Saturday, December 16, 2017

Regional Theme Park Industry 101, Part 2: How?

In Part One, we detailed what the regional theme park industry was and how it got started. In Part Two, we look at the development of the business to the present day to see how companies evolved, grew, and shrunk.

By the 1990s, regional park consolidation had created four significant players; Time Warner's Six Flags, Paramount Parks, Anheuser Busch, and lowly Cedar Fair. Six Flags was bought and sold multiple times at this point, being a subsidiary of Bally's and Penn Central at various points. Time Warner saw the potential in using the theme park chain to promote their IPs and made a steal of the chain, acquiring it in full by 1993 and investing heavily into the facilities with real success. Paramount had wound up with Taft Broadcasting's parks after the company was the target of a hostile takeover from, what else, a guy with no actual entertainment experience but plenty in the realm of convenience stores (he ran it into the ground and lost $560 million in the process). Paramount similarly saw the same opportunity Walt had to promote offerings in the 1950s drop into their laps across a multitude of markets. AB hadn't really planned on running a theme park empire, but when HBJ Inc. sold them the SeaWorld chain in 1989, they had some of the most beloved facilities in the country. And then there was Cedar Fair: they were the little guys. Dick Kinzel was a mere popcorn salesman when he started there in the 1970s, and he rose through the ranks to CEO, masterminding the takeovers of Worlds of Fun (70s themer) and Dorney Park (traditional amusement park).

There were still, however, a number of smaller operators throughout the United States. While most major markets had been consumed, a number of smaller or developing markets were still run outside the chains: Denver, Buffalo, Seattle, and Boston, just to name a few. As the 80s and 90s progressed, real estate development had driven the cost of real estate in these markets higher, while skilled unionized labor to build the parks had equally kept creeping up. There were no great changes to make acquisition and construction more efficient than it had been in the 50s; there still aren't any either. New construction was largely impractical, and when it was being attempted, was failing even harder than it had in the 70s. Alfa Smartparks development of Jazzland and Visionland was a total flop. Only Elitch Gardens, which had been given land by the city of Denver and a package of incentives to relocate downtown, built a "new" park, even then mostly with used rides from their prior location. There were opportunities there for someone with deep pockets.

Gary Story was a theme park lifer who wound up in charge of a small facility in Oklahoma known as Frontier City. He wasn't intended to run it forever; just long enough to get through a season before it could be sold off and dismantled for residential real estate. Instead, he managed to balloon attendance. The owners, a company called Tierco, was primarily in the oil business, but Story's unexpected success opened their minds to the potential in theme parks. Behind Story and a young Harvard Law grad named Kieran Burke, Tierco changed names to Premier Parks and decided to make a go of the thing themselves. Their strategy for expansion was bold: acquire parks, make significant upgrades to the facilities, watch money roll in. In 1995, Premier made its first big move, acquiring Funtime Parks Inc. and with it four parks with "Lake" in the name: Geauga, Compounce, Wyandot, and Darien. Not much is remembered about Funtime, but they had been birthed of ex-Cedar Point management and investors, and had brought such innovations as season pass acceptance across a chain to the US theme park industry. With Premier's purchase of Funtime, they immediately became a real player. But this was only a prelude of things to come.

In 1996 and 1997, Premier Parks spread like wildfire, assuming debt in return for purchases of Riverside Park, Marine World, Kentucky Kingdom, Great Escape, Waterworld USA, and Elitch Gardens. In three years, Premier Parks had grown into the second largest regional park operator behind only Six Flags. Burke and Story's plans had been working too - capital investment continuously resulted in double digit attendance growth. Return on investment for new attractions went from half a decade to just a single season. Looking for a park that could be a centerpiece for their growing empire, Story and Burke approached Time Warner with the possibility of taking over operations of Six Flags over Texas in 1997 and buying into its independent ownership group. At some point, the question came up: "What if we wanted the whole chain?" On April 1, 1998, David bought Goliath, and Premier Parks became the undisputed king of the regional theme park world. The expansion continued on into 2002, with the acquisition of Europe's Walibi Parks chain, Jazzland, Wild Waves in Washington, La Ronde in Montreal, Fiesta Texas, SeaWorld Ohio, and Mexico City's Reino Aventura.

Capital expenditure came hot and heavy at their new parks; Geauga Lake alone was subject to well over $100 million dollars of investment overall between 1999 and 2002. And in the short term, things looked great: Geauga's attendance in 2000 was up 42% year over year. Creating debt is not necessarily an issue if one knows that they can pay it off - think of the average mortgage, for example. But repaying the loans quickly became an issue for Story and Burke, as attendance plateaued in 2001 and began to falter in 2002. By 2003, attendance chain wide was in free fall. The huge initial gains driven by the ride construction proved incapable of retaining guests. But why?

General orthodoxy in the theme park world is that Six Flags' rapid decline was the result not of poor attraction choices, but perhaps of too many and too soon. Revolutionizing the industry to create a new fleet of super parks required far too many managers, maintenance crews, and operations staff with experience, as well as too many new front line employees too quickly for the chain's human resources and recruiting departments to possibly catch up. Six Flags Great Adventure's 1999 expansion was called "The War on Lines," featuring twenty-seven new rides. Without proper staff to run or maintain them, rides like the Evolution sometimes went literally years between days of operation. Today, 14 of the 27 rides remain at the park, with most of the adult attractions having been removed and the kiddie rides being shuffled around and re-skinned multiple times.

The events at Great Adventure were not a unique occurrence: Six Flags Magic Mountain's 2001 headliner X never opened that year. Six Flags Ohio opened 4 roller coasters for the 2000 season, but found the park largely incapable of operating more than one train on their coasters at any given time while their attendance crested 2 million. Physical infrastructure also had not been upgraded to deal with the crowds: bathroom and water fountains were either not built to accommodate the throngs or outright removed as part of expansion efforts. Six Flags America to this day suffers from a lack of bathroom or food facilities in half the park as the Premier regime simply never considered it important to run plumbing back to its most popular attractions and themed areas. The volume of work done also meant much of it was unfinished at opening: one trip report on rec.roller-coaster speaking on Six Flags America's opening day stated the blacktop sidewalks caught fire due to not properly curing.

A perfect storm was brewing for Six Flags; meanwhile, Viacom was in the mood to split itself up and send a new IPO into the world (CBS Corporation). As part of the restructuring, lots of non-core assets had to get shuttled off to make way for revenue that would please the shareholders holding onto Viacom stock. Paramount's theme parks were just such a asset. The only problem for Viacom is that they were selling the asset into a buyer's market. Six Flags divested itself first of its European parks, followed by its Ohio properties in early 2004 to Cedar Fair to raise cash for debt service, taking a huge loss in the process. They were in no position whatsoever to make the acquisition of a successful park brand, and had eliminated most of the other market players during their rise. Anheuser-Busch was out there, but to call AB poorly run in 2004/2005 would be a vast understatement, and they passed. Private capital aside (Blackstone owned controlling interest in Universal Orlando meant they were busy; Apollo and Vanguard seemingly passed the opportunity up), there was just one other player available. Cedar Fair had somehow managed itself competently enough to have a reasonable debt load and a fine history of operating amusement and theme parks. Competent enough that they could borrow the $1.25 billion dollars necessary.

America's Great Recession only worsened things for Six Flags, shuttering Astroworld for a cash infusion and seeing a shareholder revolt as a result. Mark Shapiro came in to run the company on behalf of Washington Racial Slurs owner Dan Snyder, and attempted to perform a family friendly facelift on Six Flags. To fund this, Shapiro ditched many of its smaller market parks to rot (Kentucky Kingdom, New Orleans) or private capital (the properties like Darien Lake which wound up with CNL), and sought to reinforce their largest key markets with more extensively themed attractions. The gambit bore some fruit: per capita spending increased, but attendance continued to stay static or drop, with new attractions built often not meeting the expectations of the general public. Six Flags' Dark Knight indoor mouse coasters were a prime example of this - the ride's preshow elements and theming were some of the best attempted by the chain in over a decade, but the ride itself (a production model Mack mouse housed indoors) didn't meet the expectations of those waiting long periods of time.

In 2009, Six Flags filed for Chapter 11 bankruptcy. That same year, Cedar Fair announced plans after multiple years of poor stock performance to be acquired by Apollo Management. InBev had taken over in St. Louis and divested of the Busch parks to pay back the debt to Blackstone; Blackstone's intent was to spin the parks off into public offering and fill the new corporation with debt. Kennywood Corporation too, a proud family business, was consumed by foreign money as it was integrated into Parque Reunidos' Palace Entertainment arm in 2007. The period between 1997 and 2001 had become known in enthusiast circles as "The Coaster Wars"; now clearly over, it seemed that no one had really won.

Quietly during 2007, Herschend Family Entertainment began to make a series of acquisition. First was Wild Adventures in Valdosta, GA, a theme park which opened in the 1990s and never found its legs in spite of expanding quickly to have ten roller coasters and safari attraction. They also purchased two large aquariums in the Cincinnati and Philadelphia metro areas. Herschend had been steadily increasing their overall portfolio for some time, building water parks to complement their theme parks in Branson and Pigeon Forge while eliminating their competition in Branson via acquisition and closure. Expansions became much more aggressive with bigger themed areas, intellectual property rights, and the kind of large roller coasters the chain had never before built. Their success was such that many of the temporary entrants in the industry sought their assistance: CNL placed many of their parks under their management during the late 2000s.

Another recent entrant to the North American market was Merlin Entertainments; in fairness, they're recent to exist. Merlin was a small time player until Blackstone acquired them in 2005 and ramped up investment, merging a number of European companies into them. LEGO's theme park division was one of these acquisitions, and Merlin began its movement into the US market first in California at the existing Legoland park, followed by the acquisition of Cypress Gardens and its rebranding to the nation's second such facility in 2011. Merlin had other ideas though beyond just building big new theme parks: expanding existing brands like The Dungeon and Madame Tussauds was certainly one, but they went back to the idea of an arcade-amusement facility hybrid experimented with since the 1970s under the LEGO branding. 12 Legoland Discovery Centers have popped up in retail areas around the US and Canada, each offering things like 4D cinemas and trackless dark rides.

The early part of the 2010s saw an economic recovery, and with it a new clarity in the theme park landscape. Cedar Fair's leadership was changed and the shareholders retained control, successfully managing to prevent Apollo from taking over. Six Flags emerged from bankruptcy with some adjusted strategies and much, much less debt. Others were on shakier foundations: SeaWorld was healthy and turning fine profits until the emergence of the film Blackfish, and began to make appeals for foreign investment that led to Chinese minority ownership in 2017. Hard Rock Park came and went. Parque Reunidos was traded between private equity firms, as were most of the CNL Lifestyle Properties.

Experimentation over the lean years had led to the return of some old ideas and the institution of some new ones. In the early 20th century, rides were frequently rethemed or added on to in order to create budget conscious new attractions annually. Six Flags' gamble with a thorough redevelopment of the Texas Giant at it's Arlington, TX park brought Rocky Mountain Coasters to the forefront of innovation in the industry, but also proved that a significant re-imagining of a ride beyond a mere name change or re-theme could seriously improve attendance and pass sales. Lodging was renovated (Hotel Breakers at Cedar Point) or constructed (Great Escape in NY, Lake Compounce in CT). Seasonal parks, starting with Herschend and Six Flags Over Texas, expanded their seasons from summer operation to many running March or April to New Years. Virtually all have also followed the "festival" blueprint of EPCOT and SeaWorld as well to increase return visitation. Dark rides have started to find their way back in with Sally's Justice League and Triotech's Iron Reef and Wonder Mountain attractions, and extended seasons may further push the need for more indoor attractions yet such as flying theaters.


In Part Three, we look at the "who" of the industry with the major and minor players, operators, owners, and more.

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