. Kinzel maintained the firm is “recession resistant,” but said other factors have contributed to slowed attendance.
“I think a lot of it has been the economy, but certainly there’s the advent of PlayStation and things like that,” he said. “Our biggest comment from our surveys when we ask people why they haven’t made it to the park this year, is that they just don’t have time or it’s the hassle of it.”
Different pricing strategies have been tried to help lure people from Michigan, including reduced prices for residents of that state. Two years ago, the firm dropped gate prices $5 and cut some park food and drink prices. The moves didn’t work.
For now, the company plans to increase prices slightly at parks with new attractions and to hold prices steady at the others. Still, it raised Cedar Point ticket prices by $1 in August.
Also, in the last 10 years, the firm has been spending more on its hotels, boosting out-of-park revenues from $30 million to $100 million, much of that from just outside Cedar Point in Sandusky, Mr. Kinzel said.
Scott Hamann, an analyst with KeyBanc Capital Markets in Cleveland, said increased revenue per customer will be the big story for Cedar Fair. The company, he said, is poised to generate more income as it takes Paramount ideas and puts them into Cedar Fair parks and vice versa. Plus, it is expanding its Halloween weekends to the Paramount parks, he added.
The company projects attendance at Cedar Point to be 3 million to 3.2 million for each of the next four years, so to increase hotel revenues nearby, it needs to emphasize minivacations, Mr. Kinzel said.
One way to raise cash is to switch the corporate structure from a limited partnership that pays quarterly dividends to a privately owned concern that pays no such distributions.
Cedar Fair said $80 million to $90 million annually is needed for capital expenditures, but with an extra $100 million, Mr. Kinzel said, he could build a hotel in Toronto, replace another at Cedar Point, and expand the campground at Kings Dominion.
The company weighed financial options a year ago, including cutting its distribution. But it decided against that, Mr. Kinzel said.
Two months ago, it decided to close Geauga Lake’s amusement park and have only a water park there. The company paid $144 million for the park in 2003 and invested an additional $30 million in it. But attendance sagged below 1 million this year from nearly 3 million annually before Cedar Fair’s ownership.
The rides at the suburban Cleveland park will be moved to other Cedar Fair parks, at a cost of less than half that of building new ones. One coaster already is at Kings Island, another will go to Dorney Park near Allentown, Pa., a third to Kings Dominion, and a fourth to Michigan’s Adventure near Grand Rapids.
Seven children’s rides will be moved from Geauga Lake to Cedar Point, and three wooden roller coasters will be sold or removed.
Rather than move a coaster to Canada’s Wonderland, Cedar Fair will spend $21 million to build Behemoth, a record-breaking roller coaster, at the former Paramount Park.
The Toronto park was a huge surprise of the Paramount purchase in that it has few competitors, and nearly 70 percent of Canada’s population lives in Ontario. “We continue to get calls today from people wanting to buy that property, but we’re looking at looking at ways to make it pay off,” Mr. Kinzel said.
If the company sells a park anytime soon, the likely candidate is Great America in California. The city of Santa Clara wants the park’s parking lot site for a new stadium for the San Francisco 49ers football team.Alright folk, you've heard it straight from the Horse's mouth. Kinzel says to expect Cedar Fair in prime condition within the next 5 years, but to expect the park to maintain its 3 million attendance for the next 4 years. He also continues to point a lot of the blame on things such as the Play Station for the decrease in seasonal attendance.
SANDUSKY — Though he’s 66 and white-haired, Richard L. Kinzel, Cedar Fair LP’s chairman and chief executive, still loves nothing better than an exhilarating roller-coaster ride.
That’s good, because the amusement park company he has led since 1986 has taken the Toledo native on a twisting, looping, heart-pounding financial jaunt this decade with its billion-dollar acquisition of Paramount Parks, battles against a sour economy, and attempts to cope with up-and-down attendance.
To be sure, the company has had slip-ups, such as its struggles to fix Geauga Lake Park near Cleveland. But the company is constantly changing, and it listens to its customers, though not always granting them what they want.
Through it all, Mr. Kinzel, who resides only a five-minute walk from the front gates of the company’s flagship Cedar Point park in Sandusky, remains confident that in a few years customers and investors will find a Cedar Fair that is better, if not bigger, than ever.
Before that happens, Cedar Fair, owner of 12 amusement parks and seven water parks in the United States and Canada, needs to digest the properties it bought from Paramount Parks for $1.24 billion in June, 2006.
Geauga Lake, is to become solely a water park. Its rides are to be moved to other Cedar Fair sites.
The Lake Erie-side company cut costs and imposed its model on running its five new parks: Kings Island near Cincinnati; Kings Dominion near Richmond, Va.; Carowinds, near Charlotte, N.C.; Canada’s Wonderland in Toronto; and Great America in Santa Clara, Calif.
But the changes were not well received. Attendance at the new parks dropped by nearly 200,000 visits.
“The pattern that we tried to use worked very, very successfully at every acquisition we had made prior to that time,” Mr. Kinzel said. But none of those was as expensive or large, and Cedar Fair always had more time to integrate new parks.
Specifically, Mr. Kinzel said, he failed to notice that customers at those new parks love season passes. Cedar Fair gets about 10 percent of its attendance through season passes. Paramount got about 40 percent.
Although spending per person rose enough to offset the attendance drop, “you don’t have to get hit in the head with a two-by-four twice,” the CEO said. The season pass program will return next season, he added.
The company’s revenue for the first nine months this year was $871 million, which was on target but didn’t come in the way it was expected. SkyRider, is a signature attraction at Canada’s Wonderland. That park, part of the Paramount purchase, is in Ontario, the province that is home to about 70 percent of Canada’s population.
Attendance declined in August, traditionally one of the company’s biggest months. But customer numbers soared in September and October, when the seasonal parks are open only on weekends.
Because of the surprising numbers in September and especially in October, when revenue was up 11 percent, or $8.6 million, Cedar Fair now estimates its full-year revenue will be between $960 million and $980 million. Previously, the estimate was $950 million to $980 million.
A poll of analysts by Thomson Financial estimates Cedar Fair’s full-year sales to be about $962 million.
Kit Spring, an analyst with Stifel Nicolaus in Denver, stated in a recent report that the firm appears to be on pace to exceed $980 million in revenue. He estimated earnings per share this year at 63 cents and predicts 83 cents next year.
The analyst said his main concern was whether the planned $88 million in capital spending for next year is high enough. Typically, capital spending has been about 13 percent of the amusement park company’s annual revenue, and the $88 million is 8 percent, he wrote.
The August drop and the September-October surge spotlighted other issues for the entertainment firm, such as trying to forecast customer interest.
Some past customers have stopped coming, a byproduct of the nation’s sluggish economy, especially in the Great Lakes region where the company has four amusement parks.
Attendance at Cedar Point hit 3.6 million in 1994, but the numbers have declined each year, falling to 3 million this year. Mr. Kinzel maintained the firm is “recession resistant,” but said other factors have contributed to slowed attendance.
“I think a lot of it has been the economy, but certainly there’s the advent of PlayStation and things like that,” he said. “Our biggest comment from our surveys when we ask people why they haven’t made it to the park this year, is that they just don’t have time or it’s the hassle of it.”
Different pricing strategies have been tried to help lure people from Michigan, including reduced prices for residents of that state. Two years ago, the firm dropped gate prices $5 and cut some park food and drink prices. The moves didn’t work.
For now, the company plans to increase prices slightly at parks with new attractions and to hold prices steady at the others. Still, it raised Cedar Point ticket prices by $1 in August.
Also, in the last 10 years, the firm has been spending more on its hotels, boosting out-of-park revenues from $30 million to $100 million, much of that from just outside Cedar Point in Sandusky, Mr. Kinzel said.
Scott Hamann, an analyst with KeyBanc Capital Markets in Cleveland, said increased revenue per customer will be the big story for Cedar Fair. The company, he said, is poised to generate more income as it takes Paramount ideas and puts them into Cedar Fair parks and vice versa. Plus, it is expanding its Halloween weekends to the Paramount parks, he added.
The company projects attendance at Cedar Point to be 3 million to 3.2 million for each of the next four years, so to increase hotel revenues nearby, it needs to emphasize minivacations, Mr. Kinzel said.
One way to raise cash is to switch the corporate structure from a limited partnership that pays quarterly dividends to a privately owned concern that pays no such distributions.
Cedar Fair said $80 million to $90 million annually is needed for capital expenditures, but with an extra $100 million, Mr. Kinzel said, he could build a hotel in Toronto, replace another at Cedar Point, and expand the campground at Kings Dominion.
The company weighed financial options a year ago, including cutting its distribution. But it decided against that, Mr. Kinzel said.
Two months ago, it decided to close Geauga Lake’s amusement park and have only a water park there. The company paid $144 million for the park in 2003 and invested an additional $30 million in it. But attendance sagged below 1 million this year from nearly 3 million annually before Cedar Fair’s ownership.
The rides at the suburban Cleveland park will be moved to other Cedar Fair parks, at a cost of less than half that of building new ones. One coaster already is at Kings Island, another will go to Dorney Park near Allentown, Pa., a third to Kings Dominion, and a fourth to Michigan’s Adventure near Grand Rapids.
Seven children’s rides will be moved from Geauga Lake to Cedar Point, and three wooden roller coasters will be sold or removed.
Rather than move a coaster to Canada’s Wonderland, Cedar Fair will spend $21 million to build Behemoth, a record-breaking roller coaster, at the former Paramount Park.
The Toronto park was a huge surprise of the Paramount purchase in that it has few competitors, and nearly 70 percent of Canada’s population lives in Ontario. “We continue to get calls today from people wanting to buy that property, but we’re looking at looking at ways to make it pay off,” Mr. Kinzel said.
If the company sells a park anytime soon, the likely candidate is Great America in California. The city of Santa Clara wants the park’s parking lot site for a new stadium for the San Francisco 49ers football team.Alright folk, you've heard it straight from the Horse's mouth. Kinzel says to expect Cedar Fair in prime condition within the next 5 years, but to expect the park to maintain its 3 million attendance for the next 4 years. He also continues to point a lot of the blame on things such as the Play Station for the decrease in seasonal attendance.