by Michael Collins, Leisure Development Partners
Feasibility is something most people in the industry are aware of, but many don’t fully understand its purpose or pitfalls. When some think of a feasibility study for a theme park or visitor attraction, they have a loose idea of what it entails, what it can do for them and who should deliver it.
Most people understand that a feasibility study should give an estimate of attendance and some financial forecasts. Yet there is, of course, much more to it. Some people don’t know they need a feasibility study until it is too late; others know they need one but don’t know how to go about it.
In this article, I explore some misconceptions or pitfalls that lead to feasibility work not being bankable, risking time and money and willing failure upon projects. I hope that the reader will take away what makes a feasibility assessment bankable and reliable – a bankable feasibility study is one that you can ‘take to the bank’ to raise finance and give stakeholders confidence in the business case.
1. Anyone with experience of the attractions industry can prepare a feasibility study
Some perhaps have operated attractions for a long time and, therefore, think they can do internal feasibility. Some new entrants may even believe that all you need is someone with good experience in the industry to work up your feasibility study. Years under your belt in operations, of course, has value, but having a stab at feasibility without the appropriate data and methodologies is just guesswork.
In reality, feasibility for attractions is a highly specialised skill set. Knowing operations is not the same as understanding markets and how to tailor a concept and business case to them.
2. I should finalise my concept and then do feasibility
All too often, we meet clients who have spent a lot of time and money on design and then come to us for feasibility. This is a recipe for wasted time and money!
Feasibility should inform design and scaling, and inevitably going too far with design before listening to the market will mean literally going back to the drawing board. We love to work in parallel with design teams, iterating feasibility as concepts evolve. The best bet is to get us going just before design so we can steer scaling and target audiences and ensure no wasted efforts.
3. I need one of the big four to work on my project
This work is highly specialised and relies on data that only an industry specialist has.
The list of projects which have been overcapitalised and have had huge problems because naïve owners felt they needed a household name consultant is already too long! Please do not add to it! In this industry and for its financiers, it is the specialists who are bankable.
4. Feasibility is just about the dollars and cents
Yes, financial projections are a core output of any feasibility study. Forecasts of profit and loss, internal rates of return, payback and financial sensitivities are all important outputs. However, good feasibility is not just focused on money.
It informs design and marries the markets to the programme. Ride and show capacities, exhibit spaces, the number of restaurant covers, retail space, and parking are all feasibility outputs and just as integral to the process as the cash flow.
5. The design firm can do the feasibility
We love working with a wide range of our industry’s exceptional creative companies. Many brilliant minds are developing ever more cool ways to see guests part with money for experiences.
But please let economists be economists and designers be designers. We work well together, and our services complement each other. We know, however, that some creative firms are willing to blur the lines. There is a bigger problem here, though, than one of specialisation – there is an obvious risk of conflict of interest and loss of objectivity.
Feasibility specialists have to be able to set capital budgets and appropriate project scales. We must be able to push back and/or contain project scales. Creative teams want larger projects, higher capital budgets and with them higher fees. There is no better way to compromise bankability and objectivity than with feasibility done in-house with design.
6. I can find the information I need to do this work online
Reliable feasibility is driven by benchmarking. Applying real-world performance metrics to carefully analysed markets is at the heart of an accurate feasibility study.
Developers who have worked with other forms of real estate like retail or hospitality assume that, like those uses, reliable key performance indicators can be found online. Unfortunately, that is not the case. There are no repositories of comprehensive and reliable benchmarks online for attractions. That data is carefully curated by LDP and is proprietary.
7. Scale drives demand and the model
Some forms of real estate have nice sqm-driven metrics around rent, revenues and costs. Office and retail, for example, are pretty linear. Attractions are driven by their markets, not their scale, and the feasibility process is complex as a result.
8. Incentive fees can work
We will never entertain a fee based on a realised project.
It is critical that the economics and strategy team on a project can push back and has the freedom to do its work correctly and with objectivity. Incentive fees can potentially cloud this and should never be an option.
9. The feasibility team just pours cold water on ideas
This is a common misconception. We are not here to crush dreams and kill good ideas; we are here to optimise and get the best out of the project, to drive greater returns, to tweak programmes and scales to maximise outcomes for the client. For almost every site and market, there is a project that can work. The original vision may need adjusting, but that is a part of our process.
Feasibility studies are there to give comfort to investors that their money will grow and not dwindle, to right-size projects, and to ensure components match their markets.
LDP is an expert economics and strategy specialised consulting firm for the experience economy. We’ve worked in 80-plus countries on every type of leisure and cultural attraction, and feasibility studies are around 70 percent of our workflow. We’ve been doing feasibility as LDP for 15 years, but the company founders have more than 25 years’ experience each in this niche.
We love to talk feasibility, so get in touch to discuss your needs.
