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ParkBloggin’ by Dennis Speigel


Feel the intensity and thrive


Our industry has always been identified with certain intensities, but in recent years additional factors have had a real impact on park attendance. First, I believe we are weather intensive. While we always have to deal with various weather patterns, we have seen in recent years how extreme wetness and extreme heat can affect attendance patterns to detrimental impact. In the US, we have seen problematic patterns of rain hit in the spring, causing parks to open to at a slow pace. Many times this can be made up for in the regular season. However, if a park gets hit with follow up heatwaves, it is more difficult. This weather pattern happened to many North American parks during the 2009 season, which was already being affected by the economic downturn. For the most part, operators “plan for the worst and hope for the best” when it comes to weather. A park needs to factor in the historical patterns and hope that there is not some cataclysmic or extraordinary pattern during the season. Reaching a park is fuel intensive for our guests. The price of gasoline has had an enormous impact on attendance at both destination resort and regional theme parks in recent years. As an industry, we are affected by both car and plane travel. When prices go up, attendance slows. People remain immobile and wait for prices to drop before they began their normal visitation patterns. Thirdly, I believe our industry is labour intensive. Typically, staff account for approximately 50% of a park’s operating budget. They are our single biggest expense – and are not getting any cheaper. In the USA, the current minimum wage is $7.25 per hour. When it was increased to this level in 2009 from the previous $6.55 per hour, one of our largest operators reported an annual staff bill of over $5 million in one season. While the seasonal theme park industry in North America has a special dispensation for minimum wage, competition from other employers means parks are often forced to pay minimum wage and above. Therefore, we continue to be – due to the large workforce associated with park operation – a hugely labour intensive business. I see no signs of this changing. Our industry is also capital intensive. Amusement parks thrive on repeat business – both within a season and from season to season. In this mature industry, most markets have been penetrated as deeply as


possible. It is fair to say that a park’s effort is to maintain current market penetration while, through the process of capital expansion, increase attendance through reasonable cost effective product additions. Reasonable is the key word here. Today a major attraction such as a large steel coaster can cost between $15 and $30 million. How do you continue to commit the proper amount of capital expenditure while growing the business? First, you must protect your market. If you are a teen-driven park, you must continue to provide product which will bring them back again and again. You must also present product to appeal other demographics that will help you grow. No matter which group a park chooses to target, investments are expensive. When a chain like Six Flags or Cedar Fair spreads its annual capital expenditures across all of its parks, the “burn factor” happens quite rapidly. Yet without these annual or semi- annual investments, attendance begins to stall and, ultimately, decline. Finally, and regrettably, we have also become discount intensive. Many parks have become reliant on intense discounting


Major steel coasters are capital intensive


to stem declines in attendance. The old adage, “I will accept the dilution if it is offset by volume” has not held up. Large discounts have eroded profitability. A new formula for controlling and replacing discounts should be a priority for our industry. At ITPS, we believe that “yield management” or “dynamic pricing” offers a viable tool towards controlling discounting in future. You can read my thoughts on this subject at bit.ly/A2vAqP.


As we as strive to grow and become more profitable as an industry, we must be alert to these intense, somewhat volatile, factors. The organisations that manage these intensities will be those that thrive in future.


Dennis Speigel is president of International Theme Park Services (ITPS)


FEBRUARY 2012


7


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