Six Flags Entertainment Corporation/NEW Q3 FY2021 Earnings Call

Good morning. My name is Cathy and I will be your conference operator today. At this time, I'd like to welcome everyone to the Cedar Fair Entertainment Company 2021 Third Quarter Earnings Call. All lines are being placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. Thank you. Michael Russell, you may begin your conference.

Thank you, Cathy, and good morning. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to our 2021 third quarter earnings conference call. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our investors website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair's President and CEO; and Brian Witherow, our Executive Vice President and CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's Regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. With that, I would like to introduce our CEO, Richard Zimmerman. Richard?

Thank you, Michael and good morning, everyone. We appreciate all of you being with us today. Today's opening remarks will focus on three primary areas. First, a review of the third quarter results of our parks and resort properties as well as more recent performance trends during the month of October. Second, an overview of how we successfully managed structural shifts in the labor market this season and how we plan to address this challenge in 2022. Finally, we will highlight how the organizational changes we have made and the strategic initiatives we've implemented enabled us to offset many of the effects of the pandemic positioning Cedar Fair for continued growth, success, and value creation. Let me start by saying I am extremely pleased with our company's results since the reopening of our properties in May, and particularly, over the last four months, which represents the most important stretch of the season for us. This outstanding performance would not have been possible without the unwavering determination of our leadership team, whom I believe is the strongest, most experienced, and uniquely talented collection of professionals in our industry. Of course, they're supported by the talented and committed teams operating our parks across North America. Collectively, we have demonstrated time and time again how to produce the best possible outcomes in highly challenging environments, while also pushing the boundaries of success when momentum is on our side. Every day, the associates of Cedar Fair delight our guests with immersive family experiences, which is an essential element of our differentiated business model. The strong attendance and guest spending trends we reported through Labor Day weekend continued through last Sunday, culminating in October in which our parks entertained 3.2 million guests and generated record revenues of 219 million. Our outstanding performance was a result of providing our guests with exceptional experiences. First, we reported record third quarter revenues, which we achieved despite 47 fewer operating days compared with the third quarter of 2019 as well as continued capacity restrictions at several parks and a group sales channel that has yet to fully recover. Second, we set a new high for in-park per capita spending. Credit goes to our business intelligence group for its savvy use of analytics and dynamic pricing strategies to optimize pricing both at the gate and inside the parks, as demand remains strong. At the same time, our commitment to elevating the quality of our offerings, particularly within food and beverage has resonated well with our guests. Our team's relentless focus on enhancing the guest experience and the related investments have served as catalysts for strong growth in per capita spending across all revenue channels. Third, our out-of-park revenue channels continued to perform very well. They exceeded 2019 third quarter out-of-park revenues by 9%, despite fewer operating days, and two of our signature resort properties at Cedar Point; Castaway Bay and Saw Mill Creek, remaining closed all year for renovations. For open resort properties, daily room rates were up an average of 6% across the system, with certain locations up as much as 25%. We are very encouraged by the strong rebound in demand for our resort properties, which remain a significant area of growth and a true differentiator for Cedar Fair within the industry. And finally, as I previously mentioned, the impressive and growing demand for our Halloween events produced a record October again this year, with net revenues for the five-week period ended Sunday, October 31st, up more than 40% from the comparable period in 2019. I also want to emphasize the significant contribution of our advanced purchase programs to our rapid recovery and our consistent strength in attendance. Proceeds from season pass sales produce a reliable recurring revenue stream year-after-year that underscores our confidence that our business model is a consistent generator of strong resilient free cash flow. Season pass sales also prospectively inform our fiscal planning process and capital allocation strategy. The ongoing success we have captured from the growth of our annual season pass campaigns has served as a primary driver behind our strong topline results this year as it has for many seasons. Since 2022, season passes and related all-season products went on sale in early August. Sales have outpaced the record sales volume during the comparable period in the fall of 2019, with the average season pass price trending up 5% year-to-date. Through the end of October this year, sales of 2022 season passes have topped more than 1 million units for only the second time ever, with all season product sales up in all categories. Historically, the momentum of early season pass sales has served as a very reliable leading indicator for next year's demand, which bodes very well for 2022. We believe the early and growing sales of our season passes and related programs validate our strategies and confirm the value guests place on our unique style of family entertainment. The desire to have fun next summer is widely held. We are uniquely able to monetize that and we follow through by delivering amazing experiences that create value for both our guests and our unit holders. Based on the strong results, positive momentum, and a bright outlook going forward, we are well-positioned to pay down debt in the very near term, and resume our quarterly cash distributions long term. Before I turn the call over to Brian to discuss our financial results in more detail, I'd like to shift gears for a moment to focus on the labor market and how it has changed since the pandemic began. Broadly speaking, business closures, lost jobs, and extended furloughs during a period of enhanced unemployment benefits gave workers an opportunity to reassess their employment options, many delaying their return or leaving the workforce altogether. In such a tight labor market and with the J-1 visa program remaining in a state of flux, our ability to quickly attract and retain the thousands of associates we needed to open our parks for the 2021 season became our highest priority, resulting in our decision to move quickly and aggressively on wage rates. While a difficult decision to make at the time, as we noted in our last earnings call, these adjustments were critical to ensuring our parks were adequately staffed and able to deliver the high-quality experience guests have come to expect at a Cedar Fair Park. In response to the labor pressures, we raised hourly rates to market leading levels and included various bonuses to attract and retain associates. The combination of these efforts pushed hourly pay rates as high as $20 in some markets, while the other parks used top wages to secure hard-to-fill positions such as security and culinary staff. While these new rates have pushed labor costs higher, I couldn't be prouder of the team's foresight and conviction as this decisive action was a significant contributing factor to the record per capita guest spending levels our parks were able to achieve this year. On the labor front, our attention now turns towards the 2022 season and ensuring we're doing everything we can to alleviate incremental labor cost pressures. This includes a more aggressive and proactive recruiting process and adjusting our pay rate model to provide more flexibility. We are building a labor model that allows us to adequately staff our parks to deliver a high-quality guest experience and continue to drive growth in guest spending levels, but at the same time, allow us to flex rates to match the supply of labor in the market. The anticipated return of the J-1 visa program, combined with additional operating efficiencies identified by our new workforce management and business intelligence systems should help alleviate some of the labor rate pressures. Brian will provide more detail on this shortly. I'll finish my opening remarks with these observations. We have historically had success adjusting to labor cost increases during periods of wage rate inflation and are confident that this will continue, particularly as consumer spending remains strong and attendance returns to pre-pandemic levels. I also believe in our team's ability to successfully manage the business through future periods of unanticipated change and invaluable characteristics they applied brilliantly through the depths of the pandemic this year. As we displayed this season, we remain steadfast in our commitment to delivering the highest quality entertainment experiences. In fact, according to our most recent consumer research, most of our parks are in their highest guest satisfaction scores ever, for both our daytime, Halloween, and nighttime haunt events. I want to acknowledge and congratulate our park teams for a job exceptionally well done. And with that, I'll turn the call over to Brian for a review of our financial results.

Thanks Richard and good morning, everyone. I'll begin by providing more detail behind our results for the third quarter before moving on to an update of our October performance trends. But first I need to remind you that the pandemic had a material impact on park operations in both 2020 and 2021. Because we suspended park operations in mid-March last year, and still have limited operations during the third quarter of 2020, results for the third quarter of the last two years are not directly comparable. For those reasons, I will provide more relevant comparisons to the third quarter of 2019. In 2021, operating days in the third quarter total 988 compared to 1,035 total operating days in the third quarter of 2019. As reported in our earnings released this morning, net revenues for the third quarter totaled a record $753 million, up 5% or $39 million compared to the third quarter of 2019. The increase in net revenues was the direct result of a 29% increase in-park per capita spending and a 9% increase in out-of-park revenues during the period. Partially offsetting these gains was an 18% or 2 million visit decline in third quarter attendance compared to 2019, reflecting 47 fewer operating days in the period, the anticipated loss of pre-booked group sales, and the impact of capacity limitations at certain parks, including one of our largest parks, Canada's Wonderland. For the quarter, attendance totaled 10.8 million guests or approximately 82% of 2019 levels, driven by strength in both the general admissions and season pass attendance channels. Meanwhile, in-park per capita spending in the quarter totaled a record $64.26, which represented a $14.32 increase over the comparable 2019 spending levels. The result of improved guest spending across all revenue categories. Guest spending on food and beverage, merchandise, games, and extra charge attractions was up 37% on a combined basis in the quarter over comparable 2019 levels. As Richard noted, in addition to greater consumer demand, the revenue lift we are seeing from our guests' desire and willingness to spend more each visit is in large part the result of the commitment we've made over the past several years to improve the overall quality of our revenue centers and the products we offer. The investments we've made to add new facilities or remodel existing ones, particularly within the food and beverage area, are resulting in improved efficiencies and higher retail sales, while also meaningfully improving the overall guest experience. The improved forecast also reflects a combination of strategic price increases and higher transaction counts per attendee. Since reopening, we've increased prices and reduced discounts on tickets at all our parks. In addition, we continue to dynamically price into demand for single-day tickets and minimize our reliance on promotions to drive volume. For the quarter, the average admissions per cap on paid tickets was up 24% or $8.86 over comparable 2019 levels. Finally, out-of-park revenues for the quarter totaled $83 million, with a $7 million increase over 2019 levels being driven by higher online transaction fee revenue, as well as meaningful increases in average daily room rates at our resort properties, which helped offset the loss of revenues at Sawmill Creek and Castaway Bay, the two resorts that have remained closed this year for renovations. On the cost side, operating costs and expenses in the quarter totaled $424 million, compared with $369 million for the third quarter of 2019. The $55 million increase reflects a $1 million increase in the cost of goods sold, a $46 million increase in operating expenses, and an $8 million increase in SG&A expense. Of the $46 million increase in operating expenses, approximately one-half was attributable to the increase in seasonal labor wages, offset in part by a reduction in seasonal labor hours as we try to better manage operating calendars to meet demand and match labor availability. The remaining increase in operating expenses along with the $8 million increase in SG&A expense was attributable to higher costs for operating and maintenance supplies, as well as hiring full-time wages, helping defray some of the increase in SG&A expense was lower advertising expense in the period. Meanwhile, adjusted EBITDA, which management believes is a meaningful measure of the company's park level operating results, was $333 million for the third quarter of 2021 compared with $355 million in the third quarter 2019. The decrease in adjusted EBITDA was largely due to the higher labor costs in the period, as well as the negative impact that operating restrictions including mandated capacity limitations had on attendance. As we prepare for 2022, we remain very optimistic about overall consumer demand. But it's clear that the operating environment remains challenging and dynamic from a cost perspective. The tight labor market and ongoing supply chain constraints are likely to continue in the next season. Our team has been proactively working to offset wage rate pressures through cost efficiencies and incremental revenue opportunities. Heading into 2022, we are working to maximize labor efficiencies and reduce seasonal labor hours across the portfolio through more automation, the expanded use of technologies, and process redesign where appropriate. To further offset some of the cost headwinds, our business intelligence team is also focused on optimizing yields through more dynamic pricing and creating additional revenue streams throughout the system, something we did very well this season. Turning our attention to operating trends in October, preliminary net revenues for the 10-month period ended October 31st, 2021 totaled $1.2 billion. Over the same period, attendance totaled 17.3 million visits; in-park per capita spending was $62.73; and out-of-park revenues totaled $153 million. The outstanding performance trends from the third quarter continued to build through the month of October, as demand for our haunts and other Halloween-themed events continues to grow. For the five-week period ended October 31st, 2021, preliminary net revenues totaled a record $219 million, representing an increase of 42% or $65 million from the comparable five-week period in 2019. This increase was driven by an 8% increase in attendance to 3.2 million total visits, a 32% increase in in-park per capita spending to a record $64.86, and a 33% increase in out-of-park revenues to $19 million. As we approach the final months of the year, the ongoing strength we continue to drive in guest spending and out-of-park revenues combined with the improving attendance trends positions us very well heading into 2022. Shifting our focus for a moment to the balance sheet, deferred revenues as of September 26th, 2021 totaled $211 million, representing an increase of $62 million or 42% when compared to deferred revenues at September 29th, 2019. Of the $211 million of total deferred revenue outstanding at the end of the quarter, approximately $100 million is projected to be recognized as revenue during the fourth quarter of this year. The balance will be recognized as revenue in 2022 or later, including our 2022 season passes and all season pass products. Additionally, this will include the use privileges of 2021 season passes at Knott's Berry Farm and Canada's Wonderland that have been extended into next year due to the pandemic. As Richard noted, since being launched in August, sales of next year season passes and all-season products are off to a very good start, pacing ahead of the record sales trends from the fall of 2019. Today, our balance sheet is healthy with no outstanding borrowings under our revolving credit facility and no debt maturities before 2024. At the end of the third quarter, we had total liquidity of $922 million, including cash on hand of $563 million and $350 million available under a revolver, net of $16 million of letters of credit. This compares to $652 million of total liquidity at the end of the second quarter, reflecting $270 million of positive cash flow in the third quarter. Finally, our capital allocation priorities remain consistent with what we previously indicated. First, continue to reinvest in the business. As we previously announced, our plans are to invest $175 million to $200 million in new rides and attractions and other park improvements in 2022. Second, pay down debt until we reach our net debt target of $2 billion or less. As Richard indicated, based on current liquidity levels, we are confident that we are well-positioned to begin paying down debt in the very near future as we look to further enhance the strength and financial flexibility of our balance sheet. And third, remain committed to reinstating the distribution to our unitholders. Based on our rapid recovery from the pandemic, our confidence in the business model going forward, and our outlook for a strengthening balance sheet. We believe we will be well-positioned to reinstate a quarterly cash distribution to unitholders no later than the first quarter of 2023. With that, I'd like to turn the call back to Richard.

Thanks, Brian. At the outset of the pandemic, we made a pledge to our guests, unitholders, and employees that Cedar Fair would emerge from the COVID-19 disruption stronger than when it began. We are successfully advancing our strategic initiatives to achieve that goal. We anticipate the strong demand levels continuing for Winterfest and Knott's Berry Farm events through year end, which will provide additional flexibility towards delivering on our primary goals of returning operations to pre-pandemic levels, reducing leverage, and reinstating unitholder distributions. As I noted in my opening remarks, the organizational changes we have made and the strategic initiatives we've implemented have allowed us to systematically attack and offset the lingering challenge from the pandemic's disruption. The new workforce management platform, the build-out of our new business intelligence group, and the hiring of our first CIO, are all good examples of the steps we have taken to strengthen our company, operate efficiently, and capitalize on our strategic advantages. In a highly inflationary environment like this, it is critical that we smartly manage all aspects of the business, both on the cost side and the revenue side. We will remain diligent in managing cost, while at the same time, ensuring we don't sacrifice the quality of the guest experience. On the revenue front, we must remain creative in finding new and exciting ways for our guests to spend, and we must continue leaning into dynamic pricing. Over the next couple of weeks, several of our parks begin transforming their midways into Winter Wonderland, while other properties are winding down a very successful 2021 season. As we begin plans for the season ahead, I want to thank our guests for their continued loyalty through the pandemic and our incredible team of dedicated associates who continuously achieve amazing things. For our unitholders, please know that we appreciate your trust and confidence as we continue to get stronger every day. I've never had more confidence in our business than I do right now and I'm excited to see how much fun is in store for 2022. Cathy, at this point, would you open up the call for questions?

Thank you. Your first question will come from James Hardiman of Wedbush.

Good morning. Thank you for taking my call and congratulations on a very strong month of October and the end of the third quarter. I wanted to ask about the Delta dip and how it compares to our last conversation. In the second quarter, attendance was down 20%, and it was down 18% in the third quarter. There were various factors involved, so I don't want to simply compare those numbers without considering the context. It seems like things may have worsened before improving as the Delta impact decreased. Can you walk us through the last few months?

Good morning, James. It's Brian. At a high level, I want to express that we are very satisfied with the trends we've observed across the system. At the start of the season, the process of opening was somewhat uneven since not all our parks were operational at the same time, along with staffing challenges. Richard highlighted the decisions we made to address these issues, and I believe the results demonstrate the success of those decisions and the staffing adjustments we implemented. When it comes to demand, as you are aware from your long-term following of us, there are always fluctuations throughout the season. This year, we've paid closer attention to some macro trends, like weather, which we previously preferred to avoid discussing. However, it did factor into the equation. We didn't notice any significant effects from the Delta variant in any of our markets. On the guest spending front, trends continue to improve. Our per capita spending in Q2 was slightly over $56, which increased to over $64 in Q3 and is nearing $65 in October, as we've shared. Overall, I can say that certain metrics have consistently improved while others have remained stable.

That's really encouraging. If we could focus on October, attendance exceeded 2019 levels, which seems significant for both you and the industry. I think this is the first time I've heard that since the pandemic. You had 6% more operating days in October over the last five weeks. Is it accurate to say that on a same-day basis, attendance was up 2% on comparable days? The calculations might not be straightforward. Additionally, are you still encountering the same challenges that you faced in the third quarter, such as capacity limitations or restrictions and issues with pre-book sales? In other words, could that number have been even better if those challenges weren't present, or did those challenges ease up to some extent?

Yes, James. This is Richard. Good morning. I believe the strength we saw in October, regardless of the number of days, was very encouraging. As I mentioned earlier, we had a few extra days due to the way the calendar fell. From my perspective, it validated the extremely strong demand we've experienced, and I was very pleased. As Brian noted, we have been monitoring weather trends, something we haven't focused on for a while, but overall, this ties back to why we are so invested in our event strategy. Halloween perfectly illustrates how our event strategy creates urgency due to its limited duration. Strategically, what we observed further confirmed our outlook on the business. I am happy with the team's performance and the high guest satisfaction levels. Additionally, it's worth noting that we surpassed what was already a record month for October. This clearly indicates the underlying strength and resilience of our business model.

That's really helpful. Thanks, guys.

Thanks, James.

Our next question will come from Mike Swartz of Truist Securities.

Hey, good morning, guys. Just maybe a quick follow-up on James' first question. I think he said attendance like-for-like was about 82% of 2019 levels in the third quarter. I didn't see it, maybe I missed it. What did that look like without the capacity limitations that Canada's Wonderland and I guess softer group sales dynamics?

Yes, good morning, Mike. It's Brian. The 82% figure we reported is certainly influenced by the 47 fewer operating days, which affects our overall capacity and the decline in group sales. It's challenging to pinpoint the exact impact of those two factors due to their nature. When we compare operating days directly, similar to previous months and as discussed in Q2, we've seen an increase of several hundred basis points in attendance year-over-year. As mentioned in Q2, group sales have exerted an average downward pressure of around 9% on that attendance figure. In a park like Canada, it's difficult to quantify the exact impact of capacity limitations, especially since August is typically one of the park's strongest months, and those limitations were noticeably felt on certain days.

Thank you for the information. Now, regarding the labor environment, you shared some insights on the previous call, where you indicated that labor costs, particularly hourly labor costs, had increased by about 40% compared to 2020 or possibly 2019. Could you provide us with an update on this situation and your level of comfort as we head into 2022? Additionally, what type of inflation do you anticipate for the upcoming year?

Sure, Mike. Regarding the hourly rate, the changes we've implemented have put us in a better position, as Richard mentioned. These adjustments were primarily reflected in the Q2 rates we discussed. Overall, we don’t expect significant changes in rates compared to 2021, 2019, or our 2021 budget expectations. The percentages remain consistent with our earlier reports. Looking ahead to next year, we believe the adjustments we've made this year, which were necessary to open our parks quickly, will mean we won’t need to implement significant increases again. We feel we are well-prepared based on our current situation. As Richard pointed out, we have more opportunities to plan and recruit, allowing us to introduce greater flexibility into our staffing and wage models for next year. Our focus will be on minimizing rate pressure by adjusting our approach and finding efficiencies through automation, better technology, and planning. We will also look to alleviate some pressure by increasing prices, which we have successfully done this year and believe we can continue.

Okay, great. Thank you.

And our next question will come from Eric Wold of B. Riley Securities.

Thank you. Good morning. Just one more question on labor, that'd be the only topic here. But I guess, with your move to hire and pay aggressively to get the parks staffed, are you still experiencing any notable deficiencies in any parks or any region of the country that may be adversely impacting the ability to kind of operate rides, you're going attractions open that may have impacted attendance or is that really in the past?

Yes, Eric. Good morning. It's Richard. We haven't observed any specific areas of strength or weakness; rather, the trends have been consistent across the country, particularly in North America. We have nothing significant to highlight as a specific concern. We are satisfied with our ability to attract and retain staff. As Brian mentioned, and as I pointed out in my prepared remarks, we are focused on maximizing the labor resources available to us.

Okay. But nothing that affects the ability to open attractions or rides in the parks? They are all operating at full capacity?

No, we were able to deliver the level of guest experience and product that we aimed for. If we had encountered any issues, we would have seen that reflected in our guest satisfaction scores. Once again, we reached some of our highest scores ever at nearly every park, both during the day and at night, and that is something I take great pride in.

Yes. And I would just add to Richard's comments. The staffing levels are reflective, the adequacy of the staffing levels, as Richard just commented, are reflected in those per caps. Our ability to generate the per cap numbers that we did in Q3 and in October would not have been possible had we had shortages of staffing, particularly in key retail channels.

Got it. And then final question on the season pass front any kind of underlying drivers in terms of the strength of renewals of prior pass holders versus first-time purchasers coming into the mix? And any just sort of shifts in kind of the demographic of that season pass buyer that you're seeing in terms of age, family composition, distance from the park, anything that would kind of call out a trend?

Eric, the season passes are a crucial program for us. We have gathered extensive information and monitor it closely. We have more data on season pass holders compared to single day ticket sales, and we are making progress on that front. Initially, we were aware that we needed to pay attention to the renewals and their trends. We have noticed a strong upward trend in renewals, varying by park. The extension of use benefits at Knott's Berry Farm and Canada's Wonderland into next year is something we anticipated might create some challenges. However, our data shows we are experiencing what we would expect in a typical year, so things seem to be normalizing. Renewals started off slowly but have been gaining momentum throughout the sales period. Fall remains our second largest period, but the upcoming winter holiday season is increasingly significant, and we will monitor it closely as we proceed. Thanks, Eric.

Thank you. So much, congrats on a phenomenal quarter. I had a question on the $175 million to $200 million in 2022 spend on new rides and attractions. I was wondering if you could give us any color on how the supply chain may or may not be impacting that, given the numbers seems to be holding about the same but we've seen costs and actual material transport, etc., be impacted? And then I have a follow-up.

Paul, good morning, it's Richard. We've encountered some specific challenges with the supply chain, which are certainly present. However, by planning ahead and placing our orders early, we've managed to minimize those issues. While there may be some individual projects we face challenges with, I believe we will successfully launch what we need and want for next season. Overall, nothing we are observing should hinder our ability to execute the plans we discussed in our last earnings call regarding new products for next year, as well as the related ancillary products. We are addressing the situation without any significant setbacks. We are keeping an eye on it, but we are making progress.

That's great to hear. And then on guest experience, I was wondering if you could give any color on how some of the guest experience digitization or optimization products and initiatives have been trending, whether it's front of line or mobile ordering, anything that could be a bellwether for how the uptake is driving experience or per cap quality there?

One of the notable things, Paul, in what we see this year is that we're across, as we said in our remarks, we're up across all revenue channels. So we're still evaluating all the data to distill out what we think is really driving. But, so it's a huge lift on all fronts, certainly, we think we've benefited from the revenge spending that we've talked about. But more importantly, we think we're benefiting from, as Brian said, several years of initiatives really aimed at unlocking more transactions, listening to our guests, trying to take some of those friction points out. So, we have seen good uptake and the things we've put out there, but improving our consumer technology is going to be a big part of our platform going forward. We anticipate, as we said in prior calls, that the business optimization we'll get to that over, and see the benefits of that over a two to three year timeframe, but more to come on that front as we get into upcoming calls and quarters.

Great. Thanks so much.

Thanks, Paul.

Our next question will come from Stephen Grambling of Goldman Sachs.

Hi. Thanks for taking the questions. I may have missed some of this in the opening remarks, but I'm just curious if you could weigh in on how you're thinking about labor cost inflation over time, as we look over the next couple of quarters and if you're seeing material differences by geography both in terms of rate and just the shortages that we've heard about?

Yes, Stephen, it's Brian. Good morning. Regarding the staffing challenges, there are some small differences from park to park, but I would describe it similarly to Richard's earlier comment that the tight labor market is a nationwide issue, which we are experiencing at all of our properties in North America. Those that are further away from larger metropolitan areas may face some additional challenges, while those that are closer have an easier time with staffing, as the population base is larger. In terms of our outlook, as I mentioned in response to an earlier question, the rate changes we implemented this year to address staffing challenges remain relevant for next year, and I don't see a need for them to increase. Additionally, as I noted, we have more opportunity to plan our staffing models and recruitment, which should help us offset some of the rate pressures we experienced this year.

Can you provide any insights on group attendance and how it's trending compared to normalized levels, as well as what you're anticipating for next year?

Yes, Stephen, it's Richard. On the group channel, listen, as we shared on earlier calls, back in 2008, 2009 that's usually the first to get disrupted and the longest to come back. What we've been surprised by, frankly, is the phone has been ringing from our corporate clients. So, we're starting to see a pickup in activity, not yet seeing that through the gate. So, there is some interest, although, the folks on the corporate side that we're talking to want to configure. They're asking for a little more flexibility in terms of how people use the park. So we're thinking about how to evolve our offerings to match where we think the market is going on that front, could be more limited operation on a Thursday night, things like that. How can we customize it for them? But one of the really important channels for us every year is youth sales, with schools returning and everybody back to in-person learning, we're monitoring where the school systems will be in terms of their ability, or desire to go to some of our traditional days in the spring. So, we've been encouraged by the conversations we've had and the discussions so far. But again, still a little too early to kind of forecast how quickly group comes back. I would say with our historical view that it is the first to be disrupted, last to come back. So we think there will be some impact on 2022. But feel better about it when we look at 2023 and beyond.

And one last one, just on the business optimization program the $50 million, has anything changed in terms of your thinking about that number and the split between cost and revenues? And how does the strength in per caps maybe fit into that program? Meaning could there be any difference in flow-through from the strong per caps as a result of some of the things you're doing there?

Our ability to achieve the $50 million that we've outlined, no significant update in terms of the timing or the components. We're still working our way through trying to be as efficient as possible and optimize on both the expense and revenue side, so no update for you other than that. We remain confident in our ability to hit the target.

Fair enough. Thanks so much.

And with that, does conclude our Q&A session. I'd like to turn things back to Richard Zimmerman for closing remarks.

Thanks, everyone, for your participation in today's call, and especially for your investment or continued interest in Cedar Fair. As the holiday season approaches, I know I speak for Brian, Michael and our entire team at Cedar Fair, wishing you much cheer and endless fun. We look forward to seeing you at an upcoming conference either in person or via video. Michael?

Thanks again, everybody. If you have any additional questions, please contact our Investor Relations department at 419-627-2233, and we look forward to speaking with you again in February after releasing our 2021 year-end earnings report. Cathy, that ends our call for today.

Thank you. And again, ladies and gentlemen, that does conclude today's call. We'd like to thank you again for your participation. You may now disconnect.