Six Flags: A Thrilling Expansion
By: Sophie Fiala & Asima Hudani
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Riding the Demographic Rollercoaster: Southwestern Ontario’s Surge
Southwestern Ontario has a dense population of 1.77 million and is projected to grow 40.9 percent to 2.5 million in the next 20 years. The region has a growing number of families and young adults, fuelled by a rise in immigration and astronomical rises in the cost of living in Toronto. Land in the region is cheaper and more readily available than in the Greater Toronto Area. The region is also home to eight universities and colleges, creating a built-in supply of readily available seasonal theme park workers. Almost 15 percent of Southwestern Ontario full-time residents are individuals aged 15-24, who would provide a steady supply of labour.
Merging for Magic: Cedar Fair and Six Flags Alliance
In November 2023, global leaders in the theme park industry, Cedar Fair and Six Flags announced a merger, creating a combined portfolio of 42 theme parks, 15 water parks, and 9 resorts across 17 US states, Canada and Mexico. The merger has the goal of a “diversified geographic footprint.” The combined entity would have a pro forma enterprise value of $8 billion, giving it greater access to capital.
The Great Canadian Coaster Quest: Pioneering Theme Parks in the North
Currently, Cedar Fair operates a single Canadian location, Canada’s Wonderland, in Vaughan, while Six Flags operates La Ronde in Montreal, Quebec. In 2022, the Canadian market size for amusement parks grew to $852.4 million, showing that both companies have an untapped market in the Canadian amusement park industry despite their limited presence. Traditionally, opening an amusement park in Canada has been more risky than south of the border due to tough weather conditions limiting winter operations, however, this poses an opportunity to tap into an underserved market. As London is located just an hour’s drive from the US-Canada border in Michigan and two hours from the border at Niagara Falls, Eastern Michigan and Upstate New York populations can both make the trip to visit the new theme park. Michigan’s main theme park, Michigan’s Adventure, is located more than a three-hour drive from Detroit, approximately one hour further than a cross-border visit to London. Additionally, Cedar Point based in Ohio is a two-hour drive from Detroit, a comparable distance to London.
Southwestern Ontario and Eastern Michigan (Metro Detroit) have a combined population of approximately 5.3 million, which is roughly comparable to the market size of the Greater Toronto Area at 6.4 million. The average one-day ticket price for an adult is $44.99 at Canada’s Wonderland, not including concession sales. Assuming a conservative ticket price of $34.99 per person, this represents a total addressable market size of $185.4 million for admission sales. With an adoption rate of 20 percent, an estimate for average concession sales of approximately $15 per person, average annual visits of 1.5 times per person, and EBITDA margins consistent with Cedar Fair’s historical financial performance over the past decade (excluding 2020 due to COVID’s effect), this expansion has the potential to generate $25.9 million of EBITDA to the company per year.
The Loop-de-Loop of Local Happiness: London's Quest for More Thrills
In 2023, real estate research company, Point2Homes, ranked London last on a ranking of Canada’s 100 happiest cities. The low score was driven by factors such as poor mental health and a lack of community activities, including amusement parks. London’s sole amusement parks, Storybook Gardens and East Park, cater exclusively to families with young children and have few attractions and activities. Storybook Gardens receives around 150,000 visitors per year, typically half of which are tourists and the other half being London locals. Since the end of the COVID-19 pandemic, there has been a significant increase in visits to themed parks, exemplifying the growing need for tourist attractions, especially in Southwestern Ontario as its population boom continues., The entire Southwest Ontario region is projected to see more than 35 percent population growth in children aged 0-14 from 2022 to 2046, with many regions including London expected to see more than 50 percent growth.
Building a theme park involves high start-up and fixed costs, including purchasing the land, building rides, paying workers, and licensing characters to showcase at the park. Through their recent merger, Cedar Fair and Six Flags have announced plans for the expansion of their combined brand. However, with high inflation rates, the cost of land and labour in many US and Canadian cities makes expenses exorbitantly high and drives down ROI. However, the costs of land and construction in mid-sized cities like London remain more affordable, given the increased access to capital provided through the merger. Furthermore, London was deemed Ontario’s second-most affordable city in 2021, reinforcing why London is an ideal location for new infrastructure to be established in order to build the city’s reputation, tourism, and economy.
A primary challenge with building a new theme park is physical parameters, such as determining the total land size needed and building space required. As most land in Southern Ontario is designated for residential or agricultural purposes and an extensive permitting process is required for amusement facilities, zoning remains a challenge. In addition to having land areas to support themed areas and rides, there needs to be sufficient space for traffic flow, crowd control, and visitor parking. For example, Six Flag’s La Ronde theme Park in Montreal is more than 146 acres in size with 40 rides, including 10 roller coasters. To address the land use and availability constraints, Cedar Fair and Six Flags may need to reconsider the traditional layout and elements of its theme parks. For example, building structures with height rather than width, such as an indoor waterpark that can run year-round and takes up less area than an outdoor rollercoaster.
From Coasters to Castles: Building the Next Theme Park Kingdom
The merger between Cedar Fair and Six Flags provides an opportunity to fill in the tourism gap present in Southwestern Ontario while improving the overall quality of life in this fast-growing region. The merged company should open a second Canada’s Wonderland amusement park in Southwestern Ontario, located off Highway 401 near Highbury Road between London and St. Thomas. While the cost of building the park would be between $200-400 million, the growth opportunities range from increased tourism and local traffic to jobs for residents, and improved mental health. With the region’s population projected to surge, revenues from ticket sales, parking, and other sources will support the new park’s longevity.
Given that Canada's Wonderland reached $301 million in revenue in 2023 and Cedar Fair’s margins currently sit around 12 percent, the company has precedence of being successful in the Canadian market and could work towards being a profitable venture., The new theme park would also put London on the map as a tourist destination and even has the potential to continue attracting other investments, such as Volkswagen’s new EV battery plant in nearby St. Thomas, by portraying the area as more of a livable hub.
The new park would operate as Canada’s Wonderland second location in Canada. While core activities in the park would mimic the Toronto location, the merger provides an opportunity to bring Six Flags intellectual property to an Ontario park. Six Flags’ licensing agreement with DC Comics and Warners Bros could allow the new park to build themed sections that are unique from Canada’s Wonderland’s existing location, offsetting potential cannibalization of attendance and sales from the location as visitors can immerse themselves in different experiences at each park. In addition, core Canada’s Wonderlands events, such as Halloween Haunt, WinterFest, and interactions with the Peanuts characters, could be executed at both parks given their high popularity amongst visitors and target reaching a wide variety of audiences.
This merger also provides an opportunity for the new park to take inspiration from international amusement parks, such as those established in Asia, and bring new activities to the North American market. For example, India’s Della Adventure Park is an extreme adventure park featuring adrenaline-inducing activities such as sky cycling, bubble soccer, and paintball, offering family-friendly options for keen amusement park goers. Another option could be to build an indoor waterpark to allow for year-round operations, given the Canadian weather. This could be similar to the Great Wolf Lodge located in Niagara Falls, which includes water slides, a lazy river, and a suite of forest-themed characters and related activities.
Cedar Fair and Six Flags should use attractions featuring virtual reality elements to overcome space constraints and keep up with consumer trends. For example, LEGOLAND Florida recently debuted a roller coaster called the Great LEGO Race where riders wear a virtual reality headset that brings them to a world where they fight against minifigures, surf waves, soar over cliffs, and smash through walls. These enhancements can be changed by re-programming the headsets, making the rides dynamic and new each year, and taking up significantly less space than a roller coaster like Canada’s Wonderland’s Leviathan or Behemoth. Cedar Fair already has licenses for the Peanuts family of characters and could use them in VR-enhanced rides targeted to families. Such improvements and usages of technology allow Cedar Fair and Six Flags to compete with industry leaders, like Disney, by providing an equally magical experience that is closer to home and more affordable for local families.
Engineering Happiness: One Ride at a Time
All together, the unique aspects of this second Canada’s Wonderland theme park will encompass nostalgic elements of its current location, while incorporating new elements from amusement parks in the US and Asia. The merger between Cedar Fair and Six Flags puts the companies in a unique position to expand their operations in Canada, an untapped market, in order to maintain their position as key players in the amusement park industry and lead the way for future entertainment establishments in Canada, and other international markets. By building a park in Southwestern Ontario, specifically London, Cedar Fair and Six Flags could build a foundation for future companies to expand to this area, and help the region thrive socially and economically.
