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Will Theme Park Investors Forgive a Lost 2020?

By Rick Munarriz – May 5, 2020 at 12:00PM

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Six Flags is requiring online reservations. Cedar Point is selling two years of access for the price of one. Disney, SeaWorld, and Universal are bracing for dramatically lower capacity levels to satisfy social distancing.

It won't be business as usual at your local amusement park or favorite national theme park this summer. All of the players have every intent of opening at some point in the coming months -- if not weeks -- but the experience won't be the same as you remember. 

Between the limited initial capacity constraints and the burden of pandemic containment being shouldered by both visitors and employees, this is going to be an unusual summer at your gated attraction of choice.

Let's go over what Six Flags (SIX -2.25%) and Cedar Fair (FUN -0.20%) are working on as regional amusement park giants, and we'll also check in on theme park bellwethers Disney (DIS -3.04%), Universal Studios parent Comcast (CMCSA -2.65%), and SeaWorld Entertainment (SEAS -1.24%).

The Manta rollercoaster at SeaWorld Orlando as it skims along the water

Image source: SeaWorld Entertainment.

This ride will have its ups and down

Investors will want to adjust their expectations as we head into what has historically been the peak summer travel season. It's a given that parks will be opening at a fraction of their typical crowd levels. Central Florida's economic recovery task force has suggested that area theme parks cap their guest counts at 50% of total capacity during the initial phase of reopening, leading some to wonder if Disney, Comcast's Universal Orlando, and SeaWorld will limit the initial flow of visitors to either folks staying at one of their resort hotels or just in-state locals. 

We saw the first actual plan go live this week when Six Flags updated its individual park pages. An online reservation system is being set up for all visitors to pre-schedule their trips to the chain's amusement parks when they eventually reopen for the season. Treating a regional amusement park as if it's a Michelin-starred restaurant that requires booking months in advance is a jarring notion right now, but it may be the new normal this season as the chains try to keep crowds in check. It will be interesting to see how Six Flags limits the free online reservation system to make sure that there are enough slots to go around as well as assure for itself that folks signing up for a visit actually show up.

Cedar Fair's flagship Cedar Point park is setting the bar of expectations fairly low this year. It's offering anyone who buys a season pass for 2020 to get 2021 at no additional cost. This is a compelling value for locals who planned on being at the park anyway, but it could push cash-flow concerns into 2021, when diehard fans will have already paid a year earlier. 

On Monday, SeaWorld began to sweeten the perks it offers annual pass holders, upgrading everyone to a higher level. The highest tier will receive in-park credit and a larger dining and shopping discount. 

Disney, Comcast's Universal, SeaWorld, and Legoland are already extending current annual passes by the amount of the closure for their year-round parks. We still haven't seen what, if any, gesture Disney and Universal will kick in to sweeten the pot for their pass holders. However, with the industry expected to ramp up slowly, it also wouldn't be a shock if they don't try to make visits too compelling at first. Disney and SeaWorld report earnings this week, and you can expect the companies to address some of those concerns.

Against this dicey backdrop, there are also a lot of factors beyond the industry's control. Tweaked school calendars may shake up the historically potent summer travel season. Travel restrictions would naturally weigh more on the national players than the regional amusement park operators. The biggest obstacle of all will be the inevitable recession that will eat into many potential visitors' abilities to bankroll a day at the park.

This is going to be a challenging year for all players, and patient investors will have to realize that -- like folks buying Cedar Point season passes right now -- they're really just paying now for an experience that will pay off come 2021. 

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Cedar Fair and Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$97.00 (-3.04%) $-3.04
Comcast Stock Quote
Comcast
CMCSA
$29.25 (-2.65%) $0.80
Six Flags Entertainment Corporation Stock Quote
Six Flags Entertainment Corporation
SIX
$18.00 (-2.25%) $0.41
Cedar Fair Stock Quote
Cedar Fair
FUN
$39.92 (-0.20%) $0.08
SeaWorld Entertainment Stock Quote
SeaWorld Entertainment
SEAS
$46.34 (-1.24%) $0.58

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