All types of businesses are affected by the economic crisis in Europe and other parts of the world. Fortunately, the entertainment industry has generally been spared, although some parks have seen their attendance stagnate or even decline.
On the advice of business consultants, some park owners have tried to implement crisis response strategies designed for manufacturing and distribution companies. But these approaches are not suited to amusement parks, which are more similar to hotels or airlines than they are to manufacturing plants.
What is the difference?
For service companies like theme parks, variable costs are relatively low when measured in proportion to total sales volume. Although cost cutting is certainly possible, operating an empty park is not dramatically cheaper than operating one that is full of guests. Unlike a factory, a park cannot really modulate its "production" according to demand.
For this type of operation, profit is whatever is left after overhead has been covered. So sizing capacity correctly and optimizing attendance is critical. Yield management "gurus" offer tools and techniques to maximize profits by defining the optimal ticket price based upon attendance projections.
But in order for guests to show up, the product must be attractive. This cannot be quantified or put in spreadsheets, so business consultants have a tendency to dismiss this central aspect of the business. In a park, the product is the basis upon which profit is founded. Without that solid base, return on investment is unlikely.
Theme Park business is show business
Theme Park business is show business. Not only in attractions, but in restaurants, shops, hotels and other areas. We use the word "show" not only to describe a stage show, but also a roller coaster or a shop. Developing a great show requires people skills such as empathy and story telling that are not likely to be found in business consultants. Instead, they are more likely to apply strategies designed for production and distribution optimization. Their cost-killing attempts are invariably disastrous.
This does not mean a park facing recession should spend money spend lavishly. But capacity is the variable to adjust to cut expenses, not show quality. An impeccable right-sized park is more likely to attract visitors than a larger, sloppy one.
Profits generated by a park are a byproduct of show quality. Perfect quality must be pursued regardless of attendance. A white collar executive may have a hard time understanding that the only way to succeed with a theme park is to constantly invest in it, almost regardless of attendance, and work relentlessly on every single show detail to maintain its attractiveness. But the only way for a declining park to return to profitability is a clever but reasonable investment plan.
The recovery of Disneyland Paris after the 1990s economic downturn is a prime example of a well applied, sharp business plan. In contrast, countless parks that tried to cut maintenance and show quality have closed their doors after losing money. It is virtually impossible to find an example of a successful park recovery achieved by budget cuts.
Investing in times of crisis
How to you keep the foot on the accelerator while braking? By using common sense, and remembering the equation: great product + motivated team = customers. In slow times, everyone's input is needed to find concepts that are not too expensive to implement. It may be time to recycle an older, out of fashion attraction, or to try new concepts and simple ideas that have been shunned before. Investment "on stage" (in the park) should be a priority over spending "backstage" (behind the scenes) such as refreshing the offices.
It is also a good time to review processes and purchasing. Negotiating volumes within a group of parks can be a way to get better prices from vendors without affecting show quality. There is no shame in looking for new recipes. No option should be discarded without serious consideration.
The worst choice is to cut back on maintenance. Constant care is always cheaper than a fitful, erratic approach. Carelessness sends a very bad signal to visitors and employees, not to mention investors and potential partners.
Employees, whether seasonal or permanent, are the actors in your show. This is particularly true of employees who interact with your guests. They live every day in contact with visitors and can be a mine of information and ideas. Employees should be provided with easy to understand key figures, such as attendance and visitor spending, along with information about actions undertaken to improve the situation. This will build a strong relationship between your employees and their park. Value their input and explain the recovery. Your reassurances will encourage them to give their best effort.
As with any business that faces a sluggish market, the key is not rushing to conclusions but analyzing and developing a well thought out long term plan that likely includes constant additions to your park. Team members should be involved in the process of creating new ideas. And competent outside input (such as from the Tejix specialists) is always productive. We can help you discover the roadmap to recovery.