Herschend prepares to open its theme parks
Herschend prepares to open its theme parks
Family-owned Herschend Enterprises, which delayed the openings of its theme parks because of COVID-19, is currently evaluating opening dates for the summer.
In addition to theme park operator Herschend Family Entertainment, the family enterprise includes tour operator Pink Adventure Tours; Herschend Live, owner of the Harlem Globetrotters; and Herschend Entertainment Studios, which produces shows for children.
The opening plans have been revised several times to incorporate new information and evolving developments, according to Chris Herschend, chairman of Herschend Enterprises.
The decision to delay the openings, by contrast, was “kind of iterative” and made over a period of less than three days in March, Herschend says. “It went fast.
“It went from, ‘Do you think this could happen?’ to, ‘Oh, my gosh. They just canceled the NBA season,’ to, ‘We can't open tomorrow.’ “
During those days, Herschend spoke multiple times a day with Andrew Wexler, the non-family CEO of Herschend Enterprises. Wexler was in Dollywood, the Pigeon Ford, Tenn., amusement park, where co-owner and namesake Dolly Parton had planned to attend the season opening scheduled for Friday, March 13.
As of Monday evening, March 9, the country music star had confirmed her attendance at the opening. On Wednesday, March 11, Parton canceled. On Thursday, March 12, Disney announced it would close its U.S. parks starting the following Monday. By Thursday night, Herschend had decided not to open its parks.
“It couldn't have happened at a worse time,” Herschend says. “We work all winter. We put capital into the ground. We put expense on the company to bring back all our seasonal workers. We rehire. We get everybody trained.
“March is always our worst balance sheet of the year for those summertime businesses.”
The timing was bad for the other business units, as well. March is a peak month for Pink Jeep tours and a time of high turnout for Globetrotters events.
“This is a complete full stop,” Herschend says. “It's been existentially threatening in every possible way.”
After the decision was made to stop all business activity, he says, “There was a release. You feel for a moment that you've made the tough decision. And then about a minute later, there's the dread: ‘Oh, my gosh. Now what do we do with all our seasonal employees?’ ”
Steps to save the company
The company moved quickly to institute furloughs. “All our non-furloughed employees took a 50% pay cut, and Andrew I took 100%,” Herschend says. Subsequently, “we made a second round of cuts that went deep into the year-round staff.
“We're expecting them to come back. But still, we've never done anything close to this scale” in the 70-year history of the company.
Staffing was slashed to just 5% of what it had been a year earlier. “That was agonizing and brutal,” Herschend says.
“The employees that remained after the furloughs are working harder than ever, and we are eager to restore them to full pay, which we hope to do very soon,” he says.
The company is covering premium payments for furloughed employees who were eligible to participate in the health plan. “This is one of several things we did to try and ease the transition to unemployment benefits,” Herschend says.
“We didn't even have a board meeting until April 2 because it was so obvious what had to happen,” he says. “We had to focus on survival first.
“We were under-levered compared to our peers, but we were still in danger of not surviving if we didn't rapidly cut costs.”
The shareholders wanted the company to remain independent, without taking on outside investors, Herschend says.
Capital investments were delayed for a year or more. Lack of investment in the attractions “hurts our guests, but also our employees,” Herschend notes. “The growth rate slows and their compensation drops as a function of that. We don’t do it lightly.
“We don't even talk about financial performance right now. All we talk about is cash flow and survival.”
Keeping family in the loop
As Herschend and Wexler discussed the park closures, Herschend kept in touch with family members via a secure messaging app.
“They were asking me questions in real time. And I was able to answer some and pass some on to Andrew,” he says. “There was a lot of communication and it was really a blessing because it was super-efficient.”
The family knew about the decision to close the parks before it was officially announced. “All they wanted to talk about were employee issues and how we're going to care for our employees,” Herschend says. “And that was really our focus as a family for about two weeks. We didn't have any discussions about profit or loss or anything other than, what do we need to do for these people in the first, first wave of decisions?”
Several family members made personal contributions to Share It Forward (SIF), a 501(c)(3) non-profit organization that assists Herschend Entertainment employees in times of personal crisis. Those contributions from family members exceeded $800,000 in the days immediately following the first furlough announcement, Herschend says;
“What was so encouraging was that it was from individual households, not through any formal coordinated or centrally controlled entity or foundation.” SIF then made “immediate one-time payments to any furloughed employee who asked, in addition to its normal hardship mission, which was subsequently expanded to provide more effective assistance in the context of COVID impacts,” Herschend says.
Plans for opening the parks are being driven by the management teams. The board has provided input, and the plans have been shared with the family.
“The employees, the guests, the balance sheet, the stockholders — everybody benefits by us being open,” Herschend says.
Because of the changing body of knowledge about the spread of the virus, proper precautionary measures and government regulations, “It’s the most dynamic decision-making environment I’ve ever seen,” Herschend says.
“The professionalism and the depth of preparation and the care and the quality from the management teams is a huge confidence builder.”
In some ways, Herschend says, the current situation is analogous to the Great Recession of 2008 because of the effect on every industry across the board. On the other hand, he notes, “In the worst of ’08, we never had a week when we had zero revenues.”
One lesson that has emerged, he says, is “the need to communicate humbly and quietly to your stakeholders — and a lot.
“People value transparency and frequency of direct communication. And nobody needs you to tell them all the reasons they should be optimistic.
“People can be trusted with bad news. And especially in this case, there's so much of it. They didn't want me to be a cheerleader.
“Now, I couldn't be a pessimist. But I could definitely be a realist. I spoke as plainly as I knew how. And the family has responded really, really well. They've been great for one another and to each other.”
Company leaders knew that lenders would request the suspension of distributions to shareholders. “We got out in front of that — we told the shareholders we're doing this before the banks even asked us to,” Herschend says. Family members responded that they understood.
“We've done formal and informal video updates. We've done a lot of a lot of talking and chatting and communicating
“And I think it’s brought us closer together.”