Park Power Play: Herschend's Bold Acquisition Reshapes the Theme Park Landscape

0:00 Front of our studios in Los Angeles and Tampa. This is green Tag, a theme park in thirty. I'm Philip. I'm joined by my Cohastcott Swinson, a Scott Swinson creat development. On Green Tag, we recap the top news from theme parks each week and try and explain why it matters to you or should matter to you. And this week, Scott, there might be a new third place challenger in the US theme park world. Yeah, this is big news. This is pretty exciting. This is pretty exciting. And I will say when we when we, after you explain a little bit more. I'm not as surprised as I think some people are. But yeah, I'll let you. I'll let you because you're because you're so very good at it. I'll let you sort of share with us the parameters and uh and then I'll yamor on for a while. Oh good, good, well, normal normal way we do the show.

0:44 Yeah, yes, yes, good. I'll need a coffee break when Scott's theamorine, So that's perfect timing. That's why I took a sip at the beginning of the show. So great Hershan So for those of you that have not heard hershand announced a definitive agreement to acquire all of Palace Entertainment's US entertain properties Hershend. Just so you know it, Hershend operates Dollywood, Silver Dollar City, and Kentucky Kingdom and they're going to add more than twenty amusement parks, water parks and fec with this acquisition. Hershend is committed to ensuring a smooth transition for everybody. And here's the thing, just a note here. You know, this is coming right after the Six Flags nonsense merger thing going on there, and whereas six Flags, it's a I think dollar wise, it's a larger merger, and of course that's a merger versus an acquisition, but that's much larger. And those are both public companies. So we have all sorts of information on Six Flags. With Herschend and Palace Entertainment, these are private companies, so we don't have as much I guess disclosures when it comes to financial stuff. So we don't have a number here, like a financial number that was released about the actual acquisition amount. But there's a lot of differences. I mean, while on its surface, I think this looks like very similar to what happened six Flags, there's a few differences beyond the fact that it's public versus private companies, but one is kind of what Hershin is saying immediately about it, which is that they're not going to change anything in the short term, which I think is a great idea, but also indicative of the

2:16 difference here because when you have six Flags that's a public company, you have a lot of people, shareholders, the general public, the media, a lot of people who are scrutinizing it that are wanting to know what's going to happen. So I think they might need to be a little bit more aggressive versus in this one where Hershing can kind of take a more measured approach. So they said that no immediate changes are planned the daily operations, and they listed in their press release they even put out a list of things that they're going to do in the coming months, and they're saying they're going to prioritize supporting the new employees with training resources and opportunities aligned with Hershin's people first culture. They're going to maintain continuity and guest experiences while exploring enhancements that align with Hershin's commitments to high quality entertainment and they're going to proactively communicate with employees, guests, and local communities as a transition progresses.

3:03 Just a few more details here. I think a lot of people are thinking, as we said at the top of the show, that this is going to be potentially them vying for who's going to be third place or fourth place. Right we got Disney, got Universal, six Flags, and now potentially Hershin being third or fourth place. Before the acquisition, Hershin was estimated to get about fifteen million annual visitors. With the acquisition, people are estimating that's going to be at twenty million, which is really close to six Flags last that when we report on last time, which is six Flags is like twenty one million with all their parks, like more properties overall, but only twenty one million, and this will get Hershin pretty close to that in terms of numbers. The only thing I could really find here for you all is that Moody's reported in twenty twenty two that Hershein's annual revenue was about six hundred and fifty million. So keep in mind that was twenty twenty two, and they've been doing well, so it's definitely more than six hundred and fifty million annual. However, the Palace Entertainment US parks were also doing really well, and overall, the Palace Entertainment section under Park's reunidose, which is the parent part of that, their cash flow was two hundred and twenty four million euros. Of course, they're a European company, which is part of the reason they wanted to divest of this is that they wanted to kind of get rid of the US portfolio and allow

4:33 a US operator to take over that, and that would free them up to invest in the European markets. But so if they're two hundred and twenty million in twenty twenty four of total cash flow, and this part is about thirty percent of there, then you can kind of see, you know, where that kind of you can see the proportions of that. Roughly, A lot of people are estimating this deal is around seven hundred and fifty million to the billion dollar range, which would be I don't know, maybe three or four times EBIT based off their growth percentage. So that's a lot though. I mean, so say they say that, let's just say Hersheen paid potentially a billion for this uh and their total operating revenue was six, maybe seven fifty or eight hundred at this point, I don't know. I mean, I guess that's perceivable. I mean, if all the properties are doing well and they have a plan to enhance items, then you could see this, you know, really becoming a good investment for them. I don't think anyone thinks it's bad. But also we don't really know because they're private companies. So I think in many parts it's a it's interesting. There are a few interesting things here. I want to talk about the programming, and I also want to talk about what this means for Europe. But first Scott, tell me what you think of the overall plan.

5:57 So this, this makes this makes so very very very much sense, certainly for a couple well, for a couple of reasons. I think the reason it makes sense is because even though Parks Riannidos was the the overall owner, from what I had garnered from friends and associates, the European side and the North American side, or the the the U S side were run very very differently, all kind of filtering up to a head point, but there was always a little bit of confusion and quirkiness. And I also think that this is you know, as you mentioned, this is a great opportunity for them to get some cash flow so that they can continue to invest in European properties, which you know, as we've talked about on the show, is is becoming a new hot hotbed, you know, with with Universal opening there and and and oh gosh, poet Afoo expanding and doing a new park and so it it it makes it makes all kinds of sense in that regard. It also makes sense that they're not planning to do any major, you know, sweeping changes basic basically because both Hershend and Palace to most guests, they have no idea who Hersheend or Palace are because they're all all the parks. None of them have the Hersheend name above the title are blatantly blazoned, emblazoned around the title.

7:28 The parks are all known as their independent parks. And that there's no need for either company to put their name on everything because that's simply not their brand and not their approach for either either Hersheend or Palace. So I think that that that just makes a lot of sense. Unlike six Flags. You know, six Flags has their name on everything, and when they went through their their buying spree several years ago, quite a few years ago now. But when they went through their buying spree, they couldn't. Even when the parks that they couldn't afford to bring up to six Flags standards, they would say, Geaga Lake a six Flags property, you know, so they they felt the need to get that six Flags brand on there somewhere, even though it wasn't necessarily they didn't. They weren't confident enough to say it's a six Flags park yet. Ye, so there's no there's no need to. So that doesn't surprise me at all. I think that I think that it just in true Hersheen form in their in their list of in the coming months, what they're gonna how they're prioritizing the change, and how they're prioritizing the the acquisition, supporting the new employees with training resources and opportunities aligned with the Hershean's people first culture. This is what has made Hersheen different from all the other theme parks. You know, everybody thinks that that Disney has the has cornered the market on on people first, But until you really start digging into what Hershen does and the hirsche the various foundations that they have for their employees, and that hershend is is they really practice what they preach here. Uh, they're very they've always been very much a people for company,

9:00 and so it makes total sense that that is the top priority as opposing to put the Hershian name on everything, because the Hershian name isn't on what they owned already. Yes, so there's that. I think that you know, the idea of maintaining the high quality entertainment that's kind of a sorry, that's kind of a uh, you know, nobody's going to say and we're going to let everything slide and get really crappy. They're not going to do that. They're going to say they're going to maintain the top quality stuff. So so that makes that makes sense. I mean, that's you have to kind of say that. And and I think the idea of the keeping the keeping the focus on the local communities because the vast majority of these are all legacy parks really, I mean, you know, they all started as as small, privately owned parks that were then bought up by Palace and now bought up by Hershand uh so that's that's the da of the parks that are being added to their portfolio. It would make zero sense for them to all of a sudden say, Okay, screw you locals, We're going to make this all about tourism.

10:09 So it's it seems like a pretty wise acquisition. To me. It seems like things are pretty much in line because, let's face it, Palace and hershend very similar. And again not to say that that six Flags six Flags Valley Fair was not or Cedar Fair was not, but because they too were very similar in their approaches. But these two just seem I'm I'm curious. I haven't talked to any of my friends who who have worked for Palace yet about this, but I'm gonna guess that they're going to feel pretty good about it, because again, they're they're trying to They're being purchased by a company that has always focused on the local, small quote unquote independent parks and been able to give them an improved buying power by being a larger company, and usually that is in the in the form of employee benefits, insurance, that kind of thing. So to me, this sounds like a really good acquisition. Just kind of knowing the the the personalities or the cultures of the to the two major holding companies. Now, whether they're going to really go into competition for six Flags for third place, I don't know. And and my guess is they I think that's I think that's that's a nice to have. I don't think that's why they

11:40 did this. That's just my just my gut feeling. Well, I'm not sure about that last element there. I think that as with all things, we talk about this pendulum all the time. We talk about the way market works and how everything works, and we there's been the trend of bundling and unbundling, like unbundling, rebundling, unbundling. You know, it used to be we had cable, we had just a few channels. Then the democratization of media came with the Internet and everything got split up in a giant in tiny pieces, and now you see everything rebundling back up. And I think the core of that, or a piece of that, is because people don't like to have too many choices ultimately, right. We always talked about the three menu options, you know, give give someone three options, right, And I think that that's that's just natural in any market where you see the bundling. And then rebundling, and I think that's what's essentially is what is happening in the theme park space in the US at least, is this consolidation. And it just makes sense because you effectively you have to become big enough to compete. And I think in some ways the Six Flags thing might be driving this need because you just have to be big enough to compete. So I think I agree that it may not be you know, their their number one decision deciding factor. It might be like a confluence of elements

13:12 together where it's like it might become big enough to compete. And also, right now, with the current situation in the DJ and all that nonsense, we know that any mergers and acquisitions are not going to be stopped or really scrutinized. So it's a good opportunity timing wise with the government situation. And then also it's kind of where the trend is going right, like Disney's taking off, Universal is taking off with Epic, and then six Flags is like, uh, you know, also just in terms of sure property size, you know, their reach is just enormous, and so you know, then when you got United Parks, so they're like no, You're like, we got to be like get you know, you got to get in there to compete because you know, just like when we looked at the streaming wars, right, you know, people are going to choose three to four options. I think the same. You can take that concept and extrapolate it out to the theme park saying, and you're going to say you're going to choose like three or four options.

14:09 I think being past number four would be a bad position to be in. See, I would agree with you. I would agree with you if it became Hershin's Dutch Wonderland or Hershindland, Dutch Wonderland or Dutch Wonderland. They Hershend Park, they don't. They don't present themselves that way. We'll see. And actually that's where I think that I actually think it's fascinating to look at the different approaches between six Flags and Hershend and I would say a lot of our complaints that we had with six Flags as approach to the merger, actually Hershend is almost like doing you know, kind of navigating around those things better where they're communicating upfront. They're not going to panic people by changing it. They're playing more regionality whatnot. But what I would say is a lot of the things that six Flags claims are going to be able to do, like control costs, consolidate departments, and Soliday brand. I actually think hershe Is have a better chance of doing those things.

15:02 So I think while you might not, while they may not be banking on like the name of Hershan being at the parks, I do think they're going to actually benefit from some of the cost saving consolidation measures that six Flags claimed, but we have not really right. Six Hogs is not fully right. But that's not what I'm talking about. What I'm talking about is your three menu choice, your three choice menu, because going to be Hershen is not going to be on the menu. Dollywood is maybe on the menu, and Dutch Wonder Lady will. Maybe they will for the locals. I think maybe that's maybe that's the play is, like the people in those regions will go, they'll travel. For me if it's not competing with a Universal or a Disney Park, well, I would disagree with that.

15:44 I do think that a lot of I don't have the numbers for this. That would be an interesting thing for me to look up at some you know, a future venture. But I think the play might be if you have somebody in Pennsylvania right now, they're that person's top three, like Pittsburgh, Philadelphia. Theirs will be like, uh, you know, go down to Universal for Halloween Hornines, or go down for you know, whatever thing Universe is doing because it's so close, or go to Disney. So there's those theme park fans are still going to travel because it's so close Orlando, right, but then Philly. No, no, no, they're not good. That's not close. It's close compared to you. You're used to traveling all over the world. Most human beings who don't make the theme park industry their job, their business. That's a big investment and they'll do it once every five years. You know, I think that it's a two hour flight. It's from Philly. Yes, okay, I've flown to Philly. It's at least two and a half, at least two and a half, usually three. But it's a it. And then you add in the hotel costs, and you add in the and it's a four hour flight to California. So why aren't we competing with Disneyland.

16:56 My point, my point being is they're not going to say I'm going to put I'm going to put Kenny Wood up against U, up against Walt Disney World, They're not gonna do it. Well. Day World is in a different class completely, So it's not even competing. If they were putting, if they were looking at I'm going to a Hershiant park or a six Flags park, or a Disney or Universal park, there's your there's your your three menu. I think Disney and Universal are in a class unto themselves. They are a destination location. I think what's going to benefit them here is when now they're going to look at I'm going to go to either I'm going to go to either Dollywood or Kenny Wood or Silver Dollar City or Kentucky Kingdom. Those are all on the Eastern seaboard.

17:42 Those are significantly closer. Yeah, And and what's happening is by keeping the park's individual and unique from a guest standpoint, they're actually seeing that, well, I've got this choice, this choice or this choice. But the nice thing is the money all goes into Hershian's pocket. Now, yeah, well, I kind of feel like I don't think Hershian really cares whether they're number three nationally. I think they want they're more interested in looking at diversification to portfolio. That would be my that would be my guess. Right, I feel like we're almost saying the same thing. I think I probably just need to clarify, Like, I think we both agree that Disney Universal are in the class of their own, and in that way, they're almost not in this calculation, because if you're gonna go to Disney Universal, you're gonna go like you're not gonna you know, you're gonna you're gonna make the investment and travel to do those things. And so I think that's what I meant by that is I meant like the people in those areas, if they're gonna plan a vacation, they're gonna do it regardless where they're gonna leave and go to a park. But then outside of those you know once a five every five year you know sprints down to those big theme parks. Then they're gonna be choosing among their local things to do. And Hershan's play then is to make sure that they're always in the consideration for what to do locally.

18:53 That they've got something that they've got something locally to compete with. But that's not that's not what you were talking about with your with your your three menu option. You know, a three menu option. Then is am I going to a six Flags park? Am I going to a Hersion park? Or am I going to a Merlin park? I mean, that's really what you're talking about. If you take Universal and Disney out of the equation. Well, I think sure. I still think though that you do have families that plan out a once a year or once every five year vacation thing, and in that regard, they're probably choosing. But I think to your point, if they were going to do that, they would choose between the Orlando, California or Vegas. I think the consumers of the park, the way the parks are consumed by people who aren't local, are different. Yeah. Yeah, So if you put these into buckets, then basically you know what you're saying.

19:37 My point is, I just don't think Hershin gives a rats behind right now as to whether they're they're number two or number three. They are at the moment, and they and you know they're not gonna they're not going to fight it if they get there. But I think at the moment, they're just looking for diversification. They're looking for diversity of profile and or portfolio and I think they're I think they're getting it with this purchase. I think it's a wise move. Yeah, and I do I want to. I think the point to my numbers earlier was to kind of emphasize that it's still on a on a numbers basis, not as big, not nearly as big as six Flags, because that was eight billion, and then you know, we're looking at maybe upwards of one billion for the acquisition and at its peak probably upwards of one billion, like max one billion of a total operating revenue for Hersheen before this.

20:27 I also think that is potentially one of the red flags, although we just won't know because it's private. Is like, essentially you're doubling the size, is I think what we're looking at, well on not doubling size, but you're like, if you're taking on an equal amount of debt, right, if you're taking on like a up to a billion in debt and you only bring in whatnot, I mean that is that's a big move. So who knows how that'll work out from a financial perspective. But but I do agree though that it's shocking to me how how good the quality is. And I think that in this statement, you can see that they're going to attempt to maintain that quality at these acquisitions because to your point, I mean, if people would ask me in twenty eighteen, twenty nineteen, I would have said Disney had the best service, But now I would say it's HERSHEANDT because their staff. How you know that the programs they have for their staff, their commitment to live entertainment, their coritment of training. I mean, they like recruit heavily from entertainment schools and like getting a job at these parks and live entertainment is like something people aspire to do in the same way that US fire or go to Broadway like it's it's and it's crazy. And I think if they expand that ethos, they're going to be highly competitive in those markets.

21:45 As as far as yes, as far as customer service, as far as training and retention. I mean, they've they've won awards. Hersheant has run one awards year after year after year, YEP for their training programs, for their for the recruitment program, for their for their retention programs. They are they are the they are the park, the park with heart and they and they have always well not always, but as long as I've been involved, they've been they've had that reputation, you know. So so you're right, that's why, you know, live entertainers love to work there because they feel respected. But also, you know, if you look at it, things like you know, the parks like Dollywood and Silver Dollar City, they're in areas that don't have a ton of opportunities for people who don't have a lot of high end training to actually work and become part of a larger company. And they have fostered that and and there's a lot of there's a lot of internal growth in those companies. And and that's a Hershan thing, that's that's their trademark. So the fact that that's being that's the first thing they plan on prioritizing when they roll out into the other parks, as opposed to painting with such a broad brush. It's like, now we're going to make them all six Flags sparks or all hirscheand parks.

23:02 That's I guess that's my point. They're trying to play up. They're trying to play up the diversity of their of their portfolio, but the unification of their quality and the quality of experience, which I think is a smart move. Yeah. It also we hinted at this earlier. But this also means a lot, I think more for Europe that people are not talking about this at all. But but like we said at the beginning, I mean, this is freeing up that this is giving a lot of capital to a place that already has properties in Europe. And again at the same time, when I would talk about our number three right, so you got like universally UK Puyta food is also coming in and you have all the Merlin stuff. I think the Merlin answer was let's cut staff, right, let's try and the.

23:47 Merlin answer was let's save our way into profit. And the parks Renidos was is is much more the let us let us free up some some some spending money. Let's let's get some cash flow going here so that we can invest. Yeah, we'll see which one works. I know where I will I know where I'd put my bet, but we'll see which one works. Yeah. It is fascinating just to again look at the complete different approaches. You know, we here we have six flags versussertion approach almost entirely different. I mean, even down to the merger quote unquote merger versus an acquisition and then like you said, rolling out like nationwide branding, even the nationwide pass right you can go to all that.

24:31 I mean, just really trying to become like you know, you could go to your local six flags in the way you go to your local publics or wal Mart or you know whatever. And then they're like versus a hirshand regional approach or keeping everything the same. And then I think similarly in Europe with this, you know again divest to invest versus just fire to save. Yeah, yeah, again, it's very difficult to save your way into profit. I'm not saying that you should, you should not look at ways to reduce but any time I have worked for a company and this is you know, and I'm sure Philip you'll have some data on this or can find it, but anytime I've worked for a company, anecdotally, when they tried to save their way into profit, it ended up undermining them. It ended up taking away the quality that they had become known for, and in essence, pruning the tree, pruning the tree till it dies, you know, as opposed to well we're gonna we're gonna lower our expenditure so that we look really good on paper. Usually when when companies do that, the first thing they're trying to do is sell so that they look they look very profitable on paper, but they're not really looking at the quality or the experience of the guests are getting.

25:42 So and I'm not suggesting that with Merlin at all, but it's one of those. It just any anybody who knows finance, and people who know finance significantly better than I do, who are much smarter about it than I am, will say, if you want to increase your profit you have to you have to find a balance. You can't save your way into profitability. So we'll see, we'll see how that works out. I wonder if Southwest is listening. Hmm. Don't get me started on that one. Okay, Well, that's not part of the show. I know I was about to. I was about to dive in on another airline too, because you know I found one that huh. Anyway, Meanwhile, meanwhile, yeah, so should we get into that, We'll get into that unhinged.

26:32 Yeah, we'll get that. Should we talk a little bit about velvet ropes? You want to talk about how we Yeah, let's talk about vet ropes. Okay, Yeah, so velvet ropes. So also this week we got news out from Disney about two new kind of velvet rope lounge experiences they're opening up. The first is Spaceship Earth Lounge, which is the first Disney adults only space within a Disney theme park. The Spaceship Earth Lounge, called G eighty two, will open in twenty twenty five at epop Epcotpcott, possibly marking possibly marking the first adults only space in at Disney theme park. Guests must be at least twenty one years or older to enter, which will offer a relaxed heating and elevated views of Epcot from the indoor area that just located just behind Spaceship Earth. So the eighty two in the name signified as nineteen eighty two, the year Ipcot opened, and the lounge will be opened sometime later. Reservations are going to be required, but any guest eligible can bank those reservations. So essentially, I guess it's just like a new lounge kind of dining ish lounge experience that requires reservations versus but it'll be open to anybody as long as they're in Epcot, right versus the DVC lounges, of which they just open their third Disney at rit large as open their third, and the DVC lounges you have to be a DVC member. So the third one that just opened is called mckim's Milehouse. It's in the Magic Kingdom.

28:00 It just opened this past week and it's exclusively for DVC members, where you can charge your device, you have access to Coca cocola, freestyle machines, cure eggs, armchairs. It's open from eleven am to six pm daily. You can see roughly forty guests. And it was opened in frontier Land there, so that is the third. One, just to give you know frontier Land it's the Old Shooting Galery, so that'll tell you kind of yeah it. Is yep, it's the old Shooting gallery. And it is a third one. They had one open at Disneyland in twenty twenty three in April, and then they had one in Epcot a DVC lounge in twenty sixteen. So now we got multiple lounges that are velvet ropes in different ways, one for age gating and one for member gating effectively.

28:48 And the thing I love about this is there you know, it's something that we talk about all the time on the show is let's use your assets to the best of their ability. None of these are building new buildings. These are these are all reallocating how spaces are being used. Yes, there is there is cost involved, there is construction involved in making them into these kinds of lounges. But you know, obviously with the with the the Epcot Adult space, it's it's kind of the the most the most high end playdate bar I've ever seen in my life. And it makes total sense. It makes total sense in Epcot because you can First of all, Epcot generally has a slightly older demographic, so putting it putting in adults only in Epcot makes makes perfect.

29:37 Makes a lot of sense. Yeah. Yeah. And secondly, with families, you know now that now that they are skewing, they're trying to skew a little bit younger. But with families, you can you can say, you know, well, we'll meet you all. We'll set up a meeting time and a meeting place, which is what you should do when you travel with your family in any theme park. And uh, just in case everybody gets lost or everybody goes off doing their own thing and uh, and mom and dad or grandma and grandpa, or aunt and uncle can make a reservation here, go chill out and then meet up with the family leader and everybody has a great time. Like I said, all of these locations are existing spaces. The Disney Vacation Club lounge, I think those are I think those are just wonderful little perks that have a great deal of perceived value and don't cost a lot to actually implement, which I think is really smart. And I'm not even certain with a capacity of forty guests how how much people are going to even be able to use them, But just knowing that they're there is just another perk for Disney Vacation Club, which is a great way to bring in a bunch of money to the Disney parks, because for those of you who who haven't really looked into the Vacation Club, they pretty much have locations in nearly every resort in Walt Disney World. Certainly everyone built after a certain time period where they started going, oh yeah, we can we can make money off of this. We can we can do time shares in our in our massive hotel. So again, creating those velvet ropes, cross utilizing assets. It all makes a ton of sense and it seems too uh well

31:09 obviously with the Disney Vacation Club. Seems to be going well for them because they've done they're opening their third So just another way to dangle that velvet rope in front of somebody. Well, speaking of dangling a velvet rope, we hope that all of you will cross over the velvet rope and join us for Unhinged. But this is the end of this week's Green Tag theme Park in thirty on behalf of Philipernandez and myself Scott Swinson. We hope you've enjoyed this week and we will see you next week.