The challenges of opening a new park are not that easy. I can’t stress enough how important it is to read my prior article on reasons why the park did NOT fail before reading this one. Most people who visited, including myself, thought Hard Rock Park was a fantastic product. Unfortunately, even if you have a solid park, all it takes is a few bad business decisions combined with bad luck and even the best theme park in the world doesn’t stand a chance.
If you recall from my previous stories on Hard Rock Park, the investors expected that the park would attract around 3 million tourists a year and cost around $400 million dollars to build. That’s not entirely true. In reality, the full amount of the loan was $385 million. Not a huge difference, but you need to know the real numbers moving forward. So you can build a decent amount of theme park for $385 million, right? Actually $160 million was promised to the investors and was set aside as financing costs. What they had to spend to build the park was about $225 million.
Hard Rock Park didn’t only want to make a lot of money and quickly, it had to, in order to start earning a return for it’s investors. Hitting 3 million visitors who paid full admission price, plus high guest per cap spending, is what top management promised those investors in one year’s time. Another crucial piece of information to keep in mind is that $225 million was all the money they were going to get to open the park. There was no going back to the well to draw an extra $10 million for anything. Remember when I said Jon Binkowski got to build the park he wanted to with very little corporate oversight? The catch was, because there was no giant company backing the park, there was no one to keep it afloat if a financial storm had to be weathered.
Of course, you can feel free to disagree with my opinion, but know that it is the result of much careful consideration and research. The following analysis of why Hard Rock Park was forced to file for bankruptcy comes from hours of interviews with the park’s senior management combined with my years of theme park experience. Unlike my last article, the reasons listed will be in order: from the least important factor to the most important.
Reason #3 – The Economy
In the summer of 2008 the United States economy started to tank. Gas prices hit a national average of $4.09 a gallon, which to this day, is still the highest they’ve ever been, and an increase of about 38% over the previous year. As a result, many families cancelled their family vacations that summer and the media coined a new term: “staycation”.
Myrtle Beach may have millions of visitors every year, but the typical family who visits is extremely budget-conscious. This beach town is not as glamorous as Las Vegas, Palm Beach or even Orlando. I come from a family that visited Panama City Beach in Florida every year (a nearly parallel market). Our vacationing habits mimicked those of a family visiting Myrtle Beach. We would come down the same week every year, stay at the same hotel, eat at the same restaurants and play mini-golf at the same locations year after year. If there was something new in town that we wanted to try, we had to choose what regular attraction we wanted to drop that year in order to make room for the new one.
In 2008, Myrtle Beach took a sizable drop in the amount of tourists who decided to visit that year. Most of those that did come decided to cut back on the luxury expenses of attractions and stick with the #1 free draw: the beach. Coughing up the kind of money that Hard Rock was charging, including $10 to park, couldn’t compete with the free sun & waves just a few miles away that summer.
Reason #2 – Ticket Pricing Structure
If there is one major lesson to be taken away from Hard Rock Park, it’s this: know your market. The senior management thought they would be a game changer in the theme park industry. Rock n roll and theme parks seemed to be a no-brainer and they felt like they had created the next generation of family entertainment. So why stop at creating a solid brand, why not change the admission policies as well?
Most major theme parks have tried their hand at creating a new ticketing structure in some form: eliminating ticket books, second day free, pay for one day and come back all year, etc. All of these initiatives have been based on the perception that guests will get more value out of their money. This may or may not be true, but it’s the perception of the family paying those ticket prices that really matters. In Hard Rock Park’s case – they did something no one else in the industry had done.
Anyone who entered the gates above the age of 3 was required to pay the full $50 admission fee, no exceptions. The general public perception of this policy was (and remember kids, in the world of business, perception is reality) the senior operating management at Hard Rock Park were a bunch of greedy bastards.
Management pleaded their case with me when I spoke with them in 2008. Their reasoning was that there was very little a small child couldn’t enjoy during their visit. For example, if your 4 year old was too short to ride Led Zeppelin The Ride, then they would get value out of riding the Sole Train attraction in Kidzville which only smaller children could ride anyway. The attractions the entire family could ride were a wash because clearly everyone can ride, so they were worth equal value to everyone.
Here’s another way to look at it. Let’s say you’re a parent with two kids and they are dying to see the new Monsters University movie coming out this summer. However, after watching Monsters Inc on DVD every day for 6 months straight, you think seeing Mike and Sully one more time will be like hearing nails on a chalkboard. In theory, the same logic could be used for family films. Depending on how it’s twisted, the children could actually get more value from going to the movie than the parents do. Therefore, shouldn’t those little ones pay a few dollars extra? Luckily the movie industry hasn’t used this mentality when it comes to pricing children’s tickets – yet.
Reason #1 – Marketing
You’ve heard of Coca-Cola, right? They are not new to the soda market. Coke is readily available in nearly every country on the planet. Yet, they still spend around 2.8 billion dollars in marketing every year – as a mere reminder they still exist. Are the head honchos at Coke idiots for spending that much on marketing a product everyone knows already? Considering they rake in about 40 billion annually, they seem like they knew what they’re doing.
The “Marketing Rule of 7″ is an old adage stating that you must reach a customer at least seven times before they will even consider spending money with your business. In addition, if you diversify your reach in seven different ways (billboards, radio, television, internet, etc.), the odds of getting someone’s attention increase dramatically. Many people think that Hard Rock Park spent very little money on marketing and while this is true in general, they did spend some mega bucks.
For example, Hard Rock Park owned the Magical Mystery Tour Bus that was used in The Beatles’ film – not a replica, the real deal. This piece of rock history was towed at great expense (because it had no working motor for years) from New York City to Myrtle Beach on a seven city tour designed to generate buzz in 2007. The tour would set up shop and hold a concert designed to get people excited about the park’s opening in 2008. The problem was that when they arrived in each city, the event was barely advertised and no one knew they were there. Only a few hundred people showed up, as opposed to the thousands they were hoping for.
The tour culminated in Myrtle Beach in the parking lot of where the new preview center was going to open. The idea was to open the preview center on the same day as the concert. In addition, the first chance to buy an annual pass to Hard Rock Park was on the same day. Without the proper buzz, hardly anyone showed up and they sold less than a hundred annual passes that day.
The Hard Rock Park “Backstage Tour” preview center was built at great expense in Myrtle Beach. The tour was interactive and featured many of the props and special effects that wound up in the park. A little over 100,000 visitors walked through the facility which may sound like a high number until you consider in a couple of factors. Over 14 million people visit Myrtle Beach every year and most importantly, the preview center was 100% free. Yet again, they spent next to no money advertising that this free mini-attraction even existed in Myrtle Beach and the $1 million-plus dollars they spent to create it were pretty much wasted.
This is not to say they didn’t spend money on mass marketing. A clever ad campaign called “Must Have Been to Hard Rock Park” appeared as fifteen and thirty second television spots mainly in the South Carolina market. Created by Avertt Free Ginsberg ad agency, the commercials definitely gave off the rock and roll attitude, but didn’t show much of the actual park. Take a look for yourself.
In addition, there was a billboard campaign, but the signs were scattered throughout the Southeast and were extremely vague. They would feature an image from the park like the Bear Metal Family with the Hard Rock Park logo in the corner. However, they gave very little idea of what the theme park was like and didn’t give directions on how to get there. Some of them didn’t even say that the park was in Myrtle Beach.
The final nail in the marketing coffin was how little they did to work with the community in Myrtle Beach to get the word out. They offered no special ticketing or previews for residents. Most importantly, they did no partnering with local hotels, restaurants or attractions. In a town like Myrtle Beach, word of mouth can make or break you. When tourists would come into diners or hotels and ask about Hard Rock Park, the answers were often reflective of how expensive it was and how it was a waste of time and money – and many of the locals never bothered to visit the park because of the lack of discounts and ticketing structure to form that opinion.
Around the first week of July, they realized they were only getting between 2,000 to 3,000 people in the park during the course of an entire day versus the 20,000 to 30,000 they were projecting. The marketing team went into overdrive trying to come up with ways to get the word out and offer discounts in an economy that was getting worse by the week. Hard Rock International helped out by adding table topper ads to many of the Hard Rock Cafes on the East coast along with a few other ideas that could be implemented quickly. AAA was contacted to add Hard Rock Park to their list of companies that would accept a 10% discount, but by the time the word could get out, the summer was practically over.
Towards the end of the summer, when it looked like the economy was going to get worse before it got better, the Hard Rock Park team started to come up with some sharp ideas that would drive people into the park in 2009 season. Before another famous company announced a similar initiative, Hard Rock Park was going to offer free admission on your birthday. In addition, they were looking to partner with other attractions like Medieval Times for a one day combo ticket. They were also considering an after 4 pm discounted pass that would allow the people who spent the day at the beach to enjoy the park at night.
However, it was all too little and too late. On September 24th, 2008 Hard Rock Park closed its gates for good. With a dismal summer behind them, many of the investors had already been burned by other business ventures in a sagging economy and decided to take their investment in the park as a write off.
If you look at parks like Disneyland Paris or Islands of Adventure, they took years to start pulling in the numbers they originally projected. They were only successful after many different attempts at marketing and millions of dollars from their respective parent companies to keep the parks operating through their own storm of uncertainty. With Hard Rock Park, there was no mother ship that they could turn to in order to grab any additional money to keep operating an extra season or two – $225 million was the number they were given. Had there been additional funding, perhaps I would be writing to you about the latest new attraction the park was about to open instead of why it crumbled.
Recently I got a chance to chat with Jon Binkowski, the park’s Chief Creative Officer about what it was like to put this amazing project together. The interview covered everything from his greatest challenges to what he was most proud of in Hard Rock Park. We even talked about what he would have done differently if he had a chance to do it all over again. Come back next time to see that interview.
I realize that I did not list all the reasons why the park closed, but these are the big ones. Feel free to add your own reasons why you think the park closed below. In the meanwhile, strictly from a creative standpoint, what would you have done differently if you had a chance to build this park? What are some marketing ideas that you would have come up with and done differently? Leave your comments in the section below.