Thanks to an analyst upgrade, Six Flags (NYSE:PKS) opened at $9.99 yesterday. Unfortunately, that was as good as the share price got, but investors still saw another healthy day of gains for the regional amusement park operator. If the stock had hit the $10 mark -- something that may well happen soon -- it would have marked the first time that Six Flags traded in double digits since the summer of 2002.
There are signs of life again as new CEO Mark Shapiro continues to piece together improvements for the 2006 season. Yesterday, he announced a new marketing and entertainment division headed up by one of his former executive buddies from ESPN, Mike Antinoro. But if Shapiro's not careful, a few simple blunders might derail all of his efforts to turn the parks around.
The price of success
Expectations are running high for Six Flags now. For proof, look no further than the aforementioned upgrade from Bear Stearns (NYSE:BSC). Just last November, the firm had downgraded Six Flags' stock, even though it's trading 32% higher today than it was at the time. That's not the kind of humble pie you come back for, unless you think it's going to be even tastier down the road.
No one is expecting the company to tackle its gargantuan debt overnight. That will take years and patience. However, after successfully growing attendance through 2005, this year wouldn't be a bad time for Six Flags to improve operating margins. The company is making the necessary changes now to ensure that Shapiro and owner Dan Snyder's fingerprints are all over the 2006 season. In fact, last night the company announced that it was hiring a new interactive marketing company to help improve its communication efforts.
"We understand how critical it is to constantly improve our communication with our guests," Antinoro mentioned in last night's press release announcing the appointment of OgilvyOne.
Let's just say that the timing of such a claim couldn't be any better. Earlier this week, I wrote about what seemed like a pretty ridiculous rumor that had begun circulate around the Internet. Folks were claiming that Six Flags prohibits same-day reentry into its amusement parks. I laughed it off, since reentry is a sacred cow staple at theme parks all over the country. Much to my surprise, several readers directed me to the recently updated policies page of the Six Flags America amusement park on the outskirts of Washington, D.C. Sure enough, there was no reentry allowed. Guests who left the park for any reason had to pay again to come back in later in the day. Need to check into your hotel? Left your diaper bag in the car? Feeling dizzy and want to go home and rest for a few hours? Sorry. Good riddance. Don't let the turnstile hit you on the way out.
It was so outlandish a policy that one person wrote me to suggest that maybe the site had been hacked. If only! However, no sooner had I started to reheat a plate of crow in the microwave than I received another batch of emails, pointing out that the page was updated yet again that same Tuesday afternoon. Reentry was back. Peace started to settle in, but how out-of-touch can the new regime be if it even tries to float this kind of disastrous policy? I saw both versions of the policy page with my own eyes. Now my faith in Shapiro is starting to rattle like some old Vekoma boomerang coaster.
The tricks of the turnstile trade
Let me state the obvious: Doing away with reentry rights -- if it chooses to do so -- will only hurt Six Flags. No one will pay twice to see the same park on the same day. Guests caught unaware will simmer, further souring Six Flags' notoriously feeble reputation for customer service. Young families on vacation will avoid the parks altogether once they realize that they can't leave for afternoon naps without stiff penalties.
See, there really are just two factions that routinely take advantage of hand-stamped reentry: families who need a break and cash-strapped teens looking for cheaper eats outside of the park. You won't gain much by keeping the penny-pinching young'ns around. They'll just live off pocketed snacks and water fountains. Tripping up the families will sting, too, because they usually come back recharged and ready to snap up more souvenirs, snacks, and dinners. If they see the value proposition toppled, they will spend their money -- all of their money -- elsewhere.
Six Flags shouldn't blame its patrons just because it has failed to make its parks whole-day destinations, or its concessions too attractive to resist. If anything, it should learn from the operators who thrive on guests no matter what side of the turnstile they're on. Disney (NYSE:DIS), a company Shapiro once worked for, has on-site resorts and Downtown Disney entertainment districts to keep the money flowing. General Electric (NYSE:GE) enhances its Universal parks with Citywalk shopping and dining areas just outside. Even Cedar Fair (NYSE:FUN) has several adjacent lodging establishments at many of its parks, along with a modest shopping strip outside Knott's Berry Farm in California.
Six Flags is making headway on that front. Next month, it will open a resort at one of its smaller parks in New York. A Six Flags-owned hotel at its popular Great Adventure park in New Jersey should be coming soon. The quicker it moves to flesh out the world beyond the exit turnstiles, the sooner it will realize that opportunity clicks both ways.
Later this year, the Paramount Parks chain -- now owned by CBS (NYSE:CBS) -- will open a Great Wolf Resorts (NASDAQ:WOLF) indoor waterpark resort next to its Kings Island attraction in Ohio. It was an easy sell. Paramount is receiving a minority stake in the project just for leasing out land that it wasn't using anyway.
I hate to see Six Flags' new captains make the same mistakes as the recently ousted old-school regime. Yes, something as nonsensical as a restrictive readmission policy can be enough to derail a season of more live concerts and improved concessions. It's troubling that this kind of "stick it to the guest" mind-set comes just as the investing community is starting to believe that Six Flags is about to embrace its long-neglected patrons.
In Six Flags' press release, Antinoro described the hiring of OgilvyOne as a way to "enhance the overall guest experience." Later, new directors were announced. The company is making the clean sweep as visible -- and public -- as possible. Share prices are already starting to reflect a recovery in 2006.
Will Shapiro earn patrons' bucks and shareholders' optimism? I'm no longer sure. Ignorance and greed can let that old pessimism creep back in awfully quick.
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Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He has three Six Flags parks on his itinerary, but that's written in pencil until he sees Shapiro's true colors. He owns shares in Disney and Great Wolf, and units in Cedar Fair. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
