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Cedar Fair (NYSE:FUN)
Q2 2018 Earnings Conference Call
Aug. 1, 2018 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Cedar Fair's second-quarter 2018 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Stacy Frole, vice president of investor relations.

Please go ahead, ma'am.

Stacy Frole -- Vice President of Investor Relations

Thank you, Anna. Good morning, and welcome to our second-quarter earnings conference call. Earlier today, we issued our 2018 second-quarter earnings release. A copy of that release can be obtained on our website at www.cedarfair.com under the Investors tab or by contacting our investor relations officers at (419) 627-2233.

On the call this morning are Richard Zimmerman, our president and chief executive officer, and Brian Witherow, our executive vice president and chief financial officer. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. For a more detailed discussion of these risks, you can refer to filings made by the company with the SEC.

In addition, in accordance with Regulation G, non-GAAP financial measures used on the conference call today, are required to be reconciled to the most directly comparable GAAP measures. During today's call, we'll make reference to adjusted EBITDA as defined in our earnings release. The required reconciliation of adjusted EBITDA is in the earnings release and is also available to investors on our website via the conference call access page. In compliance with the SEC's Regulation FD, this webcast is being made available to the media and the general public, as well as analysts and investors.

Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Now I would like to turn the call over to Richard Zimmerman. Richard?

Richard Zimmerman -- President and Chief Executive Officer

Thank you, Stacy, and good morning, everyone. On today's call, we will provide context for our second-quarter results, update revenue trends through this past weekend, and provide perspective on our expectations for the balance of the year. As you read in our earnings release this morning, the first half of 2018 has been a challenge on several levels. While our only year-round park, Knott's Berry Farm, is off to an outstanding start and on pace for a record year, Kings Island, our park in Cincinnati, has gotten off to a very slow start and has struggled to match last year's record performance, offsetting the gain generated by Knott's.

Meanwhile, the performance at our other seasonal parks has been mixed, with disruptive weather patterns throughout much of first half of the year making it difficult to build any sustained momentum in attendance. The impact of the attendance shortfalls has been compounded by anticipated labor cost pressures, although our parks have done an excellent job of minimizing these as much as possible. While results through this past weekend have not met expectations, we remain confident in the resiliency of our business model. Our annual revenues remain strong, and we continue to generate a significant amount of free cash flow, which funds our tax-advantaged distribution, currently sitting at more than 6% yield.

Before I turn the call over to Brian to discuss second-quarter results in more detail, I want to directly address the question on everybody's mind. Our consumer trend's changing. Each day that our parks are open, we compete for the consumer's entertainment dollar, as well as for their discretionary free time. We hang our hats on offering guests an extraordinary experience.

That is our overarching strategy and it has withstood the test of time by producing solid growth over the long term. Although the first half of the year has been challenging, we have seen nothing to suggest wholesale changes in our guests' attitudes toward the unique entertainment we provide. The guest response to our new rides and attractions has been very positive. Guests have increased their spending inside our parks, and the number of season pass holders renewing their passes have again increased.

We also look at the strength in our long lead indicators, such as group bookings and resort reservations, along with our award-winning Halloween attractions and new WinterFest celebrations, as positive indicators of our ability to have a strong finish to 2018. And as we saw this past weekend, when summer weather is normal, attendance levels are in line with expectations, giving us confidence in our long-term strategy and the investments we have made to support it. Given the variable impact that weather has on our outdoor seasonal business, discerning involving consumer trends is difficult without a continued focus on gathering consumer information. With that in mind, we've undertaken a number of initiatives to deepen our understanding of what our guests want to see in our park, including our brand-positioning work, the ongoing evolution of our consumer insight function, employing increased utilization of focus groups and guest surveys, and the development of new consumer touch points and distribution channels.

Based on the information gleaned from this research and, in particular, from the brand-positioning work, we have significantly enhanced the guest experience at our parks through investments in new rides and attractions, the expansion of multiweek special events, the introduction of executive chefs and first-class catering facilities, upgrades to our resort properties, and general infrastructure improvements. And our guests like what we have done. We believe these strategic investments, combined with future initiatives, will provide meaningful economic returns for many years to come. For example, you've heard us talk about our brand-revitalization efforts, specifically at Knott's Berry Farm, where we updated the Timber Mountain Log Ride and the Calico Mine Ride, expanded the Soak City waterpark in Camp Snoopy children's area, and built a world-class rollercoaster in HangTime.

In combination with these transformational capital investments, we introduced Seasons of FUN where we strategically introduced events and programming to create fresh excitement and, therefore, additional urgency to visit the park all year long. And given the Knott's results year to date, it's working. Offering more programs and attractions was part of a multiyear strategy that revitalized the Knott's brand and turned the park into the place to be for fun year-round in the Southern California market. I'm pleased to report that in 2018, Knott's is on pace to have its best year ever, driven by record season pass sales, attendance, and per capita spending.

We are also implementing multiyear strategies at our other seasonal amusement parks to enhance their brands and support new reasons for the consumer to visit. At Cedar Point, for example, the recent investments in our resort accommodations, including the renovation and expansion of Hotel Breakers and Cedar Point Express Hotel, along with the expansion of Lighthouse Point with new luxury cabins and RV sites, are the largest contributors to our out-of-park revenue growth, currently on track for a record year in 2018. Our investment in an outdoor amateur sports facility in Cedar Point, a new destination marketing campaign, and the activation of our mile-long beach with an expanded boardwalk are also attracting new customers to Cedar Point, Cedar Point shores and our resort accommodations. Steel Vengeance, a record-breaking hyper-hybrid rollercoaster, is quickly becoming recognized as one of the best rollercoasters in the world, leading to higher sales of our premium products, such as Fast Lane, and driving increased guest spending inside the park.

As our slogan says, and we truly believe, Cedar Point is a place like no other. We are confident in the investments we've made thus far, as well as the investments we will soon be announcing, and that they are transforming this park into more than a place to ride rides, but rather a unique destination for guests of all ages. At this point, I will turn the call over to Brian to discuss second-quarter financials and results through this past weekend in more detail, before I discuss our outlook for the remainder of 2018. Brian?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Thanks, Richard, and good morning. Before I begin, I want to caution you that it's always difficult to extrapolate partial season performance into full-year results. As of this past Sunday, July 29, more than 40% of our forecasted attendance and some of our most profitable operating days are still to come. First, I would like to briefly discuss our results for the second quarter before moving on to more current revenue and attendance trends.

Net revenues for the second quarter ended June 24, 2018, totaled $380 million, which is down $12 million, or 3%, when compared with second quarter of 2017. The decrease in net revenues for the quarter was the direct result of a 5%, or 363,000-visit, decrease in attendance. Somewhat offsetting the attendance decline was a 1% increase in average in-park guest per capita spending and a 4%, or $2 million, increase in out-of-park revenues. As Richard said earlier, Knott's Berry Farm's solid first-quarter performance has continued into the second quarter, with the park on track for another record performance in 2018.

Unfortunately, Knott's strong performance was not enough to offset lower-than-expected attendance figures at our seasonal amusement parks. While the attendance declines are across most of the seasonal parks, we have not identified any negative long-term consumer trends as there have also been pockets of solid demand throughout the quarter. As mentioned earlier, we have a number of initiatives under way to further deepen our understanding of the current state of consumer trends and potential indicators of a change in long-term trends. We believe the large contributors to our attendance declines in the second quarter of 2018 were results of unfavorable weather patterns in the Mid-Atlantic region, which included record rainfall and flooding this spring, lower season pass sales at Kings Island, and regulatory and construction delays on a new coaster at California's Great America, which added pressure on season pass sales and daily attendance during the second quarter.

At the end of the quarter, our deferred-revenue balance totaled $211 million, representing an increase of $18 million from the second quarter of 2017. The 9% year-over-year increase in deferred revenues is largely attributable to an 8% increase in sales of season passes and all-season products, and to a lesser extent, room night deposits at our resort properties. Virtually, all of this deferred revenue will be fully recognized in the second half of the year. With regards to average in-park per capita spending, we saw pure in-park guest spending increase 2% in the second quarter.

The largest increase was in our food and beverage category followed by increases in spending on premium products and merchandise. The strength in food and beverage is largely attributable to the continued growth of our all-season dining and beverage programs. The increase in pure in-park spend was partially offset by 1% decrease in admissions revenue per capita, which is primarily due to a higher season pass attendance mix, the expansion of our free Pre-K season pass program to three more parks this year and the recognition of season pass revenue over a longer period of time at Kings Dominion, as it remains open in November, December this year for its new WinterFest celebration. Admissions per capita.

Our non-season pass sales in the second quarter increased 4% compared with the second quarter in 2017, giving us confidence in our pricing structure and our ability to continue to strategically manage to a better net yield at the front gate. Moving on to the cost front. Operating costs and expenses for the second quarter were up $10 million, or 4%, to $256 million, which is in line with our expectations. The increase in cost and expenses is largely the result of higher labor cost due to market and minimum wage rate increases, as well as higher operating expenses attributable to operating supplies for Park operations, personnel-related costs, including associated housing.

I want to show you that our team remains highly focused on managing operating costs as we pursue our long-term strategy. A disciplined approach to expense and capital investment management is a core initiative to the long-term success of the business. It's difficult to make material adjustments to operating cost in the middle of the year without significantly impacting the guest experience as of our calendars, including operating hours, have already been established. We also don't want to overreact to short-term fluctuations that may impact our long-term success.

We've identified opportunities where we may take advantage of additional cost savings in the future whether by adjusting the operating calendar based on demand, investing in technology to more effectively and efficiently manage the scheduling of our 45,000 seasonal employees, or by eliminating costs related to rising attractions that have run their course and are no longer as popular with our guests. All of these things are being reviewed and discussed at great lengths as we work to build our 2019 park-level business plans. Meanwhile, adjusted EBITDA, which we believe is a meaningful measure of park-level operating results, totaled $127 million for the second quarter of 2018, down $23 million when compared with the same period a year ago. This is the direct results of the attendance shortfalls in the second quarter, combined with the anticipated increases in operating costs and expenses.

Turning our attention to results through this past Sunday, July 29. Based on preliminary results, net revenues through the first seven months of the year were down 2%, or approximately $15 million, compared with the same period a year ago. This decrease was due to a 3%, or 480,000-visit, decrease in attendance to 14.6 million guests. During the same period, average in-park guest per capita spending increased 1% and out-of-park revenues were up 4%, or $3 million, compared with the similar period last year.

As Richard mentioned earlier, 2018 has been a challenging year for us thus far. While we had anticipated a positive shift in momentum coming out of second quarter, disruptive weather patterns in July across the country have made it difficult for our parks to gain meaningful momentum through the end of July. However, on the days with normal seasonal weather patterns, our parks are reporting a nice lift in attendance, coupled with increased guest spending. This gives us confidence that our long-term strategy is working and the fundamentals of our business model remain strong.

Given where we are in the operating season, it will be challenging to fully recover the year-to-date attendance shortfalls, but it is not impossible. As I mentioned earlier, we still have more than 40% of our forecasted full-year attendance ahead of us, including some of the most profitable operating days. Our very popular Halloween events and the continued expansion of our WinterFest celebration to a fifth park, Kings Dominion. What this means moving forward is that our long strategic plan is no longer dependent on any one quarter or any one year.

We will continue to monitor trends and make adjustments where we deem appropriate, but as we've said in the past, if it rains on any given Saturday you don't change your strategy on Monday. Now let me shift focus to our balance sheet for a moment. At the end of the second quarter, we had $60 million in cash on hand and approximately $1.69 billion of debt, of which the majority is fixed either through long-term notes or interest rate swaps. Of our total term debt, only $2 million is scheduled to mature within the next 12 months.

Based on our current outlook, we anticipate our total leverage ratio at the end of the year to be approximately three and a half times debt to adjusted EBITDA, which is well within our comfort level. And for the full year, we anticipate cash payments on interest and taxes to be approximately $85 million and $45 million, respectively. You've heard us saying numerous times that our focus is not just on the amount of the distribution we are paying to our unitholders, but also on the quality of the distribution, ensuring that is sustainable and growing as our business grows. Our balance sheet is designed to withstand a challenging year like 2018, providing us with the financial flexibility to pursue organic growth and tandem with our commitment to grow the distribution.

Because of this, we remain committed to a steady 4% annual increase in the distribution even in a year where results may be below what was anticipated. Including of our cash position together with the existing lines of credit provide sufficient flexibility as part of working capital needs, partnership distributions and growth through our capital expenditure programs. And with that, I'd like to pass the call back to Richard. Richard?

Richard Zimmerman -- President and Chief Executive Officer

Thank you, Brian. As we head into the last five months of 2018, I remain confident in the resiliency of our business model, the core elements of our strategic plan and our ability to implement them. I also believe in the quality of our total entertainment package and the value it represents to our guests. This includes two of our largest multi-week special events, our award-winning Halloween events in October, and our WinterFest celebrations that extend the operating season at five of our seasonal amusement parks.

Both of these events leverage our unique regional brands. They offer a complete immersive experience at a quality and scale no other regional amusement park or entertainment venue can match. On Halloween this year, our parks will offer more than 120 haunted attractions, more than 40 hair-raising shows and more than -- and 5,000 monsters roaming the midways. Then as we transition to WinterFest, our parks have transformed into spectacular winter wonderlands with magnificent light displays, holiday shows and festivities for every member of the family.

During the Seasons of FUN, we also offer a wide variety of food and beverage offerings, specifically, tailored to the event and time of year. As Brian mentioned earlier, it will be challenging to fully recover the attendance shortfalls we've experienced to date. Despite some recent areas of strength in our business, the lack of meaningful momentum or pickup of our attendance through July, leads us to believe that results could fall below the low end of our full-year guidance of net revenues between $1.34 billion and $1.38 billion, and adjusted EBITDA between $475 million and $495 million. Full-year results will be heavily influenced by our parks' performance between now and Labor Day, and success of the numerous new initiatives we deployed.

We will be better positioned to provide more color on the season and update our guidance in early September. While today's call primarily addresses the current operating season, I can assure you we're already actively engaged in the execution of all strategic aspects of the 2019 season. Over the next month, many of our parks will be announcing new rides and attractions for next year, including the introduction of additional world-class roller coasters, immersive and interactive areas for families of all ages, and continued enhancements to our in-park revenue locations, particularly, within the critical food and beverage channel. In the latter half of 2019, we also look forward to the completion and opening of several long-term projects, including an indoor sports facility at Cedar Point, and the new SpringHill Suites hotel adjacent to Carowinds.

With the investments we have made over the past several years and plan for 2019, I am confident that we offer a great combination of family and thrill entertainment. However, I'm also equally confident that we can continue to expand the appeal of our parks, adding events and entertainment programming to drive urgency to visit and enhance the appeal to a broader audience. I've challenged our team to develop programs to drive incremental revenue with less reliance on capital expenditures. Growing free cash flow is our ultimate objective, and while we remain committed to good long-term decisions, I'm convinced we have arrived at a point where we should be able to drive greater efficiency from the capital we choose to invest going forward.

I'm not ready to give you specifics today, but I hope this gives you a sense of the discussions we're having internally and with our board as we finalize the next iteration of our strategic plan. Before we turn the call over to questions, I just want to say how proud I am of our team for their hard work and dedication to giving our guests the best day experience each and every time they visit our parks. I'm fortunate to work with passionate people who have committed their carriers to this industry. They have the experience and maturity that supports an effective dialogue and, in turn, results in better decision-making.

And because of this, we expect to have a strong finish in 2018 and make the necessary adjustments to resume our growth trajectory next year and beyond. Now we'll open the call for any questions you may have. 

Questions and Answers:

Operator

Thank you. [Operator instructions] And we'll now take our first question from Tim Conder with Wells Fargo Securities.

Tim Conder -- Wells Fargo Securities -- Analyst

Thank you. Just a couple here. A little more color, Richard, on why -- I know you said you had a record year last year at Kings Island, but why then maybe experiencing the season pass decline in sales there? And then, the Santa Clara ride delay, when is that expected to be resolved? And then, Cedar Point, how specifically has Cedar Point done in July, given it appears weather there was pretty good in the month of July?

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Tim. Let me take those in order. First, at Kings Island, as we said, they were coming off a record year last year between the reaction to Mystic Timbers, then the rollercoaster and their additional WinterFest. As we got into the spring season pass sales period, which as you take a step back, that's the biggest sales period for all of our parks.

They experienced some extreme cold as they got out of the blocks in the April, early May time frame. So what we've seen there as we've seen in other parks is that, when attendance is a little lower in the spring we sell the same percentage of season pass sales, but -- as a percent of attendance, but that trends down.

Brian Witherow -- Executive Vice President and Chief Financial Officer

The attendance -- this is Brian. I would add to Richard's point on Kings Island, we came into the year with the expectation, there'll be a little bit of pressure on season pass sales given the strength of 2017, as Richard alluded to. I will tell you in spite of the challenges we've seen there, the park is still on pace for its second-highest season pass program performance ever. And so it's a little bit of a tough pill to swallow, the softness we've seen in '18.

But quite frankly, the performance -- if we gauge it versus the last five or six years, it's still a very good year for that park.

Richard Zimmerman -- President and Chief Executive Officer

And with regards to Santa Clara. Yes, we had a bit of a challenge getting our new ride open there, which -- RailBlazer, which opened a little later than we had anticipated in part because of a complicated construction environment, a lot of activity out there. But what we've seen there, which we see everywhere, we missed a little bit of the season pass sales window. I will tell you since the ride has debuted, we've seen tremendous response from our consumers.

They really like the ride. And since the ride is open, Great America has largely been performing in line with expectations.

Brian Witherow -- Executive Vice President and Chief Financial Officer

As it relates to Cedar Point, Tim, as you can see from the release and mary that up with the July Fourth announcement, which really took results through the 8th. The last three weeks have been challenging for us across the system, in large part at the seasonal parks, particularly in the eastern half of the U.S. I will tell you that Cedar Point was sort of under the same kinds of pressures that we saw generally at those parks. If I look at the last three weeks and break it down a little bit, it's really the tale of a couple different scenarios.

We have one week of very good weather and we saw good lift across the system at those parks, mid-single digit lift in attendance. We had two weeks of very challenged weather and saw attendance down high-single digits to low-double digits those two weeks. So while we don't like to cling to weather as an excuse, when you break it down into the small bite sizes, it definitely has an influence. And I would characterize, to your points, performance over that three weeks is pretty consistent is what we've seen out of the broader group.

Tim Conder -- Wells Fargo Securities -- Analyst

OK, OK. And then lastly, any color on the second half of initiatives to drive attendance that you alluded to in the press release?

Richard Zimmerman -- President and Chief Executive Officer

Yes. Tim, as we go into each year, we go through a meticulous amount of planning. And we've got on the shelf things that we may need, should we seek an opportunity or not see the results that we want. So what we've gone in and done -- and really breaking down into a couple of different avenues, we pull off the shelf some of the things we had ready to go through different channels that varies market by market.

So we've got offers out there that we're testing through different channels. We're also looking at what we can do to support the growth not only in the second half of the year but in '19 and beyond. So as we -- we're a couple of weeks out from debuting our season pass program. And when we do, you'll see there's some program enhancements there that we think will help drive season pass sales in the fall, which will also then benefit our 2019 season.

Tim Conder -- Wells Fargo Securities -- Analyst

Thank you.

Operator

We'll now take our next question from Steve Wieczynski from Stifel.

Steven Wieczynski -- Stifel Financial Corp -- Analyst

Hey, guys, good morning.

Richard Zimmerman -- President and Chief Executive Officer

Hey, Steve.

Steven Wieczynski -- Stifel Financial Corp -- Analyst

So I guess -- good morning. How are you guys? So I guess the question is around your guidance for the year and it looks like to get to the midpoint of your guidance, you probably had to grow the back half of the year, probably around 8%. Is this kind of the math we're coming up with? And given the pressures we've already seen in July, I guess, the question is why not adjust your guidance range now maybe a little bit more conservative and get in front of some of these weather events and other pressures versus kind of waiting to see how the next six or eight weeks plays out?

Richard Zimmerman -- President and Chief Executive Officer

Steve, good question, and good morning. As we look at the back half of year, we continue to look at, once we get to Labor Day, the fall represents, as I said in my prepared remarks, the strength of our Halloween celebration, the WinterFest. We look at the appeal of those, and Halloween, particularly, has driven record October after record October. We've also seen, as we saw last year, a really strong second half of the year.

We saw a little bit of challenge in July and August. We came into the year believing July and August were our opportunity. We continue to see when weather is good -- as witness, Brian said, the last three weeks, good weather week -- we're up mid-single digit. But when we look at last Saturday, and the strength we saw with a good forecast and good weather, we had one of our strongest Saturdays in the last several years.

So when look at August, it's such a key period between now and Labor Day in terms of impacting our look at the full year and I'll go back to Labor Day weekend being a weekend where we lost last year probably around 150,000 in attendance. So when we look at it, I think, we're trying to be as transparent as possible. But when we look at not revising guidance at this point, we want to make sure we were as transparent as we could be. Where we got strong belief and the confidence in the second half of the year based on the quality of our events.

So Brian, anything to add?

Brian Witherow -- Executive Vice President and Chief Financial Officer

No. I think, just dovetailing off of that, the -- we gave a lot of consideration to taking guidance down, as Richard alluded to. August is critical to -- and we said on the call, August is critical to our ability to hit the year-end numbers that we'd like to. And I throw Labor Day into that as well.

And so I think, we'll be much better positioned to forecast what the full year looks like when we get through the next five or six weeks.

Steven Wieczynski -- Stifel Financial Corp -- Analyst

OK. Gotcha. And then, the second question, I guess, would be around the distribution. I know you guys have talked about trying to increase that about 4% on an annual basis.

And we've gotten a couple of questions for investors kind of saying, well, how secure is that 4% increase if attendance continues to go down? So I guess, a different way to say it is, are you guys even remotely close at this point to being concerned about being able to raise that -- the distribution?

Richard Zimmerman -- President and Chief Executive Officer

Steve, when we look at our business model, we've built the balance sheet to withstand short-term disruptions at current leverage ratio. We've built this flexibility over several years, so we could accommodate that. When we look forward, we don't see a structural change in our business model. We don't see a fundamental shift in the consumer's behavior.

As a matter of fact, in their attitude toward our entertainment package, all of our internal metrics from our guest satisfaction scores to the ad awareness, intent to visit, says those are all pointing the right direction. So when we look at the distribution, I got a setback to the fundamentals of the business model, which is we generate a lot of free cash flow. Looking forward, we continue to see the distribution as one of our main priorities, and both the quality and the sustainability of that is our focus going forward.

Steven Wieczynski -- Stifel Financial Corp -- Analyst

OK, great. Thanks, guys. Appreciate it.

Operator

We'll now take our next question from Barton Crockett from B. Riley FBR.

Barton Crockett -- FBR Capital Markets -- Analyst

OK, great. Thanks for taking the question. I wanted to ask a little bit about the structuring of your business model in the face of this kind of weather issues. It seems like we're now in kind of a third successive summer of subpar weather, which almost sounds like kind of anti-Lake Wobegon setup where everyone is below average, which maybe we should contemplate the scenario that maybe this is a new normal that weather is [Inaudible] perhaps turned more negatively for summer, which I think asks the question whether it makes sense to pivot your business to a model that would be more resistant, more durable in the face of kind of weather volatility.

I think of someone like Vail that's insulated themselves from a bad ski-weather period last year by pivoting more to season pass. Your peer, Six Flags, is doing a lot more attendance from season passes with more aggressively to that than you guys have in terms of a percentage of mix. And now they're pushing essentially, a Netflix type subscription model, which would go a long way to mute weather volatility. And I'm just wondering how you guys think about the statement that maybe weather patterns are changing permanently and whether it makes sense to kind of address the business model to do some of these things I mentioned to insulate yourself from that?

Richard Zimmerman -- President and Chief Executive Officer

Barton, thanks for the question. First, let me say that we continue to be extremely pleased with the performance of our season pass program, which does in and of itself provide a hedge of weather. You look at the deferred revenue sitting on our balance sheet. When we think about that, we continue to see higher season pass renewal rates as we referenced in our prepared remarks.

When we look at the evolution of our season pass program, it has evolved over the past several years. We do study everything goes on in our industry and adjacent industries. One of the things that you will see us come out with in the fall is, we're going to test a 12-month installment in the fall versus a nine-month to test the incrementality and see how each of the markets react. So one of the conversations that's on the table, as we prepare for the next iteration of the strategic plan, which we've committed to roll out late this year or early next year is both dealing with the weather and looking at our business model.

But also, how can we continue to evolve our season pass program because that needs to be a key source of growth as we move forward, and obviously, a key part of our focus.

Barton Crockett -- FBR Capital Markets -- Analyst

Right. But what about the comment about weather? I mean, would you say at this point we should assume maybe as a base case that weather patterns are more like what we've had for the past three years than what we had before that?

Richard Zimmerman -- President and Chief Executive Officer

I don't know that we can comment because I'll go back to what we always say about weather, Barton, which is, over the course of the season or over the course of few years, weather tends to average out. What I can say is, with the appeal of the events that we stacked in our third and fourth quarters, we continue to see more appeal of those events. So as we think about both weather protection and the business model, I go back to our Seasons of FUN looking specifically at the second quarter, and how we would build early season attendance. How we build a focus and challenge the marketing team to take a fresh look at our second quarter, both in terms of programming and promotions.

And I think one of the things that we can do to hedge against weather is get off to a stronger start to each season.

Barton Crockett -- FBR Capital Markets -- Analyst

OK. All right. Well, thank for addressing the questions. I appreciate it.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Thanks, Barton.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Barton.

Operator

We'll now take our next question from James Hardiman with Wedbush Securities.

James Hardiman -- Wedbush Securities -- Analyst

Good morning. Thanks for taking my questions which unfortunately are going to...

Richard Zimmerman -- President and Chief Executive Officer

Good morning, James.

James Hardiman -- Wedbush Securities -- Analyst

Good morning. To continue, I guess, along this weather line. Obviously, you've said for a while now that when weather is normal, attendance levels are in line with expectations. I think Barton's question was a good one, whether normal is changing.

But, I guess, the other possibility is as we think about what's going on here is that -- is attendance significantly worse for bad weather days, I guess, is the question that I've never asked. And I'm going to age myself a little bit when I say that I remember a time when kids would actually go outside when it was raining. Maybe that's a bigger deal today. Maybe as people have more and more apps to tell them what the weather is going to be like the next day, the next week, the next 10 minutes, that's a negative impact on your business.

Any thoughts around that?

Richard Zimmerman -- President and Chief Executive Officer

James, you must be sitting on some of our internal conversations because we talk about this one a lot. And not just in terms of weather, but how the consumer perceives weather. I will tell you the metrics -- I'll give you the metrics, and then we can all talk about the reasons behind. But if you look at this particular season, when we've seen significant declines on a daily basis, we've had significantly more days where we've lost on particular days a lot of attendance versus less days where we've seen a pickup of that type of attendance.

So yes, we've seen that type of more extreme or if you want to call it volatility, where we lose more on a given day. So that's clearly one of the things that we're seeing this year that makes this year very different from past years. Now for those of us who've been around a long time; we've been doing this, a lot of us have been here for a couple of decades. One of the things we always say is, "This year's bad news is next year's good news on a daily basis." It gives us some opportunity going forward, but your comment about how consumers perceive weather is something that we do talk about a lot.

And I do think there is something to the immediacy of it. What we do know for whether it's our advanced bookings or our sales pattern on e-commerce, our consumers tend to buy their tickets closer to when they want to use them, be it a season pass or single-day tickets. And because of that, that may exaggerate the potential impact of weather.

James Hardiman -- Wedbush Securities -- Analyst

And is it also safe to say as more and more of your mix is season pass holders given that they can go at any point over the course of the summer, are they significantly less likely to go to the park on a day when the weather is bad?

Richard Zimmerman -- President and Chief Executive Officer

Yes, that's what we see, James. They would be -- they shift their visits around. Now over the course of the season, season pass holder, an average visitation tends to also revert to the mean. So we do say them make up their visits when the better weather returns.

James Hardiman -- Wedbush Securities -- Analyst

Great. And then lastly, I think, you may have commented in the prepared remarks about some of the contingency plans that you might be considering for next year. One of those included adjusting the operating calendar, which may speak to one of the issues going on here, just a notion that you expanded your calendar into some of the shoulder periods, maybe, I think I've asked this question before, but given what's going on, it's worse revisiting. Is it possible, rather than being additive, some of these late-season events are cannibalizing earlier on in the season? And how do you address that if that might be the case?

Richard Zimmerman -- President and Chief Executive Officer

Good question, James. We've added incremental operating days attached to WinterFest because of the appeal of the event. But as I said before, and I think you hit on it. The Halloween and then WinterFest have tremendous appeal.

So we are pulling interest and appeal into the third and fourth quarter, generating attendance. I go back to what we've seen work successfully at Knott's, which is really program each of the four different seasons. So when I look at and reiterate my comments about the second quarter, James, I think, we got to look at the front part of the year differently and really lean to our events and programming and drive the value and the appeal. The other thing that I'll touch back on the research we keep doing, some of the common themes keep coming through.

We are living in a bifurcated economy. As we think about the value customer, the early part of the season really becomes, I think, an appeal to us when we think about how we can attract the value customer. So I think, there's a few different things that we can do to have the attendance throughout the year.

James Hardiman -- Wedbush Securities -- Analyst

Got it. Thanks, guys. Good luck.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, James.

Operator

We'll now take our next question from Michael Swartz from SunTrust.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Hey, good morning, everyone.

Richard Zimmerman -- President and Chief Executive Officer

Good morning, Michael.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Good morning, Michael.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

I didn't hear any commentary on the -- on your prepared statements regarding the Cedar Point Sports Complex. I know that's something that we've talked about the last several years. So just wanted to get an update of maybe how attendance or tournament bookings are trending there? And whether or not they're in line with your expectations for the year?

Richard Zimmerman -- President and Chief Executive Officer

Michael, I can tell you the outdoor sports complex is performing well ahead of the performance that we had going into the project. We knew that there would be appeal on the ticket side, but one of the significant impacts we're seeing is it's really driving occupancy in our hotels, not just during the summer, but right now even in the shoulder periods because there are some tournaments in the spring and the fall. One of the things we like about the indoor sports complex is that it will drive room occupancies at our resorts during full 12 months a year, but, in particular, during the shoulder periods, during the winter when we're not traditionally open. Brian, anything to add there?

Brian Witherow -- Executive Vice President and Chief Financial Officer

No. I think just to your point on against projections the -- as we said last year, the first-year numbers were well ahead of the year one pro forma. And I would tell you that, as Richard just alluded to, year two results are significantly outpacing year one. So very pleased with the results to date.

Wish we could put more of these types of facilities around the other parks, but the -- and as we've said in the past, the complexities around that come down to the financing of these facilities and the ability to get the public funding that we got here and in Erie County and the City of Sandusky, little bit more challenging in some of our other markets.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Just second question. You've talked in previous calls about some of the local market -- marketing initiatives that you've undertaken over the past couple of years. Just wanted to get an update there and maybe thoughts around the return of some of those investments and maybe how you see yourself tweaking that going forward?

Richard Zimmerman -- President and Chief Executive Officer

Well, a couple of things that I'll touch on, Michael. I'll ask Brian to step in. The destination marketing campaign in and around Cedar Point has really worked well. When we look at driving the outer markets, we continue to see the pull from further out, which is really important for our flagship park.

It's really filling the occupancy of our hotels and resorts and accommodations here. We've been sold out for past couple of weekends. And we're sold out, again, this weekend. So we're seeing good traction in the outer drive markets.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yes. As always, just one of the things that's nice about being a house of brands, Mike, when it comes to marketing and some of the advertising initiatives we have in place, we're able to test things differently from park to park without worrying about the message bleed. We spent a lot of time working as a management team, including Kelley Semmelroth, our CMO, on reviewing our marketing spend and gauging its efficiency. Challenging ourselves, are we getting the impression that we want? Are we being as efficient with the dollars? So I spent a lot of time with her analyzing that each year. And as we work toward, as Richard alluded to on the call, as we work toward our 2019 business plan, I can tell you right now, we're right in the thick of it as it relates to assessing what those marketing plans look like going into next year.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

OK, great. Thank you.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Michael.

Operator

We'll now take our next question from Chris Prykull from Goldman Sachs.

Chris Prykull -- Goldman Sachs -- Analyst

Good morning, guys. Thanks for taking my questions. The first one was just a follow-up to Barton's question earlier. Given consecutive years of a bit softer start to the summer than everyone had hoped, are you considering any more structural changes to the long-term growth strategy to help offset weather and software organic growth? And I guess, for example, maybe three things that I would highlight: membership, M&A or international licensing?

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Chris, I'll take that. On all three things, let me first start with membership/subscription. I think we want to see what the evolution of our season pass program is and it's one of the things where we're closing looking at. So as we go through the dialogue for our strategic plan and look at what we think the evolution and the growth rate is, we're going to look at that as one of the key planks.

Specific to M&A, I'm not going to comment on anything specific other than to say, Cedar Fair has been built through a pattern of M&A over a series of years. It may have been a while since we've done one, 2006 the last major acquisition. But we're constantly engaged in dialogue on opportunities that may be out there. And I won't comment any further than that.

And then in terms of international, when you've heard us say on previous calls, our management team has been focused on really the core organic growth that we've had. We've had inbounds over the last several years, and continue to feel the inbounds now on development opportunities overseas and potential management opportunities. We continue to be intrigued by that and continue to see those inbounds. We got a little bit better understanding about that, now that we've hired Tim Fisher, who's got in as chief operating officer, who's got international experience.

So as we look to the growth outside the core and how we expand that, all those conversations are on the table.

Chris Prykull -- Goldman Sachs -- Analyst

Great. And then a question on CAPEX. I think you alluded in your scripted remarks just more efficient spend. Do you think you can get CAPEX closer to 9% of revenue like your peer targets? Or is there something just structurally different with your locations or business that could prevent that?

Richard Zimmerman -- President and Chief Executive Officer

I don't think there's anything that's structurally different from us and the rest of the industry. I think our strategies are different and sometimes that drives what we spend on capital. We continue to like things like resort accommodations, which make us slightly different. But in terms of core marketable capital, I stand by my statement.

And I won't give you a specific number. I think I've challenged the team to come up with ways to grow our revenue on a far more efficient spend.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yes. And Chris, I would just add, our capital programs over the last several years have been a little inflated by some of the investments that we've made that I do think, as Richard just said, are a little bit of a differentiator from us -- for us in the space, whether there that be the accommodation side, or even on the infrastructure things. The amount of monies that we've put into our parks over the last three or four years to add amenities like Wi-Fi as an example. Now that those things are behind us, whether we're talking about those infrastructure projects like Wi-Fi or the hotel refurbs, like the Breakers and the Cedar Point Express Hotel, I think, we're able to get back down to levels that are maybe more comparable to where we've been historically.

And as a company, we've been able to drive growth at those 9% levels. And so Richard's challenged us to find those efficiencies, and I think they're not going to be that hard to find given the things that we've done over the last several years.

Richard Zimmerman -- President and Chief Executive Officer

Chris, let me follow-up and say, as I referenced, we do longer-term projects like hotels and other things you've heard us talk about. And we put in place longer-term financing for that. We've bought an incremental $115 million. We did our refinancing last year for projects that we knew about.

But we're really focused on the core organic growth and the trajectory we see forward and the right level of capital expenditure to target that growth. And again, I think, you hear us saying loud and clear is free cash flow is a priority for us.

Chris Prykull -- Goldman Sachs -- Analyst

Great. That's all really helpful color. Thanks so much, and good luck for the rest of the year.

Brian Witherow -- Executive Vice President and Chief Financial Officer

Thanks, Chris.

Operator

We'll now take a question from Brett Andress from KeyBanc Capital Markets.

Dan Charrow -- KeyBanc Capital Markets -- Analyst

Hey, this is Dan Charrow, on for Brett. Thanks for taking my question.

Richard Zimmerman -- President and Chief Executive Officer

Hello, Dan.

Dan Charrow -- KeyBanc Capital Markets -- Analyst

So if my math is -- hey. If my math is correct, from what you mentioned earlier around the weather impact in the eastern half of the U.S., it seems like overall it was somewhere in the mid-single digit realm of the headwind during the quarter, which would be most if not all of the attendance declines. So I guess, looking forward, what are you thinking for a sustainable attendance growth rate from here on out ex-weather?

Richard Zimmerman -- President and Chief Executive Officer

Brian?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yes. I don't think we're going to give any specifics into what are our attendance expectations over the balance of the year. Just to comment on your point regarding the magnitude of weather, as we said earlier, it's tough to really to put a specific number on it. The one thing we want to make sure that we are not doing down when it comes to weather is using it as a crutch and excuse internally.

It's one of the reasons why we've taken some of our normal course research efforts and refocused them in a couple of markets to specifically try and cut through the noise that weather may be creating. But clearly, it has been a factor, particularly, as we look at a short window like the month of July. With some return to normalcy, up weather, and again, as a number of people have said on this call, what does normal mean today, that's the tough thing to gauge. But some return to good weather, we would expect to see attendance lift like we saw during the -- the best week that we had during the month of July.

Dan Charrow -- KeyBanc Capital Markets -- Analyst

Great. That's helpful. And then just one on some of the wage inflation that you called out. I think in the release you mentioned it was relatively in line with what you're expecting.

And on a year-over-year dollar growth rate, should we think about that as comparable for the bulk of the year from here on out?

Brian Witherow -- Executive Vice President and Chief Financial Officer

Yes. So, Dan, It's Brian. As you break down the pressures we're seeing on seasonal labor, it really comes down to two things, right. It's rate and it's hours.

Coming into the year, I would tell you that rate is trending up at a level that's in line with what we have expected. Our park management teams, our general managers and their teams have done an outstanding job of managing the other lever, which is hours. We are running hours inside of both plan and prior year to try and offset those pressures from rate. Overall, the net effect of that is that seasonal labor costs are still trending up in a comparable range to where they have been in the last couple of years, which is in that mid-single digits, 5%, 6%, 7% kind of range.

This year, it's a little bit more rate-driven than it is clearly hours-driven because the teams have done an outstanding job of filling efficiencies and taking hours out of the system.

Dan Charrow -- KeyBanc Capital Markets -- Analyst

OK, great. Thanks so much.

Operator

We'll now take a question from Tyler Batory from Janney Capital Markets.

Tyler Batory -- Janney Capital Markets -- Analyst

Thank you. Good morning. So just a quick follow-up from me on the attendance topics here. Can you talk a little bit more about what you're seeing within your various guest segments? I mean, your trends are pretty consistent when you look at families or young adults or teenagers or in group bookings.

Whether any differences worth calling out there?

Richard Zimmerman -- President and Chief Executive Officer

Yes. This is Richard. We don't see any huge difference from demos in past year. So when we look at the family segment reasonably consistent year over year.

The group segment, in particular, we got stronger second half bookings and the channels it is coming from, particularly, the web-driven business, very consistent. We haven't seen any outsize increase or decline in any of our age demos. So the pattern looks pretty much the same as what we've seen in prior years.

Tyler Batory -- Janney Capital Markets -- Analyst

OK. And I think you said in the past that families are about 50% of your attendance. Is that still consistent?

Richard Zimmerman -- President and Chief Executive Officer

That is still consistent.

Tyler Batory -- Janney Capital Markets -- Analyst

OK, great. That's all for me. Thank you.

Richard Zimmerman -- President and Chief Executive Officer

Thanks.

Operator

We'll now take a follow-up from Tim Conder with Wells Fargo Securities.

Tim Conder -- Wells Fargo Securities -- Analyst

Thank you. Gentlemen, just don't mean to keep being on this as it's been asked in several different ways here, but wanted to get back to the season pass plans here. Again, you're evaluating moving from a nine- to 12-month payment plan. But still under that approach, the consumer still has to opt in.

And I guess, again, taking at the reward that it's a higher renewal rate under a membership plan was what the Six Flags has commented on. Why wouldn't that be appealing? Because it's auto-renew, you have a higher renewal rate. Could you address some of these issues? Or the other side is also brought up if you look at Vail. If somebody doesn't fully utilize their Epic Pass in a given year, rather than risking that customer dropping out, they contact them and say, "Hey, here's a smaller version of an Epic Pass" to keep that customer engaged.

Just any comments along those lines, again, just given how we're seeing results from Vail and Six Flags, and it appears to be maybe a little bit more struggles with just the traditional season pass plan that you had?

Richard Zimmerman -- President and Chief Executive Officer

Tim, let me only answer your question this way. We have been at extremely healthy renewal rates already. I can't comment on what anybody else is seeing, but we've been at extremely strong renewal rate. So as we think about it and break it down into its pieces, we both want to attract new folks into the funnel and get them to purchase their season pass, but continue to increase our renewals, which we have been doing for several years.

So we are healthy and getting healthier. So I would say we have the same objective as we look at it. We do have season pass auto-renewal program already existing within our program. We saw a tremendous growth when it went to the installment program several years ago.

And we've evolved that program to continue to add appeal to it.

Tim Conder -- Wells Fargo Securities -- Analyst

OK. What about a plan, Richard, maybe to somebody is not utilizing, rather than just say, "Hey, I didn't utilize my plan last year, I only went once." And it doesn't make sense dropping out to offer a slightly tweaked program, again, back to looking what a Vail will do?

Richard Zimmerman -- President and Chief Executive Officer

I think we've got a really robust CRM platform. That's one of the first things that Kelley Semmelroth, our CMO, did when she came on board was build that program. When we -- we go through a lot of effort to activate somebody once they purchase the season pass. So we reach out to them often to drive that visitation.

I'll remind you, Tim, our average visits are over five, up from four a few years ago. So we continue to see the engaged season pass holder as the highest likelihood of renewal. So we're very much a source of engagement, but as with any big program, most of the folks live kind of in the middle of that bell curve in terms of visitation and engagement. You always got something -- somebody on either end.

Tim Conder -- Wells Fargo Securities -- Analyst

OK. OK. Thank you for the additional color. Appreciate it, Richard.

Richard Zimmerman -- President and Chief Executive Officer

Thanks, Tim.

Operator

And it appears there are no further questions in the queue at this time. I'd like to turn the conference back over to our presenters for any additional or closing remarks.

Richard Zimmerman -- President and Chief Executive Officer

Thank you all for your interest and ongoing support of Cedar Fair. I'd like to reiterate the decisions we're making are responsive to the short-term trends we may experience and long-term value creation. We're mindful that the vast majority of our ministers are counting on us to be part of their portfolios for many years to come. I can assure you, we'll do our best to deliver against both near-term and long-term objectives.

I know many of you have an opportunity to visit Cedar Fair park. For those of who haven't, I encourage you to take the time to visit one or more of our parks to truly experience what differentiates Cedar Fair. Stacy?

Stacy Frole -- Vice President of Investor Relations

Thank you, everyone, for joining us on the call today. Should you have any follow-up questions, please feel free to contact our Investor Relations Department at (419) 627-2233. We look forward to speaking with you again in about three months to discuss our third-quarter results.

Operator

[Operator signoff]

Duration: 61 minutes

Call Participants:

Stacy Frole -- Vice President of Investor Relations

Richard Zimmerman -- President and Chief Executive Officer

Brian Witherow -- Executive Vice President and Chief Financial Officer

Tim Conder -- Wells Fargo Securities -- Analyst

Steven Wieczynski -- Stifel Financial Corp -- Analyst

Barton Crockett -- FBR Capital Markets -- Analyst

James Hardiman -- Wedbush Securities -- Analyst

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Chris Prykull -- Goldman Sachs -- Analyst

Dan Charrow -- KeyBanc Capital Markets -- Analyst

Tyler Batory -- Janney Capital Markets -- Analyst

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