THE FED RAISED RATES. NOW LET'S WATCH THE GUEST’S WALLET

Following several media calls and conversations with investment banking contacts this afternoon, I have been asked the same question. What does today’s Federal Reserve interest-rate increase mean for the leisure and theme park industry during the remainder of 2026?

As we saw, the Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75%–4.00%, which when looking back, is its first increase in more than three years. The Fed also indicated that additional tightening could follow as it attempts to bring persistent inflation under control. So, raises may not be over yet, as it certainly seems there are possible more to come!

My personal view is that I do not believe this single rate increase will materially derail theme park attendance between now and December 31. But I do believe we need to watch the guest’s wallet as closely as we watch the turnstile. Further, my viewpoint on the issue is not simply that a quarter point increase in interest rates is catastrophic. It is the cumulative and amplifying pressure now confronting the American consumer. Higher interest rates mean more expensive credit cards, automobile financing, and impacts on other borrowing. Mortgage rates are already elevated. Add inflation and increased energy costs, and discretionary income becomes increasingly important.

And we have all learned, theme parks compete for those discretionary dollars. Fortunately, we are entering what has become one of our industry's strongest operating periods. Halloween events are already planned, tickets have been purchased, season pass sales are underway (with many already in people's pockets for 2027). And shortly after Halloween, Christmas programs will soon follow. I doubt that families are likely to cancel a planned Saturday night at a Halloween event simply because the Federal Reserve raised rates. Same for the Christmas programs. But it is still early in the fall. Another rate hike could have a late season impact. What I am concerned about is that they may change what they spend once inside the park (i.e., more parking lot tailgating).

Looking back, history provides an interesting precedent for our industry. During October 2008, right in the middle of the financial crisis, Cedar Fair reported attendance increased more than 10%, representing approximately 205,000 additional visits. Yet, average in-park guest per-capita spending declined 6%.

Think about that. The guests still came. They simply became more careful about opening their wallets. My point. But by 2009, after the economic weakness had more fully worked through household and corporate budgets, Cedar Fair's attendance declined 7%, or approximately 1.6 million visits. The company cited the poor economy's impact on group business, lower season-pass sales, and fewer visits, along with the ever-present, old reliable factor of unfavorable weather.

That tells us something important about where we are today. Economic pressure does not necessarily hit our industry immediately. There can be a lag. I have seen where destination parks have not suffered early season downturns, due to prevailing issues like regional parks face, because planning, reservations, and dollar commitments were made well in advance of an economy downturn. So, they were attending, come hell or high water!

Between now and December 31st, I believe the first warning signs, if they occur, will more likely appear in per-capita spending, food and beverage, merchandise, games, premium products and upgrades, and surcharges, before showing up dramatically in attendance numbers.

I think parks should also watch discounting. As consumers become increasingly value conscious, we could see more bundling, dining offers, promotional ticketing, and aggressive 2027 season-pass programs designed to lock in revenue. It’s still early enough to make necessary adjustments.

And there is another side to this equation we have to consider. Higher rates also affect the operators themselves. For highly leveraged leisure companies, sustained higher borrowing costs can eventually affect refinancing, debt service and, ultimately, the amount of capital available for new attractions and expansion. This last issue is our “Holy Grail”, an absolute necessity, which I have explained many times recently. So, my takeaway from today's Fed action is relatively straightforward. Don’t panic over the turnstiles. Keep a keen eye out and watch the wallets closely, stimulating every way possible, while delivering a price value relationship to the guest.

If attendance remains relatively stable while per-capita spending begins slipping, the consumer will be telling us something. And as I have learned many times during my years in this industry, we had better be listening and ready to react!

Source:  Hersheypark