CoStar
01/24/19

SeaWorld Favors Roller Coasters Over Hotels to Boost Attendance
By Lou Hirsh

https://product.costar.com/home/news/shared/1589481510

For SeaWorld, adding marine-themed roller coasters is a higher priority than building on-site hotels to lure visitors to its parks across the country.

New and upcoming coasters are helping SeaWorld rebound from deep visitor and revenue declines after the 2013 documentary “Blackfish” showed the harm on whales in captivity at the chain. At the same time, the company moves away from adding on-site hotels as part of its recovery formula after the recent cancellation of one at its San Diego location.

Following last year’s opening of its attendance-boosting Electric Eel roller coaster, SeaWorld San Diego this May plans to open Tidal Twister, billed as a “dueling coaster” taking riders on a twisting, banking ride at 30 miles an hour with zero-gravity rolls. In 2020, it plans to debut the shark-themed Mako coaster, described as the “tallest, fastest and longest dive coaster in California” and the state’s only floorless dive coaster, in which riders will dangle as the coaster climbs to 153 feet.

The coaster comes as Orlando, Florida-based SeaWorld Entertainment Inc., once famous for its orca mascot Shamu, abandoned a proposed hotel project on the park. The company confirmed late last year it had canceled an agreement finalized earlier in 2018 with prominent local developer and operator Evans Hotels to build a resort-style hotel on the grounds of SeaWorld San Diego, which the parties had been discussing since late 2015. While SeaWorld has not publicly disclosed the exact reason, Evans officials contend the theme park operator sought to avoid potential conflicts with local labor unions over construction and operation of the hotel.

In a November earnings call, SeaWorld interim Chief Executive John Reilly told analysts that developing “attendance-driving attractions” remained its top priority.

“While we are currently not pursuing hotels, they remain options for our consideration in the future,” said officials at SeaWorld’s headquarters, in a statement sent recently to CoStar News. “At this time, we are focused on other growth opportunities within our parks.”

Officials added that “it’s critical that we continually refresh or add new attractions, exhibits, rides and events at all of our parks every year,” noting SeaWorld Entertainment plans to open nine new attractions at its 12 U.S. parks, operating under brands including Aquatica and Busch Gardens in addition to the marine-life-themed SeaWorld.

SeaWorld San Diego, which opened in 1964, is the city’s second-biggest visitor attraction after San Diego Zoo. It was the 19th most-visited theme park in North America during 2017, drawing 3.1 million customers, according to a report from the Themed Entertainment Association and consulting firm AECOM.

SeaWorld’s hotel-free approach runs counter to other big Southern California attractions such as United Kingdom-based Merlin Entertainments’ Legoland California Resort in the San Diego suburb of Carlsbad, which last year opened its second on-site hotel; and Walt Disney Co.’s Disneyland Resort in Anaheim, which has three on-site hotels though it recently canceled plans for a luxury-oriented fourth property amid tensions with that city.

Improving Attendance

The SeaWorld San Diego hotel plan was among several initiatives put forward in 2015 and 2016 by SeaWorld Entertainment’s then-CEO Joel Manby, as the company was reeling from several quarters of bad public relations, along with drops in revenue and attendance, following the 2013 release of the CNN-produced documentary “Blackfish.” The film raised questions about the company’s treatment of captive killer whales, following the 2010 death of a SeaWorld Orlando employee during an orca performance show.

The company’s three SeaWorld marine parks — in San Diego, Orlando and San Antonio, Texas — were particularly hard hit by public boycotting.

SeaWorld Entertainment in 2016 announced it would invest $175 million in new shows, attractions and sea-life habitats at its U.S. parks in 2017 alone, and projects have continued well into 2018 and 2019. In response to the “Blackfish” controversy, the company discontinued orca performance shows and the captive breeding of killer whales, and put more marketing focus on its marine-life conservation and education programs.

Still, the troubles continued well into 2017, when SeaWorld San Diego’s attendance dropped 13.9 percent from the prior year, to 3.1 million; and SeaWorld Orlando’s declined 10 percent, to 3.9 million, according to the theme park association numbers.

Company officials said new attractions at several of its parks, including the three SeaWorld venues, had begun to pay off by November 2018, when SeaWorld Entertainment reported that its companywide visitor count for the third quarter rose 9.7 percent from the prior year, to 8.3 million guests. Total revenue for the quarter increased 10.4 percent, to $483.2 million; and net income rose 75 percent, to $96 million.

Alan Reay, president of hotel brokerage and research firm Atlas Hospitality Group, said on-site hotels are often seen by theme park operators as important to boosting time — and money — spent on properties, though it’s not known what impact might result from the SeaWorld San Diego hotel not getting built.

In general, he said SeaWorld’s recent uptick in attendance might spur other hotel operators to consider their own venues near the theme park, provided they can find appropriate sites that haven’t already been built out.

“It could encourage other developers” to mull future projects on the park’s perimeter, similar to what’s already happened for the past several decades around popular theme parks in California and South Florida, Reay said.

SeaWorld San Diego has spurred development of numerous hotels in the city’s Mission Bay area since the park’s 1964 opening, although in recent years hotel metrics in that area have remained strong regardless of attendance woes at SeaWorld and its parent company. Mission Bay remains popular with both locals and visitors because of its proximity to local beaches and access to the city’s Mission Bay Park, among the nation’s largest civic open spaces with vast acreage geared to sailing, fishing and other aquatic recreation not tied to SeaWorld.

SeaWorld Entertainment posted a $2.8 million loss in fees and expenses related to the termination of the San Diego hotel deal, but SeaWorld and Evans Hotels both declined to elaborate on the exact causes for the project’s cancellation.

However, a federal lawsuit recently filed by Evans Hotels against local labor union leaders — in relation to another San Diego hotel project not tied to SeaWorld — includes claims by the hotelier that pressure from organized labor helped scuttle the SeaWorld hotel deal.

The suit alleges organized labor demands in relation to a proposed expansion at another Evans hotel, Bahia Resort on Mission Bay — demands that Evans resisted — helped kill the SeaWorld deal after union leaders also put pressure on SeaWorld, which ultimately decided to drop the hotel project.

By contrast, the roller coasters were not opposed by the union, according to the lawsuit.

“Although SeaWorld is not unionized, the union did not to oppose the Electric Eel ride because of the large number of new union jobs that would be created in constructing it,” the suit states.

Representatives of Unite Here Local 30, which represents local hospitality workers and is a defendant in the Evans suit, did not immediately respond to requests for comment. In a recent statement to the San Diego Union-Tribune newspaper, union officials denied claims in the suit and said labor leaders are “within their rights” to raise public concerns about hotel projects.