• In October, Disney stated it plans to invest roughly $60 billion in its parks division over the next decade.
• Universal said in August it would be investing $17 billion in its Florida theme parks over the next 10 years.
• That makes the merger plans of Six Flags and Cedar Fair, which the Department of Justice said this week it is reviewing, critical for the smaller parks operators after decades of consolidation, and closures, across the country's local and regional attraction destinations.

The theme park business, like many others, is consolidating and changing along with consumer habits.

In the wake of Covid-19, and as consumers more carefully choose where they're spending their money, smaller theme park operators have struggled to compete with the bigger players in the amusement industry like Disney and Comcast's Universal, which have seen huge gains from parks' divisions.

Addressing those challenges was one of the drivers behind the proposed $8 billion merger between Cedar Fair and Six Flags, announced in November. The combined company would put over 40 attractions, from iconic Knotts' Berry Farm to Magic Mountain to Canada's Wonderland, all under one ownership, as well as intellectual property from Peanuts, Looney Tunes and Marvel.

Cedar Fair CEO Richard Zimmerman said at the time of the merger that the combination would be "driving increased levels of demand and in-park value and spending." Six Flags CEO Selim Bassoui said it would "unlock new potential for our parks."

While the Department of Justice said this week it has launched a review of the merger — which comes at a time when big deals are facing higher levels of anti-trust scrutiny from regulators, investors and consumer interest groups — industry experts and park aficionados say this is sort of combination that the park operators need.

Smaller parks have struggled

In recent years, smaller parks have struggled to attract and retain guests, especially as the bigger players chart out massive plans. In October, Disney stated it plans to invest roughly $60 billion in its parks division over the next decade. Universal said in August it would be investing $17 billion in its Florida theme parks over the next 10 years and is set to open a new expansion of its Orlando Park featuring a Super Mario attraction.

One sign of the difficulties: Cincinnati, Ohio's historic Coney Island, meant to mirror the New York icon of the same name, shuttered at the end of 2023 after serving park-goers since 1886. 

Coney's closing ended an era for Cincinnati-based theme park consultant Dennis Speigel. Speigel worked his first job at Coney Island and later found himself the assistant general manager of Kings Island, a park now in the Cedar Fair portfolio. After the success of that park, he was dispatched to Virginia, where he oversaw the opening of a sister park, Kings Dominion.

Some of the excitement about the deal from long-time industry players can border on hyperbole. "When you have these two together, they can reshape the industry," said amusement park blogger Don Helbig, who holds the record for the number of rides on Kings Island's classic coaster, the Racer, having ridden it over 10,000 times. (He also worked in public relations at Cedar Fair-owned Kings Island for 16 years until last June.)

Aside from Disney and Universal, they are the two biggest players, and Helbig said that should mean more buying power that allows them to get better pricing on everything from roller coaster track to hamburger buns, and that should flow-through to the guest experience. He also pointed to Six Flags' partnerships with several major tech firms (including Google, Dell and Snowflake) that can be leveraged throughout all the parks. And there's an underlying rationale for the deal related to what's occurred on the national theme park landscape in recent decades.

"Larger companies buy up smaller ones, and now pretty much all of the old family small parks out there have gone since the 1990s and early 2000," Speigel said.

The combining of Six Flags and Cedar Fair makes sense, he said, calling it a merger of equals from an operational standpoint, but from a front-office standpoint, Cedar Fair brings stability to the union.

"Six Flags was not in a healthy state; it was a ship at sea without a captain for several years," Speigel said.

Cedar Fair, by contrast, is "a nose to the grind-stone theme park operator," he said, featuring a more seasoned roster of executives at the corporate and park operating levels. Six Flags has cycled through seven park presidents in 20 months and three CEOS in seven years.

Plans are for Zimmerman, current CEO and President of Cedar Fair, to retain the title at the new company, while Six Flags CEO Bassoul will become executive chairman of the combined board of directors. Cedar Fair shareholders will own a slight majority of new company. 

Six Flags and Cedar Fair both declined to comment.

David Katz, a New York-based managing director at the investment bank Jeffries, agrees that Six Flags has lacked consistency lately, contributing to its sagging stock prices and underwhelming performance.

"It's been an inconsistently managed company for a long time," Katz said. Six Flags went through bankruptcy during the Great Recession but emerged and then "had a good run for a while," Katz said. But around 2018 or 2019, he said the company needed more room to grow and started cycling through strategies, none of which stuck.

"Salim and his team have not demonstrated a firm command of how to make the business run well, efficiently, and profitably in a way that expands value for shareholders," Katz said.

In Six Flags' 2023 third quarter earnings reported in November, the company said had 17.9 million guests in first nine months of the year, representing 9% growth from the previous year. However, in the first nine months of 2019, the company saw 26.7 million guests visit its parks. Revenue for the first nine months of 2023 compared to 2019 is down 9.77%, even as guest spending per capita is up 40.6%.

A more consistent ride at Cedar Fair

Comparatively, Cedar Fair has seen its attendance decline from 22.9 million visitors in the first nine months of 2019 to 20.9 million in 2023. The company reported its in-park capita spending was $61.73 in that 2023 period, up from $48.73 in 2019. Revenues in that 2023 period were $1.4 billion, up from $1.2 billion in 2019.

Cedar Fair has, Katz said, been a consistently run company that has done a solid job of deploying capital and running a stable, mature business. He expects the focus to return to creating a stable portfolio of parks in North America.

But Katz thinks the impact on the big players will be different. Disney occupies a distinct niche in the travel and leisure orbit.

"If you called up Disney and referred to them as a theme park, they would probably be insulted," Katz said. Katz calls the larger parks a "destination experience." By comparison, theme parks are usually single-day trips. But Katz said they can be very stable investments and profit centers.

The combined Six Flags and Cedar Fair entity will be able to drive loyalty and repeat business so that repeat visitors cycle in and out, he said. Six Flags has tried, with modest success, a loyalty program to drive revenue, and Katz expects the new company to build on that. "The biggest impact theme parks can have is driving scale benefits," Katz said

"Loyalty programs can be hugely effective," Katz said. And while company leaders have vowed to keep park names unchanged, Katz said they may have to find a way to tie the two brands together in one easily brandable name.

Analysts at equity firm Stifel think that the combined company will more closely follow Six Flags operating strategy, which has been to focus on modestly growing attendance year and only slowly increasing prices.

"SIX made a massive change in their approach about two years ago: the company decided to limit attendance growth by pushing price aggressively." Stifel wrote in an analysis. Six banked on fewer customers willing to pay more if the parks were less crowded and had nicer amenities but Stifel wrote "Our guess is the combined company would have a pricing/growth strategy that is more aligned with FUN than SIX's new philosophy."

Carissa Baker is also no stranger to theme parks. She teaches about them at the University of Central Florida and can see SeaWorld from her front porch and Universal's Epic Universe from her office. Although the merger of Six Flags and Cedar Fair surprised her, she thinks it makes sense for the two companies.

"There are certainly differences between the two companies, but their product is similar enough that it could prompt some exciting growth," Baker said. Baker points out that both companies have executed significant acquisitions and mergers in the past (Paramount Parks for Cedar Fair and Premier Parks for Six Flags), so they have experience integrating properties and products, which is already underway at the two companies as they wait for pending regulatory approval.

Despite what will be a new industry giant in the theme park business, Baker thinks the impact on the larger rivals of Disney and Universal will be limited.

"I don't know that it will have a major impact on the two top U.S. players. The "average visitor" is more likely to go to their regional or local parks more frequently and then save up several years to visit the destination resorts," Baker said.

Disney declined to comment. A Universal spokesperson could not be reached by press time.

The deal may more clearly define the respective segment leaders across the domestic theme park market, with the consolidation leaving only a few independent ride parks scattered across the country, while Six Flags/Cedar Fair likely own the "'ride/thrill park" category, just as Disney, Universal, Seaworld and Legoland own their respective categories.  

"Disney and Universal have theme parks in several global markets and are considered destination resorts," Baker said. She said that Disney and Universal are bigger draws for international visitors and involve more extended stays, higher capital expenditure, and larger attendance despite having fewer theme parks. Disney and Universal properties, Baker said, are clustered in large population areas and have year-round operating calendars, where most of the Six Flags-Cedar Fair parks are seasonal. The merger, she said, will create a company with an expansive portfolio and more significant market share but probably little impact on the Disneys of the world.

Dallas restauranteur Shannon Wynne's take on the merger is hopeful. In Texas, Six Flags reigns supreme.

"We don't mind, especially if they improve the park," Wynne said.

Wynne's father, Angus, launched the Six Flags brand, opening a theme park in 1961 outside Dallas. The original six flags were to celebrate the various chapters of Texas history. Wynne said the park was meant to be temporary, up for a few years and then torn down.

The plan was for the park to generate cash flow for the family's fledgling industrial park, Wynne said. However, Six Flags took off in Texas and later opened parks in Greater Atlanta and St. Louis. It then began buying, branding, and transforming struggling amusements since starting new parks from scratch was so costly. But Six Flags innovations have spread throughout the industry. Wynne credits his father with creating the single-ticket concept, where park-goers pay one price for admission instead of paying to go on each ride.

Wynne said he had never heard of Cedar Fair until the October announcement, and he guesses that 95% of Texans haven't either. But he wishes the merger success.

"I hope the owners treat it with respect and make it better," Wynne said, adding that he and his family hadn't been involved in Six Flags in quite some time. His father passed away in 1979.

"It's like blending families," said Elizabeth Ringas, president of the American Coaster Enthusiasts, who has ridden over 700 coasters in 140 theme parks and fairs over the past few decades. "There are some things each does well and some things they don't as well. If the new company builds on the best of both, it could be a phenomenal experience for the guests," she said.

Ringas doesn't have a favorite between Six Flags and Cedar Fair, saying that the experiences vary greatly by park. But her favorite coaster is the Beast at Kings Island. The Beast is certified as the longest wooden coaster in the world, offering a 4-minute ride over soaring heights and through roaring tunnels.

Helbig expects guests to see some of Cedar Fair's signature touches coming out on top in the combination.

"The first thing Six Flags guests will notice is the disappearance of lids and straws to drinks," Helbig said, pointing to one of Cedar Fair's hallmarks — no straws or cup lids at their properties. But one thing that he doesn't expect to change is the experience. Of going to the amusement park. "It never gets old, it's always an escape, it's always fun," Helbig said.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.