Good points all. Great discussion.
Let us consider other issues from the CFO.com article: the realization people standing in line are not spending money. This has driven the Point of Sale (POS) conversion at Cedar Point. Recall, the newly announced capital program focused on "hotel refreshment" includes installing several park POS systems. Improved customer experience, increased revenues, decreased shrinkage, all lead to more profitable operations.
The growth of e-commerce revenues, up 35% following outsourcing of platform design, and pre-purchase expansion of product offerings (food vouchers, parking, accommodations, and admissions), resulted in significant returns. Look for ever larger percentages of revenues being generated from e-commerce in the foreseeable future as plenty of room exists for organic growth. Updated POS systems make the acceptance of vouchers/smart phone cash much more efficient and effective.
Clues as to other CF properties which may be on the block might be found by looking at parks which have not been identified for new POS systems. Disposition of non-core assets such as the San Diego Soak City allows for the redeployment of additional capital to fund projects such as hotel refreshments.
The "concentrated use of capital" on fewer projects resulting in greater returns can be seen in the Gatekeeper Coaster announced for Cedar Point. This is an expensive ride, concentrating capital expenditure (while reducing operating and maintenance costs associated with two older rides which it replaces), whilst integrating the new ride into the park entrance and parking lot thus enshrining and defining the park as a high energy park with the promise of connecting thrills. This capital strategy would seem to be an acknowledgement of the role of big coasters/attractions as generators of significant revenues and earnings.
Reviewing the recent impact of Harry Potter at Universal Park(s) reinforces the concept concentrated capital investments have the biggest potential payoffs. Harry Potter drove attendance in excess of twenty percent. Cedar Fair now seems committed to funding capital projects which have the ability to "drive incremental attendance." No longer can FUN afford to add rides which simply satisfy current customers. Rides must now draw significant additional attendance and the corresponding increased revenues and earnings.
CFO Witherow observes in relation to capital projects since 2007 "Was the ride’s appeal too narrowly focused? Did it twist people upside down too much, or something like that? Let’s not make that mistake again. The capital budget has to go across 11 properties.” Following the sale of SDSC the capital budget now will be spread across just 10 parks. Witherow's mention of Pepsi in the article also gives us clues as to the interview being conducted at least three months ago.
One wonders if WindSeeker additions would have passed muster under the new capital allocation process.
The conspicuous absence, as pointed out by The Interpreter, of consideration of out of park revenues is, well, puzzling. Again, recall, the recently announced hotel refreshment project at Cedar Point. That announcement included the news of removal of employee dormitories from the Point. However, the announcement did not indicate what portion, if any, of the refreshment funds would be utilized to accomplish this task.
The announcement did include POS funding as part of the refreshment project. Those POS systems were slated for parks other than Cedar Point.
Some wiggle room exists for the use of the announced refreshment funds. Other off park projects may also be addressed with these funds. As previously discussed on these forums, the refreshment funds seem excessive at a cost of between $56,250.00 to $75,600.00 per room, considering building costs per new hotel room, excluding land costs, are currently estimated at $56,100.00 for the budget/economy segment.
Hotel refreshment and price segmentation will likely spread system wide in the near future. Hotel improvements may include additional or enhanced restaurant and food venues which may also do double duty and serve on park guests.
Food improvements at Knott's Berry Farm this past year will continue to be refined and rolled out system wide. Dinning is arriving on parks and will supplant eating on park. Higher quality foods may result in increased food costs as a percentage of sales. The trick will be to increase incremental food sales to offset loss of profitability achieved by lower food cost items.
Leland Wykoff