B J & R ALPINE FAMILY ENTERTAINMENT PARKS. Becker Jackson & Reed. Investment Management A DELAWARE COMPANY

Transcription

1 B J & R Becker Jackson & Reed Investment Management ALPINE FAMILY ENTERTAINMENT PARKS A DELAWARE COMPANY

2 U.S. Theme Park Revenue Is on Its Best Ride in Years America s passion for amusement parks is white-hot these days, driven by elaborate new attractions, sophisticated pricing schemes, and a desire to get out of the house but not too far from home. You would think that a business whose proposition is selling entertainment that requires disposable income would not do well just now, says SeaWorld Chief Executive Officer Jim Atchison. The reality is consumers have found great value in these kinds of experiences. Theme Park Revenue Riding High Up, up and away. That s where revenue of U.S.-based theme parks has been heading for the past three years. Indeed, theme park revenue has grown by 3.6% in each of the past two years. And that s after a 4.5% jump in Those numbers may not sound that impressive, but the trend represents something spectacular. It means that million visitors 4.6 million more than in 2013 felt comfortable enough financially to fork out the big bucks these parks command. People don t do that when money is tight, or when they re jobless or scared about the state of the economy. And this year, U.S. theme parks are expected to reach a record $15.4 billion, a 3.8% gain from 2014, according to market research firm, IBISWorld. Cedar Fair announces record revenues through Labor Day Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that preliminary net revenues through Monday, September 7, 2015, increased 7% to a record $1.02 billion. As such, the Company expects 2015 to be its sixth consecutive year of record results. Thrill is back and so are crowds at amusement parks Crowds increased at many of the nation's parks in 2014, with some seeing record attendance. Profits were up as families sought out fun close to home and began traveling again. Better weather helped, too. Those within the amusement industry are optimistic this year will be even better and think lower gasoline prices might even help them out by enticing families to spend their vacation time near home. 1

3 Theme parks offer big draw, big prices Attendance at the 20 largest theme and amusement parks in the United States far exceeds 100 million people per year, according to the Themed Entertainment Association. (Major League Baseball's 30 teams drew a combined 73 million fans). Overall, parks in the U.S. draw over 300 million people a year and generate $18 billion in revenue, according to the International Association of Amusement Parks and Attractions. Industry Generates More Than $300 Billion Annually and Supports 2.9 Million Jobs for U.S. Economy The attractions industry is a significant driver of the United States economy. Based on research sponsored by the International Association of Amusement Parks and Attractions Foundation and conducted by Tourism Economics, an Oxford Economics company. Attractions generate a ripple effect of economic activity, including direct industry sales ($34 billion), capital expenditures ($5 billion), and the ancillary spending of out-of-town visitors at local establishments outside the attraction, such as hotels, restaurants, and retailers ($52 billion). A full measurement of the impact of the attractions industry also includes indirect and induced impacts ($127 billion) through the supply chain and the spending of attractions generated incomes. The attractions industry grew at nearly twice the rate of the overall U.S. economy from 2004 to In 2004, the attractions industry generated a total economic impact of $146 billion. Over seven years, the impact of attractions in the US grew 50% with an average growth rate of 6% per annum. The attractions industry's nationwide economic impact of over $300 billion in included $118 billion in direct impacts and $154 billion in indirect and induced impacts. This total economic impact of $219 billion included nearly $94 billion in total labor income, supporting more than 2.3 million total jobs. Amusement and theme parks (including water parks) had the largest impact, generating $156 billion in total economic activity, including $40 billion in total labor income and 1.9 million total jobs. The Summer Of "FUN" Continues At Cedar Fair; Company Announces Record Revenues Through Labor Day Cedar Fair Entertainment Company (NYSE:FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that preliminary net revenues through Monday, September 7, 2015, increased 7% to a record $1.02 billion. As such, the Company expects 2015 to be its sixth consecutive year of record results. The Company stated year-to-date net revenues through September 7, 2015, increased 7%, or $69 million, to $1.02 billion compared with $950 million a year ago. This year-over-year growth was driven by a 5%, or 1.0 million-visit, increase in attendance to 20.3 million visits; a 2%, or $0.73, increase in average in-park guest per capita spending to $46.21; and a 10%, or $10 million, increase in out-of-park revenues. 2

4 Theme Park Business Booming Despite a sluggish economy, Americans are flocking to theme parks and spending big bucks to stand in line. America s passion for amusement parks is white-hot these days, driven by elaborate new attractions, sophisticated pricing schemes, and a desire to get out of the house but not too far from home. You would think that a business whose proposition is selling entertainment that requires disposable income would not do well just now, says SeaWorld Chief Executive Officer Jim Atchison. The reality is consumers have found great value in these kinds of experiences. The theme park business has recovered from the recession much faster than other leisure pursuits. Revenue in the $37 billion-a-year casino industry has yet to return to its 2007 peak. And the national average price of a hotel room was still below its mark four years earlier, according to Smith Travel Research. Yet theme park sales, which fell 5.5 percent, to $11.6 billion, in 2009, have come roaring back. Revenue for U.S. parks is expected to break another record this year, according to market researcher IBISWorld, and climb an additional 5.4 percent annually through Theme park economy on a great ride The economy has been a roller coaster. Up and down, up and down-unless you've been investing in the theme park business, which has spent most of the year going up. Most of these companies have been reporting record numbers. Disney (DIS)'s parks business was its fastest-growing segment last quarter, as attendance rose 3 percent and spending per customer rose 7 percent. "I think this will be a record for Disney on the theme park performance," Matthew Harrigan at Wunderlich Securities. Six Flags has reported record revenue this year, as has Cedar Fair Entertainment. Wells Fargo Securities released a report this week, "Theme Parks: Favorable August Weather Sets Up Solid Season Finale," with an emphasis on Cedar Fair as "best positioned." Comcast buys majority stake in Universal Studios Japan for $1.5 billion Comcast Corp said it will buy a majority stake in Universal Studios Japan for $1.5 billion, its biggest investment outside the United States and part of an aggressive expansion of its theme park business globally. Universal Studios parks have become a core growth business for Comcast. In addition to further investments undertaken at its U.S. parks, the No. 1 U.S. cable company is also planning a theme park in Beijing as well as an indoor theme park in Moscow. "We will make more investments - not only Osaka but also other areas," Chief Executive Brian Roberts told a news conference. Comcast, which owns Universal Studios and Universal Theme Parks through its NBCUniversal unit, said it will buy 51 percent of USJ Co, the holding company for the theme park operator, from Goldman Sachs, Seoul-based private equity firm MBK and other owners. 3

5 Six Flags reports fifth consecutive record year Six Flags Entertainment Corporation (NYSE: SIX) announced its fifth consecutive year of record financial performance as it posted a company-high US$1.2 billion in revenue, an increase of US$66 million or 6 percent over The company generated full-year 2014 Adjusted EBITDA of $439 million, also a new record that represented an increase of $35 million or 9 percent over Fourth quarter 2014 Adjusted EBITDA improved $11 million or 30 percent to a record $46 million, generated from a $29 million or 19 percent increase in revenue. The strong revenue growth was primarily driven by a 3 percent increase in guest spending and a 15 percent increase in attendance. Full year 2014 revenue grew 6 percent to US$1.2 billion primarily due to a 7 percent increase in admissions revenue and a 3 percent increase in sales inside the parks. Total attendance for the year was 25.6 million guests. The company generated 4 percent attendance growth in the second half of 2014 and a 15 percent increase in attendance in the fourth quarter. The combined season pass and membership attendance mix increased from 48 percent in 2013 to 50 percent in Theme parks roar back to life, attendance jumps Disney parks are busting at the seams with visitors and well-positioned for what's expected to be one of the busiest summers for theme parks in years. Perhaps most important, attendance is soaring, even as Disney is raising ticket prices and dropping any semblance of discounting. Disney is leading the way in what's been a powerful rebound in the fortunes of theme parks. During the recession, visitors dropped off as consumers opted for cheaper putt-putt courses over a day at theme parks. But now, with consumer confidence on the upswing, visitors to theme parks are picking up, as well. That's not been missed by investors. Shares of all the major theme park operators -- Disney, Six Flags, Cedar Fair and Comcast -- are climbing. While the market for initial public offerings has been mixed this year, theme park operator Sea World successfully sold stock at $27 a share in April. Shares are up more than 30% since. Theme Park Market The theme park industry has recovered from the recessionary phase at a much faster rate in comparison to various other leisure activities. The industry recorded high visitor attendance in the last two years, drawn by elaborate number of new attractions and pricing strategies to match up with a variety of budgets. Today major operators in theme park industry continue to upgrade their parks as 2014 shaped into another record breaking year. 4

6 Amusement park attendance is on the rise around the world. There were 223 million visits to the top 25 theme and amusement parks worldwide, up 4.1% from 2013, according to the Themed Entertainment Association and AECOM global attractions attendance report. The index ranks the 25 most-visited amusement and theme parks around the world, based on attendance figures compiled by AECOM. Disney dominated the list. Disney parks in the United States, Europe and Asia made up nine of the top 10 parks and held 11 of the top 25 spots. Universal Studios' theme parks came in second place, with one park in the top 10 list and four in the top 25 list. SeaWorld held one spot in the top 25. Visits to parks around the world keep increasing, and not just at the top 25 parks: There were million visits to the top 20 Asian theme/amusement parks last year, up 4.9% from There were 138 million visits to the top 20 North American theme/amusement parks last year, up 2.2% from There were 59.5 million visits to parks in Europe, the Middle East and Africa last year, up 3% from the year before. Theme park attendance up North American theme parks last year enjoyed a marked growth in attendance, in some cases surpassing pre-recession numbers. According to the nonprofit Themed Entertainment Association and Aecom, which each year releases a report that tracks and analyzes attendance figures not normally divulged by the parks, states that overall gains were notable, the report notes, because they represented the fourth consecutive year of growth since the worst of the recession, evidence of the resilience of the theme park industry. Universal Studios in Florida was the star performer in terms of growth, posting a 14 percent gain in attendance. Worldwide, theme park attendance jumped 5.4 percent, while in North America, the growth rate was nearly 3 percent, according to the Aecom report. Parks in Asia performed the best, with 7.4 percent growth, the report said. My view of the industry is, barring any economic disruption, we ll continue to see growth in attendance over the long term, said John Robinett, senior vice president for economics for Aecom. Theme Parks Market to Reach US$31.8 Billion by 2017 Global Industry Analysts Inc. (GIA) announces the release of a comprehensive report on Theme Parks markets. The market for Theme Parks is projected to reach US$31.8 billion by the year Growth will be primarily driven by increased consumer per capita spending on entertainment and leisure platforms, and growing base of middle class households, increasing disposable incomes and waxing popularity of mass entertainment. 5

7 Major Theme Parks Are Going Indoors Anchored by Shopping Malls, Hotels, Waterparks & Casinos; KidZania is fastest-growing in edutainment. By the International Society of Hospitality Consultants When you think about Six Flags, Sea World or Cedar Fair, it is typically an outdoor experience during summer when kids are out of school. But now, major theme parks and amusement parks are going indoors --- where they can attract visitors 365 days a year and not worry about poor weather wiping out profits. What s Causing the Surge in New Development? During the global recession ( ), many consumers in the USA faced loss of jobs, loss of homes due to a mortgage crisis and lower budgets to live on --- thus a reduction in travel. It seemed that a visit to a theme park or an overnight stay in a hotel was a luxury that many could not afford. Hotels were foreclosed, also due to a mortgage mess, and sold at bargain prices to new owners with private funds. New construction of hotels and tourist attractions dwindled to near zero in the USA, while any new construction was happening outside the USA. Slowly, money for expansion projects loosened up. Gradually, the USA and world economy started to improve. Indoor entertainment centers attached themselves to shopping malls, hotels, waterparks and casinos --- to guarantee visitor demand and to help bolster shopping malls as mixed-use destination developments. Indoor entertainment centers shifted their focus to a combination of entertainment and education --- now called edutainment. Legoland Discovery Centers Legoland Discovery Centers is an indoor edutainment chain operated by Merlin Entertainments, a division of the Blackstone Group, which also owns SeaWorld Parks & Entertainment and Hilton Hotels Worldwide. The centers, which feature models inspired by the Lego building block toys, are smaller versions of their Legoland theme parks in Carlsbad CA and Cypress Gardens FL. A typical Legoland Discovery Center is 30,000 sf to 35,000 sf in size. In one year, a single center can host from 400,000 to 600,000 visitors. Averaged daily, a single center can host from 1,100 to 1,650 visitors. 6