Why should a company spend the money to build a theme park?

More than a decade ago, after Disney had reached unprecedented levels of success, CEO Michael Eisner told USA Today, "Disney isn't recession proof" noting that variables such as the price of jet fuel could have a significant impact on the theme park model.

I also thought this "blogflume" was a bit quizzical. The headline reads "Why should a company spend the money to build a theme park?" Whereas the lead asks "Why would somebody spend the money and ... build a theme park ..." Subtle difference, but still.

Agreed, especially given the example of the doomed Hard Rock Park in South Carolina. Some theme park plans are more sensible and viable than others though. Brings to mind the huge pipeline of over seventy five theme parks and attractions under various forms of development in mainland China, most of which are likely doomed to failure, as well as the efforts to develop the U.A.E. into a theme park destination hub despite the dubious attendence projections in the Emirates compared to their actual market. History repeats itself and the lessons of the recent past are ignored to the peril of those who believe they're the next Disney despite the likelihood of their becoming the next MGM Grand Aventures or Hard Rock Park.

Here's a relevant question: In order to be successful, how many guests will a new Universal Orlando park have to draw? And while doing that math, take into account how much it will canabalize the other three UO gates?

Based on the attendance figures for the existing major theme park in the Central Florida market, eight million plus guests per year. Whether those guests are from the existing attendance pool in the area or if the new theme park creates additional demand and increases the overall visitor numbers for the area is the part no one will know for certain until after the new theme park opens. All the players prefer making a bigger pie to carving up smaller slices of the existing pie, after all.

The biggest problem I saw with Hard Rock Park was their prices. Admission was more than Carowinds, their closest theme park competitor and that had a fraction of things to do comparatively. They had a few big coasters, but almost nothing for kids. Also, no discounted admission deal with local restaurants or grocery stores or soda vendors like their competition did. There weren’t many ads on TV in nearby markets (I live in Charleston, only two hours away and if I weren’t a theme park junkie I probably wouldn’t have known they existed.)

Lastly. No shade. SC in the summer is miserably hot and there weren’t enough places to get out of the blistering heat.

>>>What does a new theme park or attraction provide that fans could not get already in some other conveniently located park? If the answer is "nothing," then that new park or attraction does not satisfy any real need.

This doesn't just apply to theme Parks. I remember being very frustrated once when I worked at a Major Telco in the UK. The company was training us on a device it was about to start selling.

I don't even know how to begin to describe the device. The company took what was a VOIP phone that came with a touchscreen to get news and information, but removed the VOIP phone. That left what was effectively a table-like that ALWAYS needed to be plugged into mains power.

Supposedly customers would use this to check the news, or traffic, or the weather, forgetting that even the least-tech savy customer probably already had a device that not just replicated every function but one, but did those functions better - why would you just want to check directions when leaving your house? Your phone will give you directions En Route and on your return trip; Digital TVs here have on demand info services that will give news and weather, etc.

That left that one function I mentioned before. Electronic Photo Frame. Kodak sold those at a mere 1/10 of our price.

If your product, or park, has no reason to exist, it won't for long.

TH said “In order to be successful, how many guests will a new Universal Orlando park have to draw? And while doing that math, take into account how much it will canabalize the other three UO gates?”

A more relevant question is how much it will draw people away from Disney gates, and for how many days of their (limited) vacation time? With hotel options like Endless Summer and Cabana Bay, folks will be staying at Universal properties and traveling to Disney for a few days, rather than vice-versa.

Frankly though, I’d rather the many strollers and new-gen SW fans remain down the street. Disney can keep its rediculous and unfun levels of crowd!

DB: "Disney can keep its rediculous and unfun levels of crowd!"

I Respond: So you are confident a new UO park will never be as crowded (read that as the same as "as popular") as the Disney parks ... Okay.

I remember going to this park and wondering the same thing. There were so many wrong calls with this park, and having visited it a few months after it opened, one notion dawned on me: Why would anyone want to visit this again? Yes, the Led Zeppelin coaster was fun, although doing the pre-show in a poorly ventilated room made you sweat for the wrong reasons, and the Moody Blues ride was one of the best I've ever done. But beyond those attractions, and maybe the water acrobatics show, that was about all that was really interesting about the park even if you were a classic rock fan like myself. I couldn't tell anyone that the $50 admission fee was worth what I got from the experience and was worthy of their money as well. In the end, the Hard Rock Park gave you far little incentive to return than, say, any Hard Rock Cafe I've visited over the years, with their changing memorabilia and menus. But I'll bet another disaster like it will pop up again soon, with investors avoiding research and common sense over whatever flashy ideas win them over.

In the past here in the USA executives at some of the big companies looked at theme parks and thought "these places are crowded, expensive, and have little to no competition, so therefore must be a great business." This led companies like Marriott and Paramount to get into the business and...well obviously it wasn't as lucrative as they thought. The insane amount of labor, having to be closed more than half of the year, the cost of parts for the rides, and needing constant capital expense are totally overwhelming.

Because of the massive costs of building and running a park I think the only way a new park could succeed nowadays is to do it like Holiday World where they have slowly expanded over 25 years and never took on too much debt. It takes a long term perspective to make a park successful, I think that's a big reason Kentucky Kingdom is doing OK now under Ed Hart's leadership and tanked under Six Flags ownership.

Companies are definitely smarter now than they used to be, most companies don't just make decisions on executive whims anymore they do lots of research and data analytics. Buzz price wrote in his book about his experiences with Javanovich and how hard headed he was, when Buzz said your Sea World Texas park will get about half of what your projecting in attendance and Javaovich got personally insulted and fired him. He was adamant the park was going to instantly going to be a profitable and made it the biggest Sea World park in the world. They ended up going broke and sold the whole company to Busch for scraps.

Dear Comcast,

As you approach your decision whether or not to build a fourth gate and try and compete with and poach from Walt Disney World's seven gates, please, please, please remember that because "... of the massive costs of building and running a park" ... "the only way a new park could succeed nowadays is to do it like Holiday World where they have slowly expanded over 25 years ..." This is especially important considering that history indicates that UO will likely be passed on to a new corporate owner in .... 5, 4, 3, 2 ....

/\ Sorry I should've clarified, when I say "new park" I mean like a normal park, not a park owned by a mega corporation at an already massively popular destination. Under investing in a park that is going to be instantly popular brings its own set of problems (DHS/DCA/WDS). In that case I think Comcast needs to spend the money up front and make sure the park is really spectacular or it will get poor reviews and people will think it's not worth the money.

However the long term perspective always applies an i'm not entirely convinced Universal building another park, especially based entirely around preexisting IP, is going to work out as well as they think it will. Universal has been hugely successful the past decade because of Potter and literally for no other reason, everything they've added since then has been mediocre to borderline terrible. If they build another park with the quality of the attractions they've been building lately they will find themselves with a lot of work to do to clean up the mess. The quality of the experiences Disney has been building recently are far superior to the ones Universal has been building in every way because Disney has been taking the time to do it right. IMO the quality gap between the two has gotten even larger recently than it ever has been.

the_man: "I will say though i'm not entirely convinced Universal building another park (especially based entirely around preexisting IP) is going to work out as well as they think it will."

I Respond: Especially considering that said park will not likely welcome its first guests for about five years (2024?!) And (again) history suggests by that time, the UO parks will have a new corporate overlord.

Since the not so secret, constantly "leaked", officially unannounced and unconfirmed wink wink Universal Orlando Resort expansion is all over the local media in Orlando today for more public filings with Orange County, there's a new thread here about the reacquired acreage likely to become Universal's Fantastic Worlds. Probably the better thread for this conversation since adding a third gate to an existing theme park destination resort in the largest market in the industry to compete with the largest theme park destination resort in the world and its 4 existing theme park gates is really a very different thing than licensing someone's intellectual property to put an expensive regional, seasonal theme park in a market with no natural audience. Hard Rock Park story is a text book lesson on how NOT to develop a theme park. Not the first nor will it be the last such lesson. But, really, a different scenario in every way compared to the two cable industry giants that consider their respective theme park businesses as cash cows, that are investing over $23 billion each in their theme park destinations. The theme park wars are global and the more apt comparisons to the Hard Rock Park debacle are not about well oiled machines or expanding established success stories.

I extensively covered the opening of Hard Rock Park, and with the benefit of hindsight and a little more business experience, I think what ultimately led to its demise was hubris. The designers of HRP were the same ones that designed and built IOA, one of the most successful theme park debuts in history (in fact, a lot of the employees that worked at HRP were stolen away from Universal Orlando, and then found their way back to Florida after its demise - my Led Zeppelin coaster shirt still elicits some conversations from UC employees 10 years later). The designers were so confident that they were going to succeed that it didn't matter what anyone said regarding their projections and constructive criticism provided, they were going to do things their way because of IOA. I recall the initial tour of the park that I did with the designers and creative team, and while I never really picked up on it at the time (call it youthful exuberance and naivety), they were more like a guy showing off their Ferrari to their rich buddies than a proud parent beaming about the accomplishments of their child. The first day's tour started at the Whammy Bar (ultimately became kind of the Club 33 of the park) where the designers were more eager to show off how clever and smart they were with inside jokes at every turn instead of simply letting their creation speak for itself. It was a level of snobbery and elitism that just didn't connect with the target audience, and while I think a theme park needs to have multiple levels of detail to be successful, you have to consider your audience before going all-in with a theming strategy that will simply skim over most guests' head.

I think park designers learned a lot from the Hard Rock debacle. I also think it's wrong for analysts to blame designers for flawed estimates, because if that's what they needed to say to get the necessary funding for their project, then I doubt anyone else in the same position would have not done the same thing to make sure their dream made it off the drawing board. Sure, they were defensive about criticism, but if placed in the same situation, I probably would have made sure the narrative was as positive as possible (look at all the number fudging and "fake news" that buzzes around today - giving somewhat unrealistic attendance projections seems like small potatoes compared to today). Perhaps the HRP failure is why Disney has been hesitant to open another park, and why Universal appears to be treading very carefully in their new development. Marketing a new park takes a lot of chutzpah and confidence, which HRP designers had in spades, but getting fans to take the bait is increasingly more difficult. For as much innovation and expansion that has occurred in the theme park market, tourists are still very habitual. Trying to break visitors' traditions and routines is a difficult and expensive proposition - why I think DVC is the cornerstone to WDW's ongoing success. I do think Universal is taking the right tact by building hotels and resorts to draw more visitors east up I-4. That's really why HRP failed. It's location was off the beaten path (near the airport on the outskirts of town) and far from where tourists were staying or where they would drive during their stays. Officials constantly touted the potential fanbase for HRP, but failed to consider that when visitors have an extra day on their schedule, there was a cheap and attractive option steps away from their hotel (the beach), and even if they were tired of the beach, most visitors were going to drive past hundreds of other alternatives (mini golf, arcades, shopping, restaurants, go carts, etc...) before reaching HRP. By pulling more guests closer to their parks (and future park), Universal is not taking the "build it and they will come" approach - they're instead drawing future guests in before giving them more of what they want. It's a very different approach, and one that looks to expand and/or re-balance a mature market versus trying to create a new one.

There are definitely some lessons to learn from Hard Rock Park, but I think it was a completely different animal than what Universal is trying to do.

@the_man - For a "destination" park, which is how they were trying to market the theme park, it was "off the beaten path" compared to where most of the hotels and tourist attractions are located (that's why the outlet mall that was used as base infrastructure for the park went under). When destination theme parks have opened in the past, they have been supported by hotels nearby, making sure that anyone visiting the area is close to the action. That simply wasn't the case with HRP. I would agree that many theme parks are by nature "off the beaten path", but a lot of those are regional parks, drawing much of the attendance from locals, not tourists. HRP was marketed as a tourist destination in a tourist town (probably smart in the long term, but not so much in the short term to build a regular base of fans for continuous revenue). They had one year to get it right due to financial constraints, and the combination of poor marketing and an ill-timed recession made it next to impossible for HRP to ever succeed.

/\ For those wondering why he has a double post I apologize I was trying to make some grammatical edits to my post and accidentally deleted it lol

At the current rate of expansion of the theme park resorts in Orlando as well as elsewhere in the world, I think that the idea of Disney and Universal cannibalizing their own parks' customer bases as well as poaching customers from each other is not supported in the least.

Here's a quote from the 2015 TEA/EACOM report, "Visitation to Orlando has reportedly more than doubled over the past 20 years, growing from 32.4 M in 1995 to 66.1 M in 2015." During that same period, the world's population went from 5.751 B to 7.383 B, an increase of 28%. What did happen during that period is that both companies added theme parks to their existing resorts and expanded or updated the theme parks that were already existing.

So, the takeaway from all of these numbers is the fact that as long as Disney and Universal expand their theme park offerings in a rational manner, they will create new customers and/or encourage existing customers to make more frequent visits to their parks.

And TH Creative is just plain trolling when he throws out that supposition that the Universal parks might be sold to a new owner before the 4th gate in Orlando is complete. The Disney Corp and Comcast/NBC Universal are far too similar in their market positions to just think that Comcast is just the latest in a string of owners. The synergy that Comcast derives from owning the Universal parks just as Disney derives a great deal of synergy from their own park division makes Comcast look to be the owner of the Universal parks for a long time.

Russell "Perhaps the HRP failure is why Disney has been hesitant to open another park". I hope you're not talking about Anaheim, because not opening up the third park is probably Iger's biggest mistake and lost opportunity. Sure, they can still build it, but it will take maybe a decade with oppressive crowding in the current parks. On another point, being close to the action certainly didn't help Anaheim Garden Walk, it was close enough, but suffered from not having an entrance on Harbor Blvd. directly across from Disneyland. Location and accessibility are both important.

Thank you Tim Hillman,

People seem to forget that Comcast tried to acquire Disney in a failed hostile takeover attempt a little over a decade when Disney was at a very weak moment post-Eisner and subsequently Roberts has been trying to stick it to Iger ever since.

Yes Comcast did consider spinning off the theme park division until it realized how much it was contributing to it's annual bottom line and thus have not only kept the theme parks but more been willing and more importantly able to invest in the theme parks unlike some of Universal Studios previous owners.

Has it really been almost 11 years now?

Back then I was still living in Ohio and a more frequent TPI visitor. Now I live about 15 miles south of the former Hard Rock Park site. It's a sad sack of a place right now, with some sad stories from locals to boot. I attended and covered the park on this site as well during its one and only operating season.

I remember a park that still had some growing to do, but it certainly had what would appear to be a great start. There was attention to detail, whimsy and fun, and a few great attractions that most unfortunately didn't get to experience. Entertainment and food was of good quality, and the place had ambience. It can be up for debate whether or not the music theme was a problem with regards to design. I don't think it was. I think it lent itself just fine with the right minds behind it, and I had been to lesser places that had much higher attendance numbers. There were creative minds at work here that could have made some great things. This wasn't a design problem.

Knowing what I know about the area, you'll never convince me that the Myrtle Beach area is a bad location for a park. It has the same market size every year as just about any other area in the US. 17 million tourists visited last year and half a million people now live within an hour of the former site. If you go a couple of hundred miles out, that population center (plus their tourist economy) gets even larger. Tourists come here and drop tons of money on far less impressive attractions ($30 for the wax museum, $25 to see some alligators...etc), and that season now stretches beyond the summer. Today, Horry and Georgetown County populations are skyrocketing and thus developing the economy into a more traditional one. 2008's economy was more seasonal, however the tourism attendance and spending was still comparable to now. This wasn't a location problem.

There were two big problems...money and leadership. When you look back at the sub par marketing campaign, the overpricing, the overestimating of attendance numbers, the overspending for licensing..etc, and the failure to adapt when things weren't going well, it appears that they thought they were above it all and didn't need a plan. I would have thought that someone who had previously operated attractions in the area would have known about the importance of cross-marketing with other attractions in this market. National marketing frankly wasn't necessary. They didn't need to bring people into the area, they needed to bring the people already coming to the area to the park. The pricing was too high, from the parking to the tickets to the food, another example of the hubris of the owners...only amplified more by the lack of discount programs, coupons, and promotions used by every other attraction of all sizes in the area. They should have resorted to drastic means to fill the park, especially in light of the low attendance and turbulent economic time. Had their attendance numbers been better, their balance sheet would have been better, and the park might have had a chance to get some more capital to keep it going.

Even with bad financials and poor years, things can be fixed and the whole thing bounces back. That is unless one of the worst economic crashes of all time happens at the worst possible time. When that happened, there was no financing to be had anywhere at a time when this project needed it the most, and there was nobody in charge that could keep it afloat. Without money, plans and design mean nothing.

The massive real estate market here was ridiculously speculative at the time. A lot of people were in it and got hurt, so the crash hit the area particularly hard. Hard Rock mgmt also burned nearly all of the local and regional vendors and businesses it dealt with, leaving a sour taste in the mouth of the area that still sticks in some ways. This along with the bad economy and lawsuits fatally hobbled the attempted Freestyle Park reboot the following year. I found it hilarious when the former Hard Rock execs that had caused this disaster had the stones to sue the Freestyle Group.

I do disagree with some of the writer's assumptions about the area, demographics, and economic analysis. While there are too many beach stores and vape shops, and some mighty interesting characters around, the redneck riviera moniker just doesn't stick anymore. Most people who live here are from either the northeast or midwest, there are more jobs (not just seasonal) here than people to fill them, and the economy continues to grow into a more traditional one less reliant on tourism. Vice does do a good job of tying the speculative economic boom of the time to the type of financing they obtained and the attitudes behind the project. Everything seemed invincible and destined for success no matter what. The park management's decisions and strategies reflected just that sort of attitude, and the people with the money simply didn't ask enough questions. The result is not a successful flourishing park that would have turned eleven this year and easily been the king attraction in the region, but a giant empty overgrown space...Located in the dead center of one of the fastest growing areas in the United States. Opportunity wasted.

Soon enough the site will become something else. There's too much growth here for it not to happen. There is talk of an entertainment complex, amphitheater or arena, more condos (please God no), an RV resort, among other things.

The answer to the original question of why build a theme park lies within the success and longevity of the industry itself. Done properly at the right time in the right place and left to the right people to operate, they will be successful because people love them. I hope that someday, someone will try here again.