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.
Welcome to “Ask Mr. Theme Park,” a great opportunity to pose a question regarding the leisure industry to Mr. Theme Park (aka, Dennis Speigel. As a highly respected leader, mentor, and visionary with over 50 years of leisure experience, Mr. Theme Park has a wealth of knowledge on many different issues.
Tuesday, March 29, 2016
Thursday, March 24, 2016
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”.
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!
Tuesday, March 15, 2016
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!
Wednesday, March 2, 2016
Why Theme Parks Fail
Dear Mr. Theme Park,
While a lot of theme parks are successful, at least for a while, others that are built are suddenly gone within just a year or two. Given your experience, what would you say is the single biggest reason that parks fail?
Steve
Dear Steve,
More parks are actually developed than fail. However, there have been some enormous failures during the last 15 years. The most recent – and most significant - that comes to mind is the Hard Rock Park, built in Myrtle Beach, South Carolina. This was a project doomed from the beginning. The developers of the park literally reached out to almost everyone in the industry for advice and assistance, but in reality did not listen. Why was the park a failure? Let me capsulize the reasons.
The Myrtle Beach market, known as the “Redneck Riviera”, is known for servicing two very distinct markets – golfers and beach-goers. Each of these groups has distinct characteristics.
Characters at Hard Rock Park |
First, the golfers come for one reason – to play golf. On average, the golfers try to work in about 24 to 36 holes of golf each day. At the end of the day, they like to have a few beers, have dinner, and then it is bedtime. Incidentally, there are more than 100 golf courses in Myrtle Beach, and if you cannot get enough long courses, there are over 50 miniature golf courses to play on all day long and into the evening.
The second group of visitors in Myrtle Beach are the beach-goers. Their day consists of getting up, going to one of the dozens of pancake houses, having breakfast, and then hitting the beach for the whole day. They then go back to their hotel, clean up, and stroll the strand. They are then ready to get up the next day to hit the pancake houses again. If this seems silly, keep in mind it is true. Typically, this group is on a tight budget.
So, back to the failed Hard Rock Park, and why it failed. Fundamentally, it was built in the wrong place. As we have all heard…….location, location, location. The Hard Rock Park was built on 55 acres of property between 501 and the Intercoastal Highway. This was the former site of the failed Waccamaw Factory Shops (outlet malls). It was in an area people did not want to visit, as it was too far away off the beaten path.
An Empty Lot - Hard Rock Park |
Not only was it in the wrong location, the park was also ill-conceived, poorly designed, and highly overcapitalized. Additionally, it was expensive to visit. With a general admission of about $50, it was far too expensive for the type of park and the attractions it offered. People who came to Myrtle Beach had a theme park in their own “backyard”, which was bigger, better, and typically less expensive.
So, Hard Rock Theme Park really missed the mark on many essential aspects of planning, designing, and operating a park. These included bad location, poor layout / design, poor product line-up, over capitalization, and no real market to play to. This development was really a classic case of “if you build it, they will come”. NOT! The park opened in April 2008 at a cost of $400 million and closed in September of that same year. A very sad loss for the investors and a blemish on our industry.
I mentioned at the outset that the developers canvassed the industry for advice and assistance. I know that they approached Six Flags, Cedar Fair, our company ITPS, Herschend Entertainment, other large operators, and ex-officials of the industry – all of whom said “don’t do it.” Wrong place, wrong concept, wrong market to cater to, wrong, wrong, wrong. But, they went ahead and did it anyway.
After the fact, ITPS was hired by Cerberus Capital to perform a forensic audit on the collapse. We were mortified by the planning mistakes made and the amount of money that was “supposed” to have been spent on the park. This was clearly the most unprecedented “meltdown” of any park failure in recent time.
Steve, usually there are early warning signs. Feasibility studies normally point out the glaring errors that need to be cautioned. If a site location is wrong, if too much or too little capital is being planned, if the market population is not there to support strong initial and repeat visitation, if the design is poorly conceived and then executed, disaster is sure to strike. There was and remains a lot to be learned from the Hard Rock failure.
Steve, we like successes in our industry. Here at ITPS, when it comes to “possible projects”, we see them all -- the good, the bad, and the ugly. Sometimes, you have to tell a potential client, “just because you have an idea does not mean it is a good one!” Successes, not failures, are a lot more fun!
Good, Bad, Ugly |
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