SeaWorld will take on debt to fund building of hotels on park lands

By Devika Patel

Knoxville, Tenn., Nov. 8 – SeaWorld Entertainment, Inc. plans to build hotels on underused land surrounding its parks to capture further profits from guests and management expects to fund this expenditure with cash from the balance sheet and new debt.

“We have significant excess land across most of our parks that is currently underutilized,” chief executive officer Marc Swanson said on the company’s third quarter ended Sept. 30 earnings conference call on Wednesday.

“We have a unique opportunity to build highly compelling hotels that will integrate with our parks, allow us to capture profits from our guests that are currently staying at other properties, increased length of stay at our properties, offer more compelling vacation packages, upsell and cross-sell guests, increase loyalty and generate an attractive ROI.

“Some investors have asked how we might finance these hotels,” Swanson said.

“While cash is fungible, we have several options given the nature of these projects.

“We expect to finance these hotels with a combination of debt and cash from our balance sheet.

“Given our expected cost of capital and the expected returns on these hotel projects, we expect to generate north of 20% returns on equity for these projects,” he said.

The balance sheet is strong.

“Our Sept. 30 net total leverage ratio is 2.56x and we had approximately $586.8 million of total available liquidity, including over $215 million of cash on the balance sheet,” Swanson said.

“This strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with the goal to maximize long-term value for shareholders,” he said.

Total revenue for the quarter was $548.2 million, a $17 million, or 3%, decrease from the third quarter of 2022.

Adjusted EBITDA was $266.4 million for the quarter, a 2.8%, or $7.8 million, decrease from the third quarter of 2022.

SeaWorld is an Orlando, Fla.-based theme park and entertainment company.

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