Q1 2023 updates for Cedar Fair/Six Flags, SeaWorld, Universal Studios, and Disney demonstrated that the industry’s recovery from the pandemic was solid in Q1, despite adverse weather. The Bureau of Economic Analysis (BEA) personal consumption expenditure (PCE) data shows that domestic demand has +40% more to go to reach a full recovery. Additionally, we suspect that the industry could easily exceed the +40% and its pre-pandemic ratio of PCE (0.447%) due to the sizable increase and investments in new attractions and new parks. As it relates to international visitors, SeaWorld tagged this as still being 40% below 2019’s level. All that said, from these earnings results, the pace of recovery seems settling lower, which is consistent with our last week’s comments on travel and tourism.
Last year, we wrote about all the attractions being added to the Universal and Disney parks, which are now delivering with more on the way, including the new Epic Universal in Orlando in 2025. (All of these companies view the industry as a “growth industry” and a consequence of that bolstered viewpoint, are increasing their rate of investment in it.) For example, in terms of new attractions at SeaWorld this year: SeaWorld Busch Gardens Tampa opened the Serengeti Flyer, “the world's tallest and fastest Screaming Swing that takes riders up to 135 feet at speeds reaching 68 miles per hour.” In May, SeaWorld Orlando will open Pipeline: The Surf Coaster, “the first-of-its-kind surf coaster with seats in a surfing position that rise and fall to mimic the sensation of riding a wave. The coaster will accelerate riders to 60 miles per hour through five air-time moments and an innovative wave curl inversion.” And on, and on.
In addition to new attractions, the industry used the pandemic’s downtime to invest in new consumer-facing digital enhancements such as the Disney Genie and mobile payments and tickets, and venue (i.e. more premium) enhancements. On its Q1 2023 update, SeaWorld’s CEO shared, “On the mobile app, we are excited about our performance to date. Our recently rolled-out app, which is being used by an increasing number of guests in our parks and has been downloaded more than 5 million times. As of the end of April, the number of active users is up over 20% compared to prior year and the total revenue generated on the app is up over 200% compared to prior year. Mobile ordering has been expanded to additional restaurants and is now operating at approximately 70% of our target restaurants. Mobile orders have had a 26% higher average order volume compared to non-mobile orders.” During the pandemic, these operators also rewired their businesses for a lower cost, more efficient, higher margin business than pre-pandemic, which showed through in their results, as next discussed.
In reviewing results for theme park operators in Q1 2023, keep in mind that results were hindered by adverse weather in California and other markets. In total, SeaWorld estimated an impact of around -400 basis points (equivalent to -136K admissions). Reported admissions were +1% above 2019’s level. (More impacted Six Flags was down -27% year-over-year and down -10% compared to 2019.) SeaWorld demonstrated that excellent "electrical work" was done during the shutdown. In total, per-cap revenue of $86 was up +31% compared to 2019, whereas expenses (excluding depreciation and amortization) was up only +15%, resulting in a contribution margin of $14.56 per admission versus $3.21 in 2019. For the year, the contribution margin should reach $33, nearly double the 2019 level.
Disney’s domestic park attendance was up +7% year-over-year, but it is still down -10% from 2019 levels (which is primarily due to fewer international visitors). Disney’s per-cap revenue of $169 was up +45% versus 2019 and the contribution margin increased by over +50%. Strong financial results such as these will provide support and confidence for more investment in the quality of the experience and expanded capacity (more rides, park expansions, and more parks). Those will likely result in the amusement park PCE to total PCE ratio moving above the pre-pandemic level of 0.447%.