We're reasonably self-aware over on CoasterBuzz, in that while we all armchair CEO the amusement business, we're not pros. But we've also gotten a lot of things right. Leading up to Six Flags' bankruptcy in 2009, we could all see bad ideas in action. Give away the gate, try to make it up in volume and spending. Of course this never panned out.
Then whatever the company was most recently, it had mostly been doing the same thing. The former CEO admitted that they needed to reverse that trend, but the damage was so done. So what did they do? Approached Cedar Fair about a merger. There was zero upside for Cedar Fair to do this, which was already slightly leaning into the heavy discounting and pass reliance. Their growth was not outpacing inflation. But for whatever reason, they thought the merger was a great idea, and found a loophole where they didn't require a shareholder vote.
You know the rest of the story. Total meltdown, lost a ton of money. They recently sold some parks. Massive layoffs. The new leadership hasn't exactly been inspiring, and there's no concrete plan about digging their way out of this mess. But those goofy enthusiasts have, again and again, shown better judgment.
First, why would you let your gate integrity slip? Why race yourself to the bottom? These are regional businesses that have no direct competition. Even if you did attract more folks, at those lower rates, you're attracting people who are not likely to spend more in the park. They're probably not the best behaved, either, when you're essentially creating a low-cost babysitting service.
Second, amusement parks are a hospitality business. Hospitality is hard, and in this case you have to account for guest service, culinary quality, efficient operation to manage queues, and often there's a hotel business. It is, by definition, a people business. Ever wonder why the cruise industry has guest to crew ratios of 3 to 1, or even close to 2 to 1? Because pulling off a perfect experience doesn't happen without people. Take a break from cap ex and staff the company for hospitality.
Now there's a great brain drain. They've laid off hundreds of years of experience, and when it walked out the door, domain knowledge went with it. Still more left on their own accord. How do you dig your way out when the people who can do it are gone?
Cedar Fair had a solid, profitable business. They weren't killing it with gigantic margins, or exhibiting significant growth (because how can you with a finite audience?), but it was a durable business. The hubris to take on Six Flags was extraordinary, and they're forced to sell the company for parts. Meanwhile, ex-CEO Richard Zimmerman left with over $2 million in cash, another million in equity, and that's after more than $9 million in total comp the year before. If only we could all fail that well.
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