Theme parks cost cutting = lower quality experience
The real reason is they are saving pennies to build that launched underwater coaster that will finally fullfill the multi-coaster contract they signed with B&M.
I guess that is where VIP programs come in, LOL...
Millrace is right too, because to maintain the status quo, you need to make adjustments when you face adverse conditions like a poor economy or crappy weather. It's easy to say that reduced hours won't make a difference, but combine that with other things (not subsidizing a bus route, for example), and it all starts to add up.
Speaking of value propositions, CP dropped its gate last year, and I think Dominion and Carowinds did this year, didn't they?
Jeff - Editor - CoasterBuzz.com - My Blog
I'm not against a company insulating itself from fluctuations in the market- it is a wise thing to do. But it seems that amusement park operators can't seem to figure out what the hell to do next. You have Six Flags increasing prices while Cedar Fair is decreasing them. Maybe I'm just confused because I don't understand how any of this is going to make any kind of difference when it comes to the bottom line.
If you increase prices, you must subscribe to Gonch's thinking: more money from less customers. If you decrease prices, you might get more customers, but you cut back hours so the larger crowds have less time during which they can enjoy the park. I'm not going to even pretend to have all the answers but the two situations I just listed don't seem to make much sense. If I were a FUN stockholder, I'd probably want to see the company attempt to increase revenue and profit by investing in related businesses such as hotels and indoor waterparks, not doing things that might chase customers away in the future. And while cutting a few hours here and there might not make much of a difference, when it becomes just another thing on the pile of things customers have to complain about, I think there is a problem that needs to be addressed. I'm just hoping that companies don't shoot themselves in the foot and take things too far, because as I've been saying all along, there is a breaking point... and once customers are lost, it's that much harder to get them back.
Jeff - Editor - CoasterBuzz.com - My Blog
Jeffrey is claiming that Cedar Fair's stock has been average for a long time now- something that shouldn't be if the company is constantly searching for ways to make it more profitable.
Am I close?
You are close indeed… My thought pattern was that the individual decision makers who would choose to work for a limited growth company would not be exactly of the mindset to pinch every penny and maximize every short-term profit possibility. Yet those who took the “bottom line” side of this argument seemed to frame it as a brilliant “cut-throat” business decision based upon sound data. Not exactly the type of decision you would expect from an old-growth company mindset is it?
Cedar Fair obviously has been happy to be an “average” performing company with relative conservative decisions (sans the acquisitions) as their basis. All of a sudden we get hour cuts and many on here applauding the penny-pinching aspect of the decision (a side I’m more apt to agree with than the other by the way) without mention that such a decision seems a little out of character for THIS company.
The other point I was trying to make is that it is impossible to take emotion out of the decision entirely. The fact that there are individuals willing to work for an old-growth company like this tells me they likely believe in the product and value something other than maximal profits…otherwise they would be in more risky/profitable ventures. I found it interesting that these types of executives were portrayed as cold/calculating geniuses.
The added bonus was the introduction of various other data (internals) by participants who did not like my simple use of stock price as proof of average performance. This seems to prove the old adage that the data is only as useful as the person interpreting it. In this thread…Jeff and I (Jeffrey) have looked at the same data and have had differing emotional responses to that data. Our conclusions seem quite far apart. I see FUN as an average company unworthy of a second look as there are countless of less risky ventures that could give a similar return. My analysis is based on simple market understanding and past performance which indicates that this is not a stock that would be expected to see a price jump above and beyond the market as a whole. I tend to agree with the current “hold” recommendations. Jeff seems to see FUN as a great balanced portfolio holding with undervalued internals. He seems to buck current consensus and probably would give a “buy” recommendation.
Which got me thinking…had Jeff and I been part of he decision-making process on hour reduction for the parks…and we both had access to the same super-secret-data the parks supposedly used to come to their decision…is there a chance we would not have agreed on what the data told us?
Therefore…I’m not willing to grant the decision as the all-knowing correct response, nor am I willing to label it a disaster. I think it is inconsequential in the big picture and will not have a major effect either way. This would be consistent with the business model for FUN.
P.S. I suspect the hour reductions have WAY more to do with an inability to get enough staffing versus the majority opinion that the parks were not making enough money in the evening hours. I think they are making enough money to justify staying open...but cannot find enough workers to staff it without breaking the salary budget. This is really baseless speculation as I've no access to the super-secret data though...
*** Edited 4/26/2007 10:28:17 PM UTC by Jeffrey R Smith***
I have the perfect solution: charge people a premium price to stay past 8pm.
</funny post>
<serious post>
As Gonch is inclined to do, I have to bring up perceived value. How many people will actually notice that the park cut the hours?
Even if it does affect a lot of people, if they think "wow, we had so much fun the day seemed shorter" rather than "wow, I can't believe they cut the operating hours" then it's still a win for the park.
</serious post>
Hobbes: "What's the point of attaching a number to everything you do?"
Calvin: "If your numbers go up, it means you're having more fun."
First off, I must say that I in no way meant anything against Jeff making money with CoasterBuzz. Websites make money these days. CoasterBuzz is a website. CoasterBuzz makes money. So what. Maybe when I find another rock band to sing for, I will make money too. I have no idea why Jeff got so emotional about that. I'm sorry, Jeff. It didn't mean to sound the way you interpreted it.
What I was implying was that since it is well known that Gonch has his ties to Jeff and Coasterbuzz, it wouldn't be unbelievable for him to be helping with making the website more money by stirring the pot a little. Like the amusement industry, CoasterBuzz IS a business, and the way Gonch talks about businesses here, they only exist to make money, right?
Secondly, I still believe Gonch makes it sound like I am a moron for having feelings against getting less value from a park. Not everyone cares if some multi-Million Dollar Amusement Park Business is not profiting Millions more than they were last year. I just want to have a great time at an amusement park, and not have to wonder why they are giving me less for my money. At this rate every amusement park will be broke eventually because if the only way to make money is to cut what is offered to customers and charge more, people will stop going when a park is only open for 6 hours a day while charging $100 to get in.
I've worked a lot of retail and the most important thing they cram down your throat is that customers are expensive to get (advertising) and even more expensive to lose (loss of revenue). Why would any business decide to do anything that could jeopardize losing customers, even ones who spend a lot of money?
Third, I don't know the numbers any better than you all, but most parks I am visiting during the night have crammed-packed gift shops and long lines at the food stands, even after closing. Yes ride lines seem shorter, but people are still there.
...And Fourth, I desire quality and value. I actually desire the same level of quality and value I had in previous visits, no matter what the business I am patronizing. Why is that so wrong? My feeling are more important to me than any business entity's profits. Again, why is that so wrong?
This whole discussion is the classic struggle between "guests" trying to get value for their money, and parks trying to take it away to make more profit. I'm all for businesses making profit, but not at the expense of making even a small portion of their customers angry.
dexter said:
I've worked a lot of retail and the most important thing they cram down your throat is that customers are expensive to get (advertising) and even more expensive to lose (loss of revenue). Why would any business decide to do anything that could jeopardize losing customers, even ones who spend a lot of money?
Ya know, I've been thinking about this for a couple of days. And with something of a background in retail (I'm not involved in retail anymore but I spent enough time in the retail trenches to know a thing or two about how it works), I can completely back up what Dexter just said. Customers are expensive to get, more expensive to lose and even more expensive still to get back. As I said once before, regaining the faith of a disgrunted customer is an enormous, almost insurmountable challenge.
Third, I don't know the numbers any better than you all, but most parks I am visiting during the night have crammed-packed gift shops and long lines at the food stands, even after closing. Yes ride lines seem shorter, but people are still there.
I can see there being businesses where Gonch's idea of making more from less customers actually works. I'm not sure amusement parks are one of them.
Amusement parks are a lot like hotels, unlike a grocery store or a car dealership, because they deal with things that have to be sold on a daily basis. Most of the stuff in a grocery store (aside from perishable items) and a car dealership doesn't have to be sold right away- if the business closes for the day and something is still on the shelf or on the lot, it can be sold tomorrow and it usually won't result in any less money being made. As for something like a hotel room or a seat on a roller coaster- they always have to be sold (each night for a hotel room, each circuit for a seat on a roller coaster) because you can't sell them again tomorrow. Once they're gone, they're gone... and once you get to the start of a new day or a new circuit, you have a whole new batch of rooms or seats to sell.
A roller coaster has a fixed operational cost, meaning it costs the same to run it whether there are 2 people in the train or 25 people in the train. That being the case, wouldn't a theme park want enough people in the park to fill that train with 24 people, each and every time? After all, more people in the train means the operational cost per rider is significantly less. And it's not just roller coasters, it's everything... janitors to clean the bathrooms, maintenance people to make sure everything is running and electricity to power the rides, lights, concessions and everything else.
And getting back to what Dexter said, while I cannot dispute any figures that a park has on which to base their decisions, I stand by what I said abou never having been to an amusement park where it was completely and utterly empty at night while busy during the day. Busy days lead to busy nights, and if a park can't manage to find a way to make money on those busy nights, maybe the change that should be made is one of management?
...And Fourth, I desire quality and value. I actually desire the same level of quality and value I had in previous visits, no matter what the business I am patronizing. Why is that so wrong? My feeling are more important to me than any business entity's profits. Again, why is that so wrong?
Not wrong at all, and it's what I've been saying all along. I understand one's passion for talking about the business aspect of amusement parks but in the end, I am a customer and I am going to stand up for what I want for my money.
1) Is it fair? Of course.
2) Is it a good business decision? Possibly.
However, these issues are independant and it seems like we're arguing one issue with the answer to the other.
And as for the size of the crowds at closing:
Wouldn't they be even larger at closing if closing were at 8 instead of 10? They're not large because it's 10. They're large because the park is about to close.
Hobbes: "What's the point of attaching a number to everything you do?"
Calvin: "If your numbers go up, it means you're having more fun."
dexter said:
I've worked a lot of retail and the most important thing they cram down your throat is that customers are expensive to get (advertising) and even more expensive to lose (loss of revenue). Why would any business decide to do anything that could jeopardize losing customers, even ones who spend a lot of money?
Rob replied:
Ya know, I've been thinking about this for a couple of days. And with something of a background in retail (I'm not involved in retail anymore but I spent enough time in the retail trenches to know a thing or two about how it works), I can completely back up what Dexter just said. Customers are expensive to get, more expensive to lose and even more expensive still to get back. As I said once before, regaining the faith of a disgrunted customer is an enormous, almost insurmountable challenge.
At this point a million and one ideas rushed to Gonch's head. He immediately wanted to point out that the comparison between 'retail' and amusement parks is not valid. The first thing that popped to his head was hotels. As he continued reading Rob's post, he saw Rob went there first:
I can see there being businesses where Gonch's idea of making more from less customers actually works. I'm not sure amusement parks are one of them.Amusement parks are a lot like hotels...
Exactly!
Here's the rub. When I talk about Gonch's business model, it's really Jamie's business model.
Who the hell is Jamie? My wife.
So what? Right?
My wife is a hotel GM and has been since I married her. Better yet, she's pretty much made a career of going to older, troubled or underperforming hotels and making them profitable again.
How's she do it on the financial side?
Gonch's business model.
I spout off about that all the time because I do think amusement parks are a lot like hotels. Scarily similar in many aspects. And in the hotel industry, Gonch's business model works...really well. This isn't opinion. This is what I've observed over the past decade.
Rob continued:
As for something like a hotel room or a seat on a roller coaster- they always have to be sold (each night for a hotel room, each circuit for a seat on a roller coaster) because you can't sell them again tomorrow. Once they're gone, they're gone... and once you get to the start of a new day or a new circuit, you have a whole new batch of rooms or seats to sell.
You're dead on, my man. Hotels use so many different ways to measure revenue performance that it'd make your head spin. In the case of what you describe here (and further on) would be measured using RevPAR and RevPOR. That would be "Revenue Per Available Room" and "Revenue Per Occupied Room"
RevPAR measures revenue vs all rooms in the hotel regardless of occupancy levels. Essentially if a 100 room hotel wants to achieve a RevPAR of $100 then the hotel expects to do $10,000 a day in revenue. But here's the catch - there's many ways to get there. You could do 100 rooms at $100. You could do 50 rooms at $200. You could do 1 room at $10,000. You get the idea. That's where RevPOR comes in.
Obviously another thing hotels keep a keen eye on is occupancy. Occupancy is just the number of rooms sold expressed as a percentage. You sell 75 rooms at that same 100 room hotel and you're running a 75% occupancy.
Hotels create budgets and set goals primarily based on those two numbers. (oversimplifying...kinda)
So say for this period the hotel wants that RevPAR of $100 and they'd like to see 70% occupancy. All we need is a little math to see what 'average' is expected:
70% occupancy at the 100 room hotel is 70 rooms. $100 RevPAR is $10,000 for the day. $10,000/70 = $142.86 RevPOR.
Following? Good.
So you can see how the numbers play off of each other. Change one and the other move accordingly. How to achieve that $10,000 a day revenue?
What if we decide more customers for less is a better approach? (and this is called 'heads in beds' in the industry, for the record)
We decide to follow that 'heads in beds' theory, and drop the rate to $100. Lucky for us, we're able to sell out at that rate. So what do the numbers look like this way?
Revenue is $10,000, occupancy is 100% and our RevPOR is $100.
Yikes! Only $100 RevPOR and we're at 100% occupancy. Technically we hit the bottom line with our $10,000 revenue, but where do we go from here? We don't have any more rooms and now people expect to stay at our hotel for $100. Financially we're at a dead end, the only way to grow revenue is to raise the room rates. Do that and people are going to be pissed that they're not getting more for their money.
But what if we used Gonch's (Jamie's) plan of attack. We bump our nightly rate up to $169. Turns out some people are still willing to pay $169 for our rooms. Not as many, but we still sell 57 rooms. So what do our numbers look like this way?
Revenue is $9,633, Occupancy is 57% and RevPOR is $169.
Wow! The bottom line is pretty much there. Occupancy is a little light, but the RevPOR is almost 19% above what we expected. Plus, we still have more than 40% of our room inventory to grow on.
And what about those people who think $169 is too much? Well some will go to the other hotels that went the 'heads in beds' route, but guess what? Those places sell out quickly and a certain percentage come back to us and reluctantly pay the $169.
So what we find is that on top of the 57 rooms we sell to people who are ok with it, that we often pick up another 7 rooms on average from people who thinks it's too much, but need a place to stay.
(note: This is where the retail comparison breaks down. Say you sell $7 T-shirts. If you lose customers, you can't start charging people $9 to make up the difference because they'll just go across the street and get them for $7. There's no difference in product. The only competition comes in pricing and winning the customer battle is very important. Not only do amusement parks all differ even though they're technically the same product [like hotels], but there's most often not another option that just as reasonably accessible [unlike hotels, but hotel sell-outs can force the same conditions] - in other words your choices are this or nothing.)
Now what we're running is a 64% occupancy at a $169 RevPOR. Our bottom line is $10,816. We're beating expectations and outperforming the 'heads in beds' hotel by more than 8% in revenue and we still have plenty of room to grow as we're less than 2/3rds full.
Of course we came here to work on a troubled hotel, so we're also working on all the actual property & staffing issues. We've already established we can survive finacially with the lower number of people who are willing to pay that for our hotel. We pick up a few here and there that might not be so keen on the price but simply have no other choice and as we improve things our current customers will see increased value and we'll win a few new customers along the way. We may never run consistently full like we would in the first scenario, but we're exceeding expectations and have things moving in the right direction.
Now we can apply this directly to what a chain like SF is doing. The 'heads in beds' approach was where Burke & Co. were at. They ended up with a troubled company. Enter Shapiro trying to fix the troubled property using 'Gonch's Business Model' and you see the direction I suspect he's trying to head. In fact, Mark Shapiro coming in and trying to turn around a troubled amusement park seems pretty similar to my wife coming in and trying to turn around a troubled hotel.
And their plans of attack are strikingly similar - find the place where you retain the highest paying customers even at the cost of losing some, take some time to turn things around, thus increasing the perceived value at the higher price, start to grow the higher priced business with the space left from the lower priced business you lost.
Granted hotels and parks are NOT the exact same beasts, but I do believe it's Gator who is so fond of saying being in the amusement park industry is being in the hospitality industry and I think that's relatively valid.
All I know is I've seen Gonch's business plan work time and time again at all kinds of properties in all kinds of markets in varied geographic locations. I have no reason to believe it wouldn't work in an amusement park setting - or any non-commodity setting for that matter.
(sorry for the length, and I'm sure there's some points I missed or ends not tied up - feel free to point them out :) )
*** Edited 4/28/2007 6:48:16 AM UTC by Lord Gonchar***
Theme parks are not hotels. People traveling generally NEED a bed to sleep in. You jack up the price and get your profit margin from those willing to pay and then get a little more profit from those who are pissed and tired.
The pissed and tired theme park patron doesn't have to go to the park. He just quits going (see me and most of the Six Flags Chain).
So anyhow...your model just needs to be simplified to charge more and serve less...take home the same profit. I get this 100%.
I'd prefer charge EVEN MORE and stay open later...but still think this was more a staffing availablity issue versus a night-time profit issue.
Theme parks are not hotels. People traveling generally NEED a bed to sleep in. You jack up the price and get your profit margin from those willing to pay and then get a little more profit from those who are pissed and tired.
To a degree, but I equate those folks with the folks who still visit the parks because no other park option realistically exists for them.
Face it, many locations essentially have one 'local' park and if you want to spend the day at the amusement park, that's where you go. Say the kids insist and even though you feel ripped off, they want to go and generally enjoy themselves.
Heck, even people on these forums constantly complain about certain park chains and then still visit them and complain some more. :)
In the comparison, those people are the 'pick up' business.
If I want to fly from Des Moines, IA to LA, I have to pony up $200-$300, knowing that if I lived in Chicago (even farther from LA), I could easily get to LA for $100 if not for less on Southwest. I feal cheated, but what am I going to do?
$40+ per month for a cellphone? $50 per month for high-speed internet? $3.00+ per gallon for gas? How about insurance?
It's that whole market baring thing, right? How far can businesses push customers until they say, "no"?
One thing that has always surprised me about the amuement industry is that most parks are open 7 days a week. Why not just 4 or 5 days a week to reduce the need for employees and other overhead. It's not like the park is going to lose customers to the competition in most cases. There's generally only one amusement park in a metro area. Why not just be open Saturday through Monday? Most working adults can't go to a park in the middle of the week without using their precious vacation time. Why not strip out those dead days and make the park packed every operating day?
AV Matt
Long live the Big Bad Wolf
but there's most often not another option that just as reasonably accessible [unlike hotels, but hotel sell-outs can force the same conditions] - in other words your choices are this or nothing.
This is only true if one equates "leisure time" with "amusement park". However, for most families, an amusement park is just one of the many passtimes they might choose for recreation. For example, consider a visitor to the Smokies. (Which I'll be visiting late August). There's Dollywod and Splash Country. But, there is also Ripley's Aquarium. A Cubs AA affiliate for minor league baseball. The alpine slide in Gatilnburg. A half-dozen dinner shows---music, spectacle, magic, you name it. The National Park itself.
Closer to home, we've got Cedar Point and Michigan's Adventure close enough for a day visit. But, we've also got the neighborhood pool, golf courses, the Tigers or the Mud Hens, camping in a nearby state park, a visit to Grandma and her lake house, a long weekend at Lake Michigan, a neighborhood cookout, the Ann Arbor Art Fairs and the A2 Summer Festival, etc. etc.
Amusement parks compete with more than just other amusement parks for my family's discretionary money and time. Much more.
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