SPECIAL REPORT: Scott Ross and the Future of SeaWorld

When I travel, especially on business trips, I like to get of the beaten path and explore local neighborhoods and dine in the same restaurants as the locals do. Last April, when I was in Anaheim covering the annual Themed Entertainment Association Summit at the Disneyland Hotel, I wanted something different from the IHOPs and the Cheesecake Factories surrounding the park and found myself at a huge Chinese seafood buffet in the neighboring town of Garden Grove.

We’ll return to the buffet in a moment.

In August 2018, I was standing on the VIP balcony of the Two Bit Circus Micro-Amusement Park in downtown Los Angeles interviewing Two Bit Circus President Kim Schaefer.

If you haven’t been to Two Bit Circus, you really should try to schedule a visit. It’s as if maniacal genius circus clowns, technical wizards, and Imagineers that had worked on DisneyQuest (it’s true!) figured out a way to combine Dave & Busters with maker culture and steampunk, with elements of role playing and a lot of social interaction. Just watch the darned video. It’s your opportunity to see me look ridiculous in a VR headset.

So there I am talking with Kim, and we discuss her previous position, which was as CEO of Great Wolf Resorts, the chain of themed family hotels with attached indoor waterparks. We talked about the differences and similarities between a Great Wolf Lodge and a Two Bit Circus Micro-Amusement Park, about her stint on one of the greatest episodes of Undercover Boss – in my opinion a much, much better one than the fabled Joel Manby episode, and about why she left. Basically after close to two decades with the waterpark resort company, she was ready for a change.

Now, I didn’t ask her then, and I have no intentions of asking her now, about her relationship with the Great Wolf Resort owners. But researching this piece, I noticed her departure shared many similarities with the departure of SeaWorld’s former Chief Operating Officer and Interim CEO, John Reilly.

Which takes us back to that Chinese seafood buffet. Looming over it and the adjacent Vietnamese sausage factory is one of the final projects that Kim worked on – the Great Wolf Lodge Garden Grove (that’s the top of the hotel tower with the paw print). Groundbreaking on the project was also the first day of employment for the Great Wolf CEO that followed her, and I’ll get to him in a moment.

There’s a common factor between Schaefer and Reilly – it’s an investor named Scott Ross. I don’t have a current photo of Ross. Unfortunately, all the ones I have of him are about a decade old, where he’s attending various social circle events with different attractive women. Since I don’t want to bring those women into this article, since they, as far as I know, were not involved in Scott’s business ventures, I’ll be representing him here with the corporate mascot of another company he was involved in the acquisition of.

Follow along, because I’ll be bouncing back and forth between Great Wolf Resorts and SeaWorld Entertainment to show some rather unexpected parallels between the two.

THE BUY

2012 – Apollo Group, with Ross as part of the team, announces that it’s purchasing Great Wolf Resorts. Ross joins the Great Wolf board.

2017 – Zhonghong Zhouye Group of China purchases Blackstone’s 21% stake in SeaWorld. Hill Path Capital, owned by Ross, begins buying up small batches of shares, eventually becoming the second largest owner. In November, Ross is appointed to the SeaWorld board.

THE COMPANY PERSON

One of the five founders of Great Wolf, Schaefer was promoted in 2008 from Chief Brand Officer to President and COO. On January 1, 2009, she became the company’s new CEO. She agreed to remain in the position another five years at the time of Apollo’s acquisition.

A 33 year veteran of the Busch Entertainment Group/SeaWorld Entertainment team, Reilly served as Park President at both Busch Gardens Williamsburg and SeaWorld San Diego before being named Chief Parks Operations Officer, then was promoted to COO. Following the resignation of CEO Joel Manby in February, 2018, Reilly was named Interim CEO.

CHANGE IN CONTROL

Three years after its purchase, in 2015, Apollo sold Great Wolf Resorts to Centerbridge Partners. Ross remained in a position of power on the board.

In 2018, Zhonghong’s financing structure began to collapse. At one point, the Chinese company was taking on debt at a 30% interest rate to pay off existing debt. Ross and Hill Path began to assert more control over SeaWorld board decisions.

NEW CEO

Ruben Rodriguez had been a partner and managing director for a firm called Boston Consulting Group. One of his clients, Carnival Cruise Line (not to be confused with its parent company, Carnival Corporation), had hired him as Executive Vice President, Guest Experience in 2007, promoting him to EVP, Ship Operations in 2009. Less than three months after the sale to Centerbridge, Great Wolf named Rodriguez its new CEO.

Gustavo (Gus) Antorcha had been a partner and managing director for a firm called Boston Consulting Group. One of his clients, Carnival Cruise Line (not to be confused with its parent company, Carnival Corporation), had hired him as Senior Vice President, Guest Commerce in 2012, promoting him to SVP Guest Operations in 2015 and EVP and COO in 2017. In February 2018, a year after John Reilly had taken over as Interim CEO, SeaWorld named Antorcha its new CEO.

THE DEPARTURE

Once Rodriguez was on board, Schaefer agreed to transition back to Chief Brand Officer through the end of the year and then move onto the company’s board. Rodriguez would stay with the company for two years before returning to private consulting.

Reilly departed a month after Antorcha’s appointment. Within the following few months, the park Presidents from Orlando, Williamsburg, and San Antonio would all resign within days, and in one case, hours, of giving notice. This would be followed by the resignation of Antorcha, citing an inability to work with the board.

THE FUTURE

SeaWorld is suffering an image crisis, and management departures is the least of its worries. For a moment, the company triumphed in a brief media coup as Thomas Cook, which had discontinued selling tickets to SeaWorld in a very publicized move, suddenly ceased operations, stranding thousands of customers overseas. SeaWorld’s solution: free admission to stranded Thomas Cook customers.

But then a week later, more negative news as TripAdvisor announced its new policy on selling tickets to venues with dolphins and whales.

Now pay attention closely:

Facilities can still sell on TripAdvisor if

1. They commit to relocating their cetaceans to a sanctuary

Or

2. They are accredited by a World Association of Zoos and Aquariums (WAZA) member association (such as AZA) and commit to phasing out public exhibition through ending breeding, prohibiting wild capture, and not importing from another facility.

Pretty much the Joel Manby/HSUS policy on SeaWorld’s orcas, but on some higher dose steroids.

I expected to see Dan Ashe, the President and CEO of AZA and Christopher Dold, the Chief Zoological Officer for SeaWorld, address the specifics of these stipulations when they made statements yesterday.

But they didn’t. They talked about the usual stuff whenever someone says they’re going to quit selling tickets – accreditation, conservation, education, welfare.

The problem with such arguments is that the WAZA exemption takes into account accreditation, conservation, education, and welfare. And though the exemption was most likely written by TripAdvisor in a way to specifically exempt Walt Disney World ticket sales from being dropped, the individuals who are fighting for zoos and aquariums are not arguing about the prohibitions in that exemption. Nobody is saying, “If we want to continue to use our animals to raise awareness for conservation and to provide a platform for education, we need to breed and we need to be able to transfer animals from one facility to another so we will have them for decades to come.”

A few days ago, the Mystic Aquarium filed an import permit for five belugas to be moved from Marineland of Canada to itself and the Georgia Aquarium for a research project. I’ll just assume at this point that TripAdvisor will be dropping both locations.

More than Thomas Cook, more than Virgin Holidays, the TripAdvisor decision will have a a hard impact on SeaWorld. TripAdvisor’s programming is integrated into hundreds of thousands of web pages, and used by millions of customers in evaluating facilities and making decisions. Dropping ticket sales is the first step. And there’s nothing to prohibit TripAdvisor from dropping a location altogether on its website as the second step. This will prove problematic for SeaWorld, which is one of many companies that relies heavily on TripAdvisor awards and ratings for its marketing.

I see Ross having three options at this point – one is to diversify by purchasing a number of regional theme and waterparks, which could shift attention away from the animal parks. There are rumors that Premier Parks might be up for sale. That would give SeaWorld Elitch Gardens in Denver, but the future of that park’s current plot is up in the air.

There’s the rumored Six Flags/Cedar Fair merger, which would open up a few parks if it’s a real thing.

But the best option is one that was originally part of a rumored merger between SeaWorld and Parques Reunidos – the acquisition of Palace Entertainment. EQT, which is purchasing Parques Reunidos, is looking to sell off some assets and the Palace properties have been underperforming for a number of years, primarily due to weather issues. Such a purchase would give SeaWorld a presence in the Wisconsin Dells, at Kennywood (below) and with the 1-2-3 punch of Dutch Wonderland, Sesame Place, and Lake Compounce to compete against LEGOLAND New York, which opens July 4, 2020. Of course, it helps that a Hill Path partner is Chairman of the Board at Parques Reunidos.

Speaking of Sesame Place, I’m standing by my belief that the ideal location is a transformation of Aquatica San Diego. The park has not opened a new attraction for a number of years and is in a prime location to pull tourism from both San Diego and Tijuana to compete in the same market against LEGOLAND California.

The second option I see for Ross is to convert SeaWorld Entertainment into a REIT (Real Estate Investment Trust), owning the properties and the buildings, with a spin-off nonprofit operating the parks.

Third is the notorious Plan B, which has been considered by SeaWorld management for decades – gradually and quietly remove all the whales and dolphins to other facilities.

Why not sanctuaries? Sanctuaries take time.

In 2011, PETA argued in court that SeaWorld was violating its orcas’ constitutional rights by keeping them as slaves. The restitution they sought was for the orcas to be removed to an ocean sanctuary (and of course they lost, because their argument was flawed, but I’ll save my Steven Wise-ish analysis of its flaws for another day).

It’s been eight years since that lawsuit and, though the Whale Sanctuary Project (WSP) has taken it upon itself to make a sanctuary a reality, we’re still waiting on a location. Even the selection process is imperfect. At public meetings held in July in the San Juan Islands, WSP revealed its primary location in Washington State for an orca sanctuary – Deep Water Bay on Cypress Island. And that’s good and fine. Until this very moment that I point out that Deep Water Bay was where a sea pen collapsed in 2001, releasing 300,000 Atlantis salmon into the Pacific. Some say it was due to an abnormal tide, others say it was hungry orcas banging against the netting. My next door neighbor believes it was the US Navy experimenting with extraterrestrial technology. I just don’t know.

The National Aquarium has delayed its sanctuary due to climate change adversely affecting potential locations.

Ten years ago, Merlin Entertainments announced it was partnering with Whale and Dolphin Conservation (WDC) on a sanctuary for the dolphins it acquired with its purchase of the Heide Park and Gardaland theme parks. Still waiting.

It did, however, ship two belugas from Shanghai to a sanctuary in Iceland. But they’re spending the winter inside an indoor quarantine pool because the external weather is too severe for them to be in the sea pen.

I digress. Back to this guy:

What’s Ross’s ultimate goal. He’s told a number of people he’s in SeaWorld for the long run. But how long is long?

I have a feeling he’s waiting for the stock value to drastically increase. Right now, SeaWorld is at about half what competitors Six Flags and Cedar Fair are trading and less than a third what it traded prior to the huge post-Blackfish drop.

Why do I think this? Great Wolf Lodge.

Purchased by Apollo 2012:

$798 million

Sold 2015 to Centerbridge:

$1.35 billion

October 2, 2019: Blackstone announces it is purchasing a 65% controlling stake from Centerbridge. Total valuation of company:

$2.9 billion

This is for a chain of hotels with indoor waterparks. Imagine what Ross can make off theme parks if he gets his strategy right.

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