Cedar Fair, L.P.

views updated

Cedar Fair, L.P.

One Causeway Drive
Sandusky, Ohio 44870
U.S.A.
(419) 627-2233
Fax: (419) 627-2260
Web site: http://www.cedarfair.com

Public Limited Partnership
Incorporated: 1987
Employees: 600
Sales: $250.5 million (1996)
Stock Exchanges: New York
SICs: 7996 Amusement Parks; 4785 Inspection & Fixed Facilities; 7011 Hotels & Motels; 4493 Marinas

Cedar Fair, L.P. is the parent company to a half-dozen of America’s oldest and largest amusement parks. Cedar Point, the company’s crown jewel, is the biggest seasonal amusement park in North America, attracting over three million visitors each summer. It’s been acclaimed as both “King of Amusement Parks” and “Queen of American Watering Places.” In the fall of 1997, the parent company announced its plans to acquire its first year-round facility, California’s Knott’s Berry Farm. The company also operates Minnesota’s Valley fair, Pennsylvania’s Wildwater Kingdom and Dorney Park, and twin attractions Oceans of Fun and Worlds of Fun in Missouri. With the addition of Knott’s, the group expected to draw a combined total of nearly 10 million guests in 1998.

In contrast with such theme parks as Disney’s Florida and California extravaganzas, Cedar Fair facilities focus on amusement. Flagship Cedar Point prides itself on having more thrill rides than any other park in the world. Its “scream machine” heritage stretches from 1892, when the 25-foot-high Switchback Railway thrilled riders with its 10 mph speeds, to the late 1990s, when a collection of a dozen roller coasters sent riders— in varying positions from sitting to standing—hurtling down 200-foot drops and through stomach-churning loops at over 70 mph. In 1996, Cedar Point earned its fifth consecutive designation as the world’s “Best Traditional Amusement Park” from trade paper Inside Track.

19th-century Origins

Cedar Fair’s roots reach back to the late 1860s, when its founding park was just a sandy, cedar-bowered peninsula jutting out from the southern shore of Lake Erie. The impetus behind the endeavor has been traced to an 1867 editorial in the Sandusky Register, which suggested that “Somebody should erect a bathing house on the lake side of Cedar Point, about a quarter of a mile from the lighthouse,” noting that “There is no finer place for bathing in the world.” Though that last line may have been colored by a bit of provincial boosterism, there was enough truth in the statement to convince local businessman Louis Zistel to put up more than a dozen bath houses along the beach. He made money by renting bathing suits for 10 cents a day.

By 1870, Zistel had generated enough cash to finance the construction of a beer garden complete with a dance floor and a playground. The park’s first ride, a water trapeze that swung thrill-seekers out over the lake, was launched in 1880. Over the course of the next decade, Cedar Point added water slides, a water toboggan, and a motorized “sea swing.” The park capped the 1880s with the construction of a Grand Pavilion, which featured a bar, dining rooms, an auditorium, and an opera house.

At some point during this period, ownership of the property transferred to a group of four local investors. In 1892 they built Cedar Point’s first roller coaster, the Switchback Railway. Featuring a 25-foot drop, the lakeside ride reached top speeds of 10 miles per hour. Within five years, however, the group had exhausted its financial resources such that the park faced closure.

The Boeckling Era, 1897-1931

That’s when wealthy Indianan George A. Boeckling came on the scene. Backed by a real estate fortune and a flair for showmanship, Boeckling ushered Cedar Point into an era of national prominence. Amenities and amusements were added rapidly after the turn of the century. The park’s first modest overnight accommodation, the 20-room Bay Shore Hotel, was so successful that Boeckling built the sumptuously-appointed, 600-room Hotel Breakers as well as a two-story “Coliseum” entertainment center in 1905. Three new roller coasters replaced the Switchback Railway during these hectic years: The Racer (1902), Dip the Dips (1908), and Leap the Dips (1912). Boeckling launched an electrified midway, featuring merry-go-round, skating rink, fun house, souvenir shops, live entertainment, and a circle swing—all illuminated by thousands of lights for nighttime fun—for the 1906 season.

The resort lured the rich and famous as well as the local yokels at the rate of 10,000 per day during the summer season. Boeckling’s better-known guests included President William Taft, sharpshooter Annie Oakley, composer John Philip Sousa, and opera star Enrico Caruso. It was even said that Knute Rockne and Gus Doráis honed football’s forward pass while working as lifeguards on the beaches of Cedar Point.

Fueled by this steady stream of nationally known celebrities and entertainment upgrades, the park continued to thrive under Boeckling’s care, even after the Great Depression cast a pall over the national economy. The impresario slashed admission prices and booked big bands to keep his park afloat during the crisis, but when Boeckling died in 1931, Cedar Point—like many other amusement parks around the country—went into a long and deep decline. Without Boeckling’s deep pockets and far-reaching imagination, the park was limited to hosting musical performances throughout the 1930s, 1940s, and into the 1950s.

Post-World War II Revival

By the mid-1950s, Cedar Point only had one working roller-coaster, and at least two investors thought it had more potential as a construction site than as an amusement park. The lakeside residential development envisioned by Toledo bond dealer George A. Roose and Cleveland investment banker Emile Legros stirred up statewide objections, including an alternative proposal to turn the 400-acre plot into a state park. The public backlash against this plan—not to mention a trip to Disneyland, which had just opened in 1955—convinced Roose and Legros to preserve the property as an amusement park and maintain the historic public beach. In 1957, they purchased a controlling interest in Cedar Point for $313,000.

Though the new owners had no experience in amusement park management, they quickly grasped one of the keys to success in their seasonal business: new attractions. Over the next eight years they invested $18 million in a parkwide overhaul. Improvements in access included the Cedar Point Causeway and a marina. The new owners built the Blue Streak roller coaster in 1964, inaugurated Frontiertown (the park’s main themed area) and live stage shows in 1968, and added the Cedar Creek Mine Ride in 1969. The refurbishment increased admissions dramatically, crossing the 1 million mark in 1960 and exceeding 2 million five years later. Revenues grew from $3.5 million in 1961 to $4.4 million in 1965.

1970s Bring Increased Competition, Costs, and Profits

Cedar Point faced mounting competition for the amusement park dollar in the 1970s, when several major media companies (including Warner Communications, MCA, and Twentieth Century-Fox) entered the industry. The number of large-scale parks nationwide more than doubled from seven in 1970 to 18 by 1977. In order to raise the funds necessary to keep their park competitive, Roose and Legros reduced their combined stake in Cedar Point Inc. from about 85 percent to less than 10 percent through public and private stock placements. In 1975 Robert Munger, who had accumulated almost 10 percent of the company’s equity over his 15-year tenure on its board of directors, assumed the role of president and CEO.

In order to attract new riders and retain its old ones, Cedar Point inaugurated what would become annual multimillion-dollar investment programs. A parkwide entrance fee was established in 1970, helping to finance a decade of new attractions. The company added a 15-story giant ferris wheel, the Jumbo Jet coaster, and the Frontier Carousel in 1972, and the IMAX large-scale cinema in 1975. But it was the latter years of the 1970s that would re-establish Cedar Point’s reputation as the roller coaster capital of the world. The park launched the Corkscrew, the world’s first triple-looping roller coaster, in 1976 and fired a salvo in the ongoing battle for “scream machine” dominance with the 1978 inauguration of the twin-tracked Gemini, the tallest, fastest coaster of its time. By the end of the decade, Cedar Point had the highest ride capacity of any amusement park in the country: 71,500 people per hour. Animal attractions like Jungle Larry’s African Safari and the Oceana marine life complex were also brought on board.

Seasonal attendance crossed the 3 million mark in 1975 and rose another 15 percent on the launch of the Corkscrew the following year. Revenues multiplied from $4.4 million in 1965 to over $35 million in 1975. After several lean years of heavy reinvestments, Cedar Point began chalking up big profits, averaging a 28 percent return on equity from 1974 to 1979. The park’s bulging coffers attracted takeover offers from Taft Broadcasting Co. (owner of Cincinnati’s Kings Island amusement park), entertainment giant MCA Inc., Marriott Corp., and even Quaker Oats. But instead of being acquired, Cedar Point ended up taking over Valleyfair, a small Minnesota park, in 1978.

Limited Partnership Formed in 1980s

In 1982, management took the two parks private as Cedar Fair Partnership through a $142 million leveraged buyout financed in part by investment bank Lazard Freres and Britain’s Pearson, pic. The company returned to public ownership as a master limited partnership in 1987, with units (shares) traded on the New York Stock Exchange under the symbol FUN. The new owners promoted Richard (“Dick”) Kinzel, a 15-year veteran of the operation, from general manager of Valleyfair to president of Cedar Fair.

Company Perspectives:

Cedar Point’s sole business is to entertain the public and cater to the comfort, health and happiness of the people.

In the meantime, Cedar Point made good on its quest for new thrills, adding the Demon Drop, a ride that gave the sensation of free-falling 10 stories, in 1983; flume ride Thunder Canyon in 1986; the Iron Dragon suspended coaster in 1987; and the record-breaking Magnum SL-200, an $8 million coaster introduced in 1989 that dropped passengers more than 200 feet and reached a top speed of 72 mph. The facility reached back to its watery roots in 1988, when it launched Soak City water park. Though it was clearly second-fiddle to Cedar Point, Valleyfair was also growing during this period, adding a waterslide in 1982 and crossing the one million attendance mark in 1987.

By the end of the decade, Kinzel had boosted Cedar Fair’s profit margins to 29 percent, more than double industry leader Disney’s profitability.

Focus on Families in 1990s

Recalling its turn-of-the-century heyday as a nationally known family resort destination, Cedar Point started to beef up its overnight accommodations. The park opened the 96-unit Sandcastle Suites Hotel in 1990 and added a go-kart track, championship miniature golf course, and the family-oriented Berenstain Bear Country in 1992. A $4.3 million investment into Soak City more than doubled the waterpark, adding a 500,000 gallon wave pool, new water slides, and a special adults-only area featuring a swim-up bar.

But Cedar Point management did not forget its core clientele of thrill-seekers, adding the “tallest, steepest, fastest” rides of their kind throughout the 1990s. The park debuted the Mean Streak wooden coaster in 1991, the Snake River Falls flume ride in 1993, the Raptor inverted roller coaster in 1994, and the $12 million Mantis stand-up coaster in 1996. Guests at Cedar Fair’s other parks found new thrills as well. The company introduced both Wild Thing, Valleyfair’s first “megacoaster,” and Worlds of Fun’s Detonator, a ride that rocketed passengers 200 feet straight up, in 1996. That same year Cedar Fair installed Rip-Cord rides, which mimicked bungee jumping and parachuting, at Cedar Point, Valleyfair, and Worlds of Fun.

Cedar Fair augmented its corporate holdings during this period as well, acquiring sister parks Wildwater Kingdom and Dorney Park, both of Pennsylvania, for an estimated $48 million in cash and Cedar Fair equity in 1992. Three years later, Cedar Fair added another pair of parks, Worlds of Fun and Oceans of Fun, both located near Kansas City, Missouri. The combination of organic growth and acquisitions more than doubled Cedar Fair’s revenues from $119 million in 1990 to over $250 million by 1996, and pushed seasonal attendance over the 6 million mark. By this time, the parent company was netting a whopping $74.2 million on sales.

Cedar Fair announced its biggest acquisition to date, California’s Knott’s Berry Farm, in October 1997. Founded in the 1920s as a chicken restaurant, the heretofore family-owned Knott’s is recognized as America’s oldest theme (not amusement) park. It offered Cedar Fair a source of year-round income, since its locations in California and inside Minnesota’s Mall of America were not limited to the three-month season of the company’s other Midwestern properties, thereby mitigating the effect of bad weather on those parks. It also promised to add $120 million in annual revenues and 3.5 million guests to Cedar Fair’s annual tally.