Regional amusement park operators aren't typically fodder for investors eyeing growth stocks.
Six Flags (NYSE: SIX ) filed for bankruptcy reorganization early in its 2009 season. Cedar Fair (NYSE: FUN ) was better known for its chunky yields, but those distributions have come way down over the past two years.
Even at the national level, when Disney (NYSE: DIS ) has a healthy quarter, it usually has little to do with the meandering growth at its iconic theme parks.
However, Six Flags and Cedar Fair have shown signs of life during the typically lamentable holiday season. Six Flags reported yesterday that adjusted revenue during the quarter spiked 18% to $121.8 million. This would normally seem like a fluke, but Cedar Fair's top line also climbed a hearty 23% during the same three months. Attendance at Six Flags and Cedar Fair jumped 19% and 20%, respectively.
What's going on here? Most of the country's amusement parks aren't open year-round. They may open during weekends in October for Halloween-related haunts, and in late December for Christmas festivities, but these gated attractions live and die by the summer season when kids are out of school.
The spike in attendance indicates that there's a demand for ride-based entertainment. More importantly, the ability is there to pay for it.
Indoor waterpark operator Great Wolf Resorts (Nasdaq: WOLF ) confirms the trend with this morning's quarterly report. The company behind rustic lodges attached to massive indoor watery playgrounds posted a 10.8% surge in same store revenue per available room. Great Wolf got there through the welcome combination of an uptick in occupancy levels and overnight guests paying higher rates.
We didn't see this kind of growth during the telltale summer season in 2010, though most operators inched forward. Will it carry over into 2011's pivotal summer?
We may have to check our optimism at the door. Cedar Fair only sees revenue and adjusted EBITDA growing at a 2% to 3% annualized clip over the next three to five years. Tensions in the Middle East have sent oil prices higher, a troublesome trend to keep an eye on as we get closer to the summer road trip season.
I'm more bullish.
I already saw signs of life in 2010. Indiana's Holiday World came through with a 14% uptick in attendance. Universal Orlando -- jointly owned by Blackstone (NYSE: BX ) and General Electric's (NYSE: GE ) NBC Universal -- reported a 20% surge in turnstile clicks.
These may have been isolated cases in 2010. Holiday World has defiantly bucked the recessionary malaise for years. Universal Orlando got a boost from its magnetic Harry Potter attraction. I think the 2010 exceptions will be the rule in 2011.
Six Flags is already in better shape than it was a year ago. As a result of its Chapter 11 filing, Six Flags has whittled its net debt down from $2.2 billion to less than $0.8 billion over the past year. The chains that have prudently shaved their operating costs during the downturn will be back with thicker than expected margins as long as the cuts don't come at the expense of the guest experience.
It's going to be a good year for the industry. Seeing Six Flags shares nearly double off their summertime lows tell me that I'm not the only one feeling that way.
Would you buy into the amusement park industry ahead of the 2011 season? Share your thoughts in the comment box below.
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