DownWithTyranny!: SeaWorld chief is proud to have fewer people crowding his parks -- and dumping their filthy coin in his pristine coffers

Welcome to SeaWorld Orlando -- just not too many of you.

by Ken

I know it's going to appear in the following that I'm rolling in Schadenfreude, reveling in the banana-peel-style slip of a corporate muckety-muck, but nothing could be further from the truth. I am merely exercising my customary fascination with the fine calibrations of the marketplace as practiced by America's ever-intrepid business visionaries. (Okay, now cue the banana peel.)

I assume you've heard about the little hiccup reported last week by the powers that be at SeaWorld, or whatever the actual conglomeration is called that runs the brand's 11 theme parks spread across this great land of ours, during what is, as I understand it, the first year of operation of the new public company. One of the new regime's big, bold decisions, advancing into this brave new SeaWorld, has produced something other than the expected result, which in turn produced from the company's chief executive a visionary response such as one can only expect from our most visionary leaders -- like, say the leader of the House of Representatives, Speaker "Sunny John" Boehner.

You remember how just recently we had Sunny John bragging about the fact that his House Republican conference was doing something close to zero legislating. Why, His Sunniness went so far as to dream boldly of not only not passing new laws but of un-passing old ones! Now the SeaWorld chief executive of the newly public SeaWorld conglomeration of theme parks seems positively giddy about the sharp drop in attendance of some 600,000 souls which occurred in the second quarter of this year over the same period last year, which is to say at the very time that park prices were raised by an average of 9 percent (It's hard to quantity the price hike exactly because it included, as a further new innovation, some "dynamic pricing" schemes).

In case you were thinking that the drop in paying customers was offset by the higher sticker price by the people who did show up, well, no such luck. The box-office take was down 3 percent. Bloomberg Businessweek's Kyle Stock, reporting on the numbers released last week -- to widespread mocking attention -- wrote (in "SeaWorld Swings Prices Up, Visitation Flops"):

With some new levers to change ticket rates dynamically, SeaWorld dialed up the average admission price at its 11 parks by 9 percent from the year-earlier period, to $38.85. Not surprisingly, it welcomed only 6.6 million visitors, about 600,000 fewer than during the same time last year. Revenue in the period slid 3 percent.

But -- and here's where that executive vision comes into play -- just think how much nicer an experience those people who did show up at SeaWorld have had with the thinning out of those large, unruly mobs.

Overall, SeaWorld Chief Executive James Atchison said the attendance drop hurt, but he stood by higher prices as a net positive. Only about one-third of the visitation slump was due to steeper tickets, according to the company.

"We feel good about the strategy and what it's doing for us," he told investors late Tuesday. "Having a couple fewer bodies in the park is also good for our ratings and the experience as well, and we save operating cost."

You have to be believe that when the Price-Fixing Panel at SeaWorld Central decided to raise prices for this year, there was one soul who ventured timidly, "Gosh, do you really think that's such a good idea? People are still being kind of, you know, careful about their money, and we could just, you know, drive them away." And you imagine that this poor soul was drowned out by a chorus of cigar-chomping captains and lieutenants of industry saying, "Nah, now's just the time to bleed the suckers dry."

But no, it turns out that the overarching strategy was, so what if we draw fewer customers, and so what if we even collect fewer shekels. We'll have fewer but happier customers, and besides, that might even lower operating costs.

And it's not as if the company's overall numbers were going to look so hot anyway, with all the costs absorbed in the process of going public.

SeaWorld Swings Prices Up, Visitation Flops
By Kyle Stock

Fans of killer whales and killer water slides might not be as freewheeling as SeaWorld (SEAS) executives believe.

The theme-park operator swung to a $15.9 million loss in its second quarter as a public company, in part because its higher prices kept hundreds of thousands of visitors away.

With some new levers to change ticket rates dynamically, SeaWorld dialed up the average admission price at its 11 parks by 9 percent from the year-earlier period, to $38.85. Not surprisingly, it welcomed only 6.6 million visitors, about 600,000 fewer than during the same time last year. Revenue in the period slid 3 percent.

One would think the company was at least more profitable, but that wasn't the case. SeaWorld's operating margin fell from 21 percent to 8 percent, as sales and marketing expenses swelled and it hired more people to handle its initial public offering.

The pricing strategy, however, may not have been a total bust. If SeaWorld kept tickets at last year's level and managed to retain the same number of visitors (a big assumption), it would have garnered an extra $21.4 million or so in revenue. Pulling an extra $3.11 out of the smaller group of visitors, however, equates to roughly $20.5 million in sales.

Unfortunately for analysts and executives, pricing strategies never exist in the vacuum of an economic textbook -- the clean tradeoff between volume and profit. SeaWorld, for example, said it lost a lot of visitors because of crummy weather, and Easter came early in the comparable quarter last year, pushing some visits into the earlier period.

Overall, SeaWorld Chief Executive James Atchison said the attendance drop hurt, but he stood by higher prices as a net positive. Only about one-third of the visitation slump was due to steeper tickets, according to the company.

"We feel good about the strategy and what it's doing for us," he told investors late Tuesday. "Having a couple fewer bodies in the park is also good for our ratings and the experience as well, and we save operating cost."

Dynamic pricing is kind of a no-brainer for theme parks. Airlines, hotels, and baseball teams have been using it to lever returns for years, tinkering with ticket rates by purchasing channel and based on a number of factors, from weather to travel patterns. But because such strategies shift so quickly, they are hard to explain and even harder to benchmark.

That was abundantly clear late yesterday as SeaWorld faced a barrage of questions from analysts trying to map the fallout from the higher prices. Wall Street, meanwhile, did not seem convinced that the strategy is paying off. As Atchison argued his point, SeaWorld shares sank 9 percent.

It would be impossible to overstress how impresssed I am by the vision of Chief Executive Atchison. Whatta guy! And I'm sure his new board is feeling just the same way.