United Parks & Resorts Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 9, 2023

Key Takeaways

  • SeaWorld delivered its 8th consecutive quarter of record results, reporting Q1 revenue of $293.3 million (+8.4 %) and adjusted EBITDA of $72.4 million (+9.9 %) despite adverse weather and ride-opening timing shifts.
  • Total revenue per capita rose 9.2 % to $86.84—driven by a 9.4 % increase in admission per capita and an 8.9 % boost in in-park per capita spending—underscoring strong pricing power and consumer demand.
  • The company is on track to realize $30–$50 million in cost savings through sourcing efficiencies, technology investments and labor-optimization initiatives.
  • Digital transformation is accelerating as the mobile app surpasses 5 million downloads—active users are +20 % year-over-year and app-generated revenue is +200 %—and mobile ordering, now in 70 % of target restaurants, yields 26 % higher average orders.
  • SeaWorld Abu Dhabi, the first new SeaWorld branded park in 35 years and first outside the U.S., opens May 23 and is expected to contribute low- to mid-single-digit millions to EBITDA in 2023.
AI Generated. May Contain Errors.
Earnings Conference Call
United Parks & Resorts Q1 2023
00:00 / 00:00

There are 12 speakers on the call.

Operator

After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I I would now like to turn the conference over to Matthew Stroud, Investor Relations. Please go ahead.

Speaker 1

Thank you, and good morning, everyone. Welcome to SeaWorld's 1st Quarter 2023 Earnings Conference Call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call.

Speaker 1

Joining me this morning are Mark Swanson, Chief Executive Officer and Jim Forrester, Interim Chief Financial Officer and Treasurer. This morning, we will review our Q1 financial results and then we will open the call up to your questions. Before we begin, I would like to remind everyone that our comments today will contain forward looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward looking statements, including those identified in the Risk Factors section of our annual report on Form 10 ks and quarterly reports on Form 10 Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website.

Speaker 1

We undertake no obligation to update Any forward looking statements. In addition, on the call, we may reference non GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward looking statements and reconciliations of non GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website And can also be found in our filings with the SEC. Now, I would like to turn the call over to our Chief Executive Officer, Mark Swanson. Mark?

Speaker 2

Thank you, Matthew. Good morning, everyone, and thank you for joining us. We're pleased to report another quarter of record financial results Despite adverse weather across a number of our markets, particularly in our California market and a shift in the timing of the opening of our new rides. In the Q1 of 2022, we had 7 of our 10 new rides and attractions opened, While this year in the Q1, we only had 2 out of our 11 new rides and attractions open. This marks our 8th consecutive quarter where we have generated record financial results.

Speaker 2

I want to thank our ambassadors for their ongoing efforts as we prepare for what we anticipate will be another busy summer season. We continue to drive growth in total per capita spending in the quarter, demonstrating the effectiveness of our revenue strategies, our pricing power and the strength of consumer spending in our parks. Looking ahead, we are very encouraged by our group booking trends, which are running well ahead of 2022, And we are really excited about our 2023 lineup of new rides, attractions and events, several of which are some of the most anticipated rides of 2023 and looking forward to most of them opening in the coming weeks. On the international front, we are also thrilled for the opening of the 4th SeaWorld Park and the 1st SeaWorld branded park outside of the United States in Abu Dhabi on May 23, 2023. We are very proud of this project and along with our partners in Abu Dhabi are excited about introducing a new region of the world to the wonders of SeaWorld and introducing a next generation SeaWorld park, the first new SeaWorld branded park built in 35 years.

Speaker 2

SeaWorld Abu Dhabi is a custom built approximately 183,000 square meters almost entirely indoor park that will feature over 100,000 marine animals, The world's largest multi species aquarium and 8 different realms that showcase the complexity, interconnectivity and beauty of life under the sea. I spent some time visiting this park last month, and I could not have been more impressed by the facility, the staff and of course, the animals and attractions on display. It's really a one of a kind world class venue and we will share more information once the park is operating. For 2023, The company has a truly exciting lineup of new rides, attractions, events and upgrades, including 4 of the most anticipated roller coasters of 2023 according to USA Today. In February, Busch Gardens Tampa opened the Serengeti Flyer, The world's tallest and fastest screaming swing that takes riders up to 135 feet at speeds ranging speeds reaching 68 miles per hour.

Speaker 2

In March, Aquatica San Antonio opened Cataburro Cove, a newly expanded and upgraded 3,000 square foot area with multiple unique water play elements, waterspouts, all new private cabanas and a fully themed splash pad and multiple shade structures. This month, SeaWorld Orlando will open Pipeline, the Surf Coaster, the first of its kind surf coaster with seats in a surfing position that rise and fall to mimic the sensation of riding a wave. The coaster will accelerate riders to 60 miles per hour through 5 airtime moments and an innovative wave curl inversion. Busch Gardens Williamsburg will open Dark Coaster, the first all indoor straddle coaster in North America, Where riders experience 4 launches at speeds up to 36 miles per hour through over 2,400 feet of track. Aquatica Orlando will open Turry's Kids Cove, an all new water play area featuring watering palms, tipping buckets, spraying jets, water bottles and more.

Speaker 2

In Sesame Place, Philadelphia, we'll open Burt and Ernie's Splashy Shores, a water play area featuring water umbrellas, tipping buckets, spraying jets, water bottles and a spraying water tower. Later this spring summer, SeaWorld San Diego will open Arctic Rescue, the fastest and longest straddle coaster on the West Coast That takes riders through 3 launches at speeds up to 40 miles per hour. Water Country USA will open Riptide Race, the first dueling pipeline slide in Virginia and Sesame Place San Diego will open the CountsCastle, an enhanced water play area an expanded play structure, which features 3 tipping buckets, 4 water slides and over 100 other water play elements. And finally, we anticipate that SeaWorld San Antonio will open Catapult Falls, the world's first Launched Flume Coaster features the world's steepest flume drop, North America's only flume with a vertical lift and the tallest flume drop in Texas. Now let me give a brief update on some of our strategic initiatives.

Speaker 2

1st, our cost and efficiency related work with our dedicated internal team and specialized outside consultants is progressing well, And we are on pace to deliver at the high end of our cost savings target of $30,000,000 to $50,000,000 The team continues to find ways for us to source and organize more efficiently, replace labor with capital and technology and eliminate unnecessary and or redundant expenses. 2nd, on the digital transformation front, We continue to build out our CRM capabilities, which are still in their infancy and roll out and improve our mobile app. On CRM, we really see upside opportunities from us ultimately having more rich data about our past members and guests and being able to more effectively engage, analyze behavior and tailor messages and offerings. On the mobile app, we are excited about our performance today. Our recently rolled out app, which is being used by an increasing number of guests in our parks and has been downloaded more than 5,000,000 times.

Speaker 2

As of the end of April, the number of active users is up over 20% compared to prior year And the total revenue generated on the app is up over 200% compared to prior year. Mobile ordering has been expanded to additional restaurants and is now operating at approximately 70% of our target restaurants. Mobile orders have had a 26% higher average order volume compared to non mobile orders. While we are happy with these early results, we see additional upside from continuing to improve the app experience and functionality and to continue to expand mobile ordering capability across our portfolio. We are excited about the potential of the app and its ability to improve the in park guest experience, drive increases in revenue and decreases in costs.

Speaker 2

3rd, as you know, we have strategically increased our park specific ROI investments this year in an effort to drive incremental revenue And or decrease costs through expanding, enhancing and improving our food and beverage and retail offering, Park infrastructure and aesthetics, and generally improving the guest experience and journey around our parks and facilities. Many of the new improved and or enhanced venues will be opening as we move into the summer season and others will be opening over the course of the rest of the year. We are really excited for our guests to experience these new venues and improvements and to begin to see the benefits of these important investments. 4th, on the international front, as I have already discussed, we are thrilled with the coming opening of SeaWorld Abu Dhabi I continue to make good progress on discussions related to other international opportunities and expect to have more to share in coming quarters. 5th, on the hotel front, we also continue to make progress with our plans that we discussed last quarter.

Speaker 2

And as we communicated last quarter, expect to have our first hotel open in 2025, followed by our second hotel in 2026. We are working on design and planning for those 2 hotels and on-site selection for additional hotels across our park portfolio. We very much look forward to sharing more specifics in future quarters on what we expect to be really exciting and value creating projects. Very excited about the significant investments we are making and the many initiatives we have underway across our business that we expect will improve the guest experience, allow us to generate more revenue and make us a more efficient and more profitable enterprise. We are building an even stronger and more resilient business that we are confident will deliver improved operational and financial results and meaningful increases in shareholder value.

Speaker 2

Let me briefly comment on our balance It's 2.7 times and we had approximately $426,400,000 of total available liquidity, including $54,800,000 of cash on the balance sheet in advance of us starting our summer season, where we generate the majority of our cash flow. This strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with a goal to maximize long term value for shareholders. Despite the uncertain times that we are living in, Our financial position is strong. Our business is resilient and our Q1 results, along with the coming opening of our ride, attraction and event lineup, The opening of new and improved venues and other park upgrades and enhancements and all of the initiatives that we have underway Give us high confidence in our ability to continue to deliver meaningful growth and new records in revenue and adjusted EBITDA for 2023. With that, Jim will discuss our financial results in more detail.

Speaker 3

Jim? Thank you, Mark, and good morning, everyone. It's good to be back with you for another quarter. During the Q1, we generated record total revenue of $293,300,000 an increase of $22,700,000 or 8.4 percent when compared to the Q1 of 2022. The The increase in revenue is due to an increase in total revenue per capita of 9.2%, partially offset by a decrease in attendance of 0.7%.

Speaker 3

The decrease in attendance was primarily due to adverse weather across a number of our markets, particularly at our California parks, including during peak visitation periods. Attendance was also likely impacted unfavorably by the timing of new ride and attraction openings in 2023 compared to 2022. Our pricing and product strategies continue to drive higher realized pricing, resulting in record total revenue per capita in the quarter of $86.84 compared to $79.54 in the Q1 of 2022. This increase was driven by improvements in both admissions per capita and in park per capita spending. Admission per capita increased by 9.4 percent to a record $48.51 and in part per capita spending increased by 8.9 percent to record $38.33 in the Q1 of 2023 compared to the Q1 of 2022.

Speaker 3

The increase in admission per capita was primarily due to the realization of higher prices in our admissions projects and products resulting from our strategic pricing efforts, along with the net impact of the admissions product mix when compared to the prior year quarter. NPAR per capita spending improved primarily due to an increase in revenue related to the company's international services agreements along with the impact of pricing initiatives when compared to the Q1 of 2022. Operating expenses increased $19,700,000 or 12.9% when compared to the Q1 of 2022. The increase in operating expenses is primarily due to an increase in costs special session associated with our international services agreements, increased labor related costs due to more optimal staffing and an increase in legal costs, including approximately $3,500,000 related to the previously disclosed temporary COVID-nineteen park closures, partially offset by structural cost savings initiatives When compared to the Q1 of 2022, selling, general and administrative expenses increased $2,200,000 or 4.8 percent compared to the first quarter of 2022. The increase in selling, general and administrative expenses is primarily due to a $3,600,000 increase and third party consulting costs, including one time costs of $1,700,000 partially offset by decreased marketing related costs along with the impact Cost savings and efficiency initiatives.

Speaker 3

We generated net loss of $16,500,000 for the Q1, The 2nd lowest ever for the Q1 compared to a net loss of $9,000,000 in the Q1 of 2022 and we generated record adjusted EBITDA of $72,400,000 an increase of $6,500,000 when compared to the Q1 of 2022. The improvement in adjusted EBITDA for the Q1 of 2023 was primarily driven by an increase in total revenue per capita, As of the end of the Q1 was $212,800,000 an increase of approximately 2.3% when compared to March of 2022. At the end of April 2023, our pass base, which includes all pass products, Accounting premium, fun card, teacher and preschool was at near record levels for this time of year and down only approximately 1% compared to April 2022. We feel well positioned with the current status of our pass base with most of our new rides and attractions opening in the coming weeks and the peak advertising and selling season approaching. We are also quite pleased that we continue to realize double digit price increases on our past products compared to prior year.

Speaker 3

Mark mentioned, we have a very strong balance sheet position. As of March 31, 2023, our total available liquidity was call. $426,400,000 including $54,800,000 of cash and cash equivalents on our balance sheet and $371,600,000 available on our revolving credit facility. Cash flow from operations was $50,300,000 for the Q1 We spent $69,800,000 on CapEx in the Q1 of 2023, of which approximately 50 $300,000 was on core CapEx and approximately $13,500,000 was on expansion and or ROI projects. 2023, as our investment estimates have been refined and completion timeline solidified, we expect to spend approximately $160,000,000 to $175,000,000 on core CapEx.

Speaker 3

We plan to spend between $90,000,000 $100,000,000 of CapEx on high conviction growth In total, we still expect to spend approximately $250,000,000 to $275,000,000 in CapEx for 2023. We're excited about our ability to make these high confidence ROI investments and sincerely look forward to the benefits and returns from these investments flowing through Now, let me turn the call back over to Mark, who will share some final thoughts. Mark?

Speaker 2

Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the Q1 of 2023, we came to the aid of 85 animals in need. Over our history, we have helped over 40,000 animals, including bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts.

Speaker 2

I want to thank them and all our ambassadors for all they do to operate our parks. Also, I want to call out some recent awards received for some of our parks, which underscore the quality of our assets and the enthusiasm for our parks and experiences. USA TODAY readers once again voted Aquatica Orlando as the best outdoor water park in the United States. They voted the Mako roller coaster at SeaWorld Orlando as the best roller coaster in the United States. They voted Title Surge at SeaWorld San Antonio as the best non roller coaster ride and they voted Celtic Fire, live Irish step dancing at Busch Gardens Williamsburg as the best theme park entertainment.

Speaker 2

Additionally, SeaWorld Orlando, Busch Gardens Tampa Bay and Busch Gardens Williamsburg, all placed in the top ten for best theme parks in the United States. The Iron Gwazi roller coaster at Busch Gardens Tampa Bay And the Emperor roller coaster at SeaWorld San Diego also placed in the top 10 for best roller coasters in the United States, While Water Country USA in Williamsburg and Adventure Island in Tampa also placed in the top 10 for best outdoor water parks in the United States. We are very proud that our parks are receiving this kind of recognition from readers of USA TODAY. We are certainly excited about 2023 with an exciting lineup of new rides, attractions, events and new and improved in park venues and offerings, some of them opening in the coming weeks ahead as we start the busy summer season. We continue to believe there are significant additional opportunities to improve our execution, take advantage of clear growth opportunities and continue to drive meaningful long term growth in both revenue and adjusted EBITDA.

Speaker 2

We continue to have high confidence in our long term strategy and in our ability to deliver significantly improved operating and financial results

Operator

Thank you. We will now begin the question and answer session. Today's first question comes from Steve Wyszynski with Stifel. Please go ahead.

Speaker 4

Yes. Hey, good morning guys. Mark, so real quick, just First housekeeping question. Any idea in terms of the weather impact that you guys might have seen from an attendance standpoint? I don't know if there's any way you can kind of help us think about that or quantify that?

Speaker 2

Yes. Hey, Steve. So, I can help you with that. Obviously, The biggest impact was in California. I think you've heard our competitors talk about that as well.

Speaker 2

And that was over 100,000 and attendance lost alone just in California. And then we have other markets, notably Texas and Virginia, where we had Some declines in weather. In fairness, we had a little bit better weather in a few spots. So when you net it all out, It basically took us from being down 1% without with the weather to probably up Low single digit percentages, if you didn't have the weather impact.

Speaker 4

Okay. That's perfect. Thanks for that, Mark. And then second question, Obviously, you had Abu Dhabi opening up in what a couple of weeks here and we're starting to get a lot of questions from investors about what this could look like From a return perspective, and just wondering if you could kind of help us and investors understand the flow through here and then how this is going to look in terms of the impact on the income statement, What the potential impact it could have and maybe what the ramp is going to look like. And look, maybe you guys aren't even sure yet given the park hasn't opened, Just trying to get an understanding of how you're thinking about the financial impact of this new asset?

Speaker 2

Sure. Well, we're really excited, obviously, about the park, as I mentioned, opening here later this month. It is a licensing agreement. And so we would share, obviously, in some of the revenue and then a percent of the adjusted EBITDA. I would say it's a little early.

Speaker 2

The park is not open right now as you mentioned, but I think you can expect that's going to likely deliver single digit millions this year and ramp accordingly on the go forward basis, obviously, depending on how popular the park is. We think it's a great park. I'm very excited So I think over the longer term, certainly can expand from there. I think what you can expect us to do is, as it gets opened and operating, we can provide some updates and some more details going forward, but certainly very excited about it.

Speaker 4

So the impact this year, you said kind of special mid to upper single digit from an EBITDA perspective and then going forward, it should be higher than that?

Speaker 2

Yes. Again, a little early to tell. I'd probably model more in the maybe in the low to mid for this year. Just hard to know until we get it open.

Operator

And that's the question?

Speaker 2

Sorry. Low to mid millions, sorry.

Operator

The next question comes from Mike Swartz with Truist Securities. Please go ahead.

Speaker 5

Yes. Hey, good morning, guys. Just maybe clarification question on deferred revenue and Your season pass base, I think you said at the end of April. I'm just trying to do the math here. And I think you said deferred revenue was up 2% at the end of the first quarter.

Speaker 5

You're seeing a double digit increase in past products, then you're talking about the end of April. The past base was only down 1%. So does that mean there was a pretty considerable uptick in season pass sales in the month of April? Am I reading that wrong?

Speaker 2

Well, let me start and then if Jim wants to add anything, he can. I think What we're seeing is, as Jim mentioned, that with the pass space down just about 1%, And remember that's versus a record last year of April of 'twenty two and without really many of our new rides open. So that The new rides are ahead of us and we think that's obviously a time that many people would look to buy a pass. So, I think once we get those rides open, we would expect to see our pass base. So, hopefully, Sales would be going up.

Speaker 2

Also, we'll have hopefully some more normalized weather. So the lack of weather and kind of the bad weather, I should say, and the rides not being open put a little bit of pressure on that number. So to be down 1%, I I think it's still a pretty good story with kind of the tailwinds ahead of us, I think.

Speaker 3

Yes. The only thing I would add, Mark, is we did have a nice Increase in our past sales between March April, which we were comfortable with. And on our deferred balance sheet our deferred revenue, we did see an increase year over year, respectable in our season pass sales and our deferred revenue. So again, I think we're comfortable with where we are relative to our plan for the year.

Speaker 5

Okay, perfect. That's helpful. And then just on the following up on the Abu Dhabi question prior. I think you had mentioned that, that contributed to the in part per caps in the Q1. Any way to break out how much of the per cap, I think it was a 9% per cap growth, was driven by those international agreements and is that how we should think about that revenue stream falling kind of in that in part per cap number going forward or that'd be broken out a little differently or separately?

Speaker 2

Yes, let me try to help you with that. So I think what I would say there is about $5,500,000 or so just over that in that number for the quarter. That's going to ebb and flow a little bit depending on obviously how the park performs and different things related to the revenue agreement. So hopefully, that's a little bit of color. I wouldn't necessarily model that in.

Speaker 2

Obviously, Like I said, it's going to ebb and flow a little bit here on a go forward.

Speaker 5

Okay. Thank you.

Speaker 6

Taking one maybe bigger picture, the specific is can you tell us more about the financing for your hotels? How do you think about owning and operating versus Partnering with someone outside that will matter on the capital side, I imagine. And then the bigger picture question, what are the big levers you think to get back to Record attendance. When you were at that record attendance, and I know that was on a lot fewer potential, Was it less competitive? Was there more demand overall?

Speaker 6

Do you think that the Blackfish issue is still weighing on the parks. How should we think about that? Thank you. Yes.

Speaker 2

Hey, Phil, it's Mark. I can take that. So On the hotel financing, we don't have a final determination on that, that we can share. So when we do, that's something that we can share on a go forward basis. We're obviously excited about the hotel.

Speaker 2

We're one of the Kind of few in the industry that doesn't own our own hotels or have our own hotels. So we're excited for those possibilities. As far as the attendance of Big picture, what it takes to kind of get back to what we once did. And I'll reference what We put out on some slides last quarter, we did over $25,000,000 in attendance in 2,008, which is probably what you're What you are referencing and we are obviously several million less than that right now. So we I think we have to continue to do the things we're doing, make investments in our parks.

Speaker 2

And certainly, you've seen and we have demonstrated that we are doing that. You heard Jim talk about some of the things we're doing for this year. You heard me talk about the rides and attractions. So continue to make investments in our parks, adding things like hotels, certainly, I think gives us should hopefully line up nicely with some attendance opportunities as well. We're refreshing Venues in our parks, we've added more events to our parks, if I think back to where we once were.

Speaker 2

So Trying to do things to drive more people. We have the CRM system, which we think still really learning how to use that. So there's I don't want to suggest that we've optimized that by any means. We have a lot of learning still to do on that. And I think that can help drive Our performance as well as we learned how to better utilize that.

Speaker 2

So those are some Examples of things that we believe will drive us there. We've done a lot of work around conservation and rescue efforts and broadcasting those to people. We'll continue to do that. We know we need to do more of that. So I'm excited about the prospects on a go forward basis.

Speaker 2

And also, if you just think about if the population of the United States It continues to grow and we take our share of that. We're largely, as you know, in markets that are, I think very attractive from a population growth standpoint. When you're in states like Florida and Texas and California, Pennsylvania, Virginia, we like those locations. And so we feel poised that over the long term here, We can begin to grow attendance and our goal is obviously to not only get back to what we once did, but to do better than that.

Speaker 6

Thanks, Mark. If I can follow-up on the hotel, if you're going to open 1 in 'twenty five, I imagine breaking ground pretty soon is going to be important. Is there a time at which you're going to tell us about the financing side? Thank you.

Speaker 2

What I can tell you is we will I think when we have more to share, we will come back to you on that. We don't have anything to share right now.

Operator

The next question is from James Hardiman with Citigroup. Please go ahead.

Speaker 7

Hi, this is Sean Wagner on for James. I wonder if there's any quantification you can give on that ride timing that you called out, Whether the Q1 hit from that or is there a benefit to 2Q as well that you can quantify?

Speaker 2

Yes. Hey, Sean. So what I would tell you is kind of what I said in the prepared remarks. If you remember last year, we had a lot of the new rides were already opened in Q1. This year, Our ride opening is following kind of a more historically traditional opening time of right around Memorial Day or in that range into the summer, obviously.

Speaker 2

So, we would expect We build rides because we expect people will find them attractive and want to come visit. So, whatever what that lift ultimately ends up being is still to be determined. But Certainly, I think that would be a positive for the year going forward once we get these rides open. As I mentioned, A number of them are some of the most anticipated rides out there and should be nice additions to our park.

Speaker 7

Special. Yes.

Speaker 3

The only thing I would add, Mark, we survey our guests periodically and know typically why they would come to our parks and we had a very good survey results last year for those rides we opened in 2022. We don't have that same level of detail in 2023, but we I have a fair estimate that there was some impact and that's why we called that out.

Speaker 7

Okay, understood. And is there any way we should think about operating expenses in SG and A this year, whether by growth rate or absolute numbers, kind of what are the major pressure points there and how much of your savings that

Speaker 2

Well, let me just give you some high level thoughts On costs, I mean, we have, as you know, a tremendous focus on costs. You heard me mention that. I think the team that is working on that Has done a good job and is pacing well towards that $30,000,000 to $50,000,000 that we set out, we believe we're closer to the higher of that. And that would include efforts around SG and A as well as OpEx. So we're going Yes.

Speaker 2

I don't know that I have an exact number for you. Obviously, we would like to target low single digit expense growth. That's a good recipe over the long term. If we can grow our per caps and grow our tenants at single digits and then keep our costs in check by growing them at a low single digit percentage as well. That generally is a good recipe in this business.

Speaker 2

So that's what we would target. Hopefully, that's helpful.

Speaker 7

Yes. Thank you very much.

Operator

The next question comes from Thomas Yee with Morgan Stanley. Please go ahead.

Speaker 8

Great. Thank you so much. I wanted to ask about group bookings. You mentioned some healthy recovery there from 2022 levels. Can you give us an update on where that stands relative to pre COVID?

Speaker 8

And Maybe also just on international visitation compared to 2019, how that might be trending?

Speaker 2

Yes, I can help you there. So Let me start with international. I mean, international was obviously up in Q1 versus 2022. It's still not up to 2019. So again, that is a reason to be optimistic, in my opinion, We are still down roughly over 40% in Q1 to 2019 in international attendance.

Speaker 2

So We have more ground, obviously, to make up there. There's macro factors that you're obviously, I'm sure, aware of. There's things I'm sure we could be doing better as well. And so we'll that's something that we're clearly working on. So That is a good opportunity, I think, for us.

Speaker 2

The group business is trending very Well, versus 2022, we have we're well ahead of kind of the typical pacing we would have This time of year and ahead in units versus 2022. Versus 2019, We're in line, if you will. It was still down slightly in Q1, but it's really close to being back To 2019 levels. The good news is, we're driving more revenue out of the in most cases, The bookings we are doing.

Speaker 8

Okay, makes sense. And then back on costs, any incremental color on just maybe overall labor hours this year? How should we think about maybe just staffing levels and how that might look during peak season compared to last year? Is there an opportunity to kind of pull some stuff out with the tech initiatives that you're kind of putting in place.

Speaker 3

Yes, I would say it's Jim. For overall labor hours, I think we feel Comfortable that our staffing is somewhat improved in many of our areas. There's still a couple of pockets that we would like to see, especially in a few of our select locations. What is more comfortable to me is the recent labor rate From the Department of Labor said that inflationary pressures was about 4.5% year over year. Our labor rate As much less than that measurably less.

Speaker 3

And so I think we're pleased with at least the labor expense side of the equation. Labor hours, we do have some initiatives in place to make ourselves more efficient as mentioned last quarter. There are a couple of technology projects that we look forward to at our main entrances. We are doing some things with modifying our restaurants and the capital spend to make them more efficient. And we're also doing some very detailed labor hour analysis and making sure we've got the right labor at the right place, right time that will also

Operator

The next question comes from Eric Wold with B. Riley Securities. Please go ahead.

Speaker 9

Thank you. Two questions, I guess. One just to follow-up kind of on the last comment or last topic. You mentioned that you're at about 70% of the planned restaurants special for mobile ordering. Can you get to 100% this season?

Speaker 9

Is that a 24% or maybe later plan. And then, what is kind of the also the goal around that? Is the goal Actually drive reduced labor staffing in those restaurants when it's fully implemented or is the goal more on driving The higher basket sizes and purchases from consumers.

Speaker 2

Hey, Eric. Let me give you just some high level comments and then Jim can fill in Maybe on the timing that you talked about. Look, the goal with the mobile ordering and the app in general is Several fold. I mean, one is, we want it to be a better experience for our guests. So Certainly, that's a key component of better guest experience with an app, whether it's being able to order food or a quick queue or buy a reserve or have a map download, whatever it may be.

Speaker 2

We like that from a guest satisfaction standpoint. We know clearly that people spend more when they're buying through the app. So that's another advantage. And then I guess the third thing would be obviously some of these mobile order locations, we believe we can staff more efficiently and ultimately so we have lower costs. So it's a combination of all those things that I think are kind of the special.

Speaker 2

And then as far as how we're thinking about the target and the timing of that, you want to talk about that?

Speaker 3

Yes, sure, Mark. So as part of our Capital spend I mentioned, we do have a significant amount of that dedicated to changing our service style of our restaurants and as part of that installing mobile ordering and retrofitting on those legacy restaurants, we'll of course design new ones in the future to incorporate that. But that's going to be a multi year project. We've got some very major restaurants and we're approaching the busy season. So we're somewhat limited in the ability to take down restaurants all at the same time to do some of these retrofits.

Speaker 3

So we'll do it methodically over 2023, 2024 is our goal for that. As far as the labor, I would only add That while we are going to be more efficient, a lot of times when we're in constrained labor environments, we're able to take the labor and move them to other locations, other revenue generating areas, so that it also helps us to maximize revenue there.

Speaker 9

Thank you. And then just a follow-up question, the second question. Obviously, you've been repurchasing a lot of shares over recent years, Obviously, as interest rates have moved higher, what point does the focus of excess capital shift towards reducing the debt? What would you see as the optimal ratio, leverage ratio over the coming years?

Speaker 2

Yes. Hey, Eric. I mean, what I would tell you is, I mean, we're obviously comfortable where we are with the ratio we have now. We're at 2 point 7 times. Not that we wouldn't be comfortable lower than that or even higher than that, but we don't really guide to a target.

Speaker 2

What we do is work with our Board on what's the best use of cash. And so we'll continue to do that going forward.

Speaker 10

Thank you.

Operator

The next question comes from Ben Chaikin with Credit Suisse. Please go ahead.

Speaker 11

When you're looking at the operating environment today, are those kind of transitory items you highlighted in 'twenty two rolling off or is it pretty sticky versus what you were seeing last year? Thanks.

Speaker 3

Yes, Ben, I would say that we continue To be mindful of the cost pressures, we have seen moderation in many areas like I mentioned already about the labor. I think we're very pleased with Our ability to manage labor rate either through a reduction in overtime hours of being more efficient or being more targeted At our labor rate growth allowance, then a broad shotgun approach, we're very targeted on that. The others with cost of sales, we've had Very dedicated negotiations with our vendor partners to ensure we're getting the best pricing of that. So we've seen moderation there. I think Going forward, we've sort of reset or very close to that.

Speaker 3

We continue to look at some of our inflationary pressures. But in general, I think we're at a new fairly good baseline.

Speaker 11

That's helpful. And then I think if I heard you correctly, I think you said you saw a nice step up in pass sales between March April. It a fair assumption that this kind of correlates with some attendance trends you're seeing or was there something else? Thanks.

Speaker 2

Well, yes, I think what I would tell you is, we are not going to without commenting on attendance, I think As we get closer to opening our rides and things like that, That's a driver a lot of times of people buying past products. And so that And we have those rides ahead of us, obviously.

Speaker 11

Okay. Thanks.

Operator

The next question comes from Chris Woronka with Deutsche Bank. Please go ahead.

Speaker 3

Hey, Good morning, guys. Thanks for

Speaker 9

all the details so far. I was hoping we could maybe drill down a little bit into the customer buckets Florida Parks. Have you noticed any is there any delineation in, I guess, I would say kind of in park spend among those groups or any change Over the past 3, 6, 9 months?

Speaker 2

Look, I don't know that we're going Break that out or provide any more detail. I think what you can read into is, obviously, our per caps have been growing and for quarter over quarter for some time now. And that's with different So our level is visiting in our parks throughout the year. So I think we're generally pleased with the spending that we're seeing across our parks from the folks coming to visit our parks. There's a number of new things in our parks, Specifically here in Orlando that I think are compelling to people when they do visit, whether they are a local

Speaker 9

Okay. Fair enough. Thanks, Mark. And then just follow-up with Abu Dhabi now opening. Is the licensing or perhaps joint venture thing, is that something that could be on the table domestically, whether it's For a larger park or even a smaller kind of sesame size things that something you'd ever look at?

Speaker 2

Well, look, without getting into specifics, I think what I can tell you is, we certainly entertain a lot of different things. And so we will continue to do that. So, yes, I mean, the right opportunity, the right situation, we would certainly look at it, whether it's Domestic or international.

Speaker 1

Okay. Very good. Thanks.

Operator

The last question today comes from Barton Crockett with Rosenblatt Securities. Please go ahead.

Speaker 10

Okay. Thanks for squeezing me in. I wanted to I was curious about the description of the cadence of ride construction And a little bit of explanation about why things are starting later this year than last year. Is that By design, in other words, this is the optimal time to build and launch your new rides for best impact in the season? Or does this reflect maybe kind of labor markets and construction markets just not being special quite as efficient or as open as they were last year when you were able to get things out sooner?

Speaker 2

Yes. So Barton, I can take that one. And if you remember, most of the rides We opened in 2022. We had under construction, kind of during the COVID time period. So they were in a lot of cases fairly far along when COVID hit.

Speaker 2

You remember a lot of them were going to open in 2020 and got delayed due to COVID. So There was less kind of runway to have to complete those rides, which was a pretty big advantage and why we were able to open them earlier. Obviously, we're opening them now in many cases here in the coming weeks. And that is a more, like you said, kind of historically more traditional time to open new rides. I mean, just like any construction projects, We certainly have our challenges in certain rides with construction delays, whether it's weather impacted or labor, whatever it may be.

Speaker 2

So, but you have that on a lot of different things. So, we'll work through that And I'm excited that we're going to be delivering a compelling lineup for guests to enjoy as we move into the summer.

Speaker 10

Okay. That's it. Thank you.

Operator

This concludes our question and answer session. I would now like to turn the call back to CEO, Mark Swanson, for any closing remarks.

Speaker 2

Thank you, MJ. On behalf of Jim and the rest of the management team at SeaWorld Entertainment, we want to thank you for joining us this morning. As you heard today, we are confident in our long term strategy, Thank you, and we look forward to speaking with you next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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