SeaWorld Orlando's Future Plans

[zg44]

I can see BGW, BGT, and Sea World San Antonio, surviving, even thriving, if sold to a company with strong finances & willing to spend for upgrades, more entertainment etc. But I think that Sea World Orlando (they lost their high spending demographic & doubtful they'll return) & Sea World San Diego are in serious trouble.

I think Sea World has primarily become a local and regional park. It’s easy to justify going if you’re nearby and already had your fill of Disney and Universal. If you’re vacationing it’s really hard to justify spending a day there. Obviously there are a few exceptions, especially for people who plan longer trips.

I think you're basically both correct here.

SW San Antonio, BGW/BGT appear to be the healthiest parks and the most easily separated from the troubles afflicting SW Orlando and SW San Diego. With a financially healthy owner (and separated from Orlando and San Diego), I think those 3 parks can survive and thrive. But the problem of course is that it's nowhere near that simple. The main complications are that SeaWorld seems to only want to sell the entire company as a whole (even though there's been at least one bid for BGW/BGT separately), and that separating SW San Antonio from SW San Diego/Orlando could be messy and potentially unworkable.

The other complication of course is figuring out the most logical buyer, or whether they should just continue on their own? If Universal (or Disney but Universal is the one that will potentially build a new park closest to it) wants to get into the fray, really only Orlando makes sense to take; but there's a lot of reasons why neither would want to spend $1bn+ buying SW Orlando (including debt) and then revamping the entire resort into a worthy complement to their existing parks.

The question all comes down to what does the future look like for Orlando and San Diego. There are really only 2 other alternatives here: 1) another operator like Six Flags or Cedar Fair or Merlin with a much healthier balance sheet takes over all of SeaWorld (including BGW/BGT) or 2) SW Orlando and SW San Diego figure out how to become even more regional than they currently are.

In terms of vacationer market share, SW Orlando (and San Diego by extension given its market) are already trending that way with a sizeable decline in guests attending the parks from outside of the 300-mile range (the main $$$ vacation guests) and revenue per capita has faced pressure as a result of that.

If SW Orlando and San Diego differentiate themselves enough on price as regional offerings, there's a way to survive there, but the biggest problem is just that SeaWorld's balance sheet is in poor shape and may not be able to handle that kind of change.

 

[WAJAS]

I seem to remember that SWO attendance bottomed out this past year, but I may be mistaken. It stayed steady for the first time in a while year-over-year.

 

[MakoMania]

So much speculation of doom & gloom.

SeaWorld Orlando remains extremely profitable.

 

[zg44]

So much speculation of doom & gloom.

SeaWorld Orlando remains extremely profitable.

SeaWorld literally just took a $270 million goodwill impairment charge against SeaWorld Orlando in their 2nd Quarter 2017 earnings...; that represents a loss in value (aggregated earnings) attributed to that park over the past couple of years.

It's not "doom and gloom" to talk about the real pressures and stresses that SW Orlando and SW San Diego are facing. A basic look at SeaWorld's overall earnings for the past 5-7 years shows that those 2 parks have probably been losing money (a few million a year at least combined) while the other 3 parks (SW San Antonio, BGW/BGT) are probably keeping the overall earnings in the black. Though a number of quarters including the past 3 have been in the red overall (losses).

 

[MakoMania]

Of course there are pressures and of course the parks have lost value but for people to imply that they are not still profitable is misleading.

 

[zg44]

Of course there are pressures and of course the parks have lost value but for people to imply that they are not still profitable is misleading.

Based on SeaWorld's earnings reports for the past 3-4 years, you can make a somewhat obvious case that SW Orlando and San Diego have actually been unprofitable for large stretches of that period.

 

[epcyclopedia]

DHS is very much at the cusp of being unprofitable for Disney to operate. It's attendance can't get much lower. If the annual attendance rankings come out and DHS is above AK, we know they have no real data sources.

That said - SWO is worse off than DHS, so it certainly can't be profitable right now.

 

[MakoMania]

Based on SeaWorld's earnings reports for the past 3-4 years, you can make a somewhat obvious case that SW Orlando and San Diego have actually been unprofitable for large stretches of that period.

How can you possibly come to such a conclusion?

The company achieved an adjusted EBITDA of $332 million in 2016, this would be a totally unrealistic figure if 40% of the company's top 5 parks (i.e-SWO & SWSD) were making losses.

I know that attendance does not always automatically equate to profitability but when combined, SeaWorld Orlando & San Diego contribute close to 40% of the company's annual attendance. Are you suggesting that two of the three largest parks owned by one of the world's largest theme park operators which contribute not far off half its attendance are not making money? The numbers just don't add up.

 

[zg44]

How can you possibly come to such a conclusion?

The company achieved an adjusted EBITDA of $332 million in 2016, this would be a totally unrealistic figure if 40% of the company's top 5 parks (i.e-SWO & SWSD) were making losses.

I know that attendance does not always automatically equate to profitability but when combined, SeaWorld Orlando & San Diego contribute close to 40% of the company's annual attendance. Are you suggesting that two of the three largest parks owned by one of the world's largest theme park operators which contribute not far off half its attendance are not making money? The numbers just don't add up.

EBITDA is hard to use for theme parks because they generally operate with huge depreciation/amortization (which requires large capital expenditures to balance) and SeaWorld in particular has a high debt load: a theme park constantly has to spend money to rebuild its asset base as its assets decline in value.

I was going off of SeaWorld's Net Income, which accounts for the above. If you look at SeaWorld's revenue ($1.344 billion in 2016) and expenses ($1.284 billion in 2016) and interest ($63 million in 2016), you end up with a net income (loss) overall of -$12 million.

If you apportion those values out to the various parks based on performance (SeaWorld San Antonio is probably the healthiest overall followed by BGT/BGW and then SW San Diego and Orlando, you end up somewhere around:

SW Orlando's share probably looks something like $345 million in revenue, expenses around $365 million.
SW San Diego's share probably looks something like $270 million in revenue, expenses around $280 million.
SW San Antonio's share probably looks something like $195 million in revenue, expenses around $175 million.
BG Tampa's share probably looks something like $325 million in revenue, expenses around $285 million.
BG Williamsburg's share probably looks something like $205 million in revenue, expenses around $175 million.

Those estimates are based on a rough look at the various parks' attendances (as well as ticket prices/ap prices), and it's before we account for interest expense ($63 million in additional subtraction). FWIW, I do think SW Orlando and San Diego were extremely profitable 6-8 years ago when their attendance levels were much higher. BGT and BGW have lost some of their profitability over the past couple of years due to weaker attendance, but they haven't faced a dramatic decline. SW San Antonio's probably been the healthiest in that it's consistently grown since it opened.

 

[Mr. EPCOT]

Some interesting perspective/insights from a business and investing standpoint:

"Disney Buying SeaWorld Wouldn't be Crazy"
Disney Buying SeaWorld Wouldn't Be Crazy -- The Motley Fool

"SeaWorld May Have More Suitors Than You Think"
SeaWorld May Have More Suitors Than You Think | Business Markets and Stocks News | host.madison.com

I love the Discovery Communications idea.

Also, lol at magically somehow transforming Busch Gardens Williamsburg from a European-themed park to an American-themed one.

 

[WAJAS]

I love the Discovery Communications idea.

Also, lol at magically somehow transforming Busch Gardens Williamsburg from a European-themed park to an American-themed one.

Discovery Communications or National Geographic would be interesting options.

 

[Mad Dog]

They don't need to drastically change BGW for it to be successful. Just return it to it's Busch owned days and bring back high quality entertainment, good food, and treating customers with class.

 

[GAcoaster]

Also, lol at magically somehow transforming Busch Gardens Williamsburg from a European-themed park to an American-themed one.

Yeah, that was stupid since there are actually restrictions on them doing that with the property there. When AB bought the property and got permission for the park there were very specific stipulations that the park couldn't be an American history themed park and compete with Colonial Williamsburg.

 

[shiekra38]

Discovery Communications or National Geographic would be interesting options.

There's an IP for ya haha

I honestly still think BGT would be fine on its own - perhaps better off....If they keep being innovative with their coasters and give us a Giga down the road they will be fine...They still have the "world class coasters" identity locked down, with the animals being an added bonus IMO....Sea World has Shamu

 

[AlexanderMBush]

Q3 Results have come in.

 

[Andysol]

TL;DR:

-Double digit drops in revenue, net income, and EBITDA.
-Plan on turning it around through cost cutting measures and better advertisement.

Woof...

 

[AlexanderMBush]

TL;DR:

-Double digit drops in revenue, net income, and EBITDA.
-Plan on turning it around through cost cutting measures and better advertisement.

Woof...

It also seems more like the ship is sinking faster than what some people expected, which makes me wonder how long it may be till they have to start selling parks.

 

[zg44]

As I pointed out above, the problem is San Diego and Orlando. Both of those parks are now in the negative in terms of income generation. The estimates that I gave above were for 2016, so the numbers will probably be worse this year even though they're probably cutting costs associated with those two parks heavily.

BGT, BGW, and SW San Antonio should still be doing fine, but San Diego and Orlando are like anchors weighing down the whole company.

 

[fryoj]

As I pointed out above, the problem is San Diego and Orlando. Both of those parks are now in the negative in terms of income generation. The estimates that I gave above were for 2016, so the numbers will probably be worse this year even though they're probably cutting costs associated with those two parks heavily.

BGT, BGW, and SW San Antonio should still be doing fine, but San Diego and Orlando are like anchors weighing down the whole company.

With SWO having the largest attendance in the chain, why is it's financial situation the worst? Does it have higher overhead or costs than the other parks? More animals than the other SW's?

 

[zg44]

With SWO having the largest attendance in the chain, why is it's financial situation the worst? Does it have higher overhead or costs than the other parks? More animals than the other SW's?

Overhead and (largely employment) costs that were generated when they had much higher attendance; it's a bit complex to think about but the easiest example I can give is Universal and Disney.

Universal runs its parks at a break-even around 6 million guests per park. Disney runs its parks at a break-even around 8-9 million guests per park. It's basically apples and oranges depending on the # of employees and overhead associated with each park; Disney employs far more people per park and runs a higher cost rate when associated overhead is included.

SeaWorld Orlando in particular when it was successful was being run at around a breakeven of 5 million guests; it was profitable back in 2006-2008 when it was clearing that number easily. I'd imagine they've brought that breakeven down to around 4.3-4.5 million with cost cutting, but you're cutting at the bone.