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Ladies and gentlemen, thank you for standing by and welcome to the Cedar Fair Entertainment Company 2020 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Michael Russell, Corporate Director, Investor Relations. Thank you. Please go ahead.
Thank you, Christina and good morning, everyone. Welcome to our 2020 first quarter earnings conference call. Earlier this morning, we distributed via wire service our earnings news release, a copy of which is available under the News tab of our Investors website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO; and Brian Witherow, our Executive Vice President and CFO.
Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements.
For a more detailed discussion of these risks, you may refer to the company’s filings with the SEC. In compliance with the SEC’s Regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors, because the webcast is open to all constituents, and prior notification has been widely and unselectively disseminated. All content on this call will be considered fully disclosed.
I would like to hand it over now to our CEO, Richard Zimmerman. Richard?
Thank you, Michael and thanks to everyone for joining us this morning. It goes without saying how much the COVID-19 pandemic has impacted our lives and businesses, and the reason why our industry will look back at 2020 as a watershed season for decades to come.
For the industry, and especially for Cedar Fair, we look forward to this time of year as one of excitement and renewal, a time when we prepare our seasonal parks to welcome guests from countless communities across the nation. It’s one of the many reasons why we enjoy this business, and why our people work so hard to make the experience we offer our guests so memorable. It’s also what we’re missing most right now.
On any given day of any given year, the health, safety and well-being of our guests and associates is the highest priority we have. As an organization, our steadfast dedication to health and safety is what makes this year especially frustrating and why we’re abiding by the recommendations of the CDC as well as state and local officials related to the COVID-19 pandemic.
Unfortunately, until further notice, our parks will remain in a state of readiness while we await governmental restrictions being lifted. Until such time, our park GMs and their teams are actively addressing and planning for new measures and guidelines that may be necessary inside our parks. Whatever changes are recommended or required, our overarching goal is to ensure the safety and well-being of everyone at our parks, while still providing our guests with a best day experience.
On our 2019 year end call, we were pleased to report Cedar Fair’s best year ever, along with a very strong long-lead indicators for a robust year ahead. As anticipated, 2020 started at a record pace with attendance and revenues through mid-March trending well ahead of last year. Knott’s Berry Farm began the year strong, picking up right where it left off last year, and advanced purchase commitments for the 2020 season, including the sale of season passes and related products had never been stronger.
Through early March, the 2020 season was shaping up to be the best year in the company’s history. What followed during the next few weeks related to the COVID-19 pandemic dramatically changed our business for 2020 and perhaps beyond. Credit to our talented new leadership team for quickly recognizing the urgency of the situation, and with skill and precision, implementing a comprehensive plan to better position our company to deal with uncertainty in the near-term, as well as position us to be a stronger and better company in the long-term.
Let me summarize for you the current state of our business as well as the actions we have taken at the impact of an extended business disruption. From day one, our primary concern and overarching goal was to ensure the safety and well-being of our employees and park guests, this meant abiding by the recommendations of federal health authorities and state and local guidelines. All of the company’s non-essential activities will round down to a halt, and our employees were asked to work from home until further notice.
To protect our guests and park employees effective March 14th, we closed our parks as well as other facilities such as the Cedar Point Sports Center that had opened for the 2020 season. And we indefinitely delayed the scheduled openings of our other parks, several of which were ready to open during the weekends of late March and early April.
To reduce the operating expenses and dramatically slow our cash burn, our team went to work implementing cost cutting and cash saving measures as quickly as possible, while also suspending up to $100 million of non-essential capital projects planned for the 2020 and 2021 seasons. Many of these actions involved difficult decisions that affected our entire workforce, but these measures were necessary during this extraordinary time to provide the company with additional financial flexibility.
Additionally, our Board of Directors believed it was in the best interest of the unit holders for the company to preserve liquidity through the suspension of the quarterly distribution, with a commitment to reinstate a distribution when permitted under our recently revised debt covenants. And finally, to secure additional liquidity and address potential debt covenants, last week, we completed the issuance of a $1 billion notes offering, obtain debt covenants flexibility through 2021 and expanded the size of our revolving credit facility.
We believe the actions taken today go long ways towards strengthening our balance sheet and protecting the long-term interest of our unit holders. Collectively, our proactive measures provide us with financial flexibility and sufficient liquidity to meet our cash obligations through the end of 2021, even if we remain in a minimal revenue environment.
For our valued season pass holders, many of whom made their purchase commitments months ago, we wanted to express our appreciation for their continued loyalty, while providing meaningful incentives to retain their passes. We did so by first, suspending the monthly billings of our Easy Pay installment program until we had better visibility in the park reopenings. And second, extending the expiration date of 2020 season passes, as well as the add-on products previously purchased through the end of the 2021 season.
As a result of these steps, we’ve seen very positive feedback expressed through social media channels, as well as calls and emails directly to our parks. In fact, our marketing teams claim the response to our season pass extension policy, the most positive feedback they have seen for any previous company announcement. While we executed several important initiatives in a short period of time, their impact will likely be pivotal to our business over the long-term. Although it’s difficult knowing our parks are closed, we believe that we’ve taken the proactive steps necessary to effectively weather the storm.
I’ll stop here and ask Brian to review our financials. Brian?
Thanks, Richard and good morning, everyone. I’ll start with a discussion of our results for the first quarter before reviewing our actions taken to address the impact of COVID-19. First, for our first quarter ended March 29th, 2020, net revenues totaled $54 million, compared with $67 million for last year’s comparable quarter ended March 31st, 2019. The increase in revenues for the period was the direct result of a 239,000 visit decrease in attendance and a $3 million decrease in out-of-park revenues.
Both shortfalls were entirely due to COVID-19 related park closures starting March 14th through the end of the quarter. During the last two weeks of the quarter with no parks in operation, the company lost an estimated 388,000 visits and more than $20 million in revenues when compared with the same two-week period a year ago.
As Richard highlighted it in his opening remarks, the record pace was established in 2019 carried well into the first quarter of 2020. Prior to the disruption of our operations in mid-March, attendance was up 149,000 visits or 19%, while revenues were up more than $8 million. Both of these increases were driven by a record start to the 2020 season at Knott’s Berry Farm, our only year-round park.
Also in spite of the disruption of COVID-19, our season pass sales remained up more than 30% at the end of the first quarter compared to the prior year quarter, reflecting the record pace and sales we had coming out 2019 and the continuation of that trend to start the year. As of the end of the first quarter, deferred revenues totaled $195 million, an increase of $33 million or more than 20% when compared to the same period a year ago.
On the costs side, operating costs and expenses in the first quarter totaled $138 million, which was comparable to the first quarter of 2019. Reflected in these first quarter costs was a $1 million decrease in cost of goods sold, consisted with the post COVID-19 decline in sales, a $7 million decrease in SG&A expense, and an $8 million increase in operating costs, primarily driven by incremental operating costs at the Schlitterbahn parks, which weren’t acquired until July 1st last year. Excluding operations from the Schlitterbahn parks, operating costs and expenses in the quarter were down 6% between years on a same-park basis.
For the quarter, adjusted EBITDA was a loss of $89 million, representing an increase loss of $21 million versus the prior year quarter. Excluding the Schlitterbahn parks, the first quarter adjusted EBITDA loss would have been $82 million.
It’s important to note that the flexibility of our business model affords us the opportunity to quickly reduce expenses across the board, including costs we generally consider to be fixed during normal operations. As Richard mentioned, since closing our parks, we’ve taken proactive and aggressive measures to reduce our cash burn rate and provide the financial flexibility needed to sustain a business disruption over the long-term.
First, we eliminated nearly all of our seasonal and part-time labor costs until restrictions are lifted, and we’re prepared to reopen our parks. We announced salary reductions across the board, including a 40% reduction for the CEO, a 25% reduction for all other Senior Executives, a 25% salary deferral for all other salaried full-time employees and a 25% reduction in scheduled hours for our full-time hourly employees.
We suspended all advertising and marketing expenses. We suspended cash fees for our Board of Directors. We suspended quarterly distribution payments, and we are taking steps to defer or eliminate at least $75 million to $100 million of non-essential capital projects planned for the 2020 and 2021 operating seasons.
With these plan reductions, we now anticipate spending $85 million to $100 million on capital investments in calendar year 2020, the majority of which will be spent by the end of the second quarter. We have purposefully kept our full-time employees on the payroll and not aggressively pursued furloughs or layoffs as we believe this leaves us in the best position to reopen our parks as efficiently and effectively as possible once restrictions are lifted.
Based on the cost cutting and cash saving measures taken to-date, as well as additional measures we are prepared to implement in a more prolonged disruption to operations, we estimate our average cash burn rate going forward will be between $30 million to $40 million per month through the end of 2020.
This includes a base level of operating costs, while our park operations are fully suspended. Some level of runoff related to capital projects and process are wrapping up and interest payments on outstanding debt. Once given the green lights to reopen our parks, startup costs to do so would push this monthly burn rate up.
As Richard noted, equally as important as the cash saving measures, we’ve put in place, where the financing steps we took to improve our financial flexibility and enhance our liquidity position. First, we raised $1 billion through our heavily oversubscribed and upsized senior secured notes offering priced at 5.5%.
Second, in conjunction with the bond offering, we obtained an amendment to our credit agreement, providing us with covenant headroom through 2021 and preventing the effects of the COVID-19 pandemic from distorting our covenant calculations during the current business disruption.
Third, in concert with the bond offering, we expanded our revolver from $275 million to $375 million, providing $100 million of incremental liquidity. And lastly, we used the portion of the bond proceeds to pay down $463 million of our term loan, as well as the outstanding balance on our revolver. As part of the amendment to the credit agreement, we also agreed to a $125 million minimum liquidity covenant that will apply through the end of 2021.
As a result of the financing steps taken, our pro forma liquidity as of the end of the first quarter was approximately $821 million, providing ample liquidity to sustain a disruption in the business that could last through 2021. This includes $289 million of available revolver capacity, net of approximately $16 million of letters of credit, and $532 million of cash.
In addition to now having ample liquidity, the amendment to our credit agreement allows us to suspend testing of our financial maintenance covenant through 2020, and to use modified testing of a new senior secured maintenance covenant beginning with the first quarter of 2020 and ‘21, providing us the financial flexibility we need to manage our business.
For reference purposes, at the end of the first quarter, our pro forma senior secured leverage ratio was 2.6 times, representing more than $170 million of EBITDA cushion from the 4 times covenant. Richard and I would like to express our sincere thanks and appreciation for the unwavering support of our long-tenured bank group during this unprecedented time, as well as to our extended team who assisted in this very successful effort.
Looking ahead, we’ve withdrawn our financial guidance and long-term adjusted EBITDA target into our portfolio parks are fully operational, and we have better visibility on the recovery. In the meantime, our parks are being maintained in a relative state of readiness for reopening. We remain confident the situation in which we find ourselves in is only temporary, and that Cedar Fair is financially well positioned to manage through this difficult period until we can reopen our parks and welcome back guests.
With that, I’ll turn the call back over to Richard.
Thanks, Brian. If the last two months has taught us anything, it’s that change comes quickly in today’s business world. As a tenured management team in concert with the experience and insights of our Board of Directors, we go to great lengths to anticipate and manage change by continuously reinforcing our foundation of excellence. While few businesses had contemplated and specifically prepared for the effects of this pandemic, the strong foundation and historical performance Cedar Fair stands upon, enabled us to react quickly and take effective measures to address the recent challenges thrust upon our business.
The other good news is that as each day passes, we are seeing life in the US taken another step towards returning to normal. How long it takes before our parks can reopen remains to be seen, but we are encouraged by the overall trend to get businesses back up and running again, and their employees back to work in the safest manner possible. We too are planning for that day. And I’m confident in our team’s ability to not only deliver on the high quality guest experience our guests are seeking when they visit our parks, but to effectively implement new health and safety procedures that will be required of us in the future.
The plan we have put us in place allows us to strictly control costs, while maintaining the ability to open parks in 2020 once restrictions have been lifted. Given the seasonal nature of our operations with Knott’s Berry Farm as our only park with year-round operations, it is important that we’re able to restart the parks with a reasonable number of operating days remaining in the year. We are actively working with the authorities in each of the markets we operate in, to monitor their opening timelines and address their specific requirements. Each park is different. But once we have good line of sight to an opening date in any particular market, it will take us a minimum of two to three weeks to open.
Our operating teams remaining ready and anxious to bring the parks back to life. When we do reopen our parks, we will have all aspects of our operations fully prepared to meet or exceed the health and safety expectations of our guests and the requirements of local authorities. We are actively working on new mandatory health and safety COVID-19 training for all employees and we are introducing protocols to conduct wellness checks of employees each day. We are also committed throughout our properties to implement enhanced and expanded sanitization measures to ensure confidence that our properties are safe to visit and enjoy without undue concern.
Incremental cleanliness measures will be consistently applied and pervasively visible. This includes facilitation of social distancing on rides, inside restaurants and in the common areas of our parks. Regular cleaning of rides, handrails and restrooms, disinfection of tables, chairs and other common surfaces in our dining facilities and along our midways, and added locations and equipment for our guests to wash and sanitize their hands. We are also actively working on enhancements and expanded use of technology platforms, including our park mobile apps, in order to improve the guest experience going forward.
These enhancements will include such things as, the use of a park reservation system to better manage park attendance; expanded use of cash with cashless transactions; the potential introduction of virtual queuing; and the broader use of mobile ordering for food and initiative that we began rolling out in 2019 to good success at several of our parks.
Lastly, we are soliciting feedback from our guests in order to understand their expectations around the park experience in a post COVID-19 world. This includes gaining some perspective on what we should expect in terms of potential visitation once our parks reopen.
Before we take your questions, I want to close my prepared remarks with a message for our associates. Thank you for your patience and continued dedication to our company during a difficult and unusual time in our history. Every day, as we anticipate better days ahead, I encourage you to look for a silver lining in what we’re going through. One of mine is that with change comes opportunity.
When our parks do finally reopen, we should be excited about the chance to regain some of our lost momentum by tapping into pent up demand for an experience that few can offer and that no one does better than we do. Unlike most businesses, our parks offer what our friends and families have been missing most while being stuck at home, the opportunity to finally bring some excitement into their lives again.
The backbone of Cedar Fair resides in our 15 parks and their well-known regional brands, all of which over the years have received high praise from consumers and won multiple industry awards. Collectively, I believe our portfolio properties represents the strongest family of parks in the business, which means we have a lot going for us when we can resume operations. Our mission is to make people happy, which has been at the cornerstone of our growth and success over many decades.
I am confident that our industry and Cedar Fair specifically can develop and execute new operating procedures to address sanitization and social distancing best practices. I am also confident that we can create a guest experience that will be a welcome relief from what most have experienced over the last few months. It will certainly be different, but it will still be fun and have memory making at its core.
That concludes our prepared remarks. Christina, please open the call for questions.
Certainly. [Operator Instructions] Our first question comes from Brett Andress from KeyBanc Capital Markets. Your line is open.
Hey, good morning. So, Richard, when the parks do initially reopen, how are you thinking about the consumer propensity to return to the theme parks? I know there’s been some survey work out there, but just curious what you’re hearing from your customers about their demand when the parks reopen?
You know, as I mentioned in my remarks, you know, we’re in the middle of conducting research right now. They’ll be a lot more extensive, but we are constantly having interactions with our customers, whether through social media or through more informal channels that they’re looking forward to when the parks open and returning.
So I think as you look at the broader reopening of society, there will be – you know, there will be lots of different reactions to what we see as each of the states in the markets reopen, I think there is a large segment of people will be looking for the entertainment as I said, and I think there’ll also be some consumers that are concerned about stepping through the environment.
I think the strength of our business model, the appeal we’ve seen in some disruptions in the past, be that SARS in 2003, in our Toronto park kind of gives us a window into how to think about it, but we are as curious as everybody else to see how the consumer reacts and we are certainly monitoring everything else that’s going on in our environment.
Thanks. I appreciate the color on that. And then you know, another one I understand you can’t predict when the parks reopen, but I guess what stage of parks are you feeling you know, are making the most progress? Where do you have the most confidence? And then what parks, you know, are possibly going to take a little bit longer to reopen here?
You know, I’ll say it this way. You know, as I said in my prepared remarks, we’re working very closely with all the state and local officials to build out the protocols for operating once we do in the safest manner possible. I will tell you that it is going to be market-by-market as you referenced in your question.
But what I’m encouraged by is the engagement and the accessibility of all the state and local officials in every one of the markets, that they’ve been great partners and having this conversation. We understand what their concerns are, and we certainly have made sure that they understand our perspective, you know, the strategic value of us reopening our parks is not lost on us. It’s important to our employees, on our associates, it’s important to our guests, and it’s certainly important to the communities that we operate in. So we understand the importance of getting reopened, if we can as soon as possible after we get the green light.
Thank you.
Thanks, Brett.
Your next question comes from Tim Conder from Wells Fargo Securities. Your line is open.
Thank you. And gentlemen, again, that include yourselves and others in the industry doing a great job managing the difficult situation. A little color please, if you could on the season pass units versus deferred obviously very good and impressive results there. But the units are less than up 20%. Still, again, not shabby, but less than the 30%, excuse me, up 30% and versus the deferred dollars only up $20. Is there anything going on with mix add-on purchases versus the tickets? Is it discounting? Is it less groups? Just a little more color on that, if you could?
Yeah, Tim it’s Brian. As far as the season pass, you know, as we said it in our remarks, very pleased with the momentum we had coming out of ’19 and what we saw early in 2020. The difference that you’re alluding to is really driven by a couple of things. First, deferred revenue would reflect a lot more than just season pass, while season pass is definitely the lion’s share of it. There are other components, everything from deposits from groups and deposits on hotel rooms and other items as such, that fit in there.
So that plays into the deferred number from a percentage perspective, as does the fact that in the sales number is more of a gross number. And as you can appreciate, you know, the sales that happened last year, we started drawing on some of those season passes on from fall visits in ‘19. So the deferred numbers already seen some draw out of it, which the sales number would be the gross number.
Okay, okay that’s very helpful, Brian. And gentlemen, how would you think about the dynamic between, you know, you’re going to be most likely limited on capacity in an initial opening? And then that’ll ramp up. How should we think about the need to offer some early incentives to get the customers to come back versus, hey, I’m limited on capacity. So, you know, it is what it is and then be able to maintain pricing or limited incentives. How should we think about that dynamic?
You know, fair question, Tim. You know, as I think about when we reopen our parks and what we expect to see, you know, we typically operate our parks at much lower than full capacity historically so in many of those some are weekdays, we’re nowhere near full capacity. So as we think about what capacity limitations may be, and having a reservation system upfront, obviously we’re going to step into it. Make sure we’re in compliance with our commitments for the local and – state and local guidelines.
But as we think about how to price it or how to think about stepping into that business model, you know, we’re going to monitor that very closely and make sure that we are serving the customers, we’ve got a lot of – as you know, we’ve got a – and you just asked the question that season pass, we’ve got a large base of season pass holders out there that want to make sure get their value.
So as we think it through, I think we’re going to monitor that and lean heavily into the revenue management function that we built out over the last few years that has served us so well, to make sure we’re being appropriately responsive to what we see the conditions are on the ground as we open up.
Okay. So it sounds like potentially preference given, Richard to the season passes that would make me then most sense it would seem to be.
I think we want to balance the season pass versus the broader appeal, but we want to make sure that the season pass holders get value for their purchase.
Okay. And then lastly, what type of timeline should we be looking at? You talked about the enhancements that are in development on the mobile apps or reservations, virtual queuing, and you’re already testing from the mobile food ordering, you know, in prior years. How should we see that timeline? Should we see several of those functions you know, pretty soon with as the parks reopen, given somewhat of the needs?
You know I’ll let Brian weigh here in just a second and he can add on to my comments. But some of the things that we’re referencing, for instance, like the reservation system, we’ve actually had been utilizing that on small pilot events at some of our parks over the last couple of years, this would be a much broader application. So certainly there’s a little bit more built out.
But for the most part, a lot of these are not new concepts that we haven’t even thought about or explored. And you know, the specific timeline will depend on each of the measures. We can give you probably a little bit better timeline, Tim as we get deeper into the summer and we see what the opening is and how far we are in our thoughts and the state and local guidelines, what we’re trying to accomplish. But Brian?
Yeah, sure. I think, Tim just following up on Richard’s comments, some of the protocols are and the rollout of those protocols and the systems or other procedures meant to address those will be dependent on ultimately the timeline for openings. I think you can expect that there would be certainly some new procedures COVID-19 related protocols that will be required as part of opening, and others that’ll be more about enhanced guests service, longer-term.
You know, clearly some of the technology developments and you know, Richard alluded to the reservation platform that we have utilized in the past and expanding that to a broader utilization isn’t necessarily as complicated as maybe something that’s a brand new introduction. And so certainly these things will roll out over probably a multitude of timelines, but the ones that are most critical will get out as quickly as possible in order to be opened.
Great, thank you as always, gentlemen.
Thanks, Tim.
Your next question comes from Steve Wieczynski from Stifel. Your line is open.
Hey, guys, good morning. So, Richard, you talked about season passes were up over 30% at the end of the quarter, and I don’t know if you can tell us this or you will tell us this. But any idea where that number is now meaning, at the end of April?
I don’t know that I can give you and I don’t have handy of this specific percentage. What I can tell you is that through April, particularly as we’ve marked through April, we have continued to sell season passes so that number continues to grow to some degree. Certainly we’re not seeing the same level of sales in the season pass channel right now that we would have seen last year, because we would have been opened. What’s encouraging is we do continue to sell.
Okay, got you. Appreciate that. You talked about the cash burn, you know, being $30 million to $40 million per month and you could actually drive that down lower if the parks are closed for an extended period of time. Any idea to help us kind of think about where you could potentially get that down to or what, you know, what you could do further to drive that number lower?
Yeah, Steve it’s Brian. We’re not going to put a specific number on at this point in time, but maybe I can answer it that for you this way. Right now that $30 million to $40 million you know, as I mentioned on the call, it includes both the – you know, an OpEx burn rate as well as the other big component in there is the debt facility and interest costs associated with that outstanding.
The OpEx burn rate is really based on the scenarios as Richard described in his comments, that we’re keeping the parks in a state of readiness. We’re working tirelessly in each of our markets to get our parks back up and running as soon as possible. And so in doing so, and we’re maintaining, as we said – as I said in my prepared remarks, maintaining our full-time staff and in some cases, pared back hours, but still on the payroll, as we try and remain in what we’re calling sort of an idle state in a state of readiness to get open as soon as possible.
If we were looking to or had better visibility that the parts aren’t going to get open for some reason at all in 2020 as an example, we can take a lot more aggressive look at all the cost across the board and pull that number down, but it would definitely be under a scenario where we’re not trying to reopen in 2020.
Okay, got you. Appreciate that. And last question, and this one is totally in the weeds and you can – you’ll probably laugh when I ask it. But you know, in your release you talk about not opening the parks and you used the term near-term, you know the term near-term means different things to different people. Any idea or any help on what that actually means? What does near-term mean to you guys?
You know, I’d answer it, because I think it’s a great question, Steve. I’d answer it this way. This is probably the most dynamic situation and environment I’ve seen in the well over three decades that I’ve been doing this, literally the information on the ground changes day-by-day and sometimes dramatically so in each of the respective markets we operate in.
So when we say in the near-term, what that means is, we’re constantly getting new information about the state of the reopening of the different markets, what the actual that tied to both the consumer mentality and the actual health trends that underlie reacting to this situation.
So the near-term just means that, near-term is very different in someplace potentially like a California versus maybe some other state, be it Missouri or North Carolina or some of the other places that we operate in, or Toronto, you know, where Canada is a different country.
So when we think about near-term that we’ve always thought about that in a more general sense that it’s not longer-term meaning, you know, years and years and years, but, you know, I think that’s going to – it’s going to be different market-by-market that’s about as much clarity as I can give you.
Okay. Appreciate it, guys. Thanks a lot.
Your next question comes from James Hardiman from Wedbush. Your line is open.
Good morning. So you may have already given us or you’re going to give us on, I think it was one of Tim’s questions. But is there any way to think about what percentage of full capacity your parks typically operate at, I know typically is bloated word, because it varies. But anyway to think about sort of typical versus capacity, and then you know, how much you think you might need to scale back those typical levels to be able to practice social distancing in your parks?
Hey, James it’s Brian. Yeah, so at a high level, I guess the way I would answer it is that outside of a handful of days each year, most of our parks would operate in a normal day probably someplace at or below 50% of theoretical capacity. You know, as you know, for well-being close to at the Cedar Point, you know, Cedar Points can do 50,000 plus people on a day and that’s maybe not at theoretical capacity, but it’s getting up there.
Let’s put it in a 90% plus kind of range. But on average, that’s not what is doing, you know, over the course of an entire, you know, operating season. The average attendance is probably like I said, closer to 50% of that. So, I think, you know, as we think about the impact of limiting capacity up against the theoretical capacity number, the answer really comes down in large part to on a part-by-part basis, you know, just based on the structural limitations of the park.
And then also I think at the, you know, within each market and the state requirements are going to be there. Well, we think that ultimately longer-term will sort to sort of a standardization around what that might look like as an industry. We can’t say that for certain at this point in time.
But what I can say is that, you know, given the fact that most of the parks don’t operate anywhere near theoretical capacity, and only close to half. We can do numbers that are significantly less than theoretical capacity and still be at a very profitable level in terms of daily operations.
Okay. And you think you have the technology in place right now to do this, you talked about this park reservation system. How exactly would that work if you’re not going to let everybody in that wants to come?
Listen, I’m not going to comment on the specifics, James. But we are ready to do reservations when we open up and we are going to do extensive communication with our guests to make sure we’re very clear and there’s a lot of clarity about how that system will work.
Okay. And then last question for me. Can you maybe dig into the season pass promotions that you’re running? I think what I heard you say is that, if you buy a season pass, that’s going to be good not only for 2020, but for 2021. Is that the case, and if so, is there any way to think about how much money is essentially being taken off the table in terms of revenues for 2021?
I’ll start and again, Brian can jump in here. You know, given all the uncertainty that was created by COVID-19, James, we want to make sure that we made it crystal clear to our season pass holders that they’d receive the intended value for their season passes.
And that’s why we extended through the pass all the way through 2021 we believe that was the right thing to do for our customers. The steps we’ve taken to-date have gone a long way towards communicating that. In terms of the actual numbers, though. Brian?
Yeah, sure. James, you know, it’s – you know, if it’s helpful, I’ll step back for a second and give you some color on where we were. You know, as Richard said, and the decision was made really to provide you know, and communicate the value that we wanted season pass holders to get out of their 2020 passes, and what they expected to get.
At a time, that COVID-19 sort of disrupted everything, we were maybe a little bit ahead of 50% through the season pass sales cycle, trending as we said in our prepared remarks, significantly better than then last year in terms of units and dollars, but in terms of the calendar cycle, only about halfway through based on historical sales.
Of those pass that sold about half were purchased under payment plans. And so as we think about the impact on ‘21, there’s two sides to it, right. There’s the revenue side and cash side. From the cash side, we still don’t have all the cash related to season pass sales.
There are folks that will be once we reinstate the Easy Pay billing cycles, we’ll start getting those cash payments and those dollars coming back in, so that depending again, this all depends on how long do the park stay closed. The longer they stay close, the more of those payments start to slide into ‘21. So that would benefit us in ’21.
To the extent, on the revenue side to the extent that the parks stay closed longer, you’re going to have more deferred revenue still sitting there on the books starting January 1st of 2021 to drawn. And so I can’t really give you the specifics, because it’s all dependent really upon when the parks reopen.
But what we are confident is that, once the parks do reopen, there’s more sales to be gotten, whether that be later this year related to 2021 passes that we would normally start selling or it’s in the spring of ’21 when we would normally be selling you know, again, probably about a half or so of our normal sales cycle.
Got it, really helpful. Thanks, guys.
Thanks, James.
Your next question comes from Mike Swartz from SunTrust. Your line is open.
Hey guys, good morning. Maybe just to shift a little bit, I wanted to talk about Knott’s, obviously having a very strong start to the season there. And remember, here one of the big pushes this year with some of the local or marketing to local visitors. Can you maybe give us a sense of how that was going? And, you know, is that something that you will continue to repeat going forward?
You know, I’ll take that. Mike, good morning. Great question. You know, as we said in our prepared remarks, Knott’s was off the strongest start ever. We were seeing response to our targeted marketing efforts in the tourism channel that was starting to gain traction and we’re pleased with what we saw there. But equally important was in January and February, we ran this PEANUTS celebration and Knott’s has one of the tent pole events under the seasons of fun banner.
So if you go back to what we’ve talked about extensively over the last year strategically, you know, are leaning into limited duration events to drive urgency in certain markets during certain times of year really was playing out well in Knott’s and we’ve always said Knott’s probably is the imposter child for our seasons of fun approach and the early part of the years are incurred in that PEANUTS celebration and we saw great response.
So we think all those things continue to play well once we get to the other side of the impact of the pandemic and we’re back to a more regular operating schedule. We still feel very strongly about the strategies we’ve put in place that helped us get the momentum going into this and we think over time, they will help drive our momentum when we come out of this.
Great color. And the other question I have is somewhat similar, but this is going to be a big year for Knott’s and Cedar Point to your biggest park celebrating anniversaries. Any color on what you’re planning to do there? And is it somewhat of a dynamic of when the parks open? Or will you look to push some of those celebrations to 2021?
Yeah, Mike, my great question. You know, we haven’t made any official announcements yet. We have already announced that some of the limited duration events we have like the grand carnivals will be taking place in ‘21, not ’20 just given the uncertainty that exist and the need to plan for those types of things.
You know, we’re still evaluating what we will do for both Knott’s 100th and Cedar Point 150th. But that’s really going to be tied to when potentially we can reopen the parks, and what, you know what we’re able to get done based upon when they reopen. So that’s one we’re still studying closely.
Okay, thank you.
Your next question comes from Paul Golding from Macquarie. Your line is open.
Hey, guys. Thanks so much for taking my question. I was wondering if you could give us some color on what you’re seeing in the labor market. I know that in past results you’ve talked about, you know, some rate pressure. And I wonder to what extent, you know, these shifts in the labor market, whether they’re you know, the regulatory piece continues to be, you know, potential headwind in the future? Or if other downward rate pressure could help going forward?
I’ll let Brian – again, I’ll let Brian weigh in just a second. But what we are seeing and what we are trending toward is we thought there was, you know, probably we’re not going to see the same challenge on the availability front as we’ve seen in the past. So, again, trying to take it out of a broad base look at it, market-by-market we’re seeing very different things depending on which market we speak to.
But I will say that I think we’ve got an ability to lean into our recruiting tactics in our employment brand as we think about it to be very attractive. We’re also monitoring some of the things that are happening within the environment related to colleges and whether they go back, whether they stay virtual.
So the environment’s changing around us and we think that’ll impact the availability as to rate, you know, we will always be competitive in the markets that we’re at, and you know, we’ll – I’ll leave it at that.
Right. And I guess just a follow-up to that then on availability or a need for certain hours. With the new initiatives that you’re talking about rolling out that have been tested in the past the app based and cashless components. Any color you can shed on – there may be some longer-term margin impact that we could consider that could be favorable, you know, an out years from this?
Hi, Paul it’s Brian. So I mean as we get into this and again, a lot of these questions are hard to answer just because we don’t have a clear and defined direction on certainly some of the requirements. I think early on, the thought would be that some of the procedures and protocols that will be added coming out of COVID-19 could put pressure on margins.
But at the same time, we’re looking at is, is this as a great reset and going back in and taking a hard look at the operating costs of all of our parks and trying to find more efficiencies. You know, clearly a move to protocols where we’re more focused on cashless transactions as an example, will allow for labor efficiencies. Those may take a little bit of time to get to. And so I think the initial thought is, is that or maybe some incremental operating costs early on, and efficiencies will develop a little bit more over time.
Okay. Thanks so much.
[Operator Instructions] Your next question comes from Eric Wold from B. Riley FBR. Your line is open.
Thank you and good morning. I apologize if some of these have been asked in different ways. I came a little bit late. But I guess in discussions with local governments around your potential restrictions on attendance that may be in place when the parks to reopen. Have you gotten a sense of how many are going with a variance at in terms of its limitations based on kind of stated [indiscernible] occupancy or kind of based on your historical occupancy? Because I know that you historically operate well below max levels. And so do you think the restrictions have been based on what your levels had been or based on those theoretical max levels?
I think the conversation really right now, Eric, great question. Thanks for jumping on. The conversation right now really revolves around making sure we open up and operate in the safest manner possible. As you can imagine, when you’re dealing with a number of different state and locals, there’s a variety of perspectives on that.
In addition to that, our parks are built very differently, some very big, some very large, some a little more concise. So the answer is going to be slightly different in market-by-market. And we’re in the middle of those conversations. So we’ll be able to give you more color on that as we get deeper into the conversations get closer to understanding where the state and local authorities are going to come out on their requirements.
Okay, perfect. And then I know that you’ve got a great ability to stay in communication with your season pass holders in terms of, you know, potential limitations and capacity limit and reservations and whatnot. What about the kind of drive up single-day ticket buyers? Is there a way to communicate to them before they get to the park and may see that you know, it’s sold out from the day or get turned away from the gate? And if that, you know, what is the procedure there? And then how would you handle those potential turn away is any different if you need to versus you previous times?
Yeah, Eric it’s Brian. So you know, as Richard mentioned on the call, you know, first off, we’re you know, as we roll out and are in the process of serving our guests. It’s not only season pass holders through our CRM platform who we have the most information on, but it’s is you know, staying in contact and surveying single ticket holders that we do have information on.
And so we definitely are polling and staying in communication with all of the folks that we have within our CRM database, which is more than just season pass holders. You know, I think as we get back into a situation where we’re in operations, again, we’ll use all the available technologies and tools at our disposal, which will be everything from the mobile apps that we have on our parks, to our social media platforms to communicate with guests, both season pass holders and non-season pass holders.
That’s helpful. Thank you, guys.
There are no further questions at this time. I would turn the call back over to Richard Zimmerman.
Thank you for your interest and ongoing support of Cedar Fair. Once we reopen, I hope all of you will get a chance to get out and visit our parks this summer and experience firsthand what makes us unique. We eagerly await a word from officials in all of our markets that our parks are permitted to reopen. And we look forward to keeping you apprised of progress on that front. Michael?
Thank you for joining us today. Should you have any follow-up questions, please feel free to contact our Investor Relations Department at 419-627-2233. We look forward to speaking with you again in about three months to discuss our second quarter results. Thanks very much. Christina, call is over.
Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.