Dan Snyder and SFI
The amusement park industry falls into the category of one of the places you can jack up the prices and get away with it. High food prices aren't a new concept to amusement parks (or sporting events).
Since most major metro areas only have one park their isn't much direct competition between parks. There can be some regional rivalries for the tourist dollars, but generally the competition is other leasure activities such as sporting events, concerts, zoos, museums, nature, etc...
Couple that with what Dweaver said and that is why I haven't visited my local SF park in years. I understand what they need to do, I just don't feel like I have to give them any of my money when there are plenty of other places for me to blow my $$$. Places where I feel I get more for my money. Or at least I know exactly what I'm going to get before I pay.
My main beef all along with the whole SF pricing thing has been the operations. Does that mean that it's ok for SF to have crappy operations if their prices are lower? No, but it all goes back to the perceived value of things.
My expectations are proportional to the price. I pay less, I expect less. I pay more, I expect more. Does it mean I didn't have a good time? No, but it might mean that I'm not coming back for a while. Instead, you can find me at the StL zoo, it's free. ;)
Vincent Greene said:
This is the best analogy that explains why I, personally, think the prices (not especially the gate, mind) are too high.
You can buy a Toyota or a Hyundai. With the Toyota, you'll get sound reliability, a nicely performing car that'll hold up. With the Hyundai, you get a decent car that's sketchy. Maybe the customer service won't be as good as Toyota, and the lasting quality certainly won't. With the Hyundai you pay less.
Much more accurate in my eyes is this:
You can buy a car to get you from point A to point B in life. If price was all that mattered, then we'd all drive little used Kia's around. But we don't. Some people choose to spend $10,000 on some cheap Chevy. Some spend $50,000 for a BMW. Some spend $90,000 for a Mercedes. But in the end all of these vehicles still do one thing - take you from point A to Point B as needed.
So why do different people spend different amounts on what is essentially the same thing at the core?
There's a myriad of reasons - budget, needs, wants, perceived value, and so on. There's some people that could never justify dropping $90,000 on a car and there's some people who don't think twice about it. The opposite is true as well.
Seems to keep coming back to that magical term - "value"
What is value? It's the feeling of getting a fair deal in the trade. That feeling will be different for every single individual. How much you can afford, how much you expect, how much you want or need - it all factors in to the process your mind goes through in the decision making process.
The final answer will be different for everyone.
I personally don't see much difference between $30 for a day at a crap-ass SF park and $50 for a day at the same crap-ass park.
I don't have a problem with $15 parking because I'm fortunate enough to be in a situation where the $5 difference over the $9 or $10 parking I see at other parks isn't going to change a thing in my life - and on top of that I've paid similar parking fees at other places. In my little world, $15 for parking isn't that big of a deal.
It goes on and on. I still find value in a day at the park - even if I'm spending a little more. Oddly enough, I find I often see more value in the bigger more expensive parks because there usually seems (to me) to be much more to do. I'd rather spend $50 to get in, $15 to park and $4 a drink to be offered a large area, decent, 'escapist' theme and a plethora of large rides and coasters than pay a fraction of that for a few small coasters and aging flats in a small wooded setting.
So is there a breaking point? Sure. Everybody has that point where when they run the 'value equation' in their minds that they just feel like it isn't a good deal on their end and the value just isn't there.
But let me get off of the philosophical stuff and back to the analogies of the post I quoted.
Parks are *not* commodoties. Parks are more comparable to other service and/or entertainment offerings. Often there is no direct A-to-B comparison.
Why does one chain restaurant offer meals for $12 while at another restaurant just down the road $12 won't buy you dessert? Why do some people pay $20 to park right next to the football stadium and others park 6 blocks away and pay $5? Why do some people pay $150 for front row seats and others pay $30 for upper level seats. Why does a hotel selling rooms for $79 coexist within eyesight of one that sells rooms at $249 a night?
Because people define value in different ways - each unique to their own situation.
And yes, like some of you guys are saying - no one is forcing any of this on anyone. It's a choice...a choice based on the value you perceived in the situation. We can go back and forth forever, but no one will ever truly be 'right' on the topic. That's not to say it's not extremely enjoyable to have discussions like this.
All I know is that in the case of SF it doesn't seem to me that attendance dropped much more than expected based on the previous trends. Couple that with the equivalent increase in per cap spending and you have a wash (as RGB put it). In then end doing less volume at a higher margin ended them essentially even.
But with 12% less guests, I would also assume 12% less staff is needed. In the case of SF they didn't often have the staff in the first place but if nothing changes they're essentially 12% closer to being staffed at the same cost.
12% less guests also makes me assume that in general they need 12% less food, drink and the like. They reduce what they have to buy by 12% but end up 'even' on the revenue. Hmmm. Same revenue, 12% less cost. Sounds advantageous to me.
Then again the company still lost money in that situation, so my only hope is to assume they'd have lost more without the change.
(that's a lot of assumption in there, but none of us really *knows*)
With all of that said, I like the things SF has done so far and I don't expect tangible changes to take place overnight. I'm interested in seeing what this year (and the next few) bring from these guys (who've been in control of the parks for just around a year now, mind you). I think they're on the right track and hope the lack of time and money aren't too much to overcome. How nice would it be to look forward to visiting a SF park?
*** Edited 12/28/2006 8:32:02 AM UTC by Lord Gonchar***
The truest words in this entire thread. That is precisely why this will always be a debate of opinions and not "facts". The one's who have a problem with SF pricing are perfectly justified in their thinking. But you can't assume that everyone cares the way you do. It's also silly to label those people "fanboys" or assume we're being taken for a ride.
Perceived value is a funny thing. I don't watch much television so I'm perfectly happy with my 27' Toshiba. I honestly can't fathom why anyone would spend $2000 on a plasma screen just to watch the same crap that I see on television.
Guess what though, I just admitted that my situation does not call for me to spend that kind of money on what *I* consider crap. My situation also obviously makes it clear why that would not be a worthy investment for me. If people could just step outside themselves for a moment, they could see the silliness of debating so called "value".
To your credit, you did (sort of) clarify later that amusement parks fit into the category of "something that can't easily be found", but that still does not bolster your point.
I am not trying to be a smarta$$ here, but I am looking for some proof. As someone who works in business (20+ years), had my education (AAB, BSM, & MBA) in business, I feel I can claim some authority here.
You mention that revenue was flat, but per cap spending is up. To me, that's a victory. Why? If my attendance is down, and my revenue is flat, it costs me less to run my business. If my operating expense is less, my revenue flat, and I am not spending on excessive cap improvement, where does the money go? To pay off the debt, or to the bottom line.
The one place where your argument may hold water is when the same "perceived" business sells less for more. For example, if you have two identical McDonalds side-by-side with the same quality, cleanliness, and level of service and one sells identical food for more money, that one McDonalds will not thrive. But honestly, how often does this really happen?
In the real world, we see pricing discrepancies all the time. Check out your local grocery store. If you visit store A, a gallon of milk is $2.50, store B, catering to the same neighborhood, the milk is $3. Both stores thrive, why? Go back to my oversimplified example.
Gonch hit the nail on the head by introducing value. Value is where the concepts of quality and price meet. It is also very subjective. For me, Six Flags is not a great value. I live in Ohio, have access to some world class parks, and find Kentucky Kingdom to be somewhat mediocre. But if I lived in central Kentucky however, and did not have the means or desire to visit parks outside Kentucky, Six Flags and Beech Bend would be "my" parks, and they would be great.
This is also why only Universal and Busch can hold water against the Disney experience in central Florida. When you compete against the Disney experince, you better be prepared to provide a positive experience that few will forget.
No matter how much we debate this, only time will truly tell us what will happen at Six Flags. As a public company their accounting records are public, and a review of the 2005, 2006, and 2007 annual reports (yes I mentioned the future) will truly give a picture of what's happened. Until then (sometime 2nd quarter 2008) we will just have to sit back and speculate.
". . . don't you know baby that life is a scream!" - Gordon Gano
Basically, here's my opinion. At the end of the Burke era, the Six Flags GATE prices were high enough, and should not have moved. OTOH, the season pass prices were too cheap, especially at certain parks, such as SFA.
When Shapiro took over, they jacked the gate prices (which were enough as is--more closely comparable to other parks) and didn't jack the season pass prices, which WERE too low and enabled some parents to use SF as a babysitting service. It seemed like Shapiro got the whole babysitting thing, but I think that he jacked the wrong prices.
Along those lines, parking was increased, and that was already enough. They should have left that alone.
Look, I know SFI is in a lot of debt, and they need to get out. What I'd like to see them do is get their operations and customer service levels up where they need to be, and then price their parks more in-line with the competition. Some of you don't seem to get this or something. I'm not saying that Six Flags needs to drop all their prices pronto. What I do want to see is for them to get up to par with ops and service, and also set their pricing on par with the rest of the US theme park industry--with respect to their offerings.
For example, SFGAdv and SFMM shouldn't have 1-day tickets more than $50. This is still more than CP, but they are also in different markets. Parking shouldn't be more than $10-$12 at the largest parks, and no more than $8-$10 at the smaller parks, such as SFA. The season pass prices need to come up--way up at some parks--it seems Shapiro still hasn't gotten this, or he has some other motive in mind--maybe to keep some cash flow?
Do you get what I'm saying now? I want Six Flags on par with the industry--both in pricing and service/ops. They are to high with the former in some areas, and too low with the latter. This imbalance will cause customer dissatisfaction--and they already have had somewhat of a hard time with getting more guests in this year.
*** Edited 12/28/2006 3:43:00 PM UTC by rablat5***
coastin' since 1985
When you are trying to compare prices from one park to another you have to look at other factors such as location which has a impact on the prices.
For instance I'm sure that Gradv pays alot more taxes than say HW would pay or even a park like CP just because of the State its in. I know for a fact that SFNE pays twice the amount of taxes than Lake Compounce does therefore the Lake can make just as much profit with less attendence than SFNE can.
I think everyone here gets what you're saying. After all, you've been basically repeating the same thing for about six months now. We just happen to think that you're wrong.
You talk a lot about where the prices should be based on some magical "industry standard." Who sets that standard, and why isn't everyone getting that memo? There is a huge pricing variety out there, and it's not as simple as having a set "standard." We know where you think the prices should be. But go back and read Gonch's explanation of value. Where someone else thinks the prices should be may be totally different. What makes you right and Six Flags wrong?
Furthermore, we've been through the "improve operations and then jack prices" argument over and over again, and you're still not getting it. The Six Flags chain has some major problems to fix in terms of operations, customer service, maintenance, etc. Guess what? Those changes don't happen overnight. They may very well take five years. And that's five years that Six Flags doesn't have to dick around with low prices.
And even when those changes are finally made, it doesn't guarantee financial success. Six Flags has a major image problem to overcome. Their attendance is going to suffer for years and years because of it, even if they do fix the issues. So while that attendance is dropping, they have to make up for that loss of revenue somehow. And if attendance is dropping, then raising per-caps (via increasing prices) really is the only way.
-Nate
Sure, living off young people with summer-long season passes isn't idea for any major amusement chain, but it's what he was left with and it's what he'll have to work with until he can entice families back to his parks. Thus, his 5 year plan is set in action.
Phase one: Get the word out on your intentions. Tell anyone who will listen. Use what little money there is available to fill the parks with costume characters and parades, even if it's temporary. Unfortunately, the money ran out before the end of the season.
Phase two: Sell enough company assets to give them something to work with going forward. Set up corporate sponsorships to help bring in more revenue, which is unfortunately, badly needed.
Phase three: With money available, they can really sink their teeth into the plan. Improved operations, family rides, training programs and cleaner parks.
Phase three & four, well we'll see.
rablat5 said:
Basically, here's my opinion. At the end of the Burke era, the Six Flags GATE prices were high enough, and should not have moved. OTOH, the season pass prices were too cheap, especially at certain parks, such as SFA.
Agreed. :)
When Shapiro took over, they jacked the gate prices (which were enough as is--more closely comparable to other parks) and didn't jack the season pass prices, which WERE too low and enabled some parents to use SF as a babysitting service. It seemed like Shapiro got the whole babysitting thing, but I think that he jacked the wrong prices.
Agreed. :)
Along those lines, parking was increased, and that was already enough. They should have left that alone.
Nah. It's easy revenue. They're really not *that much* higher than 2007 parking pricing at other parks:
CP - $10
BGE - $10
PKI - $10 ($15 for premier)
Yes, they're $5 more. You could sound cute and call that a 50% increase over the other parks I mentioned. But be realistic for a second. It's $5. Five bucks.
Again, in the interest of fairness, I know that means different things to different people, but if I'm taking the family to the park - that $5 is meaningless. It raised my cost by $1.25 a person. As much as I'd like to, I just can't get pissed about that.
Look, I know SFI is in a lot of debt, and they need to get out. What I'd like to see them do is get their operations and customer service levels up where they need to be, and then price their parks more in-line with the competition. Some of you don't seem to get this or something. I'm not saying that Six Flags needs to drop all their prices pronto. What I do want to see is for them to get up to par with ops and service, and also set their pricing on par with the rest of the US theme park industry--with respect to their offerings.
We'd all like to see their service improve. But this is a perfect example what I said in an earlier post about being able to call out the problem but offer no solution. How would you fix it - that fast and with no additional revenue?
Then there's the other point I mentioned higher up on this page - when is the right time to raise prices? If you do it down the line after service is improved you still run into a point where you're charging people a lot more for the same thing and everyone still complains.
For example, SFGAdv and SFMM shouldn't have 1-day tickets more than $50. This is still more than CP, but they are also in different markets. Parking shouldn't be more than $10-$12 at the largest parks, and no more than $8-$10 at the smaller parks, such as SFA.
Based on what? Your arbitrary definition of value. And don't forget that if you buy your tickets online, SF parks are cheaper than CP. If you don't purchase online, then the cost probably isn't much of a issue to you.
The season pass prices need to come up--way up at some parks--it seems Shapiro still hasn't gotten this, or he has some other motive in mind--maybe to keep some cash flow?
You're right SP prices should be higher...much higher. Not sure where you're going with the ulterior motive thing though.
Do you get what I'm saying now? I want Six Flags on par with the industry--both in pricing and service/ops. They are to high with the former in some areas, and too low with the latter. This imbalance will cause customer dissatisfaction--and they already have had somewhat of a hard time with getting more guests in this year.
Again, entirely personal opinion. The 'value' doesn't exist for you. That doesn't mean it doesn't exist for everyone in the same way it doesn't mean it exists for everyone because I see it.
The second problem is measuring success in terms of attendance. Ateendance means dick if the revenue is there. The guy who sells one ticket for $1000 still made the same revenue as the guy who sells 100 tickets for $10. (I would say the first guy actually made more profit based on lower operational costs)
EDIT - I hate when you guys slip in really good posts while I'm typing. :) Nate's take is terrific and DWeaver uses some of that fun twisted logic that I can't say doesn't make sense.
*** Edited 12/28/2006 5:03:11 PM UTC by Lord Gonchar***
This doesn't mean the strategy failed, it just may need a little more time. Will the stockholders be patient?
I think patience is a good approach. The stock can't drop too much lower. In fact, the uninformed investor in me suggests that in the long term, it is undervalued.
I took the flat revenue statement at face value. Declined revenues and profits admittedly do not bolster my assertion, however, without seeing the actual financials, we don't know if the decline was due to higher expenses related to capital expenditures, one-time write offs related to the sale of assets, maybe even writing off SFNO altogether.
Without details, we can only speculate.
I agree with Gonch, DWeaver's take is twisted and probably not too far from the truth. Of course, as has been stated too many times, the one major flaw I see in all of this is giving away the season passes. If Kings Island can get $85, and Holiday World can get $95 for single park passes there is no reason Six Flags has to stay at $50 for a system wide pass.
". . . don't you know baby that life is a scream!" - Gordon Gano
Gonch, what would be the point of coming up with solutions for Six Flags on this board? Even if we came up with the best solution in the world, he's still gonna do what he sees fit. Besides, it's not our problem, anyway. We're the customers, and we help pay their checks--it's up to them to get us to come back.
I know that SFI's pricing scheme doesn't fit my tastes, and also probably some other people's tastes. So what--the price to see a movie doesn't fit what I'd like it to be, but what are ya gonna do, right? I just wish SF would price more in-line with their competition, and also offer comparable service levels. Higher prices is bad enough, but when you add in the lousy ops, etc., it's like salt in the wound. There is an imbalance that needs to be fixed.
If SF had service and ops that exceeded the CF parks, as well as Busch, Hershey, etc., then their pricing would definitely be more justified. But as they stand, they're still Kia.
coastin' since 1985
depotrat said:
Somewhere in this thread it somehow became accepted by some that the SFI revenue and profits were flat for 2006.
Not really. My post higher up the page says:
"Then again the company still lost money in that situation, so my only hope is to assume they'd have lost more without the change."
The per cap spending improvement was not enough to offset the decline in attendance.
That's not true.
The 3rd quarter report says:
"Total revenue for the quarter compared to the prior-year period declined 1%, from $546.1 million to $540.7 million. Increased per capita revenue was offset by a decline in attendance. For the quarter, attendance declined 12% to 14.3 million from 16.3 million in the prior-year quarter. The prior-year quarter included 0.2 million in attendance and $5.5 million in revenue from the New Orleans park, which is not operating in 2006 due to damage sustained from Hurricane Katrina. Excluding the impact of the New Orleans park, revenues for the third quarter were flat compared with the prior-year period and attendance declined 11%."
The bold part is important. Revenue was flat. It was profit that fell. Which just says to me that these guys are spending more money in an attempt to improve things, but at the core they pulled it off - they brought 12% less people through the gate and still brough the same amount of money in. Flat out - if pricing remained the same, these guys would have been screwed had attendance still dropped as such (and I believe it would have based on the lack of 'value' seen in previous years by potential guests).
So people are willing to spend more at the park, but why are less people going? Some say price, some say service, some say the combo of the two in relation to each other...value.
So does it stand to reason that if there's even a small increase in park operations (not a fix - far from it, just a slight improvement) and subsequently a small increase in "value" that they could get to a level that puts their attendance at a number equal to say a 9% or 10% decrease? If so, then they're ahead of the game already with those minor fixes thanks to the increased pricing and in turn, per cap spending.
rablat5 said:
Gonch, what would be the point of coming up with solutions for Six Flags on this board? Even if we came up with the best solution in the world, he's still gonna do what he sees fit. Besides, it's not our problem, anyway. We're the customers, and we help pay their checks--it's up to them to get us to come back.
God, do I hate that argument.
What's the point of discussing this at all then? It doesn't matter. Some of us will visit the parks, some of us won't. Nothing in this thread will change a thing for any of us. The point is we are discussing it.
Basically, you (as the customer) want them to do the impossible and you don't care that it's impossible - it's not your problem. You won't go back until the miracle happens.
That's fine. Millions and millions of other people are going back - just like you'll go back when the 'value' is there for you. For now your $15 for parking isn't breaking their bank. The people who still see value in the deal are keeping the train limping along.
As a customer, I shouldn't have to sympathize for Six Flags' financial position and agree with their increased prices, especially when their ops stink as much as they do at some parks.
"Guys, we promise we're gonna do better this year. We're gonna bring in the Justice League, Bug Bunny and Pals, do a (lame) parade every day, and clean our bathrooms! All we ask of you is that you please give us another chance. Oh, and we also ask that you give us 50% more to park your car, and, on top of that, give us more to get into the park and have a meal and/or some snacks. You're really gonna like what we've done with the place--we just need more of your money so that we can get out from under this huge load of debt that the last guys left us. Thanks for understanding!"
Well, we know how that turned out.
coastin' since 1985
A day at the park is what you make it!
You're right though, it's not your job to sympathize (although you have no problem doing the opposite) just as it's not their job to make sure you personally are happy enough to visit their parks. As long as things are where they want them it doesn't matter if rablat5 is there or not.
If one were to look at their own life at the way money is spent as opposed to earned and/or debt paid, it could make more sense.
It took me 1 week to find my house, 3 weeks to get the mortgage, about half an hour to close, and it will take 20 years to pay the money back.
When Six Flags created World's of Adventure and spent $200 million plus, then added cap expenditures, new marketing, etc. I would roughly estimate that the spent $300 million. But then, just a few years later, sold it all, lock stock and coasters, to Cedar Fair for something like $120 million. Cedar Fair did not assume the debt, Six Flags kept it. On paper, they lost $180 million, in reality they lost more long term and gained operational capital in the short term. Was this a wise decision? Maybe, as they continue to sell off parks. Ultimately, I would suspect that they will get down to fewer parks so that revenue can exceed cost and use the proceeds of the sales to directly reduce debt. That's what I would do. But then I am not a CEO or board member, and certainly not a "finance guy".
Now if they decide they need an expert in leadership and organizational change (they could use it), I am their guy.
BTW - this is one of the most interesting and "fun" CBuzz topics in a long while. No trolls, no name calling, just what appears to be a decent debate.
". . . don't you know baby that life is a scream!" - Gordon Gano
Wow! It's just like every other topic in the history of the world:
Jews v. Muslims
Anit-Abortionists v. Pro-Life
Republicans v. Democrats
Coke v. Pepsi
Wood v. Steel
Opposing forces that will never see eye-to-eye. :)
-Tambo
*** Edited 12/28/2006 8:13:21 PM UTC by tambo***
But at the same time, no more so than anything. Which poll is accurate or reliable, which coaster is fun, a certain coaster or park is ______.
What really qualifies as 'new' conversation? Hell, even discussing new rides is essentially the same (how it will effect the park, who thinks it looks fun and who doesn't, people complaining that you can't judge a ride without riding it). Even current news events follow the same patterns depending on which of the categories the news item falls into (something closing, some poll winner, a new ride, a financial announcement).
Confine the coversation to one topic (the amusement industry in this case) and it's all been said. Only the names of those involved and the people discussing it changes.
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