Two weeks ago in an article about Cedar Fair, LP (FUN) titled Cedar Fair Provides Positive Surprises At Investor Conference I discussed the partnership's two consecutive years of record attendance, record revenue, spending plans and the cash distribution projection. The cash distribution was projected to increased to $1.60 or $0.40 per quarter for 2012, growing to more than $2 in 2013. At the conference there was also a great deal of discussion on innovative programs for revenue growth that was not covered in the earlier article. This article will cover some of these programs.
Cedar Fair owns and operates 5 hotels and 17 mostly seasonal amusement parks (the exception is Knott's Berry Farm in Southern California) in the U.S. and Canada. Revenue is generated through ticket sales as well as in park and out of park spending. While enticing a first time customer to buy a ticket is key, it is also important to have that customer remain in the park as long as possible and to make the experience enjoyable so that the customer will return.
Cedar Fair has been able to extend the season beyond the traditional Labor Day end of summer by introducing Halloween themed attractions, and these have become a significant revenue stream in recent years. But, there is a limit to the length of the season, especially considering the location of many of their parks in the Northern portions of the U.S. and Canada. You won't find too many people anxious to float along the Lazy River in Allentown, PA, during December through February, especially when the river would be a ribbon of ice, nor is someone likely to want to ride a roller coaster at 92 miles per hour in Toronto in the middle of winter.
A major draw for customers has always been thrill rides and in 2012 the partnership will add several new coasters. Also important to generating more revenue is to grow attendance by broadening the appeal of the parks. And finally, once in the park, it is important to keep the customer there as long as possible so that they spend more on the midway or for souvenirs meals, snacks, refreshments, etc.
Three initiatives to accomplish these objectives were outlined for 2012:
- Bring Dinosaurs Alive! (an animotronics exhibit) to four additional parks. This attraction was introduced at one park in 2011 and it was found to draw an intergenerational demographic.
- Introducing a night time attraction "Luminosity - Ignite the Night" to motivate customers to extend their stay.
- Expanding water parks, again to broaden the appeal to families and generate repeat visits, especially in the heat of summer.
Because of the large number of parks operated by Cedar Fair, it is possible to test out new concepts without making a major commitment across multiple parks. One such initiative that was tested in 2011 and will be rolled out to all parks in 2012 is Fast Pass, a premium priced option. And, it's not just these initiatives that were significant.
A new e-commerce CRM platform is being introduced. The purpose is to drive advance sales with a dynamic pricing model, recognizing whether the purchaser is a value-oriented or a premium service consumer. Matt Ouimet, Cedar Fair CEO made the following observation about advance sales:
I've learned this from my experience in the cruise industry. Anything you pay for ahead of time increases the spending that will last on your visit. And the simplest example I give people is if you don't have to give your first $13, you can buy parking ahead of time, you don't have to give your first $13 to the parking attendant, you still spend that $13.
He also noted that people who purchase in advance are much more likely to actually attend than those that had planned to come and buy tickets at the gate. The threat of inclement weather is less of a deterrent and the customer is less likely to take advantage of a better offer that might come along.
This is not an all-inclusive list of the efforts that will be put forth to drive top-line growth, and the results won't be known to investors for months. It does, however, give an indication of the focus of management. And, if their focus on driving the top line isn't a good enough reason to buy some units, there's always that very attractive cash distribution.