Theme Park Stocks a Mixed Bag as Attendance Falls but Spending Rises

By Liz Moyer

Investing.com -- Amusement park stocks were supposed to get a big boost this year from an expected surge in visitors.

That theory hasn’t come to pass, however. Attendance is down, according to many park operators. The good news: The people who are visiting are spending more money on games, food and beverages.

Still, it’s a bit of a mixed bag. Six Flags Entertainment New (NYSE:SIX) shares are up 3.5% on Monday, recovering from a big drop last week after disappointing earnings. But they’re still down 41% for the year. 

Six Flags had a strategy to improve the customer experience by targeting a customer that was willing to pay more. It did work. In-park spending was up 18% in the recent quarter, but attendance dropped too much, down 35% from the same period in 2019. The company now plans to introduce a new dining plan and activities to draw families to boost attendance.

KeyBanc analyst Brett Andress recently cut the rating on Six Flags to sector weight from overweight, saying investors don’t have abundant patience to wait for a turnaround.

Other analysts have slashed their price targets in recent days, including Deutsche Bank (ETR:DBKGn) to $36 from $56 and Truist to $20 from $32. Six Flag’s shares traded around $24.76 on Monday.

Inflation could be one reason for the drop off in attendance, even during peak summer hours. Consumers have been judicious about spending on discretionary items with rising food and fuel costs, though they have been more willing to spend on experiences than goods, at least according to retailers and travel companies. It’s also been a summer of scorching hot weather across much of the country, which could have kept crowds away.

Cedar Fair LP (NYSE:FUN)’s second quarter revenue was up 17% from the same period in 2019, though attendance was down 8%. Spending per person inside the parks rose 26% from 2019 levels thanks to higher prices. 

Cedar Fair, which operates Knott’s Berry Farm in California, Dorney Park in Pennsylvania, Cedar Point in Ohio, Kings Dominion in Virginia and other parks, said season pass sales hit a record 3.2 million this year, and in-park spending per visitor on dining and beverages is also at records.

SeaWorld Entertainment Inc (NYSE:SEAS)’s second quarter revenue rose 24% from the comparable quarter in 2019, and attendance dipped 3%. In-park spending per visitor was up 32%. The company, which operates the SeaWorld, Busch Gardens and Sesame Place parks, said it was working to offset unusually high inflationary pressures.

Deutsche Bank analyst Chris Woronka last month called SeaWorld a short-term buy idea, believing it is benefitting from attendance caps at Disney World’s parks in Orlando that are sending visitors to its park in the area instead.

SeaWorld shares were flat on Monday and are down 16% so far this year. Cedar Fair shares were down 0.4% on Monday and are down 11% this year.