SeaWorld’s business has been taking it on the chin lately, and one analyst says it may be time for the company to consider cutting bait and ditch its Orlando location.
According to Jason Bazinet at Citi, the struggling amusement park brand is getting outmaneuvered by its competitors in the Florida market, and there may be solid benefits to selling the land and its east coast park.
SeaWorld’s rough couple of years started with the CNN documentary Blackfish, and recently got even worse after boy-band One Direction’s Harry Styles called for fans to boycott the park, prompting a massive amount of negative consumer sentiment.
The negative PR has led to decreasing attendance and revenue for the company, and Bazinet says that is focused primarily in two of the company’s 13 locations.
“Interestingly, the lions’ share of this decline occurred at just two parks: SeaWorld Orlando and SeaWorld San Diego,” he wrote in a note to clients. “These two parks represented about 85% of the attendance declines across the firm’s 11 theme parks. Yet, in 2008 these two parks made up only 45% of SeaWorld’s aggregate visitors.”
According to Bazinet, SeaWorld has been losing visitors to Universal Orlando. Furthermore, the negative sentiment from Blackfish has been particularly robust in Florida.
This led Bazinet to a radical, and admittedly unlikely, possibility: SeaWorld should sell their Orlando park.
The Florida location made the most sense, said Bazinet, because SeaWorld owns the land instead of leasing it like in San Diego and it has experienced the greatest attendance declines. Selling the land would generate $US500 million in after-tax value, according to his analysis, against a loss of $US25 million in free cash flow.
This would also mitigate the attendance loss percentages. “Without the 407,000 decrease in attendance from SeaWorld Orlando, total attendance would have decreased 2.5% instead of 4.3%,” said Bazinet. “Simply selling Orlando gives SeaWorld a comparable 2014 attendance decline as Six Flags (-2% attendance).”
Finally, Bazinet calculates that the revenue generated would go to share buybacks and paying down debt, which would raise the company’s share price $US6, from around $US18 currently to $US24, and its free cash flow multiple would jump from 10.5x to 12x.
Bazinet admits this is a nuclear option, but if such substantial attendance losses continue, all options have to be explored.
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