Dear Mr. Theme Park,

I run an entertainment center in Florida.  Recently, we have seen a downturn in attendance.  What’s happening?

Terry

Dear Terry,

A good question.  I have spoken to other colleagues in the industry and they too have seen somewhat of a slowdown in attendance.  In discussing this recent slowdown, it is my belief that all of the shootings of police and innocent people by lone wolves and terrorists all over the world have unnerved some people, and have caused them to stay closer to home.

I saw recently where Universal Studios in Orlando removed blackout dates for lower tier season pass holders.  The blackout dates will resume from December 21, 2016 through January 3, 2017.  Typically, revisions like this are not activated when attendance is running at peak.  This would indicate that attendance is soft.

I have also spoken to other attractions in the Orlando market, who have indicated some softness during the last three weeks.  Prior to the Orlando club shooting, the Baton Rouge incident, and the Dallas police officer sniper shootings, attendance across the industry was on track with projections made by most of the attraction operators.

Soon, the regional parks will be announcing attendance and revenues.  I believe we may see an uptick in attendance and revenues at regional parks, due to people staying closer to home and not venturing out as they were earlier in the season.  In other words, the “staycation” could benefit regional parks.

I also spoke with a major travel marketer who told me that they are seeing a lot of cancellations of trips abroad and domestically.

No question, Terry, these perilous situations and times we are currently experiencing are having an impact on travel and, as a result, some of our attractions.  We will bounce back due to our resilience, but for now, we have to “market” our way out of this slight downturn.

Theme Parks On Track in Q1

Wizarding World - Universal Studios Theme Park

Dear Mr. Theme Park,

What’s your take on how the industry did after most of the 1^st quarter results were announced?  Better or worse than last year?

-       Barry

Well, Barry, quite bullish!  The first quarter reports put out by 4 of the “big 5” have shown impressive results.

Based on our discussions with people in these organizations, it is fair to state that operators are quite pleased with their numbers when comparing first quarter results of 2016 with those of 2015.  We saw that Disney and Universal had tremendous performance.  While Disney’s revenues were up 9% (Q1 ending January 2, 2016), itself a huge accomplishment, Universal’s revenues increased by a whopping 57.5% (Q1 ending March 2016). 

Cedar Fair and Six Flags have also reported good first quarter results, with Cedar Fair’s revenues up by 25% and Six Flags’ revenues up by 36% (Q1 ending March 2016).  These operators have reported that 2016 season pass sales, group sales, and season dining passes have been well received and are ahead of last year.

Mako - Seaworld Orlando

SeaWorld, who as you know continues to face scrutiny and image issues, just announced today that it had an uptick of attendance by about 83,000 guests.  A portion of this increase was due to the opening of Aquatica in Texas.  The company reported a revenue increase of roughly 3%, although they still experienced a greater net loss than the previous year.  It will take a bit more time before SeaWorld sees the true results of their turnaround plan.  (Orlando is down due to a decrease in Latin American visitation and season pass sales.  Mako opens in June and visitation should improve in late Q2 and Q3.)

Barry, when you consider the price increases that we have seen in our industry over the last 5 to 7 years, one must stop and think that the American public truly enjoys our product offering.

If you took all of the professionally played sports - baseball, basketball, football, hockey, and soccer – and add their attendance together, theme parks still outdraw these sports by a substantial amount.  Last year, it was estimated that over 380 million people visited theme parks, water parks, FECs, and location-based entertainment facilities.  I ask…….what is the national pastime for Americans?  It’s overwhelming “visiting themed attractions.”

Valravn at Cedar Point

When considering the great new capital investments coming on line in the way of attractions in 2016, I would have to say we are in for a great season. It’s a little too early to forecast the percent increases, but we believe the industry is in store for another year of attendance and revenue increases.

As a whole, we have not hit the “pricing wall” yet.  The experimentation and introduction of Dynamic Pricing is going to help the per capita and revenue yields. 

We will have more to say about your question, Barry, around the second week of June, 2016.  Stay tuned and thank you for contacting us.

(Note:  Disney's 2Q Earnings are released on May 10, 2016, and expected to have positive results.)

Universal Studios - Wizarding World Opening

Dear Mr. Theme Park,

Universal Studios Hollywood opens their version of The Wizarding World of Harry Potter on Thursday this week.  What kind of impact do you think this will have on the park and how do you think it will impact Orlando?

-       Steve

Steve,

If the reception by the West Coast audience is close to what Florida experienced when they opened Harry Potter in 2010, then “Katie bar the door!”

We expect the opening to be really strong.  I remember going to the opening of Harry Potter in 2010.  John McReynolds, current IAAPA Chair and Senior Vice President of Universal, invited me to the opening event.  It was wall to wall people.  The lines during the first several weeks were 8 hours long – not to get into the park, but to enter the Wizarding World of Harry Potter section!  People did not seem to mind the long lines.  They were heavily into Harry Potter, and those in line were having a good time savoring all the fun of meeting other Harry Potter enthusiasts.

I anticipate a huge attendance from the local population and the secondary market, followed soon thereafter by people from the tertiary markets.  You can bet that merchandise and food/beverage sales will be strong, particularly the butterbeer, which sold over 1 million we were told during the introductory season.

So, Steve, the impact on California’s park will be enormous.  We at ITPS believe this impact could be well into the 20+% range as it relates to the gate, possibly 25% or more.  Revenues will trail with high per caps for the in-park spend.

One of the biggest issues with which Universal will have to cope is crowd management and capacity issues.  California, as you may know, is a smaller park spatially than Orlando.  The Wizarding World of Harry Potter in California is about one-half the size of the Orlando attraction.  This means bigger crowds in tighter space.  So, I am sure Universal Studios in California has crowd management at the top of their priority list when it opens.

What a great time to be part of our exciting industry.  We have so many good things happening, not just in the USA but globally.  Not too long from now, we will be focusing on Disney’s Shanghai opening.  What an opening that will be!

2016 Industry Expectations

Dear Mr. Theme Park,

By all accounts, 2015 was a banner year in our industry!  As most parks are now gearing up for opening day 2016 or may have just opened, what are your thoughts on how this year will compare to last year?  Are there certain things you feel must happen for the season to be on par or exceed last year?  Just wondering about your expectations?

- Phil


Dear Phil,

Indeed, 2016 is shaping up to be a good year for the theme park and leisure industry.  When you review the statistics for 2015, the “Big 5” all showed improvement over 2014, which in itself was also a good year.  And, we seem to be on a roll!

As we well know, there are certain aspects of our industry that can have different impacts on our business.  Some we manage, and some are out of our control.  A few of these are as follows.

First, oil prices.   Gasoline and jet fuel can affect visitation patterns at both regional and destination parks.  We saw this in 2007.  Oil prices reached $4.00 at the gas pumps for the first time in our history.  People did not start traveling until approximately July 12th of that season.  This was a very late start, which had negative impact on the total season when oil prices receded.  We rebounded somewhat, but not enough to turn the 2007 season around.  Gas prices in 2015 and now in 2016 have been much lower, giving consumers more discretionary spending potential.  This has been, and should continue to be, positive for the industry.

Second, weather.  Weather is a component of our business that most parks factor into their annual projections.  We have seen through the years that it can be too wet or too hot, and extended periods of either can shift a market’s visitation pattern.  In actuality, weather ebbs and flows in a way that typically works out in such as manner that it does not have huge impacts.  However, it can affect the annual season’s outcome.  Reports are that the 2016 summer is forecasting to have good or  above average weather for most of the U.S.

Third, pricing.  Pricing plays a huge role on a park’s bottom line.  Proper pricing a park is highly challenging and must be done correctly.  Today, the concept of “dynamic pricing” is making its way into our industry and I believe it will soon be the norm.  For 2016 and the coming years, it is imperative that parks properly implement pricing strategies that utilize innovations in dynamic pricing to help maximize revenues.

And, finally, the single biggest factor that impacts our industry in a most positive way is capital expenditures.  Cap-X drives visitors.  If you look at the last six years, particularly Universal Studios, you can see how significant the correct Cap-X spend can impact a park’s front gate and coffers.  Harry Potter of course!!   So, 2016’s expected Cap-X spend is looking good, considering the early positive response to the new VR technologies being introduced.

Phil, I believe we are in the middle to end of a huge growth curve in our industry.  That is not to say that we are not going to see any future growth.  Based on all of the capital being spent, we certainly will see growth in the next few years. However, we do cycle attendance and, as we reach the end of the current decade, I believe we will see some pull-back for the industry in general.

To fully answer your question, continued Cap-X in correct proportions, along with further introduction and evolvement of dynamic pricing, will help move the “growth checker” forward.  People want new experiences and are always looking for bargains.  All items referenced above properly charted can and will help our industry to grow.  Expectations for 2016 are very good.

Protecting our Guests

Dear Mr. Theme Park,

Theme parks and leisure facilities have to operate today under what seems to be more and more tense security situations, considering global threats and random terror events.  How do you think parks are reacting, and how far do you think parks must go in terms of security measures?

Richard

Dear Richard,

With the continuing global violence, parks are absolutely going to increase security measures taken at their businesses to improve guest and employee safety.

As a response to your inquiry was being prepared for the ITPS Daily Leisure News, we learned upon awakening that Brussels experienced a horrible act of violence perpetrated by ISIS.  Over 30 people were killed and hundreds injured in the heinous and cowardly act.

Richard, the world in which we live and play has changed dramatically.  The way we protect ourselves, our guests, our employees, and our properties continues to evolve based on these barbaric acts.  The way we shop, bank, educate, worship, travel, dine, relax, and entertain have all been victimized – both cruelly and unfairly by these criminals.

Theme parks are not airports.  They do not have the enormous security forces made available by government to inspect every person, parcel, or delivery entering the premises.  However, we are seeing major changes in security in parks, from the addition of metal detectors, random searches, wanding, and security dogs, to drones policing distant perimeter boundaries.  Parks are researching and employing ways to increasingly improve on-site security.  We have learned that certain parks have instituted plain clothes security personnel that co-mingle with the guests; they are unmarked and unknown by the visiting public.  This is a vigilant undertaking.

Unfortunately, it is only a matter of time before one of these gutless poltroons attempt to assail a park with a violent act of senseless intent to harm.  Unlike the story of the Emperor’s Robe, we must acknowledge our foibles and do whatever is determined appropriate to safeguard our businesses.  Therefore, we as an industry must increase our previous and current security standards.  More money is going to have to be allocated now and in the future on security measures if we are to stay ahead of the “security threat curve”.

Richard, it is truly a shame that we are being driven to these measures as a society.  But it is the necessary responsible action we are and will be taking henceforth.

Just always keep in mind that theme parks are still the greatest places on the planet to visit and recreate!

Is SeaWorld too Late Adding Hotels?

Dear Mr. Theme Park:

I recently read that SeaWorld is adding a hotel.  I know many theme parks do this, but do you think that SeaWorld is too late getting into the hotel business?

 Allan

Dear Allan,

It is never too late to “cash in” on a growing trend.  Thinking back to the early 1970s – it is interesting to note that when SeaWorld Orlando opened in 1973, it had a hotel.  It was a Hyatt or Hilton as I recall, and was located basically at the edge of its property.  At that point in time, with Disney World only two years old, there were not a lot of hotels in the area; however, there was one very close to SeaWorld.  It stuck out like a very odd place for a hotel.  Well, that was forty years ago.

Had SeaWorld incorporated more hotels into its planning back then, one has to imagine how important that incorporation could have impacted their long-term bottom line.  I for one believe that more hotels in and on the surrounding adjacent property could have helped feed the SeaWorld turnstiles from the beginning.  We all know very well the enormous growth that occurred in the Orlando hotel market.  Since 1970, with less than three thousand rooms in the area at that time, Disney and other major hotel operators all stepped up their hotel construction realizing the need to feed the Disney World properties.  Yes, like any specific market, the hotel industry in Orlando saw a downturn in hotel stays when the Arab boycott protesting the USA’s support of Israel caused gas prices to double.  And, overnight, this placed the country in a recession that would last for years.  This definitely hurt the hotel market.

Allan, oh how times have changed.  Today, for Disney as well as Universal, hotels are the life’s blood of the Orlando market – constantly feeding the parks’ new and repeat visitors.  I do believe that had SeaWorld worked with a partner early on that they could have built an important network feed of travelers to their park.  Typically, when one hotel builds, it is followed by others searching for market share.

Lowes Portofino Bay Hotel

If you look at Universal, you can see what an important part hotels on property have and will play in revenue generation, as well as keeping guests on premises.  Disney has been the master at understanding that on-site hotels create more on-site spending during a guest’s visit.

Today, even the regional park operators such as Cedar Fair and Six Flags are researching and implementing ways to improve existing hotel programs like the Hotel Breakers at Cedar Point, where they just spent $50 million on refurbishments.  This significantly enhanced ancillary guest spend.

I am sure we will see Universal Studios Orlando plan new mega hotel facilities on their just-acquired 475-acre property.  The longer they can keep people on their property, the more likely the odds for shorter stays at Disney. 

Hotels are seeing a major resurgence at parks, and operators are understanding their importance.  Having more rooms on property can have a significant impact on the bottom line.  If I were running SeaWorld, hotel development with partners would be high on my agenda, even while working out the other major issues that SeaWorld is reacting to at this point in time.

Hope this helps answer your question and thanks for asking!