At Major Amusement Parks, Attendance Is Taking a Dip

In a memo last month to employees at Universal Studios Hollywood, general manager Michael Taylor explained why the park was closing some attractions.

“Unfortunately, significantly fewer guests are choosing to visit us this summer than we had expected,” he wrote.

So it goes for most of the top theme parks this year as they continue to be squeezed by a glum economy.

Last week, Walt Disney Co. reported that theme park and resort revenue remained flat in its fiscal third quarter despite the addition of a second theme park in Anaheim, California Adventure.

And in Orlando, Fla., the theme park industry bellwether, tourism officials are bracing for the first decline in visitors in a decade.

The larger destination resorts are drawing fewer visitors this year as consumers watch their spending and opt for less expensive, closer-to-home theme parks and attractions. To compensate, the destination parks are offering a bevy of promotions and discounts to entice visitors during the normally peak summer months.

Overall, the U.S. theme park industry is expected to grow 2% to 3% this year, up from 317 million visitors in 2000. This is because of larger gains by smaller, non-resort parks.

“The regional parks this year are doing quite well, and the destination parks are slowing down,” said Susie Storey, spokeswoman for the International Assn. of Amusement Parks and Attractions. “They are just not seeing the people they thought they would.”

So far, analysts said, the situation is nowhere near as dire as in the early 1990s, when Disney’s Florida parks saw steep losses in the face of the Gulf War, recession and crimes against tourists.

Many analysts predict modest declines in theme park attendance this year. But no one knows for sure how the latest slowdown is going to play out because of uncertainties in the economy and changes in the theme park industry over the last decade.

“Do we anticipate continued softness? Yes,” said Katherine Styponias, an analyst with Prudential Securities. “The big question is, can it get a lot worse from here?”

Merrill Lynch analyst Jessica Reif Cohen estimates that attendance in the quarter ended June 30 declined 5% to 6% at Disneyland and 7% to 8% at Walt Disney World. Hotel occupancy was down 2% to 3% at both resorts, she said.

“We have long been concerned about the impact on theme park segment results from a weakening economy,” Cohen wrote in a recent report.

Disney’s California Adventure drew far fewer crowds than anticipated after the $1.4-billion park opened next to Disneyland in February. Bad weather and questions about the value of the attraction also have hurt the park.

To spur attendance at the new theme park, Disney took the rare step of offering free admission this summer to Southern California children ages 3 to 9 and $10 discounts for the parents who accompany them. Disney also reintroduced its popular Electrical Parade, once a mainstay at Disneyland.

Disney does not disclose attendance figures, but company executives have acknowledged the economy’s impact. “We clearly have seen a softening in attendance as a result of the economy,” attractions Chairman Paul Pressler said.

In Orlando, Walt Disney World also has seen a falloff in European visitors because of the weak euro.

Company executives said they don’t expect further declines in theme park attendance because of the promotions and stepped-up marketing efforts. Discounting and new entertainment at California Adventure have bumped up attendance in recent weeks, officials said.

Universal’s theme parks in Orlando and Hollywood also are feeling the squeeze, said Spencer Wang, an analyst with ABN Amro. “It’s soft all around for the destination resorts.”

The two Florida parks--Universal Studios and Islands of Adventure--are jointly owned by Vivendi Universal and Blackstone Capital Partners. Universal Studios Hollywood is wholly owned by Vivendi.

Wyman Roberts, chief marketing officer for Universal Studios Recreation Group, would not discuss attendance figures but said: “As has been well documented in Orlando, there has been a slowdown here,” he said. “It’s a fairly mature market and all the boats rise and fall with the tourists who come into town. It’s been a challenging time.”

In Orange County, Fla., hotel-tax collections were down 7% in June for the fourth consecutive month. And officials with the county’s convention and visitors bureau are predicting negative numbers in visitor growth this year for the first time in a decade.

But Roberts said the resort’s hotels--Hard Rock and Portofino Bay--have performed better than expected and that there are “signs of improvement” in Orlando.

Universal Studios Hollywood has fared better than the two parks in Orlando but did not draw the big summer crowds executives expected. Surprisingly, the theme park was counting on a big influx of visitors to Southern California from the opening of Disney’s California Adventure. Universal Studios operates a free shuttle service from Anaheim to its Hollywood park.

“We were looking for a large draw into the market, and it didn’t materialize,” said Larry Kurzweil, president of Universal Studios Hollywood. “We had to reset our sights to get through the summer.”

Kurzweil expects the park to show a modest increase in business this year.

Many smaller parks that cater to nearby visitors who come for the day have held their own.

For Six Flags Inc., which has 30 U.S. theme parks including Magic Mountain in Valencia, attendance has been up 3% over last year, said company spokeswoman Debbie Nauser. Its theme parks rely mostly on local season pass holders.

Busch Entertainment Corp., which owns the SeaWorld parks in San Diego, San Antonio and Orlando, also is having a solid year. “We’re on pace for a record year, both in terms of attendance and profit,” said Busch spokesman Fred Jacobs.

The Orlando and San Diego parks have benefited from promotions. Last year, SeaWorld Orlando started offering yearlong passes during the spring for the price of an admission ticket. A similar program was held at the San Diego park from January through April.

SeaWorld in San Diego expects double-digit gains in attendance this year, said park spokesman Bob Tucker. “What we’ve lost in terms of revenue at the gate, we’ve made up for in gift purchases and food buying,” he said.

Some of the regional theme parks, though, have seen a slowdown.

Attendance for Ohio-based Cedar Fair, which operates six amusement parks, including Knott’s Berry Farm of Buena Park, is down about 3% over last year, said Brian Witherow, director of investor relations.

Responding to the business slowdown and competition from Disney, Knott’s Berry Farm recently began a discount promotion at Ralphs markets. Through Sept. 4, the stores are selling admission tickets for Southern California children at $9.95, $3 off existing price reductions.

At Magic Mountain, which will open three new roller-coaster rides this year, attendance has been running slightly behind last year, said park spokesman Andy Gallardo.

It’s difficult to predict the fallout from the current slowdown because the industry has dramatically changed in the last decade. The economy is stronger than during the recession of the early 1990s. Yet, on top of weak attendance, parks today face much more competition for visitors’ dollars, analysts say.

“Because of the huge expansion, we have a highly competitive market, particularly in the destination areas,” said John Robinett, senior vice president of Economics Research Associates of Los Angeles. “We’ve got all these theme parks and not enough people going to all of them.”

In addition, theme park resorts are more susceptible to consumer spending cycles because theme park vacations have grown more expensive in recent years, Robinett said.

A family of four pays about $163 a day for a theme park vacation, 40% more than in 1993, according to Amusement Business, an industry trade publication.

“We’ve gotten to the point that takes theme parks beyond an impulse buy,” Robinett said. “It needs to be duly considered by the family because it’s a substantial expense.”