By Amanda Kondolojy, Tuesday, September 20, 2016 06:19
Though Walt Disney World and Universal Orlando Resort have been grappling with attendance declines at their theme parks in 2016, this has been, at most, a temporary problem for these resorts. While we are seeing budget cuts and other side effects from this disappointing year in central Florida, it is all but assumed these massive resorts will get through this rough patch relatively unscathed, and will of course continue to exist (and thrive) in the future, even if things aren’t looking so great in the short term. However, the long-term outlook for SeaWorld Orlando looks considerably more murky.
After two years of declines and poor earnings for SeaWorld parks around the country (but especially at SeaWorld Orlando), 2016 needed to be a hit. And with the brand new, record-breaking roller coaster Mako debuting in the summer with plenty of buzz, everything looked to be set for this park to finally have that good summer they’ve been talking about since 2012. Unfortunately, that didn’t happen.
Just this past August CEO Joel Manby set expectations during an earnings call saying that he wasn’t sure that SeaWorld had ”hit the absolute bottom” quite yet, implying that even though things have been bad for the park, they could get conceivably worse. And then the worst news of all came late Monday afternoon for the theme park giant: the company will be suspending dividends for stockholders, with money instead being deployed into “opportunistic” share repurchases as part of an aggressive stock buyback program.
Now if you’re not well-versed in the business world, this may not sound like that big of a deal. However, when a company suspends paying out dividends, the implication is that they are looking to conserve capital because they are becoming financially constrained. In the case of SeaWorld, this doesn’t seem like a very farfetched notion, as the company reported via its financial results earlier this year that it only had $29 million in cash on hand last quarter, way down from $52.9 million in the previous year.
This may be bad news for shareholders, but it could also be some very bad news for the theme parks as well, though not in the short term…
The future just got really cloudy…
In the short term, this bad news changes absolutely nothing at SeaWorld parks around the country. All of the attractions will continue to run, Halloween and Christmas events will go on as planned, and visitors will continue to enjoy everything that a day at a SeaWorld park entails. However, ambitious plans for the future may be altered or scrapped.
Back in 2015, when SeaWorld was anticipating that 2016 would be a banner year at the park, they announced that they were developing a brand new “rescue”-themed dark ride for SeaWorld Orlando that would allow guests to follow along with SeaWorld rescuers into remote locations across the globe. Though SeaWorld didn’t announce where this ride was going in the park, they said that they were targeting a 2017 opening for the ride. And that was the last we heard of it.
Of course, while this most recent round of bad news doesn’t automatically mean this new ride has been pushed back or scrapped, considering the Blue World project (which went from announced to abandoned in less than two years) followed a similar trajectory, such a development seems very likely in this case, as SeaWorld may well not have the budget to spend on such an ambitious attraction. Couple that with the lack of updates regarding this project (which will miss its 2017 completion date in just 15 months), and it seems very likely that if we do ever hear about this project again, it will be to announce a delay.
Similarly, SeaWorld Orlando’s previously announced plans to build up hotels around the park have also likely been either scrapped or put on hold indefinitely as the park will likely be devoting all of its resources in the coming months to staying in business in the face of what has truly been the park’s worst year yet.
So why did this happen?
Though we already knew that attendance at SeaWorld Orlando was way down year-to-year (dropping nearly 8 percent in the second quarter), SeaWorld was quick to blame the decline in international tourism (particularly from Brazil) for the park’s attendance woes. However, is this the only thing that is contributing to this stunning turn of events?
Some have been pointing the finger back at SeaWorld for these recent troubles, saying that their recent decision to halt their killer whale breeding program alienated fans, and didn’t sufficiently make an impact on the general public. And while there may be some truth to this, it seems doubtful that longtime SeaWorld fans would abandon the park after an animal policy change which won’t see any real-world ramifications for at least two more decades.
However, what is most likely the root of SeaWorld Orlando’s woes is the ongoing erosion of guest attention. Back in 2010, when Blackfish was first released, SeaWorld was a hot-button topic, with everyone talking about the pros and cons of killer whale captivity. Fast-forward to 2016, and this topic is barely even discussed anymore. And while that might sound like a good thing for SeaWorld, the fact is that many consumers made up their minds about SeaWorld several years ago, and then promptly forgot about it. Those who decided they didn’t want to visit the park anymore back in 2010 are just gone for good, and with SeaWorld not making headlines any more, they likely haven’t thought much about the park since then.
Even though SeaWorld Orlando launched an aggressive marketing campaign for Mako, it looks like those guests who left SeaWorld haven’t come back yet, and the depressed attendance levels we’re seeing could just be the new normal for the park.
While a recovery for SeaWorld remains perfectly possible, this recent move seems to indicate that SeaWorld is in even more trouble than we previously thought. However, the silver lining here is that the suspension of dividend payments is a very protective measure, and if SeaWorld can get its financial house in order, maybe they can forge a new way ahead.
Have you been to SeaWorld Orlando recently? Do you think this park will recover from these hard times, or is this the beginning of the end? Sound off in the comments below!
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