Is SeaWorld Entertainment Inc. Staging a Comeback?

Source: SeaWorld.

The turnstiles atSeaWorld Entertainment are starting to click in the right direction again. The meandering theme park operator posted its most impressive attendance gains as a public company on Thursday. SeaWorld entertained 3.2 million guests across its collection of gated attractions in the first quarter, 5.6% ahead of its attendance through the first three months of 2014.

It is SeaWorld's best showing on the attendance front since going public at $27 in early 2013, but it wouldn't have taken much to make that happen. SeaWorld's coming off of back-to-back years of attendance declines of 4%.

Improving trends and the excitement over a seasoned amusement park outsider taking over as CEO last month have won over the once skeptical market. Late last month the stock hit its highest levels since August of last year.

However, let's not read too much into a single quarter's attendance clicks. It's definitely a welcome break after a rough stretch of negative comps. It's also impressive in light of what larger rival Disney did during those same three months. The family entertainment giant reported earlier in the week, and it revealed that attendance actually declined in Disneyland and only inched 2% higher at Disney World. This would seem to be great news. The marine life park operator is actually closing the gap with Mickey Mouse! However, there are a few reasons to temper one's enthusiasm for SeaWorld as we head into the balance of the year.

  • SeaWorld's parks are seasonal, and the first three months of the year don't reveal much. SeaWorld's 3 million guests during the first quarter of last year accounted for just 13% of 2014's total attendance of 22.4 million.
  • The timing of the Easter holiday -- falling in April of last year but March of this year -- inflated the performance this time around. We saw that favorable tailwind come into play during the second quarter of last year when attendance rose 0.3%, the only other period in SeaWorld's brief tenure as a publicly traded company with positive year-over-year guest counts. We will need to see how the current quarter plays out allowing us to compare the first half of 2015 with the first half of 2014 for a more accurate read.
  • There's more to running a successful theme park than getting folks inside. In SeaWorld's case it had to discount admissions, only to find guests spending less once inside the park. Guests paid an average of 5.6% less in admissions, and an average of 1.7% less in food, merchandise, and other in-park expenditures than they did a year earlier. That's a sharp contrast to Disney where per capita admissions and in-park spending have moved nicely higher.

This doesn't mean that the turnaround in attendance isn't a big deal. Investors just can't make assumptions that SeaWorld is over the Blackfish hump or that it's back to being business as usual. Disney's theme park performance was better than guest counts indicate, and it was the exact opposite at SeaWorld.

This doesn't mean SeaWorld isn't doing a few things right these days. SeaWorld's choice for its new CEO is encouraging. Its decision to invest in a major thrill ride for SeaWorld Orlando could pave the way for the chain relying less on controversial marine life shows. It's stepping up its efforts to address activist claims that it feels are unfounded, and putting some marketing muscle behind them. SeaWorld is also cleverly trying to lump its cause with that of other zoo and aquarium operators, a move that may get the rest of the industry to embrace SeaWorld instead of treating it like an outlier that's getting mauled by negative publicity.

SeaWorld remains cautious about the balance of 2015, and rightfully so. These are challenging times. However, with the economy improving and cheap gas prices fueling summer road trips, the strong start in terms of attendance has a chance at building this year. Your move, Shamu.

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Rick Munarriz owns shares of SeaWorld Entertainment and Walt Disney. The Motley Fool recommends Apple and Walt Disney. The Motley Fool owns shares of Apple and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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