The Motley Fool Previous Page


Summer Has Sprung

http://www.fool.com/investing/high-growth/2008/05/06/summer-has-sprung.aspx

Rick Aristotle Munarriz
May 6, 2008

It may not feel like summer, but don't tell that to the stand-alone attraction operators that are starting to poke their heads out this week.

Regional park operator Cedar Fair (NYSE: FUN  ) and family resort operator Great Wolf (Nasdaq: WOLF  ) reported their quarterly numbers Tuesday morning. Disney (NYSE: DIS  ) follows later Tuesday, and Six Flags (NYSE: SIX  ) will report Thursday.

If the early word out of Great Wolf and Cedar Fair is any indication, the industry will be spared the brunt of the struggles that, many fear, will hit other discretionary-income magnets like retailers and restaurants.

Hungry like Great Wolf
Great Wolf doesn't just build family-friendly lodges; it builds massive indoor water parks within the resorts. They're not cheap. The average daily rate charged for overnight guests in the first quarter was a whopping $293 per room, and that's before another $150 per family for food, spa treatments, arcade games, and other diversions there.

If you think this kind of big-ticket model would frighten away penny-pinching guests, the company's busy check-in counter argues otherwise. Great Wolf's revenue climbed 32% to $64.2 million during the quarter. Expansion played a large part, but total revenue per available room -- the best metric by which to judge a hospitality company like Great Wolf because it factors in occupancy levels, room rates, and additional purchases -- rose a healthy 6% during the quarter.

The company posted a loss of $0.08 a share, slightly more than the $0.07-a- share loss from a year ago, but Great Wolf's adjusted profit actually improved to $0.04 a share. On that adjusted basis, Wall Street was looking for a $0.04-a-share loss on just $61.3 million in revenue.

Great Wolf benefited from having Easter fall in March, providing more of the school break holiday time that is a gold mine for it. Easter fell in April last year, as it will over the next couple of years.

Comparing an Easterless 2008 with last year's showing would normally be a bad omen for the second quarter, but so far, bookings are 7% ahead of where they were a year ago. In other words, Great Wolf's impressive streak of eight consecutive quarters of year-over-year gains in revenue per available room is likely to continue.

Because Great Wolf draws the majority of its guests from a 180-mile radius, it has been mostly immune to the high gas prices that are eating into summer plans for cross-country treks.  

Investors need to be realistic. Despite the strong start to 2008, the company still expects to post an adjusted loss of $0.24 to $0.39 a share for the year. However, as long as the patrons keep coming, Great Wolf's howls will be those of laughter.

All is Cedar Fair in love and coasters
There is less to take away from Cedar Fair's report, if only because most of its seasonal parks are shuttered during the quarter. Historically, Cedar Fair has generated just 5% of its revenue during the first three months of the year.

This doesn't mean that we shouldn't cheer about the performance. Revenue rose 35% to $40.4 million during the quarter, with the early Easter prompting the chain to open some of its warmer-climate parks earlier than usual. The loss per unit of $0.81 is better than both the $1.02 loss it posted a year ago and the $1.05 loss that Wall Street had expected. Analysts also underestimated Cedar Fair's top-line potential, which makes one wonder if they're too lazy to look up operating calendars in modeling their projections.

Early season pass sales are strong, making it look like cash-strapped locals are going to take their minds off the economic ups and downs by taking part in coaster up and downs.

Let's have some fun
There is a lot riding on this season. This will be the third season for CEO Mark Shapiro in his turnaround efforts at Six Flags. This will also be the third summer that Cedar Fair has to work its magic on the Paramount Parks properties it acquired from CBS (NYSE: CBS  ) . Meanwhile, Great Wolf's stock has been stuck in the single digits all year long, despite its consistent popularity.

The chains are opening new attractions and ramping up the entertainment value. They're also taking bolder steps in cyberspace. Six Flags is following Disney's lead by allowing guests to preview their in