Virus Concerns Loom Large Over Theme-Park Business
Second-quarter earnings season is drawing to a close, and while most industries saw business improve, the bounceback for theme parks was particularly encouraging thanks to healthy consumer appetite for entertainment. However, a new surge fueled by the spread of the Delta variant is threatening to upend the path to recovery for theme-park operators as more consumers begin to grow worried.
After seeing revenue at its theme parks sink as much as 85% from $6.6 billion Q2 2019 to just $983 million in Q2 2020, Disney reported its theme-parks revenue was well on its way back to pre-COVID levels. Even as capacity remained partially limited at its parks, sales jumped more than threefold last quarter, to $4.3 billion.
NBCUniversal said its theme-parks revenue was nearly back to pre-pandemic levels and reported revenue of $1.1 billion in Q2 2021, compared with $1.5 billion in Q2 2019.
Similar narratives played out for the other major theme-park operators. SeaWorld’s Q2 2021 revenue actually exceeded Q2 2019 by about 8%, and Six Flags Q2 2021 revenue was only about 3% below the same period in 2019. Cedar Fair’s rebound wasn’t quite as impressive as its peers, but it did see a major improvement from 2020.
Attendance also trended upwards. Disney and Comcast don’t officially report attendance figures, but the numbers from Six Flags, SeaWorld and Cedar Fair were encouraging in Q2. Six Flags noted that this year through July 25, which includes the July 4th holiday, park attendance in 2021 was about 82% versus the same period in 2019.
Meanwhile, Cedar Fair CEO Richard Zimmerman said as park restrictions relaxed and capacity increased, attendance was approaching 2019 levels. The lack of international guests was what kept SeaWorld below 2019 attendance levels, according to CEO Marc Swanson.
But the second quarter did not reflect the potential impact from the growing threat of the Delta variant, and what was uncertainty caused by the virus in 2020 has evolved to uncertainty caused by the variants in 2021.
The growing uncertainty has caused a shift in consumer sentiment over the past several weeks, as cases and hospitalizations surged among both the vaccinated and unvaccinated.
For most of 2021, Americans were becoming more comfortable with the idea of visiting theme parks until August rolled around. Among the 2,200 respondents in Morning Consult’s weekly survey, only about 44% said they would feel comfortable going to an amusement park in the first two weeks of August, down from more than 50% just a week earlier.
In addition, according to a coronavirus consumer tracker survey conducted by Ipsos, vaccinated American adults are growing more worried due to concerns about contracting the Delta variant. Of the 1,174 U.S. adults surveyed Aug. 3-4, more than half of those who said they were vaccinated are planning on pulling back from going to crowded places. And the same percentage of people who said they were planning on getting vaccinated planned to do the same.
Furthermore, about half of those who were vaccinated or planning to get vaccinated said they would be considering pulling back from visiting large cities for vacation. The survey results don’t bode well for the theme-parks businesses, which rely on high levels of foot traffic and out-of-town travelers to spend more per visit.
Investors have been patient, and they understand that a full COVID recovery will take time. But the biggest concern is whether these companies have the financial ability to weather another surge. Disney and Comcast have other revenue streams aside from their theme-parks businesses to rely on during another potential shutdown; however, companies like SeaWorld, Six Flags and Cedar Fair don’t have that luxury.
While it’s too soon to quantify the impact of yet another surge in COVID cases, it's not too early to be concerned that the consequences could be detrimental for theme parks.
