Adding Value to Out-Of-Home Experiences

January 16, 2011 No Comments

The theme of our industry report for an upbeat yet highly competitive 2011 is “Adding Value to Out-of-Home Experiences.” Combining food with experiences is one that many forward-thinking businesses are focusing on. Single anchor entertainment facilities have been expanding and adding additional attractions and beefing up their food and beverage components for the past several years, but over the past year obtaining financing has been challenging (see below how financing may also be improving).  Bowling, skating, restaurants, movie theaters, retail, and just about every out-of-home leisure business is still looking for ways to expand their services and offer their customers added value.
This trend will continue opening up the market for our industry to increased expansion. Amusement games and activity suppliers/vendors can help children’s/family places add experiences to their core businesses. These include health clubs, fitness centers, pre-schools, hospitals, museums, day care centers, car dealerships, churches, country clubs, libraries, and the list goes on and on.

We Are About to Witness a Life Style Change

Companies like CNL Lifestyle Properties (a real estate investment trust) are turning a ski mountain into a year-round resort.  Seven Springs Mountain Resort in Seven Springs, Pa., may have been one of the first to start this trend several years ago, and the company continues to add new services and attractions.  Hotels are developing their properties to become mini-vacation stays;  Landry’s and Walmart are also making strides in this direction.
Euro Disney has just unveiled a new vacation destination concept called an “eco-resort.” The Disneyland Paris resort will be expanded to included mixed-use Villages Nature with interactive eco-friendly nature experiences that include boating, hiking, walking trails, horseback riding and organic farming. The resort will be located around a geothermal lagoon and also include a waterpark.
Other new life style businesses are cropping up.  Combining “spinning” and yoga is a good example.  Spinning is indoor biking with music playing, and afterwards you have a yoga session.  Retirement facilities are adding active gift shops and learning centers, as well as activities and other eco-friendly nature experiences.
With the mid-term elections over, small business should get a breather in Congress for a while with new regulations slowing down a bit as the lame duck Congress has plenty on its plate to accomplish in the near future. Recently signed into law, the Small Business Jobs & Credit Act of 2010 could help some small businesses in our industry over the next year.  The $30 billion lending program is designed mainly to provide incentives to small banks to borrow money at 1 percent and lend this money to existing small business owners whose collateral for loans (their real estate holdings and other investments) have taken a nosedive during the recession and therefore cannot easily obtain credit to expand their businesses. The government is only going to provide this money for one year, so this is only a temporary Band-aid for small business. There is also a State Small Business Credit Initiative available ($2 billion) for some states for new businesses that help create new jobs. The kicker here is for a state to receive a grant, the state needs to prove that it is lending $10 in “new loans” for every $1 it would receive from the government. This will not be an easy task for many states to comply with due to the large deficits that many states now have to deal with in 2011.
The best part of this Act may well be the increase in the loan size maximums of Small Business Administration (SBA) 7(a) and 504 loans from $2 million to $5 million and the SBA Express loan maximums from $300,000 to $1 million.  It should be noted that SBA is a federal guarantee made to the primary lending bank(s) but it does take time, and of course there are always strings attached.
The good news is there are already several new industry projects ready to move forward for first quarter 2011 with more on their way. (Amusement Entertainment Management had six new openings taking place this past December with three scheduled for January-February.) We believe that 2011 will be better than 2010, and that 2012 will be better than 2011, and so on over the next five years.

IAAPA Attractions Expo 2010

Many suppliers and attendees of IAAPA 2010 are on board with this trend and the amusement entertainment industry is in a unique position to capitalize on it.  The “buzz” at IAAPA was about the industry heading slowly upwards – more positive attitude, cautious optimism, mid-year elections a plus for small businesses, more financing available, more new and expansion projects moving forward, pent-up customer demand for new attractions and experiences.  Len Solad of Rides 4U summed it up best, “Amusement parks have not spent money on rides in a while and they are now starting to place orders again, like having to get new clothes.”
Depending on which exhibitors you talked to, about 20 percent said that they had their best IAAPA show ever, while others said it was just OK. This is typical for any show. I (Frank) got to speak with at least 100 exhibitors who said that they had written a lot of new business, but in my case most of those I spoke with came to my Comfyland Booth, and these are the exhibitors who are interested in learning new things about the industry and make time to walk the show floor.  I (Scott) visited hundreds of exhibitors at their booths and reported that far less said that they had their best IAAPA show ever, but concur that a large majority said that IAAPA 2010 was OK.
We both see a reason for the difference in reporting.  Some exhibitors just sit in their booth, with arms folded, looking bored.  A few were seen reading magazines/books.  This is not an inviting atmosphere and it was noticeable that attendees would quickly look away from these booths and continue walking. Other exhibitors, who know how to attract people to their booths and how to sell, always had attendees in their booths. The exhibitors who left their booths prior to show hours and during slow periods and walked the show floor, just happened to be the same individuals who possess the energy and drive (Type A personalities) and who reported that they had their best IAAPA show ever.  Just something to think about for the future.
International attendees appeared to be down from previous IAAPA shows.  Scott has been going to IAAPA since 1978 and reported that there was less foreign traffic. The reason is that there are now more shows around the world and international travel to the United States has been down during the worldwide recession. Frank noticed much more international traffic from Canada, Mexico, Central and South America, and the Caribbean.  Our take is that the mix of international traffic has changed but it depends on which countries we are speaking about.
Hot topics at IAAPA were:  how social media can increase business; praising Trio-Tech’s smaller footprint 4-Seater XD Theater with greatly reduced price tag; the many great games and attractions that were introduced; and a new association that was formed called the National Association of Family Entertainment Centers (NAFEC). It was reported that this new group already has over 250 members. (IALEI had over 1,050 members when it was dissolved in 2009.) Just as minor league baseball teams feed into the majors, this group is good news for the IAAPA Show. As IALEI did in the past, NAFEC will drive new exhibitors and attendees to the IAAPA Attractions Expo and stimulate business for the industry as a whole. -

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