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The CEO of Six Flags Entertainment Corp. Selim Basul has an ambitious strategy to increase profits at the theme park chain by raising prices and attracting more families with higher spending.
“We’ve become a daycare center for teenagers,” he said on an Aug. 11 earnings call.
But the strategy has not yet been a hit with many guests, employees and investors. Attendance fell 22% in the quarter ending July 3, although other theme park operators are enjoying a rebound in rides. Park workers took to Reddit to complain about his changes. Six Flags shares have lost 40% of their value since Bassoul took over in mid-November.
“The problem is, you can’t go from Walmart to Nordstrom in two quarters,” said Martin Lewison, an associate professor who studies theme parks at Farmingdale State College in New York. “It’s not yet clear what Six Flags will do to become more premium, other than dining.”
Basoul, a 65-year-old native of Lebanon, raised the prices of the company’s annual passes. An entry-level pass that included parking was available for as little as $50 in the past. A comparable pass now starts at $115. An annual dining plan, which became a TikTok phenomenon after members shared ways to eat in the parks every day, has risen to $134 from about $80 to $100.
He also cut back on marketing while he waited to make other improvements and cut full-time staff by nearly 25%.
The price increase pushed guest spending up 23% in the quarter to nearly $64 per person. But lower attendance contributed to a decline in revenue and profit.
Some believe it could worsen amid inflation and more cautious consumer spending.
“If they thought the second quarter was bad, the third quarter is going to be terrible,” said Dennis Speigel, founder of International Theme Park Services, a consulting company in Cincinnati. “It’s just the impact of the economy.”
Basul, who declined to be interviewed for this article, told investors on the conference call that he is following the same playbook he did when he ran Middleby Corp., a maker of appliances and other equipment for commercial and residential kitchens. There he acquired other companies whose management had lost confidence in their products. Those managers cut prices to increase sales, he said. Bassoul raised prices after acquiring the business.
“In many cases our unit volume has decreased, but in every case our profits have increased significantly,” he said.
Six Flags, founded in 1961, is the largest owner of regional theme parks in North America, with 27 properties including Great America, outside Chicago, and Magic Mountain, just north of Los Angeles.
Basul said he is renovating the park’s entrances, restaurants and bathrooms and adding more benches and shaded areas where guests can relax. He also plans to host more events for families in the fall.
One upside to lower attendance is a shorter wait for a ride. This was echoed by one guest, 18-year-old Olivia Mauro, a frequent visitor to the company’s Great Adventure Park in New Jersey.
“I’ve never waited more than 20 minutes for a ride all summer,” she said.
But Bassoul’s strategy involves more customers, especially families, buying season passes at higher prices. This can be a tough sell.
Margaret Andrews, a 44-year-old worker in the nonprofit industry, said she recently paid about $250 for parking and admission for herself and two children at Great Adventure. Food and drinks added another $80.
“The day is not cheap,” she said. “Once a year is reasonable, but I don’t know if I’d be willing to pay much more.”
Six Flags is heading in the direction the industry is going — higher quality food, better landscaping and shorter lines, notes Rosenblatt Securities analyst Barton Crockett. The problem, he said, is that Six Flags still hasn’t properly marketed its new improvements, leaving potential customers and investors in the dark.
“Disney was able to make people believe they were getting something for what they were spending,” Crockett said. “Six Flags hasn’t gotten this right yet.”
On the call, Basul asked for more time. “Our aggressive strategic shift is still a work in progress,” he said.
H Partners Management, the company’s largest shareholder, bought another 500,000 shares last week.
© 2022 Bloomberg LP
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