IAAPA 2000: Dick Kinzel interview part one

Posted Tuesday, November 14, 2000 7:32 PM | Contributed by Jeff

CoasterBuzz recently sat down with Dick Kinzel, CEO of Cedar Fair, LP, to talk about the business of running parks and the state of the amusement industry. Cedar Fair owns several amusement and water parks, including Cedar Point, Knott's Berry Farm and Dorney Park.

CB: What is the difference between running a private and publicly traded amusement park company?

DK: The main thing is that everything you do is public. You have a board of directors you’re responsible to, and you’re also responsible to your investors. I think the big thing is the public knowledge that has to be out there. Your capital items are public and you lose a lot of the little things from a competitive standpoint that a private company can do. In other words, you have to announce your capital expenditures; you have to announce earnings and things like that. But other than being responsible to your share holders, the basic business decisions are the same. When you say you’re public you are just that. You have to meet certain SEC regulations and you have to disclose so much information that everyone knows your business.

CB: Is it necessary in the current landscape to make aggressive capital improvements at small and large parks to stay competitive?

DK: The way we look at that is purely on an ROI [return on investment] basis. Last year, for example, we put in about $110 million in capital investments. While the big one was Millennium Force at Cedar Point there were a lot of small capital items that showed an excellent return on investment. For example, we put about $15 million in to a hotel at Cedar Point because we knew it was going to fill up due to the impact of Millennium Force, so there’s almost a domino effect.

All of the capital we do has to show a good return on investment. We feel that you have to put in the capital dollars to keep people coming back year after year, but we have to justify it with either increased guest attendance or with increased per capita spending. A lot of people think we put the rides in because of ego, to say we’re the biggest and the best, but that’s not really the truth. The truth is they’re good business decisions to put those rides in, and the timing has to be right. Notice we don’t put the world’s largest or biggest rides in the smaller parks because we’re very careful about our strategic planning as to where we place our rides and how our capital dollars are spent.

CB: So capital expenditures in the form of hotels are a part of Cedar Fair’s strategic planning?

DK: All the hotel rooms we build, at Cedar Point for example, we fill those up and it turns out to be an excellent investment for us. We know what the key costs are for each room we build and know that if we can build for “x” amount of dollars that we can make a profit on that investment.

The main reason we can do it at Cedar Point is that we already own the land, so we don’t have to calculate the land costs in our ROI. Other locations like the Radisson Hotel at Knott’s, the old Buena Vista Hotel, was right on the same sector of land that the park was on, so it was only a matter of time before we tried to buy it and make Knott’s a total resort area like Cedar Point because we have a good population base to build off of there.

CB: That leads to the next question of expansion. As a publicly traded company, there’s obviously some pressure to grow the business. Is Cedar Fair’s strategy to do that through acquisition?

DK: We certainly would love to expand the business. There are two way of doing that, through internal growth and external growth with acquisitions. If the right opportunity presents itself, we’ve stated publicly all along that we’d like to expand our business. We also have an obligation to our unit holders now that the acquisition has to be paid for in a certain amount of time. We’re traded on our distribution, and right now that distribution is over 8%. We certainly can’t make an acquisition that we don’t feel can, in a relatively short period of time, contribute to that distribution. The acquisition has to be the right price. We can’t say that 25 years down the road this will be a good investment for us.

CB: How many years out do you plan for capital expenditures?

DK: We’re usually on about a rolling three-year growth period, with a fourth year for a financial growth plan. Right now we know what we’re going to do in our parks in 2001, of course and 2002. 2003 is subject to industry changes and changes in what people’s needs and wants are. We’re always at least two years ahead of the curve.

CB: The industry has seen aggressive spending for capital improvement lately, given the strong economy. Do you think the industry will continue to thrive as it has?

DK: Boy, I sure hope so! The last nine years have been great for the economy and certainly for our industry. Across the industry, our per capita spending has increased, we’ve been able to raise gate prices, we’ve put in a lot of capital that has made nice dividends for us, we’ve spent a lot of money and we’ve made money.

The economy is cyclical. As we’re talking today, it’s been six months that retail spending has been down. There are signs on the horizon that things may level off a little bit and we as an industry have to adjust for that.

Go to part two of the interview

Wednesday, November 15, 2000 12:03 AM
Richard is such a smart man. He is really a fantastic person to have at Cedar right now.

I wish PKI and SFO could get into building more hotels to make them more cash.
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Wednesday, November 15, 2000 4:03 AM
It is things like this interview which continue to make Coasterbuzz such a great site. Way to go Jeff...
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Wednesday, November 15, 2000 6:22 AM
It is about time for CedarFair to acquire a new park. Their last purchase was Knotts in 97' and then White Water Canyon which is now SoakCityUSA in 99'. I thought they were going to purchase Visionland,,,,but that ended, and so did La Ronde....any other parks to be bought? Great Interview btw....when does Part 2 come out? Thanks.
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Wednesday, November 15, 2000 6:37 AM
Absolutely wonderful. It is super to see one of my idols and hear what they have to say about the best amusement organization in the world. The reason Cedarfair is able to run as smoothly as it does is due to men of Mr. Kinzel's stature. I hope some Six Flags head honcho doesn't read any of this interview, or they might be able to pick up on some comman sense. Oh yeah, they don't even know how to read, my bad!
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Wednesday, November 15, 2000 7:37 AM
Part two comes tomorrow...

Regarding Visionland and La Ronde, my theory with the first is that something was dreadfully wrong for them to pull out. With La Ronde, I don't think they wanted to deal with the unions up there. From what I've heard, they make it impossible to smoothly run a business up there in Montreal. Cedar Fair knows amusement parks, and I doubt they would have people dictating how to do that job.

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Jeff
Webmaster/Admin - CoasterBuzz.com
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Wednesday, November 15, 2000 9:49 AM
we should hook this guy up with a lie detector and ask him whats going to happen in 2002 he said he knows

"look at all the gum on the wall"
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Wednesday, November 15, 2000 9:49 AM
I don't know... this interview creates mixed feelings in me. Part of me is awed by the the know-how of the amusement business Kinzel posseses, but the "purist" in me is bothered by Cedar Fair's idealogy.

I suppose it's just a matter of me coming to terms with the reality that amusement parks are indeed businesses, and the primary goal of any business is to MAKE MONEY. Kinzel would care less about creating "good" coasters if they didn't make his corporation money. This is why Cedar Fair stays away from CCI's. (and yes, Ghostrider was planned by the Knott family before CF bought the park, and Cedar Fair almost cancelled its building because they didn't initially see it as a wise investment). CCI's are great coasters, but the GP is after records, and records are something CCI doesn't usually mess with. Therefore, a CCI would not create substantial ROI for a place like Cedar Point, and most likely, Cedar Point would not build one..although I would really love to see that happen!

Personally, I think Cedar Point would be a lot better park if it werent so profit-oriented...and I DO love Cedar Point. Kennywood and Knoebels represent parks whose primary purpose is to keep an atmosphere and to stay true to the classic "amusement park" theory. I'm sure many of Kennywood's subtle little touches don't create substantial profit. Of course I guess it shows financially since Kennywood has to recycle one of its coasters this year.

I guess money is everything in today's world, and the idealist in me has a hard time accepting that sometimes. If I owned stock in Cedar Fair, I suppose I'd think differently, but something just bothers me about this style of big business. Oh well, I suppose as long as Cedar Fair keeps building the rides it has built in the last 10 years, I have no room to complain! I hope some people can see my point though...that roller coasters are important in the amusement business only because they make money.
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Coasters...the best natural buzz available.





*** This post was edited by MooreOn on 11/15/2000. ***
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Wednesday, November 15, 2000 10:51 AM
I feel like I am in my Economics class again

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Number 1 And Only Cedar Point
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Wednesday, November 15, 2000 11:25 AM
MooreOn says: "Kinzel would care less about creating "good" coasters if they didn't make his corporation money."

I don't think that could be further from the truth. No one intentionally builds a bad coaster, and Cedar Fair's recent history is filled with winners, with one exception (Mean Streak, and I think they know it). Even Boomerang at WOF is a winner for a market of its size.

He also says: "This is why Cedar Fair stays away from CCI's."

That's entirely untrue as well. CCI's are relatively inexpensive and would provide huge ROI. What probably has them gun shy is the long term maintenance that they have to deal with on Mean Streak.

Besides, check out CCI's Ghostrider page and look for the quote...
http://www.customcoasters.com/ghostrider.html

I'd say he likes them!

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Jeff
Webmaster/Admin - CoasterBuzz.com
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Wednesday, November 15, 2000 12:02 PM
Of course the parks have to concern themselves with making money! How can they afford to build more rides?!? If you want to see bigger and better rides in the future, you had better be concerned that the parks make money. Even Kennywood is concerned with making money I can assure you. Take a place like Holiday World, they give away soft drinks all year long, but they still have to make money. Breaking even doesn't work out too well if you want to grow.
Can you honestly say that Cedar Point doesn't do a good job of embracing its history and presenting a classic park atomsphere?



*** This post was edited by Camel on 11/15/2000. ***
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Wednesday, November 15, 2000 12:37 PM
Its not economics, this is finance 101. Pretty basic stuff.
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Wednesday, November 15, 2000 12:49 PM
OK response time...

I guess the thing that bothers me the most is that I know Dick Kinzel is not a ride enthusiast. He's a corporate CEO, and of course he sees his roller coasters in terms of dollar signs alone. That's what he's supposed to do, and that's why Cedar Fair has been able to be so successful. And I DID say in the previous post that I know this system is what has enabled Cedar Point to get the capital to invest in their Magnums and Millennium Forces, so I really shouldn't complain.

However, I feel that justifying EVERYTHING about a park based on its ROI, while financially sound, takes a special charm out of the amusement park. For example, look at Ghostrider. If that would have been planned after Cedar Fair bought the park, the elaborate theming would not have been there. Theming is a terrible ROI-generator, as Jeff has said himself. Ghostrider would have been just as thrilling of a ride without the theming, but the theming adds that little charm to the ride which CP's rides don't have. Now I'm not an advocate for elaborate theming on everything; I even think much of Six Flag's "theming" is poorly thought out and detracts from the overall ride experience, but there are little things that don't generate money that give amusement parks a uniqueness that I like and look for. Holiday World's free drink policy is a thing that I really admire, as is Kennywood's strict adherence to ride quality and upkeep, greasing a ride's wheels and track every morning.

The bottom line is that I understand that parks HAVE to work this way...after all this is the REAL world, but looking at the amusment business as JUST that, a business, sort of devalues for me the value of spending a day at the park and riding a thrilling, well-planned roller coaster, when the emphasis is placed on ROI and not fun.


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Coasters...the best natural buzz available.
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Wednesday, November 15, 2000 1:14 PM
I understand your point. I am not sure why you would look at a park from a strictly business perspective, though, especially when you are in one. Parks spend lot of money so that you don't have to worry about that sort of thing. When I am at the park, I don't dwell on the lack of theming (although I was blown away by IOA) or the cost of food or the lack of mist in the queues.
Even if I am only there a few hours, the atmosphere in an amusement park always takes me into another time and place. Just by virtue of being there I undergo this transformation. I don't spend any time thinking about those dirty capitalist park owners. (that coming from a FUN stock holder) ;) I think about how excited I am to be there, the rush that I got on the last ride, and what I will go on next. It is a fantasy world whether its heavily themed or not.
Also, I don't think its fair to say that ROI is placed above fun for parks. They are intertwined. Fun for guests = ROI by way of return visits and word of mouth advertising.
ROI is not a bad thing for the consumer. They will still build good rides, its not as if they are building a sledding hill instead of a coaster because it's cheap and has a high capacity. Especially not in California! ;) They still build high quality, extremely thrilling rides, and that's what is important. The bottom line is that if you didn't know they were so concerned with ROI, you wouldn't even notice it.

Damn I can't spell correctly the first try... *** This post was edited by Camel on 11/15/2000. ***
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Wednesday, November 15, 2000 3:13 PM
MooreOn. Dick Kinzel not a ride enthusiast? Maybe,maybe not. Dick got his start at the Point as I recall in the food services division. He was at one time asst.food services mgr. under Dan Keller. Yes,that Dan Keller. I think Dick is just a company man. He does know what it what works and what doesn't. He's been with the firm for almost thirty years under several different mangements. Experience does count. While some may not agree with what he does, you have to admire him for what he has accomplished. He has to keep the public and the stockholders satisfied,not always an easy task.
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Wednesday, November 15, 2000 6:52 PM
No, I'm sorry. Dick Kinzel is quite the ride enthusiast. As a high school senior last year, I was involved in a youth committee that was assigned to award grants to various Sandusky organizations. This is through the Sandusky-Erie Community Foundation. Cedar Point was a major contributor to the grant money. At our final banquet at the Sandusky Yacht Club where the grants were announced, I was fortunate enough to sit at the same table and have lunch with Mr. Kinzel and his wife Judy. (On a side note, this was the same day as the Red Cross Miniature Golf Challenge which Mrs. Kinzel is in charge of. My dad who was with us for lunch played on the winning golf team from Ford-Visteon. They have won the tournament three years in a row!) Now this was before the park actually opened, and Mr. Kinzel expressed how incredible Millennium Force was. He said it was "like a bullet" and "smooth as a baby". He really enjoys taking his grandchildren to the park as well (their favorite attraction is the karaoke in Soak City!) His family makes an annual trip to Disney World, where Mr. Kinzel says he really loves the Rock'n'Roller Coaster. He also visited Japan where he rode what was the tallest roller coaster at that time, which influenced his decision to built a gigacoaster like MF.

Overall, I would say he is a very personable guy who is quite a ride enthusiast, and a very capable CEO.
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Wednesday, November 15, 2000 7:53 PM
So your Dad was one of the people who took it too seriously! ;) I thought CP's finance guys one this year? (Guide to The Point sponsored two teams this year.)

I agree, Dick is most certainly into the rides. In fact, by sheer chance, we got a shot of him riding The Force over in GTTP's gallery. If you go to Cedar Point enough, it's not uncommon to see Dick standing at the exit of a ride or on the platform with a huge grin on his face. He makes good business decisions for sure, but I think what keeps him going is that ultimate guest reaction to the rides.

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Jeff
Webmaster/Admin - CoasterBuzz.com
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