The Death of Six Flags Is Getting Ugly

Summary

The video script discusses Six Flags' history of poor decision-making, from the Time Warner fiasco to recent financial struggles under CEO Saleem Bass. Despite a record-breaking theme park industry in 2022, Six Flags failed to capitalize, due to Bass's strategy to make the parks 'premium' by raising prices, which backfired. In 2023, Bass adjusted the strategy, lowering prices and planning new thrill rides to attract visitors. Despite a 55% drop in net income, the outlook is cautiously optimistic as Six Flags aims to innovate and invest in its core strength: thrilling rides.

Takeaways

• 🎢 Six Flags has a history of poor decision-making, including a failed partnership with Time Warner and excessive spending on roller coasters that led to bankruptcy.
• 📉 In 2022, despite a surge in theme park attendance industry-wide due to pent-up demand, Six Flags failed to capitalize and instead experienced a significant drop in attendance and revenue under CEO Saleem Bass' new strategy.
• 💸 Saleem Bass attempted to reposition Six Flags as a premium destination by increasing prices, but this strategy backfired, causing a sharp decline in visitors and revenue.
• 🔄 In response to the backlash, Bass reversed course in 2023, lowering prices and initiating numerous sales, although the base prices remained slightly higher than pre-2022 levels.
• 📊 Six Flags' Q2 2023 results showed a 55% drop in net income, which was primarily due to a $38 million adjustment in self-insurance reserves, not a direct result of operational performance.
• 🤔 The large increase in self-insurance reserves raises questions about Six Flags' management, as it contrasts with industry norms and suggests mismanagement or oversight.
• 📈 Despite the net income drop, there are some positive signs, including a 2% increase in revenue and an 11% increase in July attendance, hinting at potential recovery.
• 🎢 Bass has shifted focus back to investing in new thrill rides, recognizing that this is the core strength and DNA of Six Flags, a change from previous strategies focusing on amenities.
• 💰 Capital expenditures for 2024 are projected to increase significantly, indicating a renewed commitment to enhancing the park experience through new attractions.
• 🎢 The company plans to retire older, high-maintenance rides and replace them with state-of-the-art thrill rides, aiming to excite the park's customer base.
• 🚀 Saleem Bass expressed optimism about Six Flags' future, with a renewed vision that includes innovation across various aspects of the business, and a goal of attracting 25 to 27 million guests annually by 2025.

Q & A

What is the main issue discussed in the script regarding Six Flags' business decisions?

The script discusses Six Flags' history of poor decision-making, particularly the recent strategy by the new CEO, Saleem, to turn Six Flags into a premium destination by increasing prices, which resulted in a significant drop in attendance and revenue.

What happened to Six Flags in the early 2000s that is considered a poor business decision?

In the early 2000s, Six Flags made a poor decision by selling to Time Warner, which eventually resulted in financial trouble and bankruptcy a few years later after spending a large amount of money on new roller coasters.

What was the theme park industry's situation in 2022 according to the script?

The script mentions that the theme park industry in 2022 experienced a surge in demand after the COVID-19 pandemic and shutdowns, leading to record-breaking revenues and attendance for most theme park companies, except for Six Flags.

What was the strategy that Saleem, the CEO of Six Flags, implemented in 2022 and why did it fail?

Saleem's strategy in 2022 was to increase prices to turn Six Flags into a premium destination like Disney or Universal. It failed because attendance dropped significantly, and revenue and net income decreased, making Six Flags' performance lag behind its competitors.

What was the initial reaction to Six Flags' Q2 2023 results?

The initial reaction to Six Flags' Q2 2023 results was shock and disbelief due to a 55% drop in net income, which was later explained by a $38 million adjustment in self-insurance reserves.

Why did Six Flags make a $38 million adjustment to their self-insurance reserves?

Six Flags made the adjustment due to a past settlement of $36 million to guests in 2021, which was not properly accounted for in their reserves. The increase is meant to cover potential future insurance claims and lawsuits.

What changes did Saleem make in response to the poor performance of Six Flags in 2022?

In response to the poor performance, Saleem dropped the prices, although they are still slightly higher than pre-2022 levels. He also initiated a large number of sales on season passes from October 2022 through May of the following year.

What was the attendance increase for Six Flags in the first half of 2023 compared to the previous year?

The attendance for Six Flags in the first half of 2023 increased by only 6% year-over-year, despite significant price drops and discounts.

What is Six Flags' plan for the future according to the script?

Six Flags plans to invest in new thrill rides and improve park maintenance, with capital expenditures expected to increase to between $200 to $220 million in 2024 and further to $230 to $250 million in 2025.

What is the expected impact of Six Flags' new strategy on their annual guest numbers by 2025?

With the new strategy focusing on thrill rides and park improvements, Six Flags expects to reach their goal of 25 to 27 million guests annually by 2025.