How does a new park make money?
This question is more for those who work in the industry, or know the business end of things, but input from anyone would be welcome.
I was reading somewhere on the 'net (don't ask where, I forget) that Islands Of Adventure was constructed at a cost of nearly $2 billion- quite a large chunk of change! Looking at pictures of Disney's California Adventure, I would guess that park carried a similar price tag. Heck, Six Flags spent something like $110 million on Sea World Ohio, and I'm sure something close to that for other parks like Kentucky Kingdom, Geuaga Lake and Marine World!
My question is: How does a corporation make money after investing like that? Or, more accurately (considering the financial states that Vivendi/Universal and Six Flags are in), how did they PLAN on making money? How long do corporations expect to wait before the investments are paid off and the investments start showing a profit? I know that DCA is considered to be something of a "failure" thus far, but how does IOA perform? Has it met expectations?
I'm not sure if anyone knows the answers... I'm just curious to see if anyone has any ideas, because I'm sure that they are better than mine!
They look at it as an investment. Obviously it is a big investment, and they know it will take time to recover the cost and to turn a real profit. 2 billion dollars would take some time to recover, especially once you look at adding operational cost the picture. It may take them a few years, but they plan that it will happen, and they have a timeframe in mind. That working out or not, it's business.
It's also a possibilty that other investors got involved too. In turn for letting said company "borrow" money, they make interest, or have a stake in the company.
Eric
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"Air time is not a crime. Take a click, you're a prick" - Kris Allen (Jul 2002, HW)
*** This post was edited by eric.walton on 9/4/2002. ***
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Tuesday's Gone With The Wind.
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They did have to pay all of their cotractors and suppliers immediately though. They don't work for free. So it was a good chunk of change, no matter how you look at it.
Eric
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"Air time is not a crime. Take a click, you're a prick" - Kris Allen (Jul 2002, HW)
But IOA is owned by Universal/Vivendi. There's much more money floating around with their other entertainment ventures (music labels, movie studios - they even own mp3.com) So there is no need to turn an immediate profit. It's a very long term investment - spending money to make money.
Six Flags, I think, had (has?) the same idea but without the additional ventures of a company like Universal - it looks ugly on paper. Six Flags has taken a lot of crap lately over their business ideas but, as far as the money side goes, I still think they're doing the right thing - it's long term thinking and it *will* pay off down the road. For the next few years you'll see a slowdown in spending and the profits will increase. If they take the advice of the entire membership of these forums and begin focusing on things like customer experience, they'll be prospering in the future.
How does a park make money? Tickets, drinks, food, souvenirs, etc. - like any business it takes money to get started. It's almost like asking "How does Wal-Mart make money?"
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www.coasterimage.com
Dorney Park visits in 2002: 17
Nearly all major corporations are in some form of debt. I'm sure most of their funding outside of investors were financed with long term notes, loans, and such. As long as they have enough to cover those debts when they come due (quick ratio) and have more on top of that, it could be said they're already "making money."
Even when they pay those off they will have most likely acquired more debt from future capital improvements. In reality they will most likely always be in debt, but as long as they are slowly paying it off when it's due and have extra to show afterwards it's a success.
Joe E. has it right. As long as they can "service the debt" and cover operational expenses they are o.k. Most people do not pay cash for their house, they get a mortgage from a financial institution that makes money on the interest. Same thing, different scale with an amusement park. If they are smart, they get enough of a loan to cover their operational expenses for the first few years while they build up their clientele.
Alan T.
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