Short-Term Challenges for the Live Events Industry

Coming up, SeaWorld earnings, takeaways from the PLASA survey on live events, and two Cedar Fair parks are discontinuing scary Halloween events.

Philip: From our studios in Los Angeles and Tampa, FL this is Green Tagged Theme Park in Thirty. I'm Philip from Gantom Lighting and Controls and the Haunted Attraction Network, and I'm joined by my co-host Scott Swenson of Scott Swenson Creative Development.

Scott: Hello, welcome back for another week of what we think is important inside the theme park and attraction industry. We've got a lot of stuff to talk about today, and as usual, we're hoping to get to most of it, and as usual, we will probably only get to about half of it, because we both are very filled with opinions and thoughts, and it depends on whether we argue if we argue the show goes longer.

Philip: Oh, I love it when we argue. Well, you know what? There's no arguing with the SeaWorld earnings. Is that a good transition?

Scott: Good transition, very nice. Yes, that was good.

Philip: The theme park operator SeaWorld willed earned $0.92 per share for its last quarter, well above the $0.29 consensus estimate. Revenue came in above forecast, doubling a year ago, with park visitors spending more per person than they had prior to the pandemic. 

I don't think there's really much to be said about this. If you have been following the show for a while, you can see that this kind of lines up with what we talked about previously with the Universal earnings and the overall trend, as well, with Disney of the park chains trying to get guests to do more spend per person as a way to counterbalance the reduced attendance. Now we're seeing, of course, that the attendance is rebounding to 2019 levels, but hopefully, that will lead to overall more profitability for the parks, which I think they will need because there are other challenges on the horizon.

Scott: Absolutely yeah, I just want to make sure that the $0.29 consensus estimate wasn't just a typo, because to go from $0.29 to $0.92, that's kind of an oops. But I will say you're absolutely right, Philip, and that is the fact that the floodgates have opened, and people are coming back, they're spending, they're eager. But I use the floodgate analogy intentionally because when floodgates open there is a huge surge, but then eventually things do find some form of equilibrium. So, I think this is important to recognize, actually, because of my business, which is sort of longer lead. I'm already seeing sort of that equilibrium. I'm seeing organizations plan for that equilibrium now, and so I think it's important to recognize that its great theme parks are back, the idea of the spend being higher than it was pre-pandemic, great, it's exactly what we should expect. But don't think that this is the new world. This is making up for lost time, maybe you want to think about it that way, or it's the rush of the water pouring back in, the guests pouring back in. I think we just need to make certain that we are prepared for what is to come, as Philip so ominously stated just moments ago.

Philip: To help us figure out what is to come, PLASA the Association for the Entertainment Technology industry did a little survey. They published a global survey report on the current position and future recovery of live events industry. This comes to us courtesy of InPark magazine, and I'm actually going to be reading excerpts of the summary of the report that InPark magazine did. So, this is not like from the report, this is from like the summary that the magazine did, but you can download the full report at the link in our show notes.

To give you context, the survey ran from back in November 2021 through December 2021, so it's a tiny bit old. It's actually not that old, but then I think about it and I'm like, "wow, it feels like it's been like 3 years in the past quarter." So, it's like, so much has changed. Oh my gosh!" So, it's a tiny bit, I guess in this new world order it is a little bit old in that way. But there's 1,948 respondents in over 40 countries, so it's a pretty good sample size of this live entertainment section. I've identified a few data points that I want to hit hone in on, and I think we'll take them one at a time.

QUOTE - https://www.inparkmagazine.com/plasa-live-events-survey/

"45% took on additional debt to survive the lockdowns. Freelancers are faring no better, with low earners growing in number and top earners dropping by 78%."

Scott: That's interesting. First of all, I just want to clarify, this is Philip's summary of a summary. I just wanted to clarify that.

Philip: That is true.

Scott: Just making sure we were all listening, OK? So, they took on additional debt to survive the lockdown. Again, makes total sense. You can either shut down or you can borrow money to stay open, or stay active, which is probably more important. I feel especially sorry, we just talked about SeaWorld, the one thing that we've mentioned on the show before, but I just want people to remember is, when it comes to zoos and aquariums and any attraction that has an animal content, a living content to it, they don't just turn off like roller coasters, you can't just shut them down. You have to continue to maintain their care, maintain their water quality, et cetera, et cetera, et cetera. So, I would guess that a big chunk of the attractions that took on that additional debt had to do so in order to keep their most important assets, and I would like to call them either swimming or furry cast members, alive during a lockdown. So, it just totally makes sense.

When it comes to freelancers, I am surprised by this number quite honestly because, at least here in Florida, now granted this was '21, my personal experience is I've seen that turn around, and I have seen more and more, not just myself, but more and more freelancers like me who have either been brought onto projects as freelancers or have been tempted back into the corporate world as internal staff members for larger projects around the world. So, I think that you know we were joking saying that "2021 gosh, the end of '21 was a decade ago." But, in reality, things are changing that quickly. So, I think that that recovery has already started. November, December, of '21? Yeah, I could see where there was some concern. But I think that that has already started to make up for lost time. 

Philip: I agree with your point about that, it tracks with the conversations I have had with freelancers that are too busy, right now even, to take on more work, which we'll get to in a minute. Yes, Scott as well. But I also want to underline the thing that 45% took on additional debt to survive lockdowns. To me, what that really illustrates, I think one way to look at it is saying, "oh, look at how many people had to take on debt." The other way to look at it is to underscore that the impact has really been uneven in the industry, which is something that we've talked about quite a bit. But, to just illustrate that the three chains we've talked about in their earnings reports here--Disney, Universal, SeaWorld--being public companies, they have much better access to capital, and they have much deeper pockets and whatnot.

The smaller attractions, that Scott mentioned, really did, in order to keep animals and assets alive, they had to take on an extreme amount of debt. Which, ultimately, at on the other end of this, we're getting to the other end of this, that puts these attractions on very different playing fields where some have used the opportunity to build more assets, have deeper pockets, and still now have access more capital, whereas other attractions are still trying to even get back to a point where they don't have a massive amount of debt. So, it's very unequal. So, all this is showing me is that it underscores how unequal it has been. So, it's not like everyone has suffered equally is my big takeaway here.

Nodding, Scott's nodding yes. So, you can't hear that.

Scott: I think that's an interesting, very interesting, and logical take on the situation. I think that's assuming that there was an equitable distribution prior to the pandemic. Which, someone who owns an FEC does not have the same access, and never has had the same access to anything that a Disney, a Universal, a SeaWorld Parks and Entertainment, Cedar Fair, Paramount Parks, any of those, they've never had that. They have different expectations and different ways of measuring success.

It's interesting, because I always look at it, I guess I'm just the eternal optimist, when I was looking at it I was thinking, "I think it's great that, even during a pandemic time, there were lenders out there who felt that these organizations were valid enough to actually lend them money." Because, let's face it, banks are not known for being charitable organizations, they’re out there to make a profit. So, the fact that 45% took on additional debt, I kind of look at it from the opposite standpoint and that is, 45% were able to get loans to take on additional debt, which shows that that the financial world, at least to a certain degree, believes that there is a recovery, and I think we're seeing it now.

QUOTE - https://www.inparkmagazine.com/plasa-live-events-survey/

"A shocking 94% of manufacturers are experiencing delays in components, resulting in many being forced to source new suppliers and redesign products."

Philip: We have talked, also, about this, and in my reporting for the Network I've heard the same thing. I think my best example is from Zombie Skin saying that they expect the price of latex to double or triple in summer, and that's going to trickle down to their costs of makeup for actors for the Halloween and Christmas season when we have more actors in play. Also, at Gantom, we can share that we've felt the impacts of this, and it's a very tricky balancing act. I think we're in, paradoxically, even though we are smaller--again to look at the smaller/larger example, we do operate our factory directly in China, and that gives us more direct control, so we have less pockets and larger ability like that, but we have more direct control over the individual pieces. So, it makes it a tiny bit easier in some ways for us, but we are dealing with the same problems as well with delays in components, and even sourcing components, and trying to juggle all of these things together, and we have had to communicate that to buyers. So, overall creating a compounding problem, which is kind of mirroring the other problems we see you know, with gas prices and with the overall inflation in the economy. The delays in this cause inflation or causes delays or whatever, it causes strains in the supply chain, which then drives price up as demand can't be fulfilled, basically.

Scott: So, I want to look at this from two basic standpoints. If you are a park or a company that is hiring someone to do something or provide something to you, recognize that the bids that you worked on even six months ago, the cost of goods is no longer accurate, the timeline is no longer accurate. You can browbeat your vendors as much as you like, but that's not going to change the reality of the situation. So, I ask the larger companies, and I've been really, really lucky because every single company that I am working for is being very understanding in regards to this. We have then, in turn, from a creative standpoint, from a vendor standpoint, we've had to go back and reevaluate the design process, to re-evaluate the way things are being constructed, to reevaluate the magnitude of each element based on what is available. 

Now, the really smart folks, although I've been talking about it I can't really claim that I have put it into practice as much as I probably should, are the ones who have the multiple supply chains, are the ones who have already put into practice what we talked about probably a year ago on this show, and what I was trained during my USF certification for Post Crisis leadership: if you stay ready, you don't have to get ready. So, if you have multiple supply chains you don't have to search for that when one of them dries up. This, beyond a shadow of a doubt, really reinforces that, and I think we're going to see that's more and more of a challenge moving forward.

By the way, vendors out there, if you are doing new quotes and new bids to install things and develop hard goods or even soft goods--I've got a costumer right now who has just lost fabric coming in, it's just disappeared. Because again, all of the delivery resources are being pushed beyond their limits. It's the first time I have ever seen, from a supply standpoint, I've ever actually seen that one of the major delivery services, which I won't mention by name, has had a failure, they listed specifically as a mechanical failure, which has made it so they're unable to deliver the product. I don't know what that means. I don't know whether the box fell into the gears, and it got ground up. I have no idea, I've absolutely no idea. But these are the kinds of things that we are seeing over and over and over again. So, if you're doing new bids, extend your timelines. If you're making plans, make them sooner, earlier, make sure that, I would say add a month to your timelines if you're going to construct something new.

Now, the flip side of that is you may be saying, "Scott it's too late, that ship is sailed. So, what do we do now?" Well, then what you need to do is you need to get a good creative team to put together some new ideas and new ways of impacting your guests without utilizing those things you can't yet, all right? We all know staffing is a challenge, but you can always take something that was supposed to be animatronic and make it human. You could always take something that was supposed to be hard sculpt and make it soft sculpt. I always say that my job is creative director, when I'm hired to do that for a project, my job is to usher the creative content from what was approved to what the guests see. Sometimes there... well, always there are going to be turns and twists in that pathway. So, it's my job as a creative to come up with creative solutions to those problems. So, be willing, be able to be more flexible on both sides of that desk there, both sides of that contract and agreement. 

If you're taking everything internal, you know, make sure that you're looking at all options, because otherwise you're going to be spending too much, or you're going to be running too late, and you may have to find alternatives. That was a lot of words to say, just be aware that this is happening and plan for it the best you can.

Philip: I think, Scott, you mentioned it a few times in there, the staffing thing, that also came up in this report and I want to underscore that as well, because I think this is almost the bigger part. You know, component shortages are one thing, but this next part here: 

QUOTE - https://www.inparkmagazine.com/plasa-live-events-survey/

"In the lead up to the traditionally busy summer season, the live events industry is faced with a devastating skills shortage. Sixty-nine percent of companies report a lack of workers, particularly on-site roles such as engineers, technicians, crew, and riggers. These crucial shortages are forcing many to delay or cancel work, further losing revenue and opportunities. There is very little confidence that this picture will improve over the coming months, with the real risk of not meeting the increasing audience demand for live entertainment and cultural events throughout 2022"

Philip: This is a key point, we have talked about this before. We have also seen this come up in other studies that are in tourism-related spaces, that are not just theme parks. But the concept of demand shows every sign of going bananas again, when we get into the summer and winter and holiday event of 2022. If that demand also hits this wall of the skill shortage, you're going to potentially see inflation with staff prices, again. It's going to become critical to retain people that you do have and especially high school. So, that could be another really big piece that is coming into play. I want to just echo what Scott said with, let's sit down and make your plan. When you make the plan, you make the plan for thinking about, as Scott mentioned, shifting some of this stuff over because of lead times or component losses. Also, make that plan considering what you would have to do to maintain the skilled workers you have, or assuming you'll only get half of the people that you thought you were going to get.

Scott: Yeah, and a half again, so now you're down to 1/4. For many, many years we have heard theme park chains say their greatest asset is their human assets, the people who work for them. Now they can't just say that, they actually have to mean it, and they actually have to pay for it. Because you know, especially with these skilled laborers, there's only so many of those out there, and they're going to be at a premium. You're going to have to make certain that, not only are they well compensated, and I'm not saying pay them more than they're worth, I'm saying make certain that they are fairly and well-compensated. You will have very little negotiation room when it comes to price, because they will have three other clients that are looking to hire them, and you'll get into a bidding war, and that's not going to work. 

So, hopefully, if you've been wise in the past, you have built great relationships with these kinds of people, and you can continue to foster those relationships. Again, I'm not talking even talking about money at this point. Make sure they feel valued, make sure that they are getting some extra, you know those things that really don't matter to you like, "Yeah, we're going to give you free tickets to the park." That doesn't cost you a dime. It's one of those situations where you need to make certain you look at every possible way to compensate those people that you value, those people that you need to operate, and make it so that, as Philip said, people don't leave. That's going to be your real challenge. Again, you've got these skilled workers that have three or four different opportunities, and the moment something doesn't work in the first one they choose, they move on to the next, and by that time the second one is already more desperate and they're going to pay them more. 

So, it's one of those situations where those of you who have said for years, "our greatest asset is our people, or is our staff." Now you have to really, really defend that statement, and defend it in every way you can. 

Philip: I really want to underscore all the things that that Scott said about defending it, but I also want to put out there an unpopular opinion here, I feel like I'm always getting negative feedback for this opinion. But you might also, when you're rethinking about this, need to rethink the business model for some of the things that you offer. I think it will be increasingly difficult to have a business model that relies on the old model of employing people, where you just pay them the minimum you can get away with just because, I don't know... I had a lot of people tell me over the years in the industry, you know that they want people that that want to work there, that don't care about the money, that they just that want to work at the park because they believe in the park or believe in people, or they think it's fun or whatever. Work is work, ultimately, and I think that argument is not really going to fly, especially when you start to see compensation really outpaced. So, you're going to have to really rethink...

I would say start off by sitting down and saying, "does the business model for this event we're planning, or the seasonal thing we're doing for Christmas, does it work if we have to pay all of our staff twice what we're paying them now?"

Scott: To Philip's point, I agree with those people who say, "I want people who want to work here." But it's your responsibility as a park owner...

Philip: You have to make him want to work there.

Scott: You have to make them want to work there, you have to give them reasons to want to work there, and that has changed. I've been in theme park now for [mumble] years and it has changed from working in the theme park as being the coolest job in town when you're in high school or in college, to being, "oh, God, I can't get anything else. Well, I know XYZ Park is still hiring." That's because, internally, it has changed. The mentality has changed, even the stupid little things like the number of parties and outings and gatherings and perks, have dropped significantly because those are the things that are easy to cut on a spreadsheet. So, make sure that, I agree with Philip 100%, make sure that you work all of these changes into your business model, but make sure that you work the changes into your business model that include making you the employer of choice for your target demographic audience. Only you will know what that means in your market, unfortunately. It's a little trickier than just saying, "I'm going to pay everybody twice as much." I think it's a great start, but I don't think that's going to be realistic for everybody, so you're going to have to figure out other options. I think pay is going to be a starting point, but if you truly believe that you want people who want to work for you, then you have to make an effort to make your place of business the place where people want to work. That's just not going to magically happen, you have to work to make that happen. So, take that into consideration and make it part of your business plan, because it costs money kids.

Philip: Yeah, it does. Well, OK, so we talked a little bit about all of these areas and really looking at rethinking, going back to table and rethinking your business model everything in your offerings, doing a lot of rethinking. The report ended off by just saying that record demand was coming down the pipeline, which we already knew. But, going down the line of rethinking everything, our next story here has to do with two Cedar Fair Company theme parks, that's California Great America and ValleyFair. 

QUOTE

The parks are replacing their Halloween Haunt & ValleyScare Halloween events with the new "Tricks and Treats", a spooky-fun celebration of the Halloween season. Stroll through the three areas of "The Land of Tricks" to experience spooky, gross, and weird adventures - including the comic Zombie Clean Up Crew show, ghost stories, SkeleTONS midway games, Build-A-Scare Workshop, and more. Visit the three areas in "The Land of Treats" to experience a nostalgic fall festival - with campfire stories, acoustic covers of seasonal songs, pumpkin decorating, Jolly Rancher's Market, and a fantasy area equal parts Renaissance fair, fairy tale, and playful costume ball. All the offerings offer "activities to delight every witch and warlock...filled with silly shenanigans, not scares and gore." 

Philip: So, I do want to just put a little disclaimer here where King's Island also offered tricks and treats event a few years back, and apparently, that was very successful. So, it isn't like this isn't a new concept from the ground up, but this is a strategic replacement of the scary offering at a few of their parks. Before I let Scott take a whack at it, what I want to say is, some of the trends here, we've talked about this. There was even an episode a few, I don't even know, like in November? Where we talked about the broadening of the Halloween market and how there's opportunity in the family-friendly area for people to come in and do target family-friendly stuff. I think I'm not sure that's what this is, if we're being honest. I do think there is opportunity in the family-friendly area, I'm not sure, really, that's what this is. 

I think, to echo the conversation we just had, I think part of this is that there's more staffing that is required to do a scary Halloween event, and that could be a piece of this puzzle. I also think it's all the things we talked about last year, there's all the fights that broke out because people couldn't control the shenanigans of the teenagers, which is a security issue, which is a staffing issue, which is a nighttime issue. So, there's all these other things we've reported on in previous shows, which I think plays into this. I don't think it's as simple as them thinking the family-friendly market is the best market. 

Also, the last thing worth are out there, unless you are really good at doing family-friendly, it doesn't really make more money than scary. The reason is because kids do not drink, you know they're children, they can't drink, so that's a pretty big problem. I understand the overall point of trying to bring in a group of family and having, hopefully, more spend per person because you're doing things for your kids. But ultimately it isn't as profitable really as scary, because if you can bring a group of four college friends and they all buy a bunch of alcohol, that's more profitable than two parents and two kids.

Scott: So, I think this actually ties back to the floodgate story that we were talking about earlier. Because so many more people are coming back to the parks, I think they're testing this--and it is a test, I don't believe that anything is permanent. But they are testing this, it appears, so that they can make up lost time for their daytime family-friendly audience. They've decided to focus on creating, it appears--and it's not just Cedar Fair, because other entities are doing similar things or are trending towards the more family-friendly. Because again, I think they need to find additional ways to give people the experience in their parks, and not turn them away, not turn away their core demographic, for a seasonal event. I think all the things that Philips said are exactly right. Family-friendly events, unless they are done with the same amount of passion and fervor that the nighttime scary events are done, are less profitable, generally speaking--or let me rephrase that, they have been in the past. We're in a whole new world, I don't know. We could discover that there's a bunch of parents who are like, "oh gosh, we haven't done anything for our kids over the last two years. Let's spend money on absolutely everything. Let's do the build-a-scare, let's invest more money, let's get them all sugared up, and then make them feel like we really care about them because we really are out there doing wonderful things for them." Which, again, may turn out to be a very profitable event, I don't know. 

But, to me, this is just a way to spread out their core day market, and I see that happening... when you do a Halloween event, or you do any sort of seasonal event, you can either target the market that you have to give them more, or you can use it as a way to expand into a market that you don't normally target. This seems to be embracing their family-friendly market during the day. I don't see anything wrong with it, I wish them well, I hope it works out for them. I think we all need to pay attention, I think we all need to be curious as to how this is going to pan out. Because, again, this is a radical shift for these two parks, and hopefully they will have luck with it, and perhaps decide now we can add something scary again because the market is always going to be there for scary at Halloween.

Philip: The last thing I want to throw in is, I just think that we will have to watch it. I don't know their market very well, so I want to preface that. But I do think that overall, the thing we mentioned, we talked about family-friendly thing, is that there is more competition in family-friendly potentially coming from outside of our traditional spaces. Here, where I am, the malls are huge competition now for family-friendly, because they have taken their parking lots and set up... like literally everything is in this list was set up by a mall, and done really well, by a mall, in their parking lot. Here's the thing, I just think you're going to get competition from a lot of other people if you were going to this family-friendly space, and you're not getting your extra gate, which was a really big piece of the revenue model for scary. It's an extra gate, you can be open for twice as long, you can get a second gate. That's a big thing when you're trying to keep it just as one gate, and you're going to be facing competition from everybody that has space. I just feel like you're not really fully utilizing your assets in these types of things. But, we'll see, a different market.

Scott: Real quick, if you're in the market, if you are an independent haunt owner or have ever thought about becoming an independent haunt owner, or have a facility that could go scary and dark, if you are in the drive radius of either of these parks, get your scary stuff together because there's going to be a whole market of young people who are going to be going, "well, I don't want to do that, that's lame, I want to do something that scares the crap out of me." Which may be good for the industry as a whole, may open it up to a bunch of new people.