Beverage pricing: They're still not listening

djDaemon said:
No, I'm saying that you cannot use PAST data to predict FUTURE success, especially when you consider the FUTURE scenario has to navigate a recession, which the PAST did not.

What's so hard to understand about that?

Yes, actually you can. Cedar Point has always 'over charged' for pops when you compare them to the local 7/11. They are over charging now. Hm, how did they used to do when they over charge? Well, according to ebidta, per cap, cash flow, and operating they did well, but wait, wait, HOLD THE PHONE, DJdaemon here on pointbuzz says that they have just over stepped the line, at $5 a pop they are doomed!

Fact 1: CP's markup on soda is as high as it's ever been (since I've been alive, anyway).

Fact 2: CP has never had to endure a recession of this magnitude, especially one so locally-concentrated.

The above are happening at the same time. The soda is not the only issue, but it is representative of the larger problem, as I see it: increasingly poor value proposition in a region that is, more than ever before, cognizant of value. I question the long-term effects of such a problem.

And you can quit the little personal comments, Kyle. They're not adding to the discussion.

djDaemon said:
Fact 1: CP's markup on soda is as high as it's ever been (since I've been alive, anyway).

Fact 2: CP has never had to endure a recession of this magnitude, especially one so locally-concentrated.

Really? Because both of those were going on in 2009, and all of the statistics from 2009 point to damn good ebitda, per cap, operations cash flow, and operating income. Shoot, sorry, I used factual financial data, sorry.

djDaemon said:The above are happening at the same time.

And this is the problem (as you have been trying to say). The park should adjust in a situation like this just as Disney, and Im sure other companies, are doing. When the public is spending less, you can't raise your prices and expect positive results. Maybe they were able to get by in 2009 but should you really push your luck the following year by raising prices with the same, if not worse, economy? Heck, the prices are to high for a good economy.

And you can quit the little personal comments, Kyle. They're not adding to the discussion.

Quoted for Truth! Even I am getting tired of them.

Which statistics from 2009 were good?

Actual Financial Data
EBITDA: down 15.7% from 2008**
Per cap: down 2.6% from 2007
Attendance: down 7% from 2008
Net revenue: down 8.0% from 2008

True, their net income was up, but almost 2/3 of that income was "generated" by selling property in Ontario. Can CF do that every year? The answer, obviously, is no. So stop using that figure as an indicator, since it clearly is not.

**2009's EBITDA is actually down 22.2% if you exclude the CW land sale. So, if EBITDA is the gospel, how is that result good again?

I saw a family of three last Thursday by Los Gatos sharing a fountain drink with 3 straws. They did not look to be short on cash, were of standard midwestern U.S. build (i.e. 20 pounds overweight) and followed up their lunch with custard cones. Mgmt should have asked the physics students there that day to quantify the unsurmountable beverage-spending inertia caused by those drink prices.

Slightly OT: The $5 sundae from the custard shop was huge - so large we decided to split one. About 20 oz of soft serve, 3 oz of caramel, slathered in whipped cream and a cherry on top. It took 3 minutes of labor to make it and take the cash. Relative to the fountain drinks, that's quite a value.

@DJ:

Cedar Fair EBITDA - 33.6%
Disney EBITDA - 20.3%

Just because some stats are down slightly doesn't mean they aren't good. Cedar Fair, operationally, you know? selling pops, tickets, etc... beat up on Disney, the company you guys keep referring to.

EDIT - and Cedar Fair should have taken the sale of the land out of EBITDA, IMO. So I don't see your point.

Kyle2154 said:
Just because some stats are down slightly doesn't mean they aren't good.

Oh, I see... When the metrics (that you offered, by the way) support your argument, they're valid. When those very same metrics are used to break down your argument, they're not relevant.

Got it.

EBITDA is THE statistic, IMO, operationally. Net income, and stats you provided simply venture off track into including things like the debt, which has nothing to do with operations or pop prices. That helps you though, so you use it.

Got it.

If that's the case, how can you suggest things are so awesome if EBITDA - "THE statistic" - is down 22.2%?

Because, when compared to the Mecca, Disney, it is still overwhelmingly better.

I would rather us go from 35% to 33% than 15% to 18%. It's simple math.

So, you'd prefer to have your business decline by 6.1%, rather than improve by 17%?!? Stunning.

Is your name Rick Wagoner, by any chance?

Sort of. If I make a Million dollars a year, and my boss says I've got to take a 20% paycut down to $800,000 a year, I would still rather make that than the dude at Burger King who just went from $8 to $9 an hour.

Right, and that's totally relevant to your original point.

I believe so. Cedar Fairs EBITDA is still great, even if it is down. Don't believe me? Compare to Disney...

I'll take a great ebitda that is hard to duplicate over an ebitda of almost half that is up a little.

Perhaps the critical point at which they maximize profit is not obvious, but it shouldn't take a rocket scientist to see that CP is NOT doing well lately (based on per-cap, attendance & lodging). And yet, Disney - a more expensive competitor to CP - is doing just fine. Why? Because they adjusted (rapidly) their pricing in-line with the economic situation on the ground. Sure, maybe Disney didn't maximize revenue last year. But you know what? They got butts in seats (or rides), and those people left with a positive impression of their stay. I bet a $5 soda doesn't accomplish that.

Disney economics are different than those for CP so I would expect to see different reactions to the economic situation. Disney depends on the resorts for a much greater share of its business than does CP. Most CP visitors are there for the day and go home. Low occupancy rates kill Disney but do not mean as much to CP because of those differences. In addition, my guess is that the average Disney visitor was much less likely to be impacted by unemployment than the average CP visitor. Both entities took actions to maximize their own profits. But differences in their economics mean those actions are different.

CP has been increasing attendance?

Recently no. But if we are talking about Detroit's population being over a million, aren't we going back to at least 15-20 years over which time CP's attendance has increased?

GoBucks89 said:
Both entities took actions to maximize their own profits. But differences in their economics mean those actions are different.

Well, duh. I don't think anyone suggested that CP do exactly what Disney did. I'm simply stating that CP should do something in response. So far, they really haven't, and that is troubling.

But if we are talking about Detroit's population being over a million, aren't we going back to at least 15-20 years over which time CP's attendance has increased?

OK, yeah, I see your point. But in the context of this discussion (value proposition as conveyed through food pricing), I don't know that going back that far is analytically helpful.

Every one is expected to pay full price at the flag ship park.

To go back to something that Pete said...

Pete said:
If companies continue to have more confidence in the economy, I think CP will have a pretty good year as group outings sponsered by various companies are restored. That area of the business was pretty hard hit last year from what I have heard.

Group sales were awful all over last year. One surprisingly candid comment actually came from Holiday World, where they claimed that their group sales was down significantly last season. And yet, they set an attendance record, meaning that their walk-in traffic more than made up for the loss of groups.

What that tells me is that the people who visited their park as a part of a group had such a good time that when "The Company" decided not to host the annual picnic at the park last season, those people opted to go to the park on their own.

And that gets to the root of the problem, whether it is pricing, ride selection, height requirements, employee morale, customer service...whatever. Perhaps this is a metric that should be examined more closely: If group sales are down, what is the impact on total park attendance? Is total park attendance down by more, less, or the same as the number of people who aren't coming in groups? Are people who come in groups having such a good time that they will come to the park whether there is a group outing or not?

Again, I don't have Cedar Point's numbers. I don't claim to have answers. I know some things I would do differently if I were running the park, and this happens to be a beverage pricing thread, so I tend to point towards beverage pricing as a potential sore point for customers. I could say the same about parking, food, lockers, or shade trees. It all has an effect on the customer's experience. Let's focus on the real issue here: how does the park make sure that people *want to* hand over great huge quantities of hard-earned cash?

--Dave Althoff, Jr.

djDaemon said:

Captain Hawkeye said:

RideMan said:
Why is Cedar Point attendance declining?
--Dave Althoff, Jr.

The city of Detroit used to have over 1.2m people, now it's about 900,000. Having your #2 draw lose 25% of its population probably had an impact.

DING DING DING!!! We have a winner! :)

And now, for the 200-point follow-up... How should CP react to a situation where their primary market and existing customers' budgets are shrinking?

If you guessed "increase soda pricing", no points this round.

How about Encourage everyone from Cleveland to Detroit to stop using birth control?