In a notice filed with the U.S. Securities and Exchange Commission two weeks ago, Six Flags painted a grim picture of its finances. Burdened with debt taken on by past owners' expansion spree, Six Flags is facing bankruptcy if it cannot make a deal with its creditors, to either forgive or postpone payment on its debt.
I asked Shapiro, given the problems companies around the world are having refinancing debt due to the Great Recession, what cuts Six Flags might have to look at making in 2009 to conserve cash to cover its debt obligations.
"None," he swiftly replied.
"The thing you have to remember and that you already know, Robert, is that Six Flags has $200 million in cash on hand," Shapiro said. "So no matter what happens this year, we will be able to pay our bills, our vendors and our employees."
"This is a back office problem," he continued. "The parks themselves are stronger than ever; we're making money, attraction visitors and posting higher guest satisfaction ratings than ever before."
"What people need to know is that when they come to visit a Six Flags park [this year], the only changes that they will see are continued improvement."
I asked Shapiro how Six Flags was planning to respond to Disney's recent aggressive marketing efforts. Traditionally, Six Flags has positioned itself in tough times as the "affordable" alternative to a Disney World vacation. Does Six Flags have room to respond when Disney's repositioning itself a less expensive alternative?
"We're not in competition with Disney," Shapiro replied. "Disney requires a plane trip, an extended hotel stay, and," he added with a laugh, "an extensive outlay in merchandise purchases."
Shapiro contrasted a $49 annual pass to Six Flags Over Georgia, with its unlimited admission to all Six Flags parks, additional five free tickets for friends, in-park discounts and end-of-season Season Passholder Night to Disney's one-day, one-park admission price of $75.
"Six Flags is a drive, not an airplane flight. It's a full day of entertainment, but not something that's ever going to cost as much as a trip to Disney," he added.
Of course, cheap tickets won't bring in visitors to parks that don't have an attraction line-up of fresh rides and shows. I asked Shapiro, given the global credit crisis and the company's debt burden, what position it was in to be able to add new family attractions in 2010 and beyond.
Shapiro replied that Six Flags has been spending $100 million a year on new capital, including rides, shows and facilities. And that the company planned to increase its capital spending an additional 10 percent in 2010. Shapiro said he would like the company to increase spending beyond that for the company's 50th anniversary in 2011.
"Look at what we are doing at Six Flags Over Texas with the Texas Giant," he said. "That's a great ride, but it needs some love. So we're spending $10 million to redo it, and we're closing it down for a year in 2010 to make sure we can do it right."
"If the park was losing money, you wouldn't do that. You'd just shut the ride down."
On that note, I asked Shapiro about the pace of Six Flags' effort to clean up and improve the theming and customer service within its parks. I noted that several Theme Park Insider readers had complimented improvements at parks such as Magic Mountain, but others reported they were still waiting to see improvement at their local park. I specifically mentioned St. Louis, following one TPI reader's request to single out that park.
"Yes, we still have a long way to go," Shapiro conceded. "And we will so long as I am in charge of this company. We'll never get to that point of perfection."
"But given the destruction in this company over the 10 years before we came on board, there was a lot of work to be done. You can't expect to finish everything in the two seasons that we've be here."
"Look, we love coasters. Thrills is our middle name. But we recognize now that coasters come in many shapes and sizes, and that we can build rides that appeal to the whole family. I am happy with what we've done. You're seeing new family rides, new paint, cleaner facilities and better customer service throughout our parks."
Shapiro acknowledged that the pace of improvements is never constant among all parks, but noted across-the-board improvements in customer satisfaction, even in St. Louis, according to Six Flags' in-park surveys. With the economic downturn filling applicant pools, Shapiro said that Six Flags is looking forward to being able to choose from even better applicants when hiring this year.
I asked Shapiro what his message would be to theme park fans who don't visit, or don't like, Six Flags.
"This is a different company now," he responded. "Look, I understand why people turned away from Six Flags in the past. Heck, I was one of those consumers myself. But I think who do give us a chance are seeing the value, the customer service and the overall great experience that we now provide."
So what's his message to investors?
"I guess that it is 'thank you'," Shapiro replied. "I appreciate the patience that our investors have had in us as we've tried to turn this around."
I've compared what Six Flags' corporate office is trying to do now with its creditors to a "negotiated bankruptcy." Bankruptcy does not mean that a company goes out of business and ceases operations. It means that a court supervises the reorganizing of its assets and debts. It tells creditors how much of their money they can get back and tells the company what it can continue to spend. Six Flags is attempting to negotiate that kind of deal with its creditors itself, without having to go to the court.
I asked Shapiro to give me odds on whether Six Flags ultimately would have to go to court in a formal bankruptcy. He wouldn't do it, but did tell me that this renegotiation with creditors "would be a 2009 event."
"You won't hear this complaining or reporting about debt in 2010," he said. "These parks are not going away. We will restructure this debt so that Six Flags can continue for another 50 years."
Thoughts?
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But in terms of customer service, I'm not sure which is worse: SFStL or SF America. (The place I've noticed the biggest change is SF Kentucky Kingdom. In fact that manager watches the coaster forums and responds to suggestions. I, among others, have showered him with praise for a well run park.) Here's an idea Mark: move him to SFStL and let him fix that!
One more comment: I really liked Shaprio's down-to-earth communication. Saying the Texas Giant needed "some love", now that is definitely not something a big time exec is usually going to say! I think he really wants to improve the brand and make Six Flags a better, more family friendly experience. I am willing to give the man some time, and appreciate his honesty and candor.
Nice job, Robert!
That's the Six Flags advantage that they can exploit heavily this year. Orlando trips are expensive, people are staying close to home this year, and are on a budget. Market the crap out of those three facts in one form or another along with a positive spin on Six Flags. There is huge potential for them to get some market share this year.
Now I am only speaking about SFGA, but I am curious if it is at the other parks as well. SFGA honestly seemed to do very well last season. In fact, they have a new attraction being built on a sizable footprint and unveiled a new roller coaster last year (no matter how bad it was). It was also $35 to enter through the gate without a discount from Coke Cans or Jewel (which makes it cheaper). I paid 70 last year for my Season Pass, 60 this year (got it early!)What about you out there?
Look, Shapiro's a CEO. His job is to be upbeat about every aspect of the organization. I wish I'd better audio quality with my recording so I could have posted the complete interview for everyone to hear. There's interesting stuff if you note the details between proclamations.
He said that improving the parks was an at least three year project. This is the start of year three. Will every park in the chain see improvements by the end of this year? You'll be able to tell us.
He didn't rule out formal bankruptcy, and if creditors don't deal, Six Flags won't have a choice. He really ripped on Premier Parks for destroying value in the company before Dan Snyder's team arrived. They truly do understand how badly the Six Flags value has been trashed.
I found interesting the statement that Six Flags doesn't compete with Disney. Of course it does. It's not a direct competition, a la Universal Orlando vs. Walt Disney World, but all out-of-home, all-day entertainment competes with each other, whether it be theme parks, a day skiiing or going to a NASCAR race. What Six Flags is trying to do is to position itself as a different type of family get-away than Disney offers.
In essence, Six Flags is trying to turn back the clock to the days before Disney redefined a theme park visit as a week-long vacation. Given Disney's success in doing that, Six Flags is going to need to do some significant promotion to reestablish the one-day family theme park trip as a priority for the public. (Instead of the one-day visit being what a gaggle of teen-agers does.) That you offer the alternative isn't enough. You've got to convince the public that your alternative is a worthy one.
This isn't just the topic for an advertising campaign, though a more aggressive one will be required. It demands a complete marketing campaign, including efforts to reach out via websites and other publications to model one-day and weekend visitation plans for families, so people can envision what a fun, engaging and worthy Six Flags visit looks like. Disney's did that with the week-long model, but it took years.
And, FWIW, I loved the dig at Disney over the whole Disney merchandise fetish. I know, Disney's laughing all the way to bank on that one, but the extent to which people will blow money on Disney stuff amazes me, and I think Shapiro's spot on in identifying that some families want to avoid getting caught on *that* ride.
And speaking of the Disney merch. dig, he has not leg to stand on since Disney has started to put some of their stuff in his park stores. The one thing I do not like is Six Flags selling off parts of the parks to Disney, Home Depot, and Geico, especially Geico. SFGA is sometimes like a giant Geico commercial.
Oh and more kiddie rides I think is needed for them too!
Though I, too, think that they are a competitor of Disney. They are both major amusement chains.
Good luck.
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I pressed him on U.S. expansion, and he said that the company had no plans for a new U.S. park. As for the persistent rumor about a Six Flags Florida, he said that the Florida market was always something for Six Flags to consider, but that he had no plans for it.