SeaWorld Entertainment (NYSE:SEAS) rocked investors last week after announcing that it wouldn't just be winding down killer whale shows in San Diego next year. The stock's once beefy dividend is also going away in 2017. However, SeaWorld is living up to its commitment to spend at least some of the money that it will be saving in the yield-nixing move on the improvement of its parks, announcing roughly $175 million in new rides and attractions across its parks in time for next summer's peak travel season.
There's also an intriguing new type of annual pass rolling out -- a potential game changer -- that larger rivals Disney (NYSE:DIS) and Comcast's (NASDAQ:CMCSA) Universal may want to consider emulating. SeaWorld is testing what it's calling a Transferable Pass.
True to its name, the new annual pass can be transferred to anyone. There are more than a few caveats. It must be purchased at the same time as a regular annual pass, and that "host" must accompany whoever is using the transferable pass. The flexible pass also costs $40 more a year. It's eligible for most of the typical benefits associated with regular annual passes including free parking and 10% discounts on food and merchandise.
SeaWorld is only offering the new pass in Orlando and at its smaller Sesame Place park in Pennsylvania. If it's a hit, one can expect it to make its way elsewhere.
The beauty of ambassadorship
SeaWorld is in a funk. The chain posted back-to-back 4% declines in attendance in 2013 and 2014. The rest of the country's theme parks and regional amusement parks grew in that time, so the shortfall had been widely credited to the Blackfish documentary that skewered the practice of keeping orcas in captivity. Attendance finally turned slightly positive in 2015, and guest counts outside of its Florida parks have continued to move higher through the first half of 2016.
It's a different story in the Sunshine State, where its most popular park in terms of attendance -- SeaWorld Orlando -- is struggling. It's not alone. Disney World has also seen its guest counts tick lower so far in 2016. Comcast's Universal Orlando resort has been a shining star in recent years, but even Comcast is seeing top-line growth decelerate at its U.S. theme parks.
The rocky situation in Central Florida is partly the result of a sharp drop off in Brazilian tourists as the Latin American country goes through some socioeconomic struggles. SeaWorld claims that nearly half of its shortfall this year can be attributed to the sharp decline in visitors from Brazil. Other likely factors include stormy weather, Zika virus fears, and admission price hikes at Disney World and Comcast's Universal Orlando.
SeaWorld knows that it needs to do a better job of courting locals in Florida, especially at a time when attracting foreigners is out of its control. SeaWorld Orlando opened a passholder lounge with access to complimentary soft drinks earlier this year, and a new lounge is going up at its Aquatica sister water park. Now we get the transferable pass, a genius offering the more you think about it.
Sea the difference
SeaWorld is trying to pivot away from its signature killer whale shows. Its original San Diego park is updating its show to be more educational, based on natural orca behavior instead of having to leap out of the water, or take trainers around the tank. It'll be more like a documentary. Some activists won't be pleased until the orcas are no longer confined to these relatively tight quarters, but at least the performances that Blackfish argues were mentally taxing on the killer whales are winding down.
The slate of new attractions that $175 million will buy also hints at the brand's repositioning. A new coaster at SeaWorld San Antonio is themed to a sea rescue, with the coaster cars fashioned as jet skis. SeaWorld Orlando's Kraken coaster will get a virtual-reality update to immerse guests in the lore.
This is where the new annual pass steps in. Guests accompanying host annual passholders may not have been to SeaWorld Orlando since it has added a couple of world-class roller coasters. They may not have been to Aquatica at all. Exposing them to what the Orlando parks are now may convert them into named passholders.
The new pass also has to be appetizing to single serial daters, or enterprising theme-park buffs who will offer a pal a day at SeaWorld Orlando or Aquatica as long as the guests springs for food and drinks. If successful, this pass will be about exposure. It will turn SeaWorld Entertainment's biggest challenge into its biggest opportunity just as it's taking baby steps to court less controversy.
Disney and Comcast aren't under the same black cloud of notoriety as SeaWorld these days, but they could both use an uptick in guests. SeaWorld may be on to something with this ambassadorship move. Its larger rivals may want to pay attention.