An amusement park that doesn't appeal to families is an amusement that probably won't survive. This was one of the problems that Six Flags (SIX -1.13%) faced when it brought in an outsider CEO to turn the company around. Families spend money -- on food, drinks, treats, games, and souvenirs. Tell your kids they can't have cotton candy and see how that goes.
Selim Bassoul, who has been leading Six Flags for less than a year, spent his career turning around struggling businesses at Middleby. Middleby would acquire businesses with strong but poorly managed assets and breathe new life into them, raising prices, investing in the products, and slashing unnecessary costs. He's taking the same playbook and applying it to Six Flags, and a central piece of the plan is to make Six Flags a no-brainer destination for families.
Attendance is down, and that's a good thing
The market was not happy with Six Flags' second-quarter report. Attendance dropped 22% year over year, revenue was down 5%, and earnings per share plunged 35%. With inflation running hot and the U.S.economy kinda-sorta in a recession, you can't blame investors for cooling on Six Flags stock.
But high attendance is a double-edged sword. More people in a park means more potential customers of in-park establishments. But it also means long lines, frustration, and an unpleasant experience for many guests. Parents with young children aren't going to be happy if they're forced to micromanage those children among a throng of sometimes unruly patrons.
As part of its turnaround plan, Six Flags has raised ticket prices and gotten rid of many of the free and heavily discounted ticket initiatives that used to drive attendance. The result has been much lower attendance, in fact a bit lower than the company really wants. Bassoul is targeting attendance levels between 20% and 25% below pre-pandemic levels, and right now they're down 35%.
What lower attendance buys Six Flags is a profoundly improved guest experience. Lines for rides are much shorter, so guests have been able to get on more rides per visit. Six Flags didn't disclose any concrete numbers, but Bassoul said that rides per guest were up significantly compared to last year. Guests that are unable to ride enough rides probably aren't coming back, and they're certainly not upgrading their ticket into a season pass.
Less time spent waiting in line for rides creates time to buy food, drinks, and other items, and that's showing up in the numbers. Total spending per guest, including both admission and in-park spending, is up 50% from 2019 levels. In the second quarter, admission spending per guest jumped 27% year over year, while in-park spending per guest rose 18%.
Providing a better guest experience is crucial for drawing in families, because kids definitely don't want to be spending their whole day waiting in lines. Families also don't want to deal with sketchy stuff. Dropping attendance levels and removing low-spending guests have gone a long way toward fixing that problem. The number of safety and security incidents is at an all-time low, according to Bassoul.
A work in progress
Six Flags remolding itself as a family friendly destination will take time. The company is overshooting a bit on knocking down attendance, which explains the lackluster second-quarter results. It's a balancing act that will need to be refined, but plenty of progress has already been made. Spending per guest is way up, guests are getting much more value out of their admission tickets, and the mix of guests is shifting toward families that spend more money than the average guest. Eventually, these trends should return the company to revenue and earnings growth.
A big downside of essentially blowing up your brand identity and starting fresh is that your results are not going to look great during that transition. But the pieces are now in place for a successful turnaround, driven by families willing to pay a premium for a great experience.
