Funworld AUGUST 2007
Let’s Dance
by Jeremy SchoolfieldEditor’s Note: This is the final segment of an exclusive series on Cedar Fair’s 2006 purchase of the Paramount Parks chain. Here Cedar Fair’s three top executives discuss their vision for a radically changed company.
In January, Cedar Fair Entertainment Company’s three top executives
were in Cleveland to accept a “Deal Maker Award” from the local
chapter of the Association for Corporate Growth, in recognition
for the Sandusky, Ohio-based company’s monumental $1.24 billion deal
in 2006 to purchase the Paramount Parks chain from CBS Corporation.
As his business was being introduced, Cedar Fair CEO Dick Kinzel overheard a comment that was both funny and telling. “I heard some guy say, ‘What’s a Cedar Fair?’” Kinzel recalls with a chuckle. “In Cleveland, Cedar Point means something, but Cedar Fair doesn’t.”
In one sense, that is a part of Kinzel’s answer to the question of what will happen to the former Paramount parks as they assimilate into the Cedar Fair chain. Kinzel and his chief operating officer, Jack Falfas, are of one accord in the esteem they hold for their five new parks—Canada’s Wonderland in Toronto; Carowinds in Charlotte, North Carolina; Great America in Santa Clara, California; Kings Dominion in Richmond, Virginia; and Kings Island in Cincinnati , Ohio . Make no mistake: Kinzel and Falfas have rock-solid fundamental practices for how an amusement park should be run (see Falfas’ “Four Cornerstones” on p. 54, for instance), but their goal isn’t to turn these newly acquired facilities into clones of Sandusky’s Cedar Point or one of the company’s six other “legacy” parks.
“Every park in our chain has its own personality, its own complexion,” Falfas says, thinking of the wide, coaster-filled midways of Cedar Point and the small pathways snaking through Knott’s Berry Farm, or the Eiffel tower and fountains at Kings Island and the renowned stunt-diving show at Canada’s Wonderland. “Cedar Point is Cedar Point. I wouldn’t want to see us institutionalize that. There’s something special about Cedar Point, as there’s something special about Kings Island, Knott’s Berry Farm, and Canada’s Wonderland. They have these personalities, and I’m such a believer that that’s going to be the secret to our success. We’re not going to have one homogenized park in different cities; they’ll retain those values.”
But that’s not to say the two chains can’t benefit from each other. As detailed in the July issue of FUNWORLD, Cedar Fair officials relished the opportunity the acquisition provided to look behind the scenes at a completely different business model and examine a new perspective on the industry. In a more practical sense, they are also particularly excited about the Nickelodeon and Hanna-Barbera licenses they inherited as part of the Paramount purchase. Kings Island’s award-winning Nick Universe, which debuted in 2006, provides a model for Cedar Fair to follow in its legacy parks, they say.
“The Paramount parks have a reputation [for providing] great family entertainment, and the legacy parks at Cedar Fair have the reputation for being high thrill,” says Kinzel. “If we can integrate those two, I think it will be a great marriage. That’s certainly our plan.”
Certain practices, as well, Falfas says, have already been standardized across the chain to maintain continuity—such as height requirements on rides, hand signals for ride operators, or the striped referee’s shirts game operators wear, to name a few. But Kinzel matter-of-factly recognizes splashing the name “Cedar Fair” all over the former Paramount parks probably wouldn’t move the needle in these new markets. Instead, the company simply removed “ Paramount’s” from the five properties and left the core names alone.
“If we said ‘Cedar Fair’s Carowinds,’ it wouldn’t mean anything to anyone.
Outside of Sandusky, Ohio, I don’t think anyone even knows what Cedar Fair is,” Kinzel says. (For the record: When the partnership was formed in 1983, the name came from the two parks it owned at the time, Cedar Point and Valleyfair.)
“Our challenge is to maintain the quality and cleanliness that the Paramount parks had,” Kinzel continues. “If the people in Charlotte or Richmond or Toronto leave the parks knowing that they had a great experience in a clean, safe environment, they don’t care if it’s Paramount or Cedar Fair. That’s all I hope for, because if they don’t have that experience, there are other options for them to spend their discretionary dollars on. We’re in competition for that discretionary dol lar, from Xboxes to movie theaters to baseball and football games.”
Capital Improvements
One core business model Cedar Fair
and Paramount Parks shared was a commitment to capital reinvestment. Cedar
Fair will be spending approxi mately the same amount on its new parks each
year as their former owner, Cedar Fair Chief Financial Officer Peter Crage
says, but the two chains differed in their approach to capital, namely in
theming. Paramount believed in the recognition value of a highly themed
coaster, while Cedar Fair prefers to let the ride’s elements provide
the theme and thus save money on the license agreements required of a ride
such as Carowinds’ “BORG
Assimilator.”
Kinzel says Cedar Fair will spend between $80 million and $90 million in annual capital improvements across the chain for the foreseeable future. He says the new parks will not cannibalize dollars previously earmarked for the legacy parks (prior to the acquisition, Cedar Fair was spending, on average, between $50 million and $60 million in annual capital expenditures). Cedar Fair’s original facilities will continue to receive the same amount of attention they always have, and on the same schedule; the former Paramount parks will be worked into that rotation. Kinzel highlights Cedar Point, Knott’s Berry Farm, Kings Island, and Canada’s Wonderland as the “big four” in the chain that “justify mega-capital dollars” and new attractions on a more regular basis.
And one thing is certain: Roller coasters will be a foundation for future growth at the Paramount parks, just as they’ve been for Cedar Fair’s original facilities.
“We’re not going to do away with what brought us to the dance, and that’s thrill rides,” Kinzel says. “Going forward with the Paramount parks, we’ll put rides in there that will fit with their markets. If they need something high, we’ll put something high in there. If they need something fast, we’ll put something fast in there.”
He’s quick to point out, though, that the Paramount facilities offer more chances for growth than just “a concentration on thrill rides”—namely, in the land several have available for development. Kinzel and his advisers are pondering a move into more accommodations at the Paramount facilities, following the lead of Cedar Point’s successful Hotel Breakers and Castaway Bay, among others. “We’re not hampered,” he says. “With the exception of [Great America in] California, the other parks have a lot of land to grow.”
Debt Load/Distribution
As discussed in the June issue
of FUNWORLD , Cedar Fair executives aren’t exactly comfortable with
their company’s new
five-times debt load, but they were even less comfortable with
relying too heavily on two parks— Cedar Point and Knott’s Berry
Farm— to drive the company’s revenues and cash flow. Nevertheless,
Cedar Fair increased distribution in each of the past 20 years for a total
of $1.2 billion, and Kinzel has no intention of allowing that practice to
slip as his company integrates the Paramount chain over the next five years.
“The goals are simple: From a financial standpoint, I want to reduce debt and maintain the distribution,” he says. “[But] any excess money we have is going to reduce debt. There have been some years where we’ve increased distribution 8 cents or 6 cents. It’s going to be very minimal increases in distributions the next four or five years, as we try to get that debt load down. We have no intention of decreasing distribution, but it is going to be conservatively increased.”
“We know we have a large debt, and we don’t want that debt to cost us distributions to our unit holders,” agrees Falfas. “We want to keep to a very disciplined capital plan.”
“Dick’s philosophy is straightforward—he sets the tone,” Crage says. “We’re going to pay down debt, maintain distribution, and run safe parks that are fun to go to.”
For Kinzel, it comes down to one simple word: “Pride.” Pride in what he and his team were able to accomplish with the Paramount deal, and pride in what he believes will come of it.
“With that pride, there’s a new challenge,” Kinzel says. “We’re heavily leveraged, but to look at that map and see you’ve got parks in just about every major market in the country … I haven’t been this excited in years.”
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