They can make for a fun day. But is there a big financial future in theme parks, specifically those bearing the Busch Gardens and SeaWorld brands? Investors are about to find out.
SeaWorld Entertainment Inc. debuted Friday as an initial public offering composed of 11 U.S. theme parks spun off by owner Blackstone Group, and now trading under the New York Stock Exchange stock symbol SEAS. Shares were priced at $27, which means the new SeaWorld company planned to raise $702 million from investors and started life as a public company valued at $2.5 billion.
SeaWorld's stock soared 24.2 percent Friday on its first enthusiastic day of trading, closing at $33.52 a share. Blackstone retained a majority stake in the company, profiting from the spin-off and reminding us it will have a say in any critical — or expensive — theme park decisions.
The theme park company swears in its IPO documents that there's still plenty of growth and upside potential in promoting multiple SeaWorld parks and the Shamu killer whale brand, as well as in Busch Gardens Tampa and its fellow Busch park in Williamsburg, Va. Measured by attendance, the new public company owns five of the top 20 U.S. theme parks. And the company says its entertainment and conservation strategy to showcase 67,000 animals (60,000 are fish) makes it hard for others to replicate.
SeaWorld Entertainment CEO Jim Atchison acknowledged Friday that the theme parks had fallen behind on capital spending during the sale of long-standing parent Anheuser-Busch to InBev. In 2009, Blackstone Group bought Busch Gardens and SeaWorld and several other theme parks from Anheuser-Busch InBev, renaming the attractions group SeaWorld Parks & Entertainment.
Atchison, paid $803,000 last year, said the parks are now poised with new attractions coming this year and in 2014, when the SeaWorld parks celebrate a 50th anniversary.
This is no cake walk. The theme park industry is extremely competitive — witness the remarkable attendance leap at rival park Universal Orlando thanks to the 2010 opening of its Wizarding World of Harry Potter. Other players, like heavyweight Disney, have no interest in losing market share. And Blackstone-controlled Merlin Entertainment Group, which runs the Legoland theme parks (including one in nearby Winter Haven that just opened a Star Wars-themed area), also may pursue a public offering — especially if Friday's well-embraced SeaWorld IPO remains an investor hit.
SeaWorld Entertainment starts its life highly leveraged with debt and constantly under the gun to introduce the next new breakthrough attraction or ride that will reinvigorate an attendance growth rate that lately is in the low single digits.
Finding the next truly "wow" attraction is tough, and typically mandates big bucks to deliver as visitors increasingly demand thrilling entertainment that includes sophisticated technology.
SeaWorld in Orlando in late May will unveil its most expensively created attraction ever in "Antarctica: Empire of the Penguin" that features a one-of-a-kind ride, the big-bet introduction and marketing push to promote a penguin character called Puck, with the ride literally ending with a stroll inside a penguin habitat. Tampa's Busch Gardens' latest roller coaster addition was Cheetah Hunt, unveiled in 2011.
Some industry analysts are skeptical. James Hardiman, an analyst at Longbow Research LLC, told Bloomberg News just before the stock debut that SeaWorld Entertainment operates a mature business that's probably not ripe for large-scale expansion. "From an attendance perspective, they're pretty slow growers," he said.
The Tampa Bay economy, of course, wants the local Busch Gardens theme park to remain a healthy pillar of the regional tourism industry and an employer of nearly 5,000 area workers. In addition to luring Orlando visitors to this area on the way to the gulf beaches, the 306-acre Busch Gardens is also a hot destination for locals (encouraged with low-priced annual passes) and beach tourists looking for an entertainment break from the waterfront.
So how will this group of theme parks prosper?
SeaWorld Entertainment says it plans to increase attendance at its parks and persuade visitors to spend more with a steady introduction of new attractions, sharper social media marketing and a menu of visitor "upgrades" available for a fee. One example: "All day dining" in parks for a supplemental fee (currently $32.95).
The company offers smartphone apps that can tell visitors what's closest to them in the park and which rides have the least lines.
The company also says it will increasingly use "dynamic pricing" to adjust admission prices up or down, depending on peak periods and slower periods.
It's too early to say if Friday's opening day of bullish trading in SeaWorld Entertainment will prove a worthy roller coaster for investors. Going public may become the company's ultimate thrill ride.
Contact Robert Trigaux at [email protected]