Decision Making at CEO Level
Business Dilemma Part 3
Growth Analysis
The last couple of years have been interesting for the theme park and entertainment industry; COVID-19 hit most of the globe and affected the entire world. Before the pandemic, Universal Creative, the division focusing on developing and building new attractions or theme parks around the globe, was working to develop two major theme parks, Epic Universe in Orlando, Florida, and Universal Beijing based in Beijing, China. Mass layoffs occurred when COVID-19 hit the industry, and the Epic Universe project was put on hold. They continued working on Universal Beijing because it was almost finished, and it made sense to stop that project. However, after the world returned to “normal” activity, the theme parks in Orlando were open, and attendance was high, even with the restriction policies. The increase in revenue from $1.1 billion to $1.4 billion in Q3 2021 just in Orlando provided a better picture for Comcast and NBC Universal executives. It focused its decisions on this industry, one of the most profitable business units they have. As a result, Epic Universe restored operations, most of the laid-off returned, and the project is on track (Gonzalez, 2021).
Based on the information provided, customer demand for Universal Creative’s theme parks has been strong and increasing, as evidenced by the record attendance and revenue numbers. However, it is still being determined how long this trend will continue and whether demand will remain strong.
The information must provide a specific timeline for how long the increased demand will continue. The company may need to continue investing in new projects and experiences to maintain and grow customer demand.
If Universal Creative fails to meet customer demands, there could be a significant loss of revenue and market share opportunity. The theme park industry is highly competitive, and customers have a range of options to choose from. Failing to provide innovative and exciting experiences could result in customers choosing to visit other theme parks instead, which could have a negative impact on Universal Creative’s financial performance and market position (Jenkins, 2019).
According to recent financial reports, the Theme Park industry has experienced a 12% increase in revenue, amounting to $2.1 billion, and a 16% increase in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), reaching a record high of $782 million for a fourth quarter (Comcast Corporation, 2021). The revenue growth was mainly driven by the expansion of the U.S. and Japan parks, except for the park in Beijing, which was negatively impacted by COVID-related restrictions. Both attendance and guest spending at the U.S. parks increased year-over-year, with Orlando and Hollywood delivering a record-high EBITDA for the fourth quarter. Universal Japan also rebounded and achieved solid year-over-year EBITDA growth after lifting capacity restrictions in March (Comcast Corporation, 2021).
Although the investment in these park extensions is relatively tiny compared to Epic or Universal Beijing, it still presents an opportunity to leverage the market opportunity and contribute to even higher growth at Theme Parks in the future (Comcast Corporation, 2021). The company’s working capital for the year was $3 billion, reflecting a $1.5 billion increase over the previous year, which indicates a post-COVID ramp of investment in content creation (Comcast Corporation, 2021). In light of the highly competitive nature of the theme park industry, the failure to invest in new projects and experiences could result in missed opportunities and a negative impact on the company’s financial performance and market position (Comcast Corporation, 2021).
Personnel Analysis
Universal Parks and Resorts (UPR) has implemented a long-term strategy to increase its market share by broadening its entertainment offerings and creating new and diverse park concepts (Universal Parks & Resorts, n.d.). This strategic move aims to cater to a broader range of ages, enabling families to create memorable experiences together. The pandemic has influenced the company’s focus on expanding its portfolio domestically and in untapped markets such as the Pacific and Asia, resulting in significant dividends for Comcast (Universal Parks & Resorts, n.d.). Despite this, the company recognizes that Orlando remains the most critical location, attracting international visitors seeking to visit Universal Parks and Disney (Universal Parks & Resorts, n.d.).
During the pandemic, UPR faced the challenge of balancing its ongoing projects while considering its employees’ safety and the financial impact of the pandemic on the business. One of the projects under development during this period was the new Epic Universe Park in Orlando, FL, the largest park the company has ever constructed (Universal Parks & Resorts, n.d.). To ensure the project continued, the company provided exit packages with monetary bonuses, benefits, and support to individuals working on this project. This strategic move allowed the company to reduce its workforce while minimizing the financial impact of the pandemic on the project. At the same time, the company was also constructing a park in Beijing, China, which was already in an advanced stage. Given the significant investment in the project, halting or freezing the project would have resulted in substantial losses for the company. Therefore, the company continued construction while implementing safety measures and protocols to protect its workers (Universal Parks & Resorts, n.d.).
By carefully evaluating and adapting to the circumstances, UPR navigated the challenges presented by the pandemic while maintaining its commitment to its ongoing projects and future growth. This strategic approach helped the company mitigate its losses while expanding its global footprint in the entertainment industry.
The company is currently undergoing a significant expansion and has a substantial number of open positions to fill. To mitigate this, the company offered retirement packages to long-serving employees who met specific criteria, including age and tenure. It allowed the company to reduce its bureaucratic burden, as these employees’ salaries were relatively high, and their retirement would result in cost savings (Universal Parks & Resorts, n.d.). However, this has resulted in a shortage of experienced managers, and the company is actively seeking new talent to fill the gap. Finding qualified candidates in this unique industry is challenging, and the company invests significant financial and personnel resources to attract top talent.
In response to this challenge, universities in Central Florida are developing programs to guide and train students to meet the demand for these exclusive positions. These programs prepare students for specialized roles that differ significantly from the average, ensuring they are equipped to thrive in this industry (Universal Parks & Resorts, n.d.)
Cash Flow Analysis
Revenue in theme parks fluctuates with changes in attendance that typically result from the seasonal nature of vacation travel and weather variations, local entertainment offerings, the opening of new attractions, and changes in currency exchange rates. Theme parks generally experience peak attendance during the spring holiday period, the summer months when schools are closed, and the Christmas holiday season. (Comcast Corporation, 2022, p. 51)
Comcast Corporation’s (2022) financial report showed that the Theme Parks segment revenue increased 141.2% to $5.1 billion, while the Adjusted EBITDA increased from $(0.5) billion to $1.3 billion. It reflects the operation of their theme parks in the current year compared to temporary closures and capacity restrictions due to COVID-19 in the prior year period and the opening of their theme park in Beijing, China, in September 2021. (Comcast Corporation, 2022, p. 51)
The report also indicates that the company’s businesses generate significant cash flows from operating activities. They expect to continue to meet their current and long-term liquidity and capital requirements through their cash flow from operating activities, existing cash, cash equivalents and investments, available borrowings under their existing credit facility, and their ability to obtain future external financing. (Comcast Corporation, 2022, p. 54)
Comcast Corporation (2022) maintains significant availability under its revolving credit facility and commercial paper program to meet its short-term liquidity requirements. As of December 31, 2021, amounts available under their revolving credit facility, net of amounts outstanding under their commercial paper program, outstanding letters of credit, and bank guarantees, totaled $11.0 billion. The company entered into a new revolving credit facility in March 2021. (Comcast Corporation, 2022, p. 54)
Additionally, the report notes that Comcast Corporation (2022) is subject to customary covenants and restrictions outlined in agreements related to debt issued at Comcast and certain subsidiaries, including the indentures governing their public debt securities and the credit agreement governing the Comcast revolving credit facility. Compliance with this financial covenant is tested every quarter under the terms of the credit facility. As of December 31, 2021, they met this financial covenant by a significant margin and expected to remain in compliance with it and other covenants related to their debt. The covenants and restrictions in their revolving credit facility do not apply to certain entities, including Sky and their international theme parks. (Comcast Corporation, 2022, p. 54)
Expansion Recommendation
Universal is committed to becoming the most relevant brand in the US Theme Parks and Entertainment industry. To achieve this goal, Universal plans to open Epic Universe in Orlando, the largest park the company has ever built, and a new local park in Frisco, Texas, which will cater more to families with young children (Universal Parks & Resorts, 2022). This new park will feature immersive themed lands, celebrating Universal’s iconic brand of entertainment, humor, and innovation and bringing beloved characters and stories to life in ways that will wow even the youngest theme park goers.
Universal’s Halloween Horror Nights experience, including classic horror characters like Frankenstein, Dracula, and The Mummy, has been successful and could be expanded to multiple locations worldwide. The company has also worked with a new generation of horror filmmakers like Jason Blum, Jordan Peele, and James Wan. By diversifying its target market and providing entertainment for different age groups, Universal aims to cover a wider audience and meet the market’s demands.
Based on these strategies, Universal should continue expanding its offerings to different age groups and diversifying its locations to appeal to a broader audience and potentially increase its market share. Additionally, Universal’s focus on classic horror characters and working with new horror filmmakers show a commitment to tradition and innovation, which can help keep the brand fresh and engaging for audiences. As the entertainment industry continues to evolve, Universal needs to stay relevant and innovative to maintain its position as a leader in the theme park and entertainment industry.
Marketing Data Flow Diagram
