CoasterBuzz Podcast #83 posted

When they built Timberland Twister they drove flatbeds in through the service access at night to get the track in.

I have to agree with Gonch about the Declining attendance vs. increased Food prices. I also think they've raised prices to make up for the loss of attendance. They tried decreasing the prices of food and ticket prices a couple years ago and attendance still went down.

I don't know why attendance is dropping and i don't necassisarily agree with the seemingly endless upping of prices, but I also don't know what the awnser is.

And I belive Jeff is right about the "in-park per cap spending"

It says so here: http://www.coasterbuzz.com/2007-186-715979.htm
*** This post was edited by Jason Hammond 8/7/2007 6:58:29 PM ***

^ Attendance is down over last year, but is it down on a per day average? There are less operating days overall, making operational expenses less.

Plus, the whole complaining about food prices rant is getting old. When you go to a movie theatre, a ball game, hell even a church festival (in many cases) the food prices are as high or higher. Bringing HW or Knoebles into the mix doesn't cut it either, operating expenses in rural Indiana/Pennsylvania are not comparable to suburban areas or Lake Erie.

I disagree that the food price rant is getting old. It's too much, and it offsets the value of the ticket pricing. Forget the rural parks, Cedar Fair parks are more expensive than Disney and Universal now, and for crappier food.

...and that's nothing new. I noticed that I was spending more on a hot dog basket at CP than I was for a passably real and arguably healthy meal at Disney a few years ago, at least.

---

...it offsets the value of the ticket pricing.

---

I have a feeling that that's the point.

---

...it offsets the value of the ticket pricing.

---

It is the point. They have to offset the revenue loss of declining attendance someway, and why not in the food prices. They know that people are going pay the extra to eat in the park.

I think Jeff's concern as a unitholder is that you can only play that game for so long. There is a point at which people won't pay. We can argue about where it really is, but it's out there somewhere. When the park hits that point then that per-cap number starts to decline while attendance does as well.

That's exactly what I was getting at. You can't play that game forever. Eventually you need to figure out how to get buts in the park, and treating them to high food prices for crappy to mediocre food is not the way to do it.

I disagree with the comparison to ball games, movies, concerts, etc. These events are 1 1/2 to 3 hours long. They need to make their money in a very short window of time. If someone's at a park for 10 hours, you can't just bop them on the head repeatedly and expect them not to notice or change their buying habits.

If I don't want to pay for a $4 Pepsi at a movie, I'll survive for another hour and a half. If I don't want to pay it at a park, I'm pretty much screwed.

The game is changing, and they have to think of new revenue streams, not just how to siphon every dime out of a hot dog.

^There is no doubt that new revenue streams are needed. However, when you are dealing with an environment like an amusement park, where do you suggest this revenue come from? Revenue is only part of the puzzle. Six Flags has great revenue, but has been operating at a loss for how many years now?

Up charge attractions, even at full capacity, generate minimal revenue. Most of us have seen how well the 3-Point Shoot Out does, but even at full "capacity" there the revenue is small. 720 minutes in an operations day at $5 a minute = $3600, not bad but certainly not stunning.

Disney gets their revenue bump from ticket prices, hotel stays (not a viable option for most regional parks), concessions, and from the intangible value of souvenirs purchased from a "once in a lifetime" visit. Plus, while they report on attendance they do not break down their financials in a manner that allows the GP to see the operating margins of the theme parks. They may have the same problems CF and SF face.

As someone who is a walk-talking paradox (a liberal leaning moderate with an MBA and an understanding and appreciation for capitalism) I find it a challenge to understand why as a nation (warning generalization coming) people in the US want more and more for less and less, yet are NOT willing to concede that to get more for less there is a trade off.

You want to shop for $3 t-shirts and $1/lb tomatoes at Wal-Mart, great. But then you have to accept that these things are produced in a foreign country or by immigrant (legal or not) who is willing to work for the prevailing wage.

This concept applies to amusement parks as well. If you want the experience of a park that costs more to operate each day than the daily gate will cover, you need to accept that some things will be more expensive. HW can give away soda and parking by having a gate price that is comparable to CF parks without the same capital expenditure level of attractions. CF parks could do the same, but the gate would have to be raised enough to keep the operating margin the same or better. It’s the age old question of pay me now or pay me later. HW takes a pay me now approach, CF takes a pay me later approach. I think each works well for the given situations. If CF were to take a pay me now approach I think it would end the business as we know it in a very short period of time.

Specifically, how do you keep food prices down without increasing the gate price and still maintain operating margins? You could eliminate season passes, but that won't do enough. Besides, season passes provide cash to cover off-season operation expenses. You could offer (even) lower quality food, fewer options, lower service levels, etc. But what does that do to your customer satisfaction levels?

There is no easy answer here, and we will never all agree. But in my opinion, given the choice of a lower in-park pricing at the expense of quality, flexibility, customer service, safety, capital improvements, etc. or a higher in-park price without sacrificing these things and more, I pay the $3.39 for a large Diet Pepsi, and smile as I walk toward the new $21 million roller coaster that my drink just partially paid for.

For the record, I too am a CF unit holder and am not currently concerned about the direction of the partnership.

Edited to fix odd formatting.*** This post was edited by CoasterDad64 8/8/2007 1:08:57 PM ***

I'm not worried about getting "more for less" as much as I'm tired of getting less for more. Busch and countless small parks are getting the food thing right. Why can't Cedar Fair? I really think the company has lost its way now that building a big roller coaster isn't the way to print money anymore.

Smaller parks don't have the operational overhead of CF and can function profitably on their gate and basic concessions.

Busch, like Disney does not break out their park info beyond attendance. So again, we have no way of knowing if they really do it right.

Plus, as someone who had BGA as their home park for almost 10 years, their prices and quality are no better than CF parks. Only the Colony Restaurant might be considered better and its really just like a KFC with servers at twice the price.

*** This post was edited by CoasterDad64 8/8/2007 5:01:18 PM ***

I always thought the "per capita spending" number included the admission ticket as well. In fact if you go to the annual report and divide things out, I am 99% sure it does. I think you have to remember that coupons, Pepsi cans, two day admissions, and especially season passes dilute the price of admission so that on average, Cedar Point's admission is probably in the neighborhood of 20-25 bucks. Most people who come for a day are paying 30-35 with a Pepsi can. Most people who buy the two day passes are paying around that per day too. Then there are a bunch of people who buy a season pass and go 10 times averaging out to 10 bucks. And a few nuts who buy a pass and go 80 times, averaging out to just a buck or two. You get the picture. You also have to remember that CP's per capita number is probably significantly higher than the chain's average. So it's not exactly that people are paying 30 bucks to get in and only spending 8 bucks. From the annual report, it looks like admission represents about 60% of the total number, which makes my guess of 20-25 per ticket about right.

Even so, I still agree with Jeff that they are pricing out some people. Cedar Point's attendance is down 500,000 from it's peak. That is not a small decline. It's happened over a period of several years so it isn't so alarming, but again, I agree that I feel like I am getting less for more each of the past couple years at that park. Food prices keep increasing while quality stays poor, there are less operating hours to enjoy the park, operations have gone from stellar 5 years ago to downright pathetic now. It all takes a toll on my desire to drop a couple hundred bucks going down there for the weekend. I still do it on occasion, but I do it less than I did a few years back.

I'm willing to bet I'm not alone.

I think the point is that 3 million people spending $39 is not better than 3.5 million spending $37 - especially when the cost of operating a big park like CP for a day is going to be about the same whether there are 30,000 quests in the park or 40,000. Sure they cut back a little on staff when it's not busy, but the maintenance, insurance, etc all stays the same.

Revenue means very little without profit.

CF had income of $87.5 million in 2006. This includes 6 months of PPI ownership. When you divide this into attendance figures, CF realizes $4.53 in profit per person through the gate.

Here is a simplistic example of how this works. If they were to drop the price of a soda by $1 and they sold one soda to every other person in attendance, income would drop by approximately $9 million dollars (accounting for tax decrease). The operating expense would be the same, but the revenue would be lower. How many more people would they have to get in the park to get that $9 million back? Probably more than the lower price would bring - especially if you spend more money telling people that you lowered the price. Now if you raise the price by $1 and sell 10% fewer sodas, you see an increase in profit of about $8 million.

Again very basic - but it shows the point.

Attendance figures for the company increase slightly year over year, except 2003 versus 2002 where there was a slight dip. In each case per capita revenue has increased, and with the exception of 2005 (where they got a huge tax break that doubled profits) net profit fluctuates in and around the $80 million dollar range.

So, the question here is do drop prices and increase operating expenses to increase attendance at the expense of profit? Not if you're smart. If I can make more money from 3 million people than 3.5 million, I will stick with the 3 million. It's a double win, by "pricing out" 500,000 the remaining 3 million get a better experience.

As for getting less - TTD, maXair and Maverick are all less than you got before? That line of thinking doesn't pass muster.

My head hurts from pounding it on the table in frustration.

---

So, the question here is do drop prices and increase operating expenses to increase attendance at the expense of profit? Not if you're smart. If I can make more money from 3 million people than 3.5 million, I will stick with the 3 million. It's a double win, by "pricing out" 500,000 the remaining 3 million get a better experience.

---

It's the now legendary "Gonch's Business Model" and I couldn't agree more. :)

The idea that smaller parks don't have the overhead that large parks do isn't necessarily true. I can bet you that the per guest cost is pretty darn close. Actually I know that to be true in several specific cases. The big parks have economy of scale working in their favor.