Well, last night I got an email promotion as a Six Flags season-pass holder. With it, I can now take up to six friends to Magic Mountain before the month ends at just $14.99 a pop. That's a pretty good deal, considering that a one-day ticket bought at the gate would run a guest four times more.
I'm going to pass on the offer, since I actually live three time zones away. However, ask yourself who would be quick to snap up that kind of promotion. It's not young families, because if one family member has a pass, they all probably have a pass. That's right -- it's the penny-pinching young 'uns that Six Flags was hoping it didn't need to pander to.
More than the markdown
It's not just the discounts. When Shapiro was discussing second-quarter results this month, he seemed embarrassed to blame the weather for the company's fiscal shortcomings. It was something that he had mocked when his predecessors pinned the tail of misfortune on Mother Nature.
Investors have bolted for the exit turnstiles, too. The stock is trading at a 52-week low. Even worse, the shares have shed 61% of their value since peaking in February on hopes that Shapiro's magic would provide a quick fix to the company's ills.
The irony in all this is that Shapiro's plan is working. The average guest spent 15% more at the park this past quarter. It's clear that many of the improvements, like more costumed characters and an emphasis on park cleanliness, are bearing fruit. However, per capita gains have been perfectly offset by lower attendance. The end result has been more red ink than expected on essentially flat revenue growth.
Shapiro is succeeding in attracting the patrons he wanted. He has simply failed to draw them in larger numbers. Unfortunately, facing antsy creditors and market impatience, Six Flags is only making things worse as it reacts to the fiscal shortcoming by hacking away at park operating hours. At one park -- Six Flags Darien Lake outside of Buffalo -- the cost-cutting initiatives now find the gated attraction set to close a month early, awkwardly shoehorning Halloween haunted-house events into the harmless month of September.
This may seem all well and good in the name of fiscal preservation, but Shapiro will quickly discover that shaving costs and giving away the gate so late in the season will put him back where he was when he began trying to buff up a tarnished brand -- and leave investors even more cynical about his turnaround strategy as we dive into his second season.
The mighty mental metabolism
I met Shapiro early in the operating season. We explored Six Flags Great Adventure together as he detailed the challenges and opportunities of running a debt-saddled company after his breezier stint at Disney's (NYSE:DIS) ESPN. I know that he can be the one to right the wrongs at Six Flags. He just has to refrain from straying as he has late in the 2006 season.
Fixing Six Flags isn't rocket science. It's more about mettle, common sense, and perseverance. Let's go over a few things that Six Flags has to do to make sure that it starts off the next season on the right foot.
- Embrace the affordable experience enhancers. If I could have invited Shapiro on a late season road trip, I know just the spots to hit. We would have gone to Holiday World in Indiana to unearth guest-friendly policies and the secret to friendly staffs. We would have gone to Cedar Fair's (NYSE:FUN) Cedar Point in Ohio to see how coasters should be run and the contagious enthusiasm of those dispatching the trains. We would have gone to Islands of Adventure in Florida and spent an hour in front of the enchanted Mystic Fountain that spouts watery witticisms, until he devised a plan to try something similar at all of his parks in 2007. We would have explored the Downtown Disney complex in California, to see how dormant land on the wrong side of the turnstile can be transformed into evening-extending entertainment.
- Take it online. When you see tens of millions of guests every year in a seasonal business, it's a shame to lose that connection during the offseason. Six Flags has served itself well in hooking up with OgilvyOne in extending its guest relationships, but it doesn't have to stop there. The Internet can be a pretty powerful place. Don't blow the chance to use it to your advantage. Let the individual park sites become vibrant communities with user uploads, park manager chats, and sticky social-networking features. If you think that lining up corporate sponsors like Papa John's (NASDAQ:PZZA) and Home Depot (NYSE:HD) is lucrative in the offline world, just imagine the possibilities in the high-margin digs of cyberspace. Ask yourself why Google (NASDAQ:GOOG) is writing fat checks to some of the most popular eyeball magnets, and connect the dots to get there. Have park employees compete in creating viral videos, then see how quickly they can be disseminated through sites like YouTube and MySpace.
- New and improved in 2007. Look at the big picture in mapping out ride additions. Add family-friendly attractions but don't neglect the more marketable adrenaline-raisers. Provide premium experiences that don't disenfranchise the mainstream. Follow the competition in building out onsite resorts, especially through joint ventures where you put up the land and they build the lodgings. Beef up concession offerings by providing one-of-a-kind foodstuffs that can't be had anywhere else. The same goes on the retail front. The market will forgive 2006, but it won't be as tolerant if the company doesn't take definitive steps forward in 2007. Embrace the creative possibilities and reward the employees who fatten up the suggestion box with the most outlandish of suggestions. You never know which one may be the one to turn the company's fortunes around for keeps.
Got all that? It is then, and only then, that you should value what a park is ultimately worth before selling off more of your empire to the highest real estate developer. The future can be as bright as you once imagined. You just need to close your eyes and dream it a little longer.
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Disney is a Stock Advisor recommendation.Home Depot is an Inside Value pick.
Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He did his part by hitting Six Flags Great Adventure and Six Flags Great Escape in May. He owns units in Cedar Fair and shares in Disney. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.
