WASHINGTON, Aug. 17 (UPI) -- The sun is not shining over the amusement park industry. Struggling with declining attendance and poor financial results during the first six months of the year, Six Flags, Inc. and Cedar Fair, L.P. agree on the culprit of their disappointing performance: foul weather.
The low rate of job creation and consumer confidence certainly have kept some people from spending their discretionary income - the cash in consumers' pockets for nonessential expenses - in amusement parks. But experts say recent heavy rainfalls in the Northeast, the Midwest and Texas discouraged scores of visitors from showing up at the nation's 600 parks and weakened a $10 billion industry that caters to more than 300 million people every year.
Six Flags and Cedar Fair, with respectively 28 and 12 parks nationwide, say adverse weather negatively impacted their results in several key markets. The consequence for the two companies has been a decline in both attendance and net revenues in the first six months of 2004.
"The inconsistent economic recovery and second straight year of unusually inclement weather clearly took a toll on our business and that of the other regional park companies," said Kieran E. Burke, chief executive officer of Six Flags, in a conference call last week.
Burke partially blamed the 4.1 percent decrease in attendance and lower revenues on adverse weather affecting parks in Atlanta, Chicago, Seattle and Texas in the spring. And while he accepted the unpredictability of weather, he said good and bad weather usually average out over a longer period of time.
"We can expect our fair share of normal weather over the next three to five years," he said.
Mother Nature's mood swings do not account for all financial woes of Six Flags - the world's leading of regional theme park company. The company carries a debt burden in excess of $2 billion and had to sell seven parks in Europe and one in Ohio in April because of what Burke described as a "weak competitive position" in those regions. The sale and heavy debt refinancing led to a net loss of more than $400 million and sent Six Flags' stock plummeting to a new 52-week low of $3.36 per share after the company released its quarterly and six-months results this week. Six Flags also received some publicity it did not ask for in May when it agreed in to pay $5.6 million to settle charges of discrimination at its Magic Mountain park in California. That same month, a customer fell off a roller coaster and died at Six Flags New England.
But Six Flags' experience with the elements somewhat mirrors that of the industry. Cedar Fair, the other publicly traded amusement park company, explained its 8 percent attendance decline and its $16 million net loss in the first six months of the year by "cool temperatures and frequent rainfall in the Midwest," where the company operates several amusement and water parks.
"The company credits the shortfall to poor weather, which is consistent with our detailed analysis of inches of rainfall, number of rainy days, and number of weekend rainy days," wrote Kit Spring, an analyst for Stifel Nicolaus, in a report on Cedar Fair's performance.
Family-owned parks also suffered from unfavorable atmospheric conditions. Patrick Thomson, who owns Western Playland, an amusement park in El Paso, Texas, said in a phone interview that attendance at his park has been "flat" this year. The park attracts an average of 200,000 customers each year. He blamed heavy rains in April for the disappointing first part of the season.
"The economy is part of it, but a lot of our business is the weather," he said. "If we have bad weather, it could really affect the business. We're like farmers."
Rob Norris, owner of Seabreeze Park in Rochester, New York, said people are spending more money in his 125-year-old park this year, which he attributed to a recovering economy, but he added that a string of rainy days in May, June and July had had a negative effect on attendance results.
"People really picked the right days," he said. "They want to wait for the right sunny day."
Seabreeze also has a water park, which makes it even more dependent on sunny skies, he said. "When the weather is good, business is fantastic," he said.
Unlike regional parks, which rely mostly on customers living in a 100-mile radius, destination parks such as Walt Disney World in Orlando, Fla., and Universal Studios Hollywood in California attract flocks of domestic and international visitors. Attendance at bigger parks is less susceptible to bad weather because visitors decide to go to the parks far in advance and are less likely to be deterred by bad weather once they're there, said Jerry Aldrich, president of Amusement Industry Consulting Inc. Aldrich, who is based in Orlando, Fla., said occupancy rates for Disney hotels are up from the spring, which indicates a higher attendance. In its last quarterly earnings report released last week, the Walt Disney Co. said higher attendance at Disney World drove up revenues for the quarter, which increased 32 percent for Disney's parks and resorts.
"The attendance that they missed in the spring, they seem to be making it up during the summer," Aldrich said in a phone interview.
Will Koch does not complain about the weather. He called 2004 "a good weather year" for Holiday World, the park he owns in Santa Claus, Ind., and said attendance increased 15 percent compared with last season and should reach 890,000 by year-end. Koch said it also rained on his park in May and June, but it was mostly afternoon thunderstorms.
"A thunderstorm will chase a few out of the park, but it doesn't ruin our day," he said.
Koch said good business initiatives can largely offset the impact of bad weather. He credited Holiday World's encouraging results on specific ideas, such as offering free unlimited soft drinks and sunscreen to all park visitors and said that a set of new water rides had probably helped boost the attendance.
Koch said that park owners often use adverse weather as an excuse to explain bad seasons when they meet at trade shows.
"We all ask each other how your season was, and there are only two answers you ever get: either they did something smart and they're up or the weather was terrible and they're down," he said. "Nobody is ever down because they made a bad decision."
