by Dennis Speigel
In my opinion the most important aspect in the planning and development of a leisure project is the “First Step” – the feasibility study.
During my time in the industry I have seen hundreds of projects cross my desk. The good, the bad and the ugly. Some have exhibited lunacy. Some have demonstrated enormous possibility. Except for the extreme cases, they all have one common denominator: they require proper analysis from the moment the idea is set in motion (when money is spent).
For the most part the projects that get off the ground are supported by a bonafide feasibility study. The study becomes the “road map” for the project. It charts the course for the planning that will follow. Yes, there will be deviation along the way. This is normal. However, assuming there are not incredible swings or major changes in the original concept idea, size, scope or type of attraction, the feasibility study, if properly constructed will provide definite guidance in several areas.
The study will break down the potential market by various demographic segments: age, income, sex etc. From this data, conceptual design information can be developed covering retail, food & beverage and entertainment capacities, including virtually all sizing aspects for essentials such as benches, toilets, walkways, queue lines, parking spaces etc.
Once the design data has been calculated, financial information will be estimated: departmental revenues, per capita spend, gross revenue, operating expenses and net revenues. Most important, a feasibility study will provide the project with the “net warranted investment” level. This is the number that dictates the cost of the project from the forgoing determinates, and I always tell our clients not to exceed this. I have seen many projects incur cost overruns either through idea expansion or overspending in construction. This can put a project in a major downward tailspin, from which it is difficult to reverse.
The following processes should typically be included in a top level feasibility analysis:
•Characteristics and trends of the leisure/amusement industry
•Site identification and assessment
•Characteristics of similar operating attractions
•Definition and analysis of local market
•Estimation of potential tourist support
•Determination of potential market penetration
•Estimation of attendance
•Preliminary physical planning parameters
•Revenue and cash flow analysis
•Internal rate of return analysis
Interestingly, the late Harrison “Buzz” Price was responsible for defining the process above during his legendary 50+ year career in the industry. It worked for Walt Disney, it can work for you!
The important thing is, if you are undertaking the development of a project, commission a feasibility study by a reputable organisation. It will be the most important money you spend. Even if it tells you the project is not viable, you will still be ahead. The time of “build it they will come” is over.
Dennis Speigel is president of International Theme Park Services (ITPS), based in Cincinnati, Ohio. ITPS is the industry’s leading, independent management/consulting firm, offering services including feasibility analysis, design/masterplanning, pre-opening operational planning, on-site management, sponsorship & marketing, executive search and business audits.