Strategic Plan for Fiesta Texas 1995 to 2000

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Strategic Plan for Fiesta Texas 1995 to 2000 University of Central Florida STARS Harrison "Buzz" Price Papers Digital Collections 7-17-1995 Strategic Plan for Fiesta Texas 1995 to 2000 Harrison Price Company International Theme Park Services Part of the Tourism and Travel Commons Find similar works at: https://stars.library.ucf.edu/buzzprice University of Central Florida Libraries http://library.ucf.edu This Report is brought to you for free and open access by the Digital Collections at STARS. It has been accepted for inclusion in Harrison "Buzz" Price Papers by an authorized administrator of STARS. For more information, please contact [email protected]. Recommended Citation Harrison Price Company and International Theme Park Services, "Strategic Plan for Fiesta Texas 1995 to 2000" (1995). Harrison "Buzz" Price Papers. 162. https://stars.library.ucf.edu/buzzprice/162 Confidential STRATEGIC PLAN FOR FIESTA TEXAS 1995 TO 2000 Prepared for Fiesta Texas Theme Park July 17, 1995 Prepared by HARRISON PRICE COMPANY 222 West 6th Street, Suite 1000 San Pedro, California 90731 Phone (310) 521-1300 • FAX (310) 521-1305 In Collaboration With INTERNATIONAL THEME PARK SERVICES 1212 Sycamore Street Cincinnati, Ohio 45210 (513) 381-6131 Confidential STRATEGIC PLAN FOR FIESTA TEXAS 1995 TO 2000 Prepared for Fiesta Texas Theme Park July 17, 1995 Prepared by HARRISON PRICE COMPANY 222 West 6th Street, Suite 1000 San Pedro, California 90731 Phone (310) 521-1300 • FAX (310) 521-1305 In Collaboration With INTERNATIONAL THEME PARK SERVICES 1212 Sycamore Street Cincinnati, Ohio 45210 (513) 381-6131 TABLE OF CONTENTS Section Page 1 INTRODUCTION ................................................................................................... 1-1 2 THE MARKET ........................................................................................................2-1 PARK ATTENDANCE ........................................................................................2-1 MARKET PENETRATION ..................................................................................2-2 FIESTA TEXAS ATTENDANCE DISTRIBUTION BY SOURCE ................. 2-5 Season ...........................................................................................................2-8 Attendance by Product Categories ...........................................................2-8 3 CAPACITY CHARACTERISTICS .................................................................. 3-1 Existing Ride and Waterpark Capacity ..................................................... 3-2 Show Capacity .............................................................................................3-5 Food Service .................................................................................................3-6 Merchandise Service ..................................................................................3-7 Aggregate Capacity .....................................................................................3-7 4 PER CAPITA ANALYSIS ..................................................................................4-1 Analysis of Free Attendance ......................................................................4-4 5 PROFITABILITY ....................................................................................................5-1 Cost of Goods Sold ......................................................................................5-1 Profit and Loss Experience ........................................................................5-1 Expense Analysis .........................................................................................5-3 Catering and Christmas Profitability ......................................................... 5-6 6 STRENGTHS AND WEAKNESSES ............................................................ B-1 Preferred Alternative and Recommended Action ................................... 6-2 7 FIVE YEAR ECONOMIC PROJECTIONS FOR THE RECOMMENDED ALTERNATIVES ................................................... 7-1 Reduced Scale Alternative .........................................................................? -5 LIST OF TABLES Table Page 1 An Array of Typical Regional Park Market Penetration ..................................... 2-4 2 Attendance Distribution by Source .......................................................................2-6 3 Estimated Ranked Resident and Visitor Splits in Various Parks ..................... 2-7 4 Hourly Ride Capacity ...............................................................................................3-3 5 Aggregate Hourly and Daily Venue Capacity ..................................................... 3-8 6 Admissions Per Capita Analysis by Ticket Types .............................................. 4-3 7 Analysis of Free Categories ...................................................................................4-5 8 Profit and Loss Experience ....................................................................................S-2 9 A Labor Cost Comparison For Long and Short Season Parks ....................... S-4 1 0 Expense Analysis 1995 Budget ............................................................................5-5 11 Catering and Christmas Profitability .....................................................................5-7 12 Throughput Parameters Five Year Projection .................................................... 7-2 13 Per Capita Projection ($) ........................................................................................? -3 14 Improved Profitability Projection ............................................................................? -4 Section 1 INTRODUCTION Fiesta Texas is at a turning point. A high quality product in a divided market, it suffers from: • excessive price discounting • declining attendance • operating losses throughout its life • negative cash flow • diversion of a one park market by two operating parks. As a reflection of these problems, $71.1 million of the $210 total development cost was written down in 1994. The project requires additional reinvestment to hold and/or gain market share. In early June, Fiesta Texas management met with Harrison Price (Harrison Price Company - HPC) and Dennis Spiegel (International Theme Park Services - ITPS) to discuss redevelopment and strategic options with the aim of identifying and defining problems facing the organization. Out of that meeting the writing of a preliminary summary strategic business plan was authorized. It would attempt to express where the park is in its marketplace, and what might be done to improve its economic performance. Management has requested that three alternative options be addressed and evaluated in the course of the work: 1. reducing costs (expenses plus cost of goods sold) from $53 million to approximately $40 million 2. infusing new capital additions 3. operating as is with modest capital additions. 1-1 The objective of this short form business strategy is to identify and evaluate the following forces and conditions influencing the performance of the park: 1. the market outlook 2. capacity and balance within the park 3. generated per capita expenditures 4. departmental and overall profitability 5. strengths and weaknesses of the park 6. the market niche of the offered product. As a final step, at the conclusion of this operational and economic review, a five year strategy is presented which is considered to represent the best option or options for ownership. Projected economic results of that strategy are presented over the five year period 1995- 2000. This report is a joint undertaking by Harrison Price Company and International Theme Park Services. 1-2 Section 2 THE MARKET San Antonio's resident and tourist markets are growing fairly rapidly. HPC's projection of that growth--based on a substantial amount of recent work in the area--is expressed as follows (in millions): Regional ADI Annual Overnight Y.H! Resident Market Visitor Market Total 1990 1.736 7.150 8.886 1992 1.837 7.227 9.064 1993 1.874 7.370 9.244 1994 1.911 7.569 9.480 1995 1.949 7.860 9.809 2000 2.151 9.192 11.343 The decade annual growth rate of the total market is a compounded 2.5 percent. The rate in the first five years of the decade was 2.0 percent. The local market will be negatively impacted in the short run by the closure of Kelly Air Force Base, however, San Antonio's acceptance as a major destination resort is gaining momentum and will continue. Spurred by the local closure, public sector leadership plans to encourage and stimulate long term touristic development. PARK ATTENDANCE Theme park attendance in San Antonio is reported as follows (in millions): 2-1 Actual Reported Ynr Fiesta Texas Sea World Total 1990 1.682 1.682 1992 1.982 1.500 3.482 1993 1.884 1.400 3.284 1994 1.908 1.400 3.308 1995 1.701 1.400 3.101 Noted from above: • appreciable attendance decline since 1992, 14.2 percent for Fiesta Texas, 6. 7 percent for Sea World of Texas. • The combined attendance has dropped 10.9 percent. This is atypical of the business. The 48 largest parks in the U.S. reported attendance of 143 million in 1992, 146 million in 1994. • One major reason for the two drops is that in both parks early attendances were inflated by "papering" and discounting. The objective in both cases was to achieve unrealistic initial goals (3 million at Sea World, well over 2 million at Fiesta Texas). Sea World by itself was overbuilt for the 1988 market. The combination of two parks in 1992 compounded the problem. Excessive discounting which resulted eventually becomes counter productive.
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