Kelly, I think I'll stick with my initial guesstimate of $2 max profit per paying passenger. That was based on the financials from the Six Flags chain. Six Flags would require expenditure of $22 to generate $5 profit. Even though ETPI won't have the Six Flag tax bite, remaining factors have to weigh against ETPI.
The major factors against ETPI are:
Economies of scale: If there were only one Six Flags, profit per person would have to be lower. Many sites means larger buying discounts, development costs spread further, marketing costs go further.
Quality of management: Six Flags is a premier-quality operation. ETPI's designated management of the waterpark is a question mark.
Market size: How many people live in the Midland/Odessa area vs a Six Flags location? Midland is not a travel destination. People will go from Midland to Dallas for a ball game, etc., and incidentally will go to Six Flags. No one will go from Dallas to Midland to take the family to a water park.
Finally, there's the question of insurance. A visitor drowned at Six Flags over Texas recently. With liability insurance and its other strong financial resources, Six Flags can absorb the litigation costs. If someone drowns at Waterpark, (1) what kind of insurance does ETPI carry?, (2) will litigation costs above the insurance limits bankrupt ETPI? What has ETPI told us about its insurance coverage?
So I view $5 profit per visitor as a longer-term goal (like a $2 stock price). I can't buy Marcus's estimate of a profit margin that Six Flags can't match. We don't even have any estimate of revenue (or visitor count) yet, so Marcus is premature.
Also there have been prior estimates that the restaurants would be 'cash cows', that Heroes at Arlington would boom, the Bronco Bowl deal would pay off big, that Internet sales will be taking off, and most recently that 'all divisions are operating at a profit'. It seems like once the spotlight fades, so does the performance.
With a record like this and without the inevitable charges for 'start up costs', I have to be skeptical. Why expect a profit at all in the first year of operations? And when you look at the quarterly/annual financial reports of this 'fully reporting company', do they ever tell you which operations are making money and which are not?
Forgive my smirk here, Kelly. |
