The problems created by the pandemic will last longer for the U.S. entertainment industry, predicts Chicago’s Fitch Ratings.
The analyst said the pandemic had created a “dip” in credit quality for the industry, but said theme parks and other similar venues were positioned to recover faster than other segments.
“The pace of debt repayment as cash flow improves is a major risk, given the industry’s historically favorable position to shareholders. However, the slowdown in vaccinations and the acceleration of infections could also affect the recovery of operators’ credit profiles. “
Fitch said theme parks benefit from a reliance on local tours rather than air travel, an attractive value proposition, and outdoor activities considered safer during a pandemic. Conversely, the cruise segment faces the health risk of occupying nearby indoor spaces and travel management companies are relying on business travel, which is expected to be slow to recover. “The credit profiles of these segments will remain in lower speculative grade categories in the near term due to the increase in debt to bolster liquidity during the pandemic.”
Theme park attendance, Fitch said, in 2Q21 and 3Q21 seasons is expected to accelerate as vaccine rollout continues and demand for outdoor recreation activities during warmer months. increases. “We forecast that regional theme park attendance will return to 60-70% of 2019 levels in 2021 and reach 100% in 2022 as the US economy recovers and vaccine penetration grows.”
He noted that regional games, which would include FECs, looked stable in the outlook with a clear path to EBITDA recovery. It has the least severe decline in revenue, limited impact of occupancy restrictions, localized visits and a positive FEC.