Will SeaWorld's Bet on New Killer Whale Habitats Pay Off?

SeaWorld Entertainment, (NYSE: SEAS  ) on Friday announced a new project to expand and upgrade the killer whale habitats at its parks in San Diego, Orlando, and San Antonio. The company also said it will provide $10 million in matching funds to research groups studying wild orca health and ecosystems.

The first new Blue World orca setting, slated to begin construction next year in San Diego, will give the park's killer whales a 1.5-acre home that's up to 15 feet deeper than their existing tank. The new setup will also give the whales a fast current to swim against, similar to what they would encounter in the open ocean. Viewing areas will offer visitors up-close and bird's-eye views of the orcas.

Artist's rendering of planned Blue World orca habitat. SeaWorld Entertainment.

But will the Blue World project improve the public's view of SeaWorld after the documentary film "Blackfish" criticized the company's handling of its orcas? Or would it be better business for the theme park chain to just cut its losses and stop displaying killer whales altogether?

Choppy waters for SeaWorld

There's no doubt that SeaWorld's image and business have taken a hit since the movie's release last year. Last month, Southwest Airlines (NYSE: LUV  ) and SeaWorld announced the end of their 26-year partnership, citing "shifting priorities." A petition by animal rights activists to Southwest to end the partnership wasn't discussed in the statement, but it's quite possible that one of Southwest's priorities was to repaint its three SeaWorld-themed planes and distance itself from SeaWorld's ongoing image problem.

On Aug. 14, Bloomberg reported that Omega Advisors had sold its stake in the company, worth $31 million. Earlier in the week, the company announced Q2 earnings that came in below analysts' expectations, which prompted a swift nosedive in share price and a credit-rating downgrade by Standard & Poor's, which cited SeaWorld's "reputational risk" as one of its reasons.

Other parks doing well without whales

With that kind of financial news on top of falling park attendance over the past year and a half and growing protests by animal welfare groups, it makes sense that SeaWorld would make a splashy move designed to renew interest in its parks and soften its image.

But is Sea World making the right call by doubling down on its most controversial attraction? Of the company's 12 parks, only three feature killer whale shows. And the killer whale issue appears to be dragging the company down, even though SeaWorld's other parks have strong reputations.

Discovery Cove, SeaWorld's snorkeling and nature park in Orlando, landed at No. 1 on TripAdvisor's Traveler's Choice 2014 lists of the Top 10 US and global amusement parks. Busch Gardens in Tampa also made the U.S. list. The company's Aquatica Orlando made TripAdvisor's national and global top 10 waterparks list this year, and Water Country USA park in Williamsburg, Va., made the U.S. top 10 list, too. None of those parks feature killer whales. Meanwhile, of the flagship parks, only SeaWorld Orlando made the U.S. top 10, and none made the international list.

It may be that SeaWorld would do better overall without the expenses and image-management issues associated with killer whale shows. The concerns raised by "Blackfish" and animal rights groups may be forgotten or forgiven once the public sees the completed Blue World displays. Or the orca problems the company's dealing with today could mark a sea change in the way people think about whales in captivity, something that the new habitats might not overcome. SeaWorld needs to navigate carefully here to avoid putting its entire fleet of parks at risk.

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  • Report this Comment On August 16, 2014, at 10:48 PM, BriFool wrote:

    Having seen Killer Whales in their natural environment, the vastness of the ocean off Victoria, BC, this is a joke. There is no way Sea World can build a tank big enough for these animals, let them go! Don't own this stock, don't own mutual funds with this stock. Their stock can't go low enough. I am in no way a PITA member or animal rights person, this is just common sense.

  • Report this Comment On August 22, 2014, at 10:59 PM, Runrig wrote:

    I've never seen Orcas in their natural environment. But I'm an annual passholder at Sea World. And I bought right after the fall. Woo Hoo!

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