Problems at Six Flags Entertainment (SIX)
Six Flags Entertainment (NYSE: SIX — $1.83 billion) describes itself as the “largest regional theme park operator in the world” with 24 parks in the United States, two in Mexico, and one in Canada. Investors are excited about the company’s prominent brand, low valuation, and turnaround potential. The Bear Cave believes Six Flags is a struggling business with strong competition, out-of-touch management, looming debt maturities, and a future that may be heading off the tracks.
Six Flags generates its revenue from ticket sales, season passes, parking fees, and food and beverages. Last year the company welcomed nearly 28 million guests and roughly half the country lives within 50 miles of a Six Flags park. The company primarily serves the middle-class demographic along with close competitor Cedar Fair (NYSE: FUN — $2.18 billion).
The new CEO of Six Flags, Selim Bassoul, wants to change that.
Since Mr. Bassoul took over in November 2021, he’s drawn outrage for comments on attempting to shift the company’s target demographic upwards. On the August 2022 earnings call, Mr. Bassoul said, in part,
“At the end, our objective is not to become a park that's not affordable to everyone. So, let's make that clear… I'm migrating a little bit from what I call the Kmart, Walmart customer to maybe the Target customer, if I want to say that.”
He added,
“[A friend of mine said] I want my children to be safe. I don't want rowdy teenagers running around… We only got the discounter or we became a daycare center for teenagers. [The company] was a cheap daycare center for teenagers during breaks and the summers.”
Mr. Bassoul’s comments on “premiumization” were criticized by customers with some saying they were “classist” and “just idiotic.” The basics of Mr. Bassoul’s premiumization strategy for Six Flags is to 1) raise prices, which will lead to lower guest attendance and shorter lines, 2) lower employee counts based on lower attendance, and 3) use the cashflow to make the park attractive to higher income consumers who will spend more on fast passes, cabanas, and meals.
It isn’t going well. One theme park-focused YouTube channel, Attraction Ideas, published an August 2022 video titled “The Death Of Six Flags Is Upon Us.” The video has since earned over a million views and some top commenters wrote,
“Everything this new CEO has said, or planned, makes it sound like he walked into Six Flags with no other goal than destroy it.”
“The fact that the CEO thinks that they should focus on families instead of teenagers and adults, just shows how much he knows about the Six Flags parks.”
“The only reason my family would go to Great America while I was growing up was because it was the only affordable theme park in our area. This will be disastrous for Six Flags.”
“Six Flags needs to desperately CLEAN their parks, PAINT fading facades and rides, FIX cracked pavement and buildings, MAINTAIN their rides better, MANAGE landscape better and TRAIN their employees on cleanliness, guest relations and employee expectations.”
“Raising prices without making some kind of improvement or anything in return was a horrible business decision. Especially if you're marketed as the 'affordable alternative' which inherently implies that they are second rate in comparison to big name theme parks.”