Can Orlando Handle Another Theme Park?

Dear Mr. Theme Park,

Universal bought a huge amount of property in Orlando and is rumored to be planning another theme park.  Do you think Orlando can support another major theme park?

Thanks, Roger


Dear Roger,

The question of whether or not Orlando can support another theme park of magnitude is certainly warranted.

It is truly amazing what has happened in Orlando in a short 46 years.  From oranges and swamps to the “mecca of themed entertainment”, Orlando shows no sign of stopping its leisure attraction growth.  As John McReynolds, Universal Studios SVP and current IAAPA President, told me recently, Orlando is at or approaching 67 million tourists!  Orlando had a record 32 million room visits in 2014 and collected over $200 million in bed tax.  2015 will be even better.

Universal has been on a major winning streak ever since the introduction of the first Harry Potter installation in 2010.  Tom Williams, Chairman & CEO of Universal Parks & Resorts, indicated that numbers have soared, both in attendance and revenues, due to Harry Potter.  Mr. Williams said after the first year of success with Harry Potter that, “Harry was his best new friend.”

The purchase of the 450-acre parcel of land first acquired by Universal close to Orange County Convention Center is a significant purchase and a great piece of real estate.  The land makes up the largest tract of vacant land in the International Drive tourism area and already has existing entitlements which would allow for hotel and residential units if required – not to mention entitlement for a theme park attraction!

Roger, the Universal properties are so hot at this point that they need and, yes they can support, another gate particularly if they bring on a new IP (which is only a matter of time).

It is interesting to note that, back in 1991, a few years after Disney opened their new Michael Jackson Captain E.O., a 3-D science fiction film, Universal opened their Back to the Future ride.  This was, in my opinion, the turning point for Universal Studios Theme Parks in terms of introducing new product.  In fact, this was the first time Disney was ever “out-Disneyed”.  The ride was a colossal success and gave Universal the confidence to embark on many new and thrilling rides and attractions.  Ever since that introduction, they have been on a major project expansion role.

So, Orlando can continue to support new developments over the next 46 years.  Universal and Disney will both be drivers in the continuing increases in tourism.

One other point.  Do not overlook the importance that International Drive is playing in Orlando’s future tourism.  In effect, I-Drive has become a non-gated theme park in its own right.  The critical mass of attractions, restaurants, retail outlets, and oddities that have been developed – with more coming on – makes I-Drive a force to be reckoned with as it relates to a time consumer for visitors to Orlando and the gated attractions.

All in all, Roger, Orlando is booming and shows no signs of letting up.  The important infrastructure is there and expanding to continue to support existing and future tourism.  Who would have thought what was going to happen to Orlando?  Not even Walt Disney could have foreseen the immense growth and tourism that Orlando experiences today.

Thanks for reading!

Shanghai Disneyland - The Mouse Hits the Mainland

Shanghai Disneyland just announced a June 2016 opening.  Do you believe the park will fare better than Hong Kong Disneyland when it opened, and just how important do you think Shanghai is to Disney?

Kenneth

Dear Kenneth:

The opening of the Disney Shanghai park announced for June 2016 will be a monumental milestone for the Disney company.  With over $5.5 billion USD expended, it will be Disney’s largest ever investment.  CEO Bob Iger has said, “It will be a one-of-a-kind, world-class destination that is authentically Disney and distinctively Chinese.  It will be a merge of Disney’s legendary storytelling involving and featuring China’s rich culture.”  

The park will open with two hotels, an expansive recreation area, a unique retail and entertainment district, and the main feature – a 6-area theme park.  The park will showcase never-before-seen attractions created specifically for the people of China.  The park will feature the largest castle among all Disney parks and a new area called Treasure Cove (Disney’s pirate themed land). There will be a newly created Tomorrowland with rides and attractions such as Jet Packs, Star Wars Launch Bay, Buzz Lightyear Planet Rescue, Marvel Universe, and many, many more attractions.

Kenneth, the Hong Kong Disney park has never achieved the projections that Disney expected.  It is the smallest Disney theme park and, in my opinion, never achieved the level of quality expected by locals and tourists.  The park has always experienced intense competition from the pre-existing Ocean Park Theme Park.  Ocean Park is a world-class theme park which actually was better received by the locals and visiting mainland Chinese.

Ocean Park draws over 7.79 million in attendance per year compared to Hong Kong Disneyland’s 7.5 million in attendance per year.  The Hong Kong Disney Park has attempted to build attendance to the 7.5 million per annum as projected, and has finally hit projections after 9 years.  I project that Hong Kong Disney will see a decline, particularly from the mainlanders who will hold off visiting Hong Kong Disney to go to Shanghai Disney Resort.

The Shanghai market is enormous with over 330 million in population within a 3 hour drive or train ride to the park.  I believe that the Shanghai Disney Resort will attract over 10 million guests its first year of operation.  The park has the potential to be a “superstar” park in Disney’s line up of their parks.  Kenneth, the park is a staggering 963 acres – three times the size of Hong Kong Disney.  It is bigger, better, and has never before seen attractions.  They have room to produce two additional theme parks, which are being planned.  I have heard the master plans are currently underway.

Shanghai Disney Resort is a joint venture of the Disney organization, a 43% owner, and the Shanghai Shendi Group, a 57% owner and itself a joint venture of the Chinese government.

Disney sets the bar for our industry, there is no question about that.  They have made mistakes along the way, however.  For instance, Euro Disney saw colossal errors when it opened.  ITPS was retained by Banc Paribas, the local French Bank to study what went wrong. In those days, Disney very seldom reached beyond its own envelope.

In a nutshell, what we found was that they over estimated the guest spend.  They did not realize at that time that Europeans spend less than the Americans and Japanese do in the other parks.  They did not realize that a European could jump on a plane, go to Orlando, be guaranteed good weather and more attractions, and visit cheaper than traveling within Europe to Euro Disney.

The Disney park in Paris is also on the wrong side of the weather line in Marne-la-Vallee, a town located about 20 miles east of the center of Paris. Cooler weather is experienced there than in Paris.  They also opened with too many hotels and not enough demand.  Occupancy was 38% in the initial year, less than required to support their operations.  The local farmers were also “mad as hell” because Disney received special dispensation from the government and was highly resented for receiving these government awards.

Parisians did not like the American park coming to their city.  When asking a Parisian if he had visited Disneyland, you would receive a cold stare and an indignant “no, no, no!”  The greatest faux pas was that it was built in Paris, France.  It should have been developed – in our opinion – in Spain on the Costa del Sol.  Warmer year-round weather and it would have been welcomed with open arms.

So, as great as Disney is, they do get it wrong from time to time.  I believe they have learned from both Paris and the smaller Hong Kong Disney what needs to be presented in Shanghai.  I believe they will have a grand slam home run when it opens.  My long time friend, Nick Winslow, who opened the Shanghai World’s Fair, told me many stories about the enormous crowds that flooded that event.  Many days, they had well over 100,000 to 200,000 people and, in the end, achieved an attendance of over 73 million by closing!

So, Disney will be a lot smarter in 5 months!

And I predict a lot richer.  

Minimum Wage Increases

Dear Mr. Theme Park:

My state was one of the states that began 2016 with a minimum wage increase.  I am concerned that this increase is going to hurt my business.  What can I do to prepare for the upcoming season in terms of possibly reducing staffing – or other measures - without impacting my guests and their experience?

Jim

Dear Jim:

Your concern about minimum wage impact is one shared by many park organizations and small park operators.

For many years, our industry enjoyed a special dispensation from minimum wage.  Quite frankly, I am not sure if we still have this dispensation.  Nevertheless, even if we do, at this point in time in our competitive industry, it really does not make any difference or have a positive impact.  Why?  Because we are in a highly competitive labor market.  Most parks are competing for high school and college students with many local businesses, such as retailers, fast food facilities, and more.  There are many companies and people hiring for positions to be filled by high school and college students, all of which compete with theme parks and other forms of leisure entertainment.  These include:

• Babysitter / Nanny
• Camp Counselor
• Pool Cleaner
• Career-Oriented Internships
• Tutor
• Movie Theater Employee
• Golf Course Caddy
• Mobile Automobile Detailer
• Lifeguard
• Newspaper Delivery Person
• Handyperson
• Dog walker/pet-sitter
• Product Merchandiser
• Sales Associate
• Pharmacy Technician/Associate
• Non-Medical Assistant (caregiver for elderly)
• Housekeeper
• Mover
• Warehouse worker
• Office clerk
• Waiter/waitress and barista
• Cashier
• Restaurant host/hostess

One of the most impactful issues affecting our industry from the employment standpoint is the changing school calendar.  Over the last 25 years, we watched our high schools and colleges across America end their school year later and start it earlier.  This change is having an enormous negative impact on our employment programs.  It not only affects our scheduling of workers, but it also affects days and hours of operation.  We have seen where many parks have had to significantly shorten both number of days and the number of hours they operate because of this change.

In addition to a shorter season, the shrinking labor pool necessitates us to pay more on an hourly basis.  I well remember when we opened Kings Island and, for its first ten years, had a huge talent pool in the greater Cincinnati area from which to hire seasonal employees. We actually hired one employee for every five students we interviewed.  Today, that luxury no longer exists at Kings Island or for any theme park.  The shortage of students forces us to pay higher hourly wages which continues to rise yearly.

For parks that have a small annual turnover, it appears that they have to compensate returning employees at higher levels every season.  Yes, a lot of parks will have an attrition factor that takes place, eliminating some of the higher returning employees as they move on to full-time employment.  But, on an interim basis, the end result is that it costs us more to operate due to increasing necessity to compete with the jobs listed earlier.

Visitors expect theme park employees to be courteous, smiling, informed, and polite.  Seems reasonable, but it also costs money.  These are the qualities all of the above competing employers are looking for when recruiting.  Recently, McDonald’s began paying signing bonuses to employees.  Many parks have employed end-of-the-season bonus plans, but I know of none who have instituted upfront signing bonuses.

Jim, labor is our single largest cost associated with operating a park.  Through the years, operators have utilized many ways to manage labor expenses.  Not all were good and not all were successful.   Some of these attempts included shortening hours of operation, reducing days of operation, and rotating employees in the operation of certain rides and attractions over a defined period of the day, thus using less labor.  The impact of these measures of labor reduction can be a real “turnoff” to guests.  If they came on a Pay One Price plan, they expect to “eat the full buffet.”  Several management regimes ago, Six Flags put several of the above plans into effect with disastrous results, which saw heavy complaints and low guest dissatisfaction.  The end result was that attendance began to suffer.  (They no longer do this).  It was a reaction to increasing labor costs resulting in negative return.

Jim, above all, my suggestion is to not implement any procedures which significantly affect the guests’ visit.  Try managing labor better during times of rain or bad weather, and reducing labor shifts during these times before they are scheduled to start work.  There is no need for them to come if it is a rain-out.  Make sure to manage shift overlaps in a way that minimizes the number of staff reasonable to cover shift changes.

You could also look at your fringe periods of operation to determine if this is when and where you should or could reduce labor expense.

We know there are new ways to also mechanize some jobs in a park.  Ask each department head for their suggestions. The best ideas many times come from the field.  

You may want to talk to your industry counterparts.  Forums at the IAAPA seminars provide great opportunities to share ideas, and learn ways to save money and improve guest experiences.  

Good luck and remember to be vocal to your local government representatives about the negative impact that minimum wage increases have on you and your employees if forced to cut jobs.  Here’s to a good 2016 season!

US Department of Labor

Dynamic Pricing

Dear Mr. Theme Park:  I just read where Universal Studios is switching to a variable pricing program.  Can it really have a positive impact on Universal, Disney, and other parks considering the pricing program change?

Carolyn

Dear Carolyn:

Nothing stands forever and change is good.  

When you examine our industry’s pricing practice over the years, you find that we basically started out selling “strip tickets” at a cost of about 5-cents per ticket.  Rides and attractions based on their popularity were priced accordingly.  A roller coaster, as an example, may have cost 4 to 5 tickets, and a carousel 1 to 2 tickets.  The industry utilized the “strip ticket” concept for decades.  It was not until Angus Wynne opened Six Flags Over Texas in 1961 that the pricing parameters of amusement parks and theme parks to follow changed dramatically.  

Six Flags introduced the Pay One Price (POP) concept much to the delight of moms and dads who take their children to parks.  The POP concept eliminated the “nag factor” of children always pulling and tugging on mom and dad to ride an attraction that heretofore may have been too expensive for the family to ride.  All rides and attractions were included in admission, so like eating at a buffet, you could enjoy all you wanted.

Carolyn, the concept was very successful when introduced, yet many other parks were still skeptical.  As it caught on, traditional amusement parks located all over the USA began testing the POP program. As the public became familiarized with the POP system, they embraced it and fully adopted it after the several years of testing that many parks introduced.

The biggest pricing change was when Disney was forced to replace their ticket books (known as E, D, C, B, and A tickets) for the enormously popular POP admissions program.  Disney’s ticket book program was a sophisticated variation of the ticket-by-the-strip program, which worked quite well for many years.  It was the evolution of strip tickets, long gone after POP’s success.  

Now comes the Dynamic Pricing/Yield Management pricing concept to theme parks.  And why not?  We are a mature industry which has to continue to find new ways to “mine the market.”  When you look at penetration rates of theme and amusement parks, you find that they are quite high, established, and have been for years.  To continue to maintain and grow market share, continual approaches to “mining the market” must be explored and implemented.  We believe at ITPS that dynamic pricing is the next wave of pricing to come to our industry.  POP has been in existence for 55 years.  It has served us well.  But, due to the maturity and changes in how people plan, spend, shop, and utilize social media to shop, dynamic pricing is the way for parks to continue to grow attendance and revenues.

Carolyn, it is interesting to note that by name, a lot of people are not familiar with this pricing concept, but they use it all the time.  For years, airlines, hotels, and car rental companies have employed dynamic pricing.  It works and works well when properly instituted.  There are many aspects to the program that allow for “calling audibles” if need be due to certain issues a park may encounter during the season.  Knowing how to precisely manage the dynamic pricing concept is very important to the overall success.  It is more than a normal park discounting program.  Transparency from the launch is extremely necessary.  However, once properly established, it will become a booster to growth in many ways.  Let me briefly say, not only can dynamic pricing be instituted at the front gate admission/pricing, but also internally in food and beverage, games, and retail.

In answer to your question, yes, we believe that dynamic pricing / yield management will have a significant and positive impact on the park industry as more and more parks try the concept.  As I said, change is good.

Thanks for the great question!  - Mr. Theme Park