How do I sell a theme park?

Dear Mr. Theme Park,

I am considering selling my family owned and operated amusement park. How do I go about finding a buyer and making sure that I am getting the best price?

John T. from Texas

Interesting question John. During the last 10 years, ITPS has been responsible for approximately $800 million in buying and selling transactions of dry and wet parks. John, each park transaction and process has a personality and a life of its own. Some processes can move very quickly and others like molasses. 

There are important considerations to review when selling. 

First, are you really serious about the divestiture? 

Have you thought about the personal and family ramifications that can arise from a sale of a property? 

Is the property in a reasonable state of repair and will it show well when taken to marketplace? 

Recently, ITPS was engaged to look at a property that was once one of the best privately owned small parks in the country. It sold after the owner died and was taken over by a company which was tangentially related to our industry - a distant cousin. The new owner did not understand our business, and let the park lapse in terms of capital expenditures and, even worse it lapsed in maintenance expenditures. The park began to deteriorate over a few years. Assets deteriorated, as well as employee morale. During the time the park was owned by the new company, competition in the not too distant markets began to intensify. The park was in a severe downward spin. We looked at it for our client and suggested they forgo any further consideration. The park continue to go downhill in every sense. There was a time when we would have “snapped it up” immediately, but time expired. 

John, the reason I tell you this story is to impress upon you the importance of having your park in the proper shape necessary to sell it. There are a lot of factors to consider, but a persistent, clean property will help initiate the sale of it. 

You will also want to have a recent appraisal of the property - both land and assets so you know in advance their values. Sales can be asset sales or stock sales and your company’s business status will determine what type of sale is best for you. Your accountants and attorneys will advise you. It is best to have this understood at the outset for when you begin discussions with a buyer. 

We here at ITPS have what we call the “pilot’s checklist”, a procedure that we work through with the buyer/ seller from the start, so nothing is forgotten. 

That said John, the small amusement park transactional space is very limited these days. I can assure you there are various groups looking to acquire small parks. I suggest you engage a company of your choosing to help navigate you through the process. ITPS is one of a few companies who excel in this area. You can always contact the IAAPA for referrals as well. But I would suggest you engage in someone to assist you. An amusement park sale is not a normal real estate transaction. Nor is the appraisal of above ground assets, so please make sure you involve a company who understands the rides and attractions valuations. Proper preparation as outlined will help you in obtaining proper value for your park if and when you decide to sell. 

Disney dreams on a Small Park Budget

Mr. Theme Park, 

I operate a small amusement park and we don’t have a hundred million dollars to spend on new attractions. So what can a small park do that is important in order to provide high quality, like Disney, on a small park budget?

-Charles T. from Louisiana 

Charles, this is something that small park operators have asked and had to deal with since Disneyland opened in 1955. 

There are many things you can do to keep up and grow and continue to entertain you annual visitors.  This starts with understanding your demographics -- in other words, knowing your visitors. Are they children, teens, family? Are they a mixture? Depending on which demographic is your “franchise”, you need to continue offering new products to them on a well planned capital program, while at the same time understanding where your opportunity for growth in demographics best lies. So you need to always protect your most important visitor base and invest in the potential demographic that can grow attendance. 

On a small budget, I would like to suggest that our industry has an excellent used rides and attractions program. By searching the suppliers of used equipment, you can find excellent product opportunities for a fraction of the cost of a new ride - sometimes as little as thirty (30) cents on the dollar. Once refurbished and revitalized, to your guests it is a “new attraction”. When you properly and introduce your new attraction, you have a winner- a product that will help you continue to sustain and grow your attendance. 

Charles, keep in mind also the market in which you exist is constantly changing. Just to mention three examples - more and new competition, economic ups and downs, and changing demographics. You must keep constant tabs on these ever-changing market trends. Understanding these issues and knowing your market conditions will greatly assist you in making the correct capital planning actions.

As we have always heard, “bigger is not always better”. Remember the back bone of our industry has always been the small park operators. Many of the regional operators were also small once. They dealt with the same issues you face. Good management, proper planning, and strong fortitude on your part will win the race. Good luck and good planning. 

Disney - Toy Story, Avatar and Star Wars

Dear Mr. Theme Park:

Disney just made some major announcements recently with the additions of Star Wars, Avatar and Toy Story.  But most probably won’t open for quite some time.  What can Disney --- or any park that is waiting on a major expansion – do to keep attendance thriving until that time?

- Josh, South Carolina

An interesting question, Josh.  Parks – whether they are destination parks like Disney, Universal, or Sea World – and regional parks like Cedar Point, Kings Island, and all of the Six Flags parks absolutely have to continue to reinvest capital on a well planned cycle if they want to continue attendance increases.

Our industry lives on repeat visitation, and repeat visitation is driven by the introduction of new product through capital expansion.  We have seen many times, that when smaller park operators and some of the larger ones hold back on capital planning, attendance remains flat and can actually decrease.

So it is imperative that parks set up a practical schedule for their product planning.  We have seen recently at both Disney World and Universal Studios Florida where they embarked on multi-year expansions.  Disney expanded the Fantasyland into a huge new attraction, which took four years to complete.  They developed the new Fantasyland area in a manner that would allow for sequential opening of various parts of the expansion.  They also built the new area in a way that was partially exposed to the visiting public – thus “titillating” the on-site guests and encouraging them to return to see finished products or to visit along the way during construction.

As parks mature, it is incumbent upon operators to review their internal properties to ensure that they are best utilizing their physical properties and intellectual properties in the highest manner.  We have seen in the industry that product and themes can stagnate, thus creating “wasting assets”.  When this happens, an operator is not getting the highest use and return on their investment, so they have to change and capitalize on fresh new ideas of themes.

This is exactly what Disney is doing – taking wasted assets and areas in their parks and supplanting existing wasted assets with new, popular, high-tech expansions.  Star Wars and Avatar will both be incredible, state-of-the-art new “Attract-Areas” that offer the newest advancements in guest experiential immersion.  Disney is going to publicize the “coming attractions” during its construction periods.  Star Wars is located in Disney Hollywood Studios and Avatar will be located in Disney’s Animal Kingdom. 

Parks are getting smarter on planning and introducing their capital expansions.  They have to take the proper time, sometimes several years, to add these new attractions.  But, Josh, no question, the approach is working well and enticing guests to want to come back and see the new introductions.  Whether it is “GateKeeper” at Cedar Point, which removed the Sky Tower a year before opening the new ride, or Harry Potter at Universal Studios Florida, where they supplanted half of The Lost Continent to add Harry Potter and where Jaws was shut down to add Diagon Alley, parks are better utilizing their properties.

And, remember, all the time, these new additions are being built, the parks are hyping and promoting to their in-park guests – their best clients.

Josh, keep watching.  There are amazing new attractions and parks coming in the future.  What an exciting industry!

Disney's Dynamic Pricing

Dear Mr. Theme Park,

Disney just announced lots of changes to their annual pass pricing.  It’s all very confusing! What does this mean for me and my family who always bought regular passes to Disney?  Sometimes, it feels like theme park pricing is just getting more complicated!  Thanks.

- Gary W, Atlanta, Georgia

Gary, the new Disney pricing programs actually are brilliant.  Yes, they seem a little confusing at first, but after they “sink in”, the pricing programs are going to have an enormous impact on the visitation patterns for their parks.  Where Disney will see huge positive impact is on their revenue streams, both in-park and at the front gate admissions.  What Disney is moving towards is what we call “Dynamic Pricing.”  You may not know the name of this type of pricing, Gary, but I can assure you that you are familiar with the concept.  This dynamic pricing program is used by hotels, car rental companies, and most prominently all airlines.

Dynamic pricing is also being used now quite successfully by major league baseball teams, specifically due to the number of games they play and the long season.  It really is working well for the baseball industry.

Here at ITPS, we have literally been “preaching the virtues” of going to dynamic pricing in our industry for the last five years.

As our industry matures, we continue to hit “the pricing wall” every several years.  Our industry relies heavily on discounting – we always have.  Unfortunately, as our industry matures and prices increase at the front gates, discounting occurs in many erratic ways.  Discounting in some form will always be important to attractions, but true dynamic pricing like you are beginning to see at the Disney parks will create a whole new “transparency” to theme park pricing.  Some days will be cheaper; some days will be more expensive.  What dynamic pricing does is communicate the best times and prices to visit to guests, who typically fall into one of two categories:  (1) price sensitive or (2) time sensitive.  For the park, it fills downtime periods with price sensitive visitors, and during busier times, it can help manage attendance flow while also generating higher in-park income.  

So, Gary, as you buy season passes in the future and visit other seasonally operated parks, keep your eyes open for dynamic pricing deals, to see which can save you significant dollars.  And, as always, thank you for your question and thank you and your family for being very important visitors to our parks.

Related story:  Variable pricing may be a new theme at Disneyland

Theme Park Challenges.

Dear Mr. Theme Park,

What are the biggest challenges that parks and leisure attraction operators face today and how have these changed over time?

From:  Carey in Texas

Dear Carey:

As progress marches on and we see the continuing proliferation of parks and attractions, yes, there are challenges that we face very single day, week, month, and year.  

One of the biggest challenges is competition.  Look at Orlando, Disney, and Universal slugging it out as it relates to attracting the guests.  New rides and attractions at levels of sophistication we have never seen before in our industry are being introduced every year.  Just look at the impact Harry Potter has had on Universal Studios and their attendance and revenues.  Their increases are astronomical and continue to grow.  Disney expanded Fantasyland over a several-year period and saw phenomenal growth in the same categories.  During the next several years, Universal Studios will introduce the new King Kong attraction (Skull Island:  Reign of Kong), Fast and Furious attraction, a new waterpark and new hotels, and Disney is going to present the new Star Wars Experience, Avatar and a Toy Story Land.  

All of these advancements will cost tens to hundreds of millions of dollars.  So, competition and capital spending, or “keeping up with the Joneses”, are very big challenges for the industry.

In addition to this, labor today is a huge problem for the industry. The regional parks rely on high school aged or college students for workers.  In the U.S.A., schools continue to release students later each summer and they are going back into session earlier each year in many districts. This cuts the labor force down and impacts a park’s operating schedule, thus closing some parks on a daily basis well before Labor Day (which used to be the benchmark for closing daily operations in a park).

Another major challenge is the ever-changing technology and the rate at which it continues to advance.  With the pace that technology is changing, it pushes parks to constantly review their maintenance procedures and programs, while improving their levels of sophistication.  This may not seem like a lot to the unknowing guest, but it has inherent expense associated with these advancements in hardware, software, and personnel – a necessary challenge to meet

The last item I will address is security.  The crazy world we live in today dictates that all parks and attractions heavily review their security programs.  Front gates, service entrances, personnel thoroughfares – all must be reviewed to meet the security challenges that in general face the world today.  We must continue to do everything possible to maintain guest and employee safety.

Carey, the industry we operate is a great place to work.  I have been in the industry now for 56 years.  Yes, as an industry, we face challenges.  We always have and always will.  Every industry has its own set of issues and programs with which to interface.  Our industry is a wholesome industry and, as I have said many times:  “We work in a great industry.  We do not pollute the skies and we don’t contaminate the streams.  At the end of the day, what we really do is put smiles on people’s faces.”  Not a bad place to work.

Thanks again for the question and don't forget to get your season pass for next year!  It's the best time to purchase.