Funworld JULY 2007

Time of Transition

by Jeremy Schoolfield

Cedar Fair execs discuss how they began to merge two amusement park chains mid-season

Editor’s Note: This is the second piece of an exclusive three-part series focusing on Cedar Fair’s 2006 purchase of the Paramount Parks chain. Here Cedar Fair’s three top executives discuss their company’s transition period last year and their first full season with the new parks.

From an external, front-of-house perspective, Cedar Fair Entertainment Company had a very good idea what it was getting when it purchased the Paramount Parks chain in June 2006. Part of the appeal of the blockbuster deal to executives of the Sandusky, Ohio-based Cedar Fair was the similarities between the two chains in such wide-ranging areas as general maintenance and upkeep, the type of guest experience they provide, and overall feel of the parks.

As such, Cedar Fair officials say, when they took control of the five Paramount 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—on June 30, 2006, everything went well, all things considered.

“There were no big negative surprises,” says Dick Kinzel, Cedar Fair’s president and CEO. “It was a lot smoother than any of us thought [it would be].”

While it seems logical to assume taking over an entire amusement park chain mid-season would mean a logistical nightmare, Cedar Fair execs say it was exactly the opposite. There was more than a month between the announcement of the deal on May 22, 2006, and the actual turnover date, so in that time Cedar Fair was able to map out its management changes. Other key elements, such as operations and marketing, were already firmly put in place by Paramount, so Cedar Fair essentially “held on to the steering wheel,” as Chief Financial Officer Peter Crage describes it. Disruption to frontline employees and guests was minor or not felt at all, company officials say, because their goal was to maintain status quo. After all, CBS sold the parks out of a desire to move in a different business direction, not due to poor performance; as Kinzel puts it, the Paramount parks “are in great shape.”

The only significant problem that occurred during the remainder of the season was impossible to foresee: On July 9, just nine days after Cedar Fair took over, a support beam on Kings Island’s famed wooden roller coaster “Son of Beast” cracked, causing a train to hit a pothole of sorts in the track; the incident resulted in minor injuries to several passengers. The ride was shut down immediately, and a subsequent investigation determined the trains on “Son of Beast” were too heavy for the ride’s support structure. State inspectors deemed the incident a “singleevent failure” that the park’s regular and rigorous maintenance standards could not have caught.

The trains were heavy so they could maintain enough speed to make it through the coaster’s signature loop— the only inversion on a wooden coaster in the world. The loop was removed, however, so the trains could be changed to lighter versions, and the ride’s course altered to fill that hole before re-opening this summer.

‘Positive Surprises’
So while everything out in the parks went, generally, according to plan in 2006, Cedar Fair’s big surprises waited behind the curtain—and they were pleasant discoveries.

By acquiring new parks in the chain every few years, by 2006 Cedar Fair had inherited several different— and primarily antiquated—payroll systems. Prior to the Paramount acquisition, the differences between the parks’ methods weren’t that big of a deal, as each facility operated almost autonomously with oversight from Kinzel and Chief Operations Officer Jack Falfas (see sidebar on p. 34 for more on how Cedar Fair’s corporate structure and management has changed as a result of the Paramount purchase).

“When you double the size of your company, you have to make adjustments,” Kinzel says. “This forced us to get into the 21st century with technology. [Paramount] had a good team that’s going to guide us in that direction.” Cedar Fair execs were thrilled with what they found in
Paramount’s IT department, one of those “positive surprises” that makes the deal even sweeter for the new owners. Cedar Fair is implementing the
former Paramount structure throughout the company, everything from point-of-sale to season pass management to human resources—which goes back to the payroll situation.

Crage says HR is one of the ways the company is finding synergies between the two chains, something Kinzel and he promised in their pitches about the deal to Cedar Fair’s board of directors and investors. In adapting to the new system, Cedar Fair is in the process of moving its entire payroll operation to the company’s offices in Charlotte.

New for 2007 …
On Dec. 21, 2006, Cedar Fair announced it would spend $83 million in 2007 on capital and other improve ments throughout its newly expanded chain of parks. That’s a large number, but Cedar Fair is easing into its ownership of the five Paramount facilities and their respective waterparks. Kinzel says it takes his company between three and five years to fully assimilate a new property, so 2007 is about getting to know the new parks and their markets.

Atop the to-do list is determining what—if anything—to do with the brand licenses Cedar Fair inherited as part of the acquisition, as the company reviews its 10-year agreement with the Paramount brands and four-year deal with Nickelodeon (more on the future of these brands at Cedar Fair parks in Part Three of this series, coming in August).

“We like Nickelodeon and are exploring ways to do more with them,” Crage says. “On the Paramount side, we’ve questioned whether or not that has value to us, regionally focused as we are.”

For this season, at least, the Paramount name remains in place at the five amusement parks in a physical sense—on signs, trashcans, etc.—but was removed at the corporate level. In marketing materials and on its web site, Cedar Fair now refers to the parks as simply “Kings Island,” “Carowinds,” etc., dropping the “Paramount’s” prefix.

Another side benefit of the deal, Crage says, was the ability to look at another company’s business model and see the amusement industry from a whole new perspective. As a result, Cedar Fair is utilizing technology the Paramount parks already had in place to sell season passes, a push that extends this season to Cedar Fair’s “legacy” parks. At the same time, in keeping with its own model of driving front-gate ticket purchases, Cedar Fair lowered or held regular admission prices at all of the Paramount facilities. It also introduced junior/senior and evening admission discounts wherever necessary to standardize the Paramount chain with the legacy parks.

As for that $83 million, on the Paramount side $11 million went to upgrade WaterWorks, Kings Dominion’s free-with-admission waterpark; new features include a Tornado slide, a family raft ride, and a second wave pool (a similar pool also went in at Great America). Kings Island received $10 million in upgrades, including “Firehawk,” a Vekoma Flying Dutchman that was moved from Geauga Lake, Cedar Fair’s park in Cleveland, where it was known as “X-Flight.” Every Paramount park also received new live entertainment—including five shows at Kings Island—providing stopgap attractions in the short term while Cedar Fair execs determine their long-range major capital investment plan for the entire chain.

“We feel we have to spend between $80 million and $90 million per year to keep the parks up to our standards,” Kinzel says. “It’s a capital-intensive business. It’s easy to spend money, but the secret is spending it wisely.”

Coming in August: The final installment of FUNWORLD ’s exclusive series examines where Cedar Fair plans to go with its newly expanded chain over the next five years.