Folks are coming back to Great Wolf Resorts
Revenue rose by 25% to hit $34.2 million, fueled by new locations, expansions to existing lodges, and a 9.6% spike in revenue per available room throughout its properties. The company posted a net loss of $1.61 per share, but that was mostly due to a one-time goodwill impairment charge. On an adjusted basis, the company actually broke even.
When you bank on young families to fill up your resorts, you expect the last three months of the year to be soft. Kids are back in school, save for the holiday break in late December. So the woodsy lodges with huge indoor waterparks are usually packed over the weekends, but barren during the week. In the latest quarter, 52% of Great Wolf's rooms were spoken for, an improvement over the 50% occupancy rate a year earlier. Don't worry, things pick up over the summer and spring breaks. (Occupancy clocked in at 73.4% during the third quarter.)
Great Wolf's relative success in the final period of 2006 can be attributed to the strength of seasonal promotions. Howl-o-Screen in October and the month-long Snowland celebration in December appear to have done the trick.
Great Wolf's near-term plan is to enhance existing locations. Adding new watery attractions, and taking a page out of rival Kalahari's playbook by adding miniature golf courses, should help make the resorts better all-in-one destinations.
The more the better, because competitors are closing in. InterContinental's
Should this make Great Wolf investors nervous? Maybe it should be comforting to know that the industry is validating its niche. Will buyout buzz circulate that Disney will acquire Great Wolf on the cheap, as a way to get up to speed quickly? That's not the way the family-entertainment giant usually plays this game, but it's an interesting suggestion.
All Great Wolf can do for now is keep its hotel guests happy and its shareholders happier. Unfortunately, the near-term outlook won't set investors' hearts aflutter. The company's outlook calls for a loss in 2007. That's acceptable in this early stage of the hotelier's growth cycle, but it would be nice to see the chain's popularity translate into greater profitability. Let's get some of that suitcase money to hang around on the way to the bottom line.
Great Wolf Resorts was an early recommendation in the Rule Breakers newsletter service, but was eventually booted from the scorecard in summer 2005. To find out why Great Wolf doesn't run with the pack anymore, take a free 30-day trial to the newsletter today.
Longtime Fool contributor Rick Munarriz took his family to four indoor waterparks this past summer. He owns shares in Disney and units in Cedar Fair. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.