Competition takes bite out of Great Wolf earnings

Friday, 29 July 2005

Area's first waterpark resort reports $2.5 million loss.

By TOM JACKSON
tomjackson@sanduskyregister.com

Great Wolf Resorts reported a $2.5 million loss in the second quarter of 2005 and said that occupancy at the Sandusky resort dropped significantly because of new competition and an unexpected decline in business from Detroit customers.

July business at Sandusky and the chain's other waterpark resorts is expected to be better, said John Emery, Great Wolf's CEO, who said Great Wolf officials were "disappointed" and "embarrassed" by the unexpectedly bad results, which included a loss of eight cents per share. He said the company expects to show that it can handle competition in Sandusky, just as it has in the Wisconsin Dells.

Last summer, Great Wolf was the only indoor waterpark in Sandusky. This summer, it has had to battle competition from Castaway Bay, which opened late last year, and Kalahari, which opened in May.

Great Wolf, 4600 Milan Road, opened in 2001 as Ohio's first indoor waterpark.

Thursday's news caused the stock price for Great Wolf Resorts Inc. to plunge. Share prices, which closed at $19.77 on Wednesday, fell 30.96 percent to $13.65 on Thursday.

Great Wolf had forecast a 5 percent drop in occupancy in the Sandusky resort during the second quarter of 2005, but in fact occupancy fell 15 percent, Emery said. Revenue per available room fell 27 percent in Sandusky in the second quarter of 2005 compared to the same quarter of 2004, as officials were forced to lower room rates in June to fill more rooms, Emery said.

A sharp, unexpected drop in bookings from Detroit in June hurt Great Wolf's resorts in both Sandusky and in Traverse City, where Great Wolf doesn't face any competition. Detroit bookings in June were down more than 30 percent from June 2004, Emery said.

He said Great Wolf doesn't know what affected the Detroit customers but speculated that the domestic auto industry's problems have hurt business.

Great Wolf's results also were hurt by a slower-than-expected start in the summer vacation season in the Midwest and a slow start for the new resort in Sheboygan, Wis., Emery said.

People following the company should not overreact to a dip in just one quarter, he said.

Stock for Great Wolf Resorts Inc. is traded on the Nasdaq exchange. The company went public in December. The company runs, or is about to open, resorts in 10 locations.

Great Wolf's problems are "primarily short-term," Emery said. The company has revamped its marketing for each resort for the second half of 2005 and would cut costs at each resort to match revenues more closely. There are no plans for layoffs at the Sandusky resort; however, Emery said, personnel costs would be adjusted by better managing employee work schedules.

Great Wolf also has revamped its financial and operations reporting so it can recognize changes in booking patterns more quickly, he said.

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