Volume 3, No. 14. July 25, 2003
Tell
it on the Mountain
It might be easy to say Stone Mountain Park in Atlanta, Georgia—and, more
specifically, the Herschend Family Entertainment Corporation—got a bailout
this week thanks to a restructuring of the company’s lease with the Stone
Mountain Memorial Association Board. In a meeting Monday the SMMA Board voted
unanimously to reduce Herschend’s annual rent from $11 million to $8 million
while increasing the board’s take of the park’s gross revenue from
3 percent to 5 percent. That restructuring translates into a projected savings
of about $2.6 million a year for the Stone Mountain Park managers.
For
Herschend, however, the SMMA’s action was a vote of confidence—a unanimous
vote of confidence, at that—in the face of hard times for the park. It
also served as evidence that both Herschend and SMMA are committed to the remaining
45 years of the lease’s 50-year life span.
Prompting
the need for the lease restructuring was Stone Mountain Park’s performance
over the past year. In November 2001 the park opened The Great Barn interactive
play center (THE LOOP,
November 22, 2001), and in May 2002 it opened Crossroads, a Silver Dollar
City-like historical community with traditional craftspeople and a 4-D theater
(THE LOOP, June 14, 2002).
These capital improvements were supposed to boost attendance 33 percent. Instead,
attendance at Stone Mountain Park rose only 14 percent, said Christine Parker,
the park’s public relations manager.
That
is actually good news, comparatively speaking. Most other attractions in the
Atlanta market have been flat to down since the 9/11 terrorist attacks, from
the Major League Braves baseball team's inability to sell out despite fielding
its most exciting team ever to Zoo Atlanta experiencing double-digit declines.
The trend is not turning around, either; in the first five months of this year,
Atlanta's hotel room revenue is down $122 million compared to 2001. Crossroads,
in particular, was aimed at boosting the park’s tourism appeal, but no
tourists were around to appeal to. At least the addition enticed locals back
for repeat visits to Stone Mountain, which accounted for the bulk of the park's
14 percent increase. Both Crossroads and The Great Barn have been certified
big hits in customer surveys.
The
bad news, of course, is that 14 percent was still a shortfall, and Herschend
was operating Stone Mountain Park at a loss. This was after the company had
already invested $80 million in both capital improvements and infrastructure
on top of $50 million paid in rent. The SMMA commissioned a study by PricewaterhouseCoopers,
which came up with the proposal for the lease restructuring that the SMMA Board
ultimately approved. “They realize there’s business issues that have
affected our business and tourism is down,” said Ned Stancliff, Stone Mountain
Park’s general manager.
Never
in question—despite the Herschend financial outlay at Stone Mountain and
the often loud opposition from local residents to the park’s privatization
and Herschend’s subsequent development plans—was whether Herschend
would continue managing Stone Mountain Park. “They like this partnership,”
Stancliff said of the SMMA. “Privatization was the right thing to do, and
we’re five years into this thing and I think it’s a vibrant partnership.
Even though they are our landlord, they view it as a partnership, and I think
it’s helped. In this case, one partner is needing help.”
Meanwhile,
Stone Mountain remains an important asset in the Herschend portfolio. Whatever
struggles Atlanta is currently suffering, its potential cannot be understated.
“It’s an opportunity to be in a great market,” Stancliff said.
The experiences at Stone Mountain—similar in style and approach to the
company’s Silver Dollar City in Branson, Missouri, and Dollywood in Pigeon
Forge, Tennessee, but different in subject matter—also enhance the corporation’s
core competency.
Another
value Stone Mountain holds for Herschend is the very fact that it, a privately
owned company, is managing a public property. This was Herschend’s first
foray into the realm of privatization, and it may not be the last. “Privatization
may be a sign of the times,” Stancliff said. “If there were other
opportunities to privatize, we would entertain those possibilities, as long
as the product fit our core competency.”
Rather than Stone Mountain’s struggles making Herschend skittish about entering such relationships in the future, SMMA’s endorsement of the relationship, as indicated in this week’s lease vote, gives Herschend fortitude when looking at such future endeavors.
THE LOOP is written and produced by Eric Minton, Minton Enterprises, LLC. To see more examples of Eric Minton's work and Minton Enterprises services, visit www.ericminton.com.
©2003, Minton Enterprises
LLC
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