Six Flags CEO Faces Tough Climb to Put Theme Parks Back on Track
New Six Flags Chief Executive Mark Shapiro isn’t having much fun this summer at the company’s 30 theme parks.
“This product isn’t close to where we want to be,” Shapiro said during an unusually candid assessment of Six Flags Inc., which may sell six parks, including Magic Mountain and Hurricane Harbor in Valencia.
For the record:
12:00 a.m. July 8, 2006 For The Record
Los Angeles Times Saturday July 08, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 70 words Type of Material: Correction
Six Flags: An article in Friday’s Business section about Six Flags Inc. said Chief Executive Mark Shapiro received a letter in which a parent wrote about a visit to an unidentified park marked by long lines, closed rides, rude employees, rowdy teens yelling racial slurs and a couple having sex on the Ferris wheel. The visit occurred in October 2004, before Shapiro and his management team arrived at the company.
The company is $2.1 billion in debt. Its stock price plummeted 25% immediately after Shapiro’s harsh review late last month during a call with investors. Standard & Poor’s and Moody’s Investors Service lowered their outlooks and credit ratings on Six Flags.
“I’m not going to get on a call and lie to people or mislead people,” Shapiro said in a subsequent interview. “I think it’s important that people know what we’ve inherited. This is a long-term investment. This stock isn’t for short-timers.”
Six Flags’ shares fell 12 cents to $5.46 on Thursday.
Since taking over as CEO in December -- after shareholders overthrew the New York company’s previous management during a nasty proxy battle -- the 36-year-old former ESPN executive has launched a massive makeover to transform Six Flags from thrill parks overrun by teens into family-friendly destinations.
It may not be as easy as Shapiro thought.
In the middle of a second tour of company parks, this time during the busy season, Shapiro said he had witnessed unfriendly, slow-moving seasonal employees, poor maintenance and popular rides with a single train running at a time.
One parent wrote him a letter detailing a visit marked by long lines, closed rides, rude employees, rowdy teens yelling racial slurs and a couple having sex on the Ferris wheel. Shapiro declined to identify the park.
“This is the best example I have of what we’re up against,” Shapiro said. “We’re going to win this guy back.”
In the process, he’s winning fans.
Shapiro’s tough assessment of his company and willingness to unload troublesome properties brought cheers from industry experts even as some fretted about the potential loss of Magic Mountain’s unmatched collection of thrill rides if real estate developers were to end up with the land.
“It’s difficult to see much more room to disappoint,” Bear, Stearns & Co. analyst Glen Reid wrote in a note to shareholders. “This remains a long-term turnaround and we continue to be optimistic.”
Even Six Flags’ competitors are happy with the recommitment to the parks, said Dennis Speigel, president of consulting firm International Theme Park Services Inc.
“Shapiro took a body that was on the table that didn’t have a heartbeat after the other management team left and he’s got the heart beating again,” he said. “Morale has never been higher.”
But Shapiro said that Six Flags’ reputation had been “squandered away” and families were not returning at the pace he had hoped. Attendance is down 12.5%.
To speed progress, he has instituted major changes: a no-smoking policy at the parks and new characters, parades and entertainment. To strengthen finances, the company has sold assets and brought in a new management team, replacing six park general managers.
“We have a lot of work to do here and we’re going to do it,” Shapiro said.
“I’m confident that the audience and the guest is going to be very pleased with the product once we’re done.”
Previous management brought no stockholder value, lost money seven years in a row and allowed the parks to deteriorate, Speigel said.
Shapiro agreed. They “put their heads in the sand,” he said, and stopped conducting research.
Although Six Flags’ reputation varies from park to park, at Magic Mountain, “it’s downright bad,” said Jeff Putz, editor of Coasterbuzz.com, a website for amusement park enthusiasts.
“If you do show up at the park ... half the rides are closed,” Putz said. “The park is messy, trash is lying around, ride operators don’t care, service at food stands is bad. It adds up to people not having a favorable impression of the park.”
Shapiro acknowledged Magic Mountain’s problems during the conference call with analysts and investors.
He recounted receiving a letter last month from a visitor who described a “despicable” day that was “one of the worst reports I have ever seen.” Food lines weren’t open, roller coasters were on limited operation and “the park wasn’t as clean as it should be.” It turned out that 42 seasonal workers didn’t show up that day, he said.
Despite the challenges, Shapiro said signs of a turnaround were apparent. Although attendance at the parks is down, reflecting a decision to stop giving away so many season passes, spending per visitor is up 14% and visitor satisfaction is on the rise, he said.
According to survey results he received last month, complaints about Magic Mountain dropped 60% compared with last year. Numbers on cleanliness and friendliness also improved. Magic Mountain is home to some of the world’s tallest, fastest, steepest and most thrilling rides and is considered the coaster capital of the U.S. It accounts for about 10% of Six Flags’ overall attendance and is one of the company’s marquee parks.
To pay down a huge chunk of debt, Shapiro said, Six Flags must consider selling a lucrative asset such as Magic Mountain.
CBS Corp. recently sold its five Paramount Parks to Cedar Fair for $1.24 billion, an indication that Six Flags could garner high prices for its theme parks. Six Flags had begun receiving inquiries even before executives raised the possibility of a sale, spokeswoman Wendy Goldberg said.
“On the Paramount Parks deal, it was a feeding frenzy,” Speigel said. “Bids were going up $50 million, $100 million. It was unbelievable.”
As for Magic Mountain, “I could see it being snapped up very quickly,” he said, because “it’s worth it” and “there’s money out there.”
Based on what Cedar Fair paid for Paramount Parks, Magic Mountain alone could sell for more than $500 million, Speigel estimated.
Shapiro said there was a double demand for Magic Mountain. Not only would it be a strong lure for another theme park operator, but it also would be sure to draw interest from real estate investors who believe the 250-acre parcel is more valuable as a site for houses and businesses. It could be a year before any deals are completed, and Six Flags has not decided whether to sell.
“We absolutely wouldn’t walk away” from Magic Mountain unless the offer was too good to turn down, said Shapiro, who plans to continue improving all the parks.
Shapiro declined to identify any potential bidders for Magic Mountain.
Although coaster enthusiasts support the new management, Putz said many believed selling parks -- including one as viable as Magic Mountain -- might be too radical.
“Ever since the takeover, I think most people have been rooting for them,” Putz said.
Still, he added, “most enthusiasts don’t want to see any park closed. But you don’t necessarily adhere to logic or business reasons.”