scarborough waterpark feasibility study … · design day assessment ... help them achieve economic...

Scarborough Waterpark Feasibility Study

March 2014

Leisure Development Partners LLP

leisuredevelopment.co.uk

freemanr

Typewritten Text

Appendix H

ContentsIntroduction, concept and disclaimer.....................................................................................................6

Introduction ........................................................................................................................................6

The Project/Concept ...........................................................................................................................6

Disclaimer............................................................................................................................................7

Site Analysis & Regional Context ............................................................................................................9

Introduction ........................................................................................................................................9

The Site ...............................................................................................................................................9

Regional Context...............................................................................................................................10

Available markets....................................................................................................................................6

Introduction ........................................................................................................................................6

Available markets................................................................................................................................6

Resident market size.......................................................................................................................6

Resident market characteristics......................................................................................................8

Tourist market.....................................................................................................................................9

Tourist market size..........................................................................................................................9

Summary and Implications ...............................................................................................................12

Waterpark Overview & Trends .............................................................................................................13

Introduction ......................................................................................................................................13

Evolution of the Waterpark & Overview ..........................................................................................13

Visitor Origin and Market Penetration at Waterparks .....................................................................15

Indoor Waterparks........................................................................................................................15

Outdoor Waterparks & Resort Waterparks ..................................................................................16

Revenues...........................................................................................................................................17

Cost of Goods Sold ............................................................................................................................18

Operating Expenses ..........................................................................................................................19

Summary and Implications ...............................................................................................................20

Revenue Forecast..................................................................................................................................21

Introduction ......................................................................................................................................21

Attendance & Markets......................................................................................................................21

Market Penetration and Attendance............................................................................................21

Admission and Revenues ..................................................................................................................23

Per Capita Spend...........................................................................................................................24

Other Revenues ............................................................................................................................25

Implications.......................................................................................................................................25

Physical Planning...................................................................................................................................26

Design Day Assessment ....................................................................................................................26

Food & Beverage and Retail..............................................................................................................27

Parking ..............................................................................................................................................28

Operating Expenses and Profit & Loss ..................................................................................................30

Introduction ......................................................................................................................................30

Staffing Requirements ......................................................................................................................30

Full Time Management Team .......................................................................................................30

Part-Time & Seasonal Team..........................................................................................................30

Other Operating Costs ......................................................................................................................31

Cost of Goods Sold ........................................................................................................................31

Marketing......................................................................................................................................31

Repairs & Maintenance.................................................................................................................32

Administration & General .............................................................................................................32

Water, Energy and Utilities ...........................................................................................................32

Insurance, Rates and Other Costs.................................................................................................32

Pre-Opening Expenses ..................................................................................................................33

Rent...............................................................................................................................................33

Reinvestment ................................................................................................................................33

Financial Appraisal ............................................................................................................................33

Financial Bases Tables...................................................................................................................34

Profit & Loss & Implications..............................................................................................................37

Appendix ...............................................................................................................................................42

Scarborough Waterpark Feasibility StudyLeisure Development Partners LLPLondon, United Kingdom

Introduction, concept and disclaimer

INTRODUCTION

Leisure Development Partners LLP (LDP) is a specialist firm in leisure real estate economics andoperational advice. We work worldwide for new and existing leisure and entertainment projects tohelp them achieve economic viability. Our experience includes all forms of leisure real estate, fromvisitor attractions, to sports and music venues, resorts and retail & entertainment developments.

LDP have been commissioned to provide market research, analysis and a feasibility study for aproposed waterpark to be located in the North Bay area of Scarborough. In this report we outline awaterpark overview and trends, available markets and our financial forecasts and feasibilityassessment.

The report and analysis has been overseen and carried out by Michael Collins and James Kennard,respectively Senior Partner and Partner in LDP. Frea Nunn, Research Coordinator, has led the deskbased data gathering exercise.

THE PROJECT/CONCEPT

The concept we have tested is for a class leading largely indoor waterpark with an exciting mix ofslides, pools and activities. Plans and drawings were shared with our team and have been used toinform our understanding of the concept and subsequent analysis. Our scope of work does notinclude capital cost analysis and we have assumed the allocated budget is sufficient to deliver theproject as described to us. Our own sense check of this suggests that is likely to be the case.

Based on discussions with the project team, potential operator, developer and on our review of theplans, it is clear that the intent is to provide a high quality, dynamic experience with a number ofcompelling signature elements which will help market the park and drive repeat visits. Indeed givenrelatively modest local resident markets it is imperative that the waterpark drive day trip visits aswell as visits from tourists staying in Scarborough and nearby. Scarborough is already wellestablished both as a day trip and overnight destination and we feel that the waterpark will benefitfrom this, as well as providing a new reason to visit or to revisit for lapsed visitors.

Our assumptions and forecasting rely on the promised quality being delivered and on extremelyeffective marketing and operations.

The plans include some outdoor elements as well as outdoor expansion (including further significantoutdoor attraction elements) and we feel this is wise. While it is extremely important to offerclimate controlled indoor space in this climate, during fine weather visitors naturally want thechance to go outside.

We are pleased to see that reinvestment and expansion have been considered from the off withreinvestment built in to the development agreements and plans for compelling additions. Asdiscussed later in this document, reinvestment is of paramount importance and generous budgetsare allocated for this within our later forecasts.


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The plans include a spa element which we view positively as this will help the attraction appeal to abroad cross section of the population, providing an attractive element for parents and grandparentsvisiting with children and for independent adults. We view the spa alongside other indoor elementsas particularly important drivers of low season usage.

The waterpark plans for the first phase illustrates a high octane attraction with signature thrill rides(which will address older children, teens and adventurous adults), more accessible features for thewhole family, waterplay for younger guests, spa for adults, lounging and dining space. In our view itprovides for a very complete offer as compared to most UK waterparks. This mix of active, passive,thrill and spa elements should combine very effectively to address a wide age range, while theinclusion of outdoor space, helps deliver wider seasonal appeal. In Scarborough, but also around theUK, there is increasingly a trend for grandparents to have short breaks and day trips with children,often while parents are working and as such the age range within many visitor groups covers a widespan. We view the concept as forward thinking and well matched with the market.

Some previous UK waterparks have failed to provide visitors with enough content to justify a longlength of stay (an attribute which encourages spending and provides for a strong perceived value).In some cases waterparks have been conceived as municipal style pools with a couple of basic slides,little space for lounging and relaxing and poor presentation. They have also often lacked attractivefood and beverage and retail elements. Our discussions with the project team have providedcomfort that all of these aspects are primary considerations and are addressed both in planneddesign and operating approach. Our analysis assumes an average stay of 3.5 hours is achieved andthat the food and beverage provision is of a high quality.

We understand that Alpamare is to be the operator and we view this positively as they have goodexperience and quality of offer. Our analysis assumes that Alpamare (or an equivalently experiencedoperator) operates the park to the high standards we would expect. A couple of UK waterparks havearguably been poorly managed and have suffered for this, gaining reputations for poor upkeep andservice. We view the decision to attract a highly reputable and experienced operator as ofsignificant importance.

DISCLAIMER

This report is based on estimates, assumptions and other information developed by LeisureDevelopment Partners LLP (LDP) from its independent research effort, general knowledge of theindustry and consultations with management at various businesses and stakeholders near the siteand other comparable developments elsewhere. No warranty or representation is made by LDP thatany of the projected values or results contained in this Report will actually be achieved.

All intellectual property rights in this Report including any forecasts, benchmarks, spreadsheets,tables or other materials provided are the property of LDP. You may use and copy such materials foryour own internal use.

Unless required by law, you shall not provide this Report to any third party without LDP’s priorwritten consent, which LDP may at its discretion grant, withhold or grant subject to conditions.Possession of this Report does not carry with it the right to commercially reproduce, publish, sell,hire, lend, redistribute, abstract, excerpt or summarise this Report or to use the name of LDP in anymanner without first obtaining the prior written consent of LDP.


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Site Analysis & Regional Context

INTRODUCTION

This section of the document provides a review of the proposed site for the waterpark. Clearly thepositives and negatives associated with the site are well known to the client team but this providesan independent overview of the suitability of the site to this kind of development.

Two LDP Partners visited the site and surrounding businesses and feel that it is extremely well suitedto a development of this nature. This section reviews our qualitative findings in relation to the site.

Scarborough is among the best of the UK’s seaside day trip and tourist destinations, with a widerange of accommodation at different price points and quality levels in a town with strikingtopography and excellent beaches. Having worked in a number of major British seaside towns inrecent years (including Blackpool, Margate, Hastings, Brighton, Barry) Scarborough’s tourisminfrastructure feels very complete and the town well cared for.

The North Bay area of Scarborough is an attractive destination for tourists and is easily accessible fortourists staying elsewhere in Scarborough or residents. The site takes a prominent and visibleposition and is among a cluster of leisure and entertainment focused uses. The plans for furtheraccommodation will enhance the on-site population, further strengthening this position.

The North Bay area is becoming increasingly strong in terms of its accommodation provision andplans surrounding the waterpark are set to accelerate this. The Sands development offers analternative and high quality accommodation offer and the open air theatre has a proven track recordof adding animation with big name events. We feel the waterpark has an excellent fit in this areaand is readily accessible to all visitors.

THE SITE

Our typical check list when reviewing the suitability of sites for developments of this nature consistsof the guidelines illustrated below. While not all are relevant in every situation, it is desirable toachieve a significant proportion of the following criteria.

The site should:

Have direct access to/from a major road and a major public transportation link.

Have strong regional transport links by road.

Be within easy access of a significant resident market base.

Be proximate to tourist markets and various forms of tourism accommodation.

Be of a size and scale to allow the creation of a critical mass of activity required to generateattendance, or be in a location that benefits from the interest generated by other attractionsand/or passing traffic.

Be large enough to develop sufficient on-site parking.


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The size and shape of the site should be sufficient to account for the planned program andallow for a suitable flow from element to element.

Be as flat as possible to minimize ground-shaping infrastructure costs.

Be in a location where surrounding land uses are compatible with leisure development, i.e.not heavy industry or dense primary residential development.

Be in single ownership or require purchase negotiations with few current owners.

Be in an area with a positive image and in proximity to other complimentary visitorattractions or natural features.

Not be bisected by any significant natural or man-made features such as rivers, canals,pipelines, power lines, roads or railway lines.

Not include areas of significant scientific, ecological or environmental importance.

Figure 1 assesses the site in light of these criteria, scoring the site on a 1-10 basis (1 being very weakand 10 being very strong), and then weighting the criteria according to importance to this particularproject.

Access to the site is extremely good from within Scarborough and Scarborough is well connected byrail to hubs such as York with fast inter-city connections. As shown, accessibility to major andregional road links, and accessibility to quality public transport all score relatively highly.

The site has relatively modest resident markets but by contrast, the tourists market, although notlarge compared to some cities, is of a good size and is highly localized around the site area. The sitealso scores very highly when considering scale and topography: the site is more than sufficient andhas capacity to allow for sufficient development and flow between uses and car parking. The site isalso flat, which is ideal for this type of development. The site is highly visible and extremelystrategically located close to accommodation, the open air theatre, the Sea Life Centre and beach, allof which are synergistic.

From our perspective there appears to be relatively few man-made features which are likely toimpede development or connectively at the site, and we are not aware of areas of issues whichmake the site unsuitable for this type of development.

Having scored the site according to this range of criteria and weighted these criteria to reflect theconcept, we have given the site a score for attraction development of 127 of out a possible 150 - avery high score reflecting a strong site for this project.

REGIONAL CONTEXT

Appendix Figure 1 illustrates a broad cross section of the attractions and leisure businessesoperating in the area. There are a number of wildlife attractions including the Sea Life Centrelocated very close to the site, as well as the heavily invested The Deep aquarium in Hull.Entertainment attractions include a number of golf, play and entertainment centres, as well asFlamingo Land, although this is some distance and we would view this as complementary to the


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waterpark, with both helping cement the wider destination for families. There are several heritagerelated attraction elements.

In general there is a clear gap in the market for high quality water leisure following the closure of theAtlantis Waterpark. These regional attractions inform our later pricing analysis and our view on thecompetitive environment.

We have reviewed market penetration rates for the most comparable regional visitor attractions(including the Sea Life centre which is located close by and Flamingo Land). These are bothsuccessful attractions, with Flamingo Land being the clear market leader. In general terms thewaterpark is complimentary to these attractions and together they help create the widerdestination.

Appendix Figure 2 provides attendance context for leading paid-entry attractions in the region. Wenote, however, that attractions are not obliged to share this information. We have data which wecannot publicly share on a number of other attractions which would make this top ten if they wereto share information.

This does illustrate the drawing power of Flamingo Land, a quality entertainment-focused attractionwhich appeals to both residents of the region and day trip and overnight tourist guests. Whilewaterparks tend to penetrate markets at a lower level than theme parks, we have been able to usepenetration information to provide a view of relative performant for our later analysis.


FIGURE 1 – SITE ASSESSMENT FOR THE SCARBOROUGH WATERPARK

Weak Strong

Weighting 1 2 3 4 5 6 7 8 9 10

1 Accessibility to major road links 1.0 X

2 Strength of regional road links 1.0 X

3 Accessibility to major / quality public transport 1.0 X

4 Access to a significant resident market base 1.5 X

5 Proximity to tourist markets and accommodation 1.5 X

6 Size and scale of development / critical mass of entertainment 1.0 X

7 Adjacency of other attractions / developments that drive passing footfall 1.0 X

8 Capacity to develop sufficient on-site parking 1.0 X

9 Capacity to allow the planned programme and flow between elements 1.0 X

10 Flatness of site to minimise ground-shaping infrastructure costs 1.0 X

11 Compatibility of adjacent land uses i.e. not heavy industry 1.5 X

12 Ownership and ease of purchase negotiations 1.0 X

13 Image of immediate area and proximity to complimentary uses 0.5 X

14 Impediment by natural or man-made features e.g. rivers, power lines 0.5 X

15 Presence of significant scientific, ecological or environmental importance 0.5 X

Source: LDP


Available markets

INTRODUCTION

In the following section we evaluate the size and profile of the available off-site markets for theproposed waterpark. Normally attendance levels at visitor attractions are a function of a range offactors including: the size and characteristics of available resident and tourist markets; the extentand nature of competitive facilities; and the quality, marketing and management of the developedcomponents. In this section we investigate the size and profile of the off-site available markets.Given the close proximity to accommodation to be developed around the park there will also be aneffective on-site population, for which it will be extremely easy to visit the waterpark. We have notanalysed this separately as to do so could risk double counting.

AVAILABLE MARKETS

Resident market sizeWe have measured the available markets based upon drive-time isochrones. Waterparks tend todraw the bulk of visitors from within 60 minutes, with the most local residents visiting more often.Larger, more heavily invested waterparks have proven able to draw day visits from up to two hoursaway.

Given Scarborough’s proven day trip success, the critical mass of its day tourism offer and the scaleand expected quality of the waterpark it is reasonable to review a two hour market. Givendecreasing propensity to visit as drive-time increases we have subdivided the resident market 0-60minute and 60-120 minute drive-time segments. Those people visiting the site but who live morethan two hours from the site are likely to stay in the area overnight and are thus considered in thedomestic tourist market.

Figure 2 demonstrates the extent of the various drive-time isochrones. As shown, the two hourmarket reaches Sheffield, Darlington and Sunderland. More importantly York as well as otherimportant seaside locations such as Whitby and Bridlington can be reached within the hour.


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FIGURE 2 – DRIVE TIME MAPS

Source: LDP and MapPoint

Figure 3 summarizes the available resident markets. In 2014, the estimated total population withintwo hours of the site is projected to be approximately 6.8 million. The 0-60 minute drive timeaccounts for only approximately 440,000 and the secondary market the remaining 6.4 million. Theprimary market is small but the secondary offers a significant opportunity, although clearlysignificant marketing budgets will be required to communicate with them. In terms of perception,some large population centres within the secondary market are on the edge of an hour.

The challenge of a modest primary market effects many seaside towns around the British coast andstrong attractions must have the drawing power to drive more distant visits and clearly to addressthe tourist markets.

To forecast future populations we have utilized official population projections. All market segmentsare expected to see a relatively modest annual growth in the population over the next 10 – 15 years,at around 0.8 percent per annum.


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FIGURE 3 – AVAILABLE RESIDENT MARKETSMarket Size (000s)

Market category Catchment Size 2014 2016 2018 2019

Primary 0-60 minutes 438.9 446.0 453.2 460.4Secondary 60-120 minutes 6,383.9 6,486.4 6,590.6 6,696.5

Total residents 0-120 minutes 6,822.8 6,932.4 7,043.8 7,156.9

Source: LDP, MapPoint, Ons

Resident market characteristicsThe age profile of the residents within the catchments is fairly unremarkable by Western Europestandards and the population is expected to slowly grow older in the future. As a part of ouranalysis we reviewed 2011 census data for Scarborough, North Yorkshire, the North East andEngland to make comparison and sense check points of differentiation from comparable waterparksavailable population.

In general, the resident catchment market is similar to England as a whole in terms of age profilewith a slight bias towards older rather than younger residents (the same can be said of the NorthEast which is broadly representative of the two hour market). There are proportionally slightlyfewer children and a bias towards older residents. While this is not uncommon in seaside locationswhich are often considered attractive retirement locations, we note that it is true of the widerregion. We provide an age profile chart as Appendix Figure 4. A similar profile is seen in severalother locations with strong performing coastal waterparks in the UK (which are included in ourbenchmarking comparables for market penetration).

As discussed elsewhere in the document, the waterpark plans include lounging and spa elementswhich are well placed to appeal to older guests (and proven to do so in certain waterpark casestudies we have reviewed, such as Tropical Islands in Germany, where a spa has proven anextremely popular addition with older guests). The UK population is ageing and the grey market isincreasingly important to visitor attractions and has proven to include generous spenders,particularly when visiting with their grandchildren. We feel the waterpark offer is well balanced toaddress multiple market segments including older guests.

Relative wealth of residents plays in to pricing decisions. As shown in Figure 4, the average weeklyhousehold income around the study is modest compared to some areas, particularly towards themajor conurbations. This suggests that nearby residents may be value conscious and clearly it willbe important to make the attraction accessible for them. Low entry fee offers during the shoulderseason could be one example strategy. We note that within the one and two hour market there aresome pockets of relatively high income households which is encouraging. Household income is auseful gauge of spending power which in turn is important factor when looking at potential demand.

In our later pricing analysis and per capita spend analysis we have considered the spending power oflocal residents and have assumed healthy levels of discounting will be employed to attract them,particularly in the shoulder seasons. That said, some of the UK’s price leading attractions are inmarkets with relatively low disposable income locally and have found that families are willing to


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spend for occasional high perceived value days out. We do still take a prudent view in our laterassessment.

FIGURE 4 – ESTIMATED AVERAGE WEEKLY HOUSEHOLD INCOME, BY MSOA, 2011

Source: Neighbourhood Statistics

TOURIST MARKET

Tourist market sizeThe tourist market will also provide an important source of visitors to the proposed developmentand in our view the waterpark will become a key marketing message for Scarborough tourism,alongside the resort’s many other positive attributes. Tourists generally travel for up to a maximumof one hour from their holiday base when visiting attractions. Therefore, we have defined thetourist market as comprising people staying away from home in locations within one hour’s driveof the site.

In our work we have found that it is extremely rare for tourists to travel more than one hour fromtheir holiday accommodation for day out entertainment and leisure amenities. As such, to look at abroader market definition would likely significantly overstate potential demand. We typicallysubdivide the market into domestic and international tourists as behaviour can vary between these


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groups, but in reality international tourism is very modest and as such we are viewing a largelydomestic market.

Such a market definition allows comparison of market size and potential at the proposed project toexisting leisure developments and attractions around the world (and is critical if we were to proceedwith a penetration analysis).

Based on the provided catchment market isochrone for 0-60 minutes, we have weighted touristarrivals and overnights (the overnights weighted figure is used to compute the weighted length ofstay shown in Figure 5) for individual areas within Yorkshire and Humber to include all areas within a60 minute drive. This unqualified market includes guests staying in hotels, serviced accommodation,self catering and camping and caravan sites. The most recent complete figures are up to andincluding 2010.

The average length of stay across the 60 minute market was 3.2 nights in 2010. Anecdotal evidencesuggests within Scarborough itself many guests stay a full week or more, while others are enjoying aweekend visit. A stay of several days certainly allows time for attractions visits. A particularlyencouraging factor is that in 2010, 74 percent of overnight tourists in the market were holidaymakers, which is high relative to many other locations in Britain and reflects a market dominated byleisure visitors.

Prior to applying market penetration rates to the market, it is imperative that we qualify theavailable markets to remove tourists staying within the catchment market area who also livewithin the resident market. This step is undertaken to prevent them from being double countedwhen forecasting attendance, and missing this step has the potential to significantly overstatepotential demand.

Those found to live within the two hour resident market were removed from the forecast. This stepincludes the removal of domestic tourists (e.g. UK tourists who live within the two hour residentmarket but also go on holiday within the one hour tourist market).

Our review of available statistical data highlights that around 41 percent of total visitors toScarborough are from Yorkshire and Humber. However, this includes the many day visitors from themarket who are excluded from this analysis as we have reviewed overnight guests only, as such weneed only exclude the overnight guests from Yorkshire and the Humber which total 20 percent.

The qualified tourists markets for 2008 to 2010 are also provided in the figure and illustrate around2.3 million arrivals in 2010. This means 2.3 million guests who stay within one hour of the site andwho do not live within the resident catchment markets (for the avoidance of doubts this is aheadcount not overnights). It is this assessed figure (and the future forecasts of it) which marketpenetration rates for tourism are applied to. This is intended to ensure no double counting and afair assessment.

In Figure 5 we summarize the available tourist markets. As shown in the table, before we havequalified the markets and the total projected tourist market in 2010 equaled just less than 2.9 million tourists. This was a significant increase on the 2008 figure and represented a low point during thedownturn.


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We have reviewed some strategy information relating to the growth of tourism in Scarborough andthe surrounding area and feel positive steps are being taken to grow demand and ensure thatScarborough enjoys continued success. That said, we feel it wise to take a conservative growth andwithin our financial modelling have allowed only 1 percent annual growth. Our forecast suggestsalmost 2.4 million qualified visits by 2018 and growth towards 2.6 million over the longer term. Wewould hope that this could well be exceeded but feel this allows for prudent forecasts. It is theseforecast markets which are utilised within our later financial assessment.

FIGURE 5 – AVAILABLE TOURIST MARKETS

Market Size (000s)Market category Catchment Size 2008 2009 2010

Unqualified market - arrivals 0-60 minutes 2,661 2,814 2,847

Average Length of Stay 3.39 3.44 3.24

Percentage Holiday Makers 69.5% 71.9% 74.0%

Qualified market - arrivals 0-60 minutes 2,134 2,257 2,283

Source: LDP

Scarborough attracts a very wide cross section of tourists, performing well with families, with olderguests and offering a wide range of accommodation in both typology and price point. As well asreviewing official statistics, we have been provided with a number of papers relating to tourismstrategy and have discussed tourism with several operators of accommodation within Scarborough.

Our research highlights the diverse array of visitors to the market with a broad age range of guests.The family market is strong and spikes during school holidays while there is also strong grey marketsupport throughout a wider season. Anecdotal evidence highlighted a growing number of oldertourists travelling with grandchildren.

According to the Visit England Seaside Tourism Survey for 2012, Scarborough is the top rankedseaside destination in terms of overnight tourist trips, having overtaken Blackpool in recent years.The same survey highlights the broad spread of holidaymakers visiting seaside destinations likeScarborough, with C1s and ABs both contributing an equal 29 percent of visits to seasidedestinations and C2s an additional 22 percent.


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As with most markets, the ageing population, improved health and attractive disposable income ofthe grey market are factors in Scarborough. Alongside this there is the emerging trend for extendedfamilies to travel together in multi-generational groups. In our view the waterpark offer describedto us is well suited to this emerging environment since it provides the high octane thrills demandedby younger guests but also lounging, spa and quality food and beverage provision demanded byparents and older guests.

Our discussions highlighted a high degree of loyalty amongst many Scarborough visitors, with manyrepeating regularly. There is a very broad range of accommodation available to guests includingbranded hotels, more traditional hotels, bed and breakfast, self-catering and a variety of camping,recreational vehicle and caravan parks. The availability of quality accommodation aimed at verydifferent market segments has resulted in a wide range of visitors in terms of socio-economic profile.

Scarborough tourism is highly seasonal and this is something that those in strategy are trying toaddress through programming and marketing. Clearly the underlying pattern of a summer peak islikely not to change but efforts can bring guests during other times of year. The waterpark’s indoorand spa elements will help play their part in making a visit during poor weather more appealing.

Within our benchmarking analysis we review a tourist market of only those guests staying overnightas day trip visitors will invariably also be counted within the resident market (or drive in excess offour hour’s round trip for a day out which is a rarity). While this is important in terms ofmethodology, we have also endeavored to understand the buoyant day trip market to Scarborough.

As well as being a leading tourism resort for overnight guests, Scarborough is very well establishedas a day trip destination and figures from the 2012 Cambridge Model Volume and Value Reportsuggest as many as 6 million day trips within Scarborough District. While this figure does not directlyfeed into our analysis, it supports the findings from our local research which highlight thatScarborough is a regular day visit destination for many residents within two hours and supports ourpenetration assessment of the secondary resident market. The waterpark programme will provideanother reason to visit and repeat for this already loyal market. It will also help encourage new andlapsed visitors to come to Scarborough.

SUMMARY AND IMPLICATIONS

The primary resident market is modest in size, with the secondary market being of a generous scale,highlighting the importance of generating visits from distant markets. However, Scarborough is aproven day trip as well as tourism destination and is perceived as the coastal day out of choice formany cities and towns in the region. The tourist market is relatively large and heavily leisure biasedand, along with day trips, represents a solid opportunity for the waterpark.


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Waterpark Overview & Trends

INTRODUCTION

In this section we review the performance and characteristics of water attractions, including moretypical waterparks and more niche water attractions which include beach and surf components.

EVOLUTION OF THE WATERPARK & OVERVIEW

The modern waterpark emerged in the late 1970s when leisure developers in both the private andpublic sectors recognised the broad popularity of water recreation and developed a concept linking anumber of water attractions in one gated park. This waterpark concept evolved rapidly from simpleslides and pools to the present product offering, which often consists of a broad mix of attractions,with waterparks increasingly evolving and differentiating their offers. Of late, additions such asbeaches, surfable waves, flowrider surf simulators, master blaster water coasters and ever moreextreme slides have further pushed the boundaries of waterpark design.

These waterpark facilities have proven over time to be both popular and profitable when comparedto some other forms of more capital intensive attractions. Waterparks typically incorporate slidesand flumes balanced by more passive swimming and sunbathing/lounging experiences as well aseating and drinking facilities, which help to increase length of stay and improve economicperformance.

As with all attraction types, the longer the duration of stay, the higher the price which can becharged and the greater the level of secondary spending. However, as much of the time spent atwaterparks is rather passive, for example sunbathing or swimming, spend per hour tends to fallbelow other attraction types.

Many waterparks derive the majority of their attendance from the local resident base, typicallywithin a one hour drive, although others are more resort guest focused as is anticipated in thissituation. Due to the dependence on the local market for some parks, repeat visits are typicallyimportant, with implications for both pricing and reinvestment requirements. As with theme parks,waterpark owners must regularly reinvest in their facilities to ensure ongoing appeal to residentmarkets and to generate repeat visits from their primary population bases. Manufacturers andsuppliers of equipment for waterparks constantly innovate to satisfy this need for new experiencesand costs associated with waterpark capital items have grown significantly over the past twentyyears.

Resort waterparks located in strong tourist markets which derive significant visits from domestic andinternational tourists can face reduced pressure to provide new experiences each year andreinvestment can be somewhat lower. This is a pattern we have seen in high volume touristlocations on the Spanish Costas for example. In Scarborough, there are high repeats amongsttourists and also a definite need to generate repeat visits from residents and day trippers and assuch, refreshment is a critical element of the business model.

As the country where waterparks originated in the 1970s, the U.S. has a mature and well developedwaterpark market. However, growth in the development of waterparks slowed during the late


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1980s as markets became saturated. Recently though, a new phase of development has taken placewhere waterparks have been developed successfully as second gates at regional theme parks, or asfully themed experiences, with investment levels closer to that of a theme park, such as thewaterparks to be found in Orlando. Internationally, this level of theming and finish was recentlyinaugurated in Abu Dhabi at Yas Waterworld which joins Wild Wadi and Aquaventure in Dubai asamong the best and most heavily invested recent waterparks. These offer a full waterparkexperience in a highly themed environment, with dedicated and specialised retail facilities and foodand beverage to complement the offer.

In addition, a new, high quality indoor waterpark product has emerged in the formerly underdeveloped northern US markets. These parks have seen more intense experiences and betterpresentation within an indoor park setting (often associated with accommodation). The ability tomitigate against poor weather while still providing a compelling product has opened up newmarkets. This new breed of indoor park is often built as a core component of resort hotels. Locatedprimarily in the Wisconsin dells (Great Wolf etc.) these waterpark hotels have successfully driventourism and established new weekend destinations that cater to regional residents as well ascorporate groups.

Waterpark development in Europe has seen growth over recent years and Spain, which sawsignificant growth in the 1980s and early 1990s, is amongst the most developed markets. TheSouthern European waterpark offer is typified by outdoor regional waterparks, many of which are instrong tourist markets.

In Northern Europe, indoor water leisure offers are more typical. The indoor waterparks in Germanyand the U.K have often lacked quality and intensity and in some cases have struggled to repaycapital. Many were public sector lead projects associated with municipal leisure centres andprovided little more than a pool with a few slides. There are a few examples of innovative indoorprojects, such as Splash Landings at Alton Towers, a themed waterpark with extensive water playfeatures, constructed as a component of one of the hotels at the Alton Towers resort and as asecond gate for the theme park. There are a new generation of indoor waterparks with a fewnotable examples built and more in planning. This project is similar in that it embraces a level ofintensity of experience and plans to provide a pleasant and fun environment which will encourage along length of stay.

Costa Caribe which opened at Port Aventura in Salou was constructed to provide additional contentalongside the theme park and resort offer, as per Splash Landings. This is one of Europe’s bestparks, if somewhat small given its potential, with extensive theming and some major signature waterrides such as a Master Blaster.

The higher end water offers in Europe have begun to expand and differentiate their offers with theaddition of standing waves (flowriders) and major slides such as the Master Blaster water coaster.

PRINCIPAL CONCEPT TYPES SUMMARYWaterparks are a diverse attraction industry segment with many different forms which havevariation in terms of scale, capital, weatherization, activities and other factors.

In climates such as Northern and Western Europe, the indoor waterpark is the most typicalconcept type, but within this there are several forms. Many have been swimming pools with


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a handful of slides, presented as municipal pool plus. These tend to be relatively cheap tovisit but also have a low perceived value. At the higher end of the industry, indoorwaterparks have comprehensive slides, waterplay and even signature elements such as lazyrivers, master blaster water coasters and themed waterplay – these offer a longer stay andhigher perceived value and are the segment most relevant to the Scarborough Waterpark.

Themed outdoor waterpark - heavily themed, outdoors and located in major tourist markets(e.g. Orlando), these parks are at the forefront in terms of capital expenditure, attendanceand revenues.

Outdoor regional waterpark - typically built in locations with good climates and often intourist areas, these tend not to be heavily themed but offer thrilling slides, family slides,waterplay and lounging areas.

Indoor waterpark hotels - these all inclusive waterpark concepts have developed in the USprimarily in areas of inclement weather such as the Wisconsin Dells, and have provenintegral to a developing tourism industry.

VISITOR ORIGIN AND MARKET PENETRATION AT WATERPARKS

Indoor WaterparksMarket penetration rates for a cross section of indoor waterparks are shown in Figure 6. As with allour reporting we show ranges and averages as this information is considered confidential byoperators and this ensures they remain willing to share their data with us.

For most indoor waterparks primary resident market penetration is by far the highest of any marketsegment. The majority are not in resort areas and have a more resident focus (often withsignificantly larger primary resident markets than available in Scarborough. Two extremely highperformers achieve around 15 percent, one is large scale and heavily invested (although nowsomewhat dated) and the other is in a modest market with little competition (as is the case for theScarborough primary market).

For the secondary market we see a significant drop off in penetration for almost all parks, highlightdecreasing propensity to visit and repeat visit as drive time increases. Most parks achieve between0.5 percent and 5.0 percent in this segment with only a few outliers. Several achieve in the region of2 to 3 percent.

Among typical indoor waterparks located in cities or other non-resort locations, tourist penetrationis often modest with an average of just one percent of tourists within an hour and several achievingaround two to three percent. A UK waterpark in a heavily tourist orientated market but with intensecompetition for leisure spending achieved towards the top end of this range.

Although excluded from this Figure due to their resort accommodation links, penetration ratesamongst the indoor waterpark hotel examples such as those in the Wisconsin Dells and Alton Towerstend to be much more skewed towards tourists as they are actually the tourism driver and linked toguest nights. While in absolute terms penetration is not always higher, the visitor mix tends to bemore tourist biased. We review resort orientated waterparks in the next segment and these arealso an important benchmark set given Scarborough’s resort focus.

For more resort focussed waterparks the majority of guests still come from the broader region (3-4hours from the site) as they are often weekend destinations. Costa Caribe at Port Aventura (which is


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mostly outdoors but has an indoor area) achieves a high percentage of international visitors giventhe visitor mix in its hotels driven by the theme park and its nature as a second gate to the park.

FIGURE6 – MARKET PENETRATION FOR SELECTED INDOOR WATER PARKS

Primary(0-60 min)

Secondary(60-120 min)

Domestic(0-60 min) International

Max 15.2% 12.6% 2.8% 0.9%

Min 1.5% 0.4% 0.1% 0.0%

Median 5.1% 1.3% 0.6% 0.0%

Average 6.7% 2.5% 1.0% 0.2%

Source: LDP

Outdoor Waterparks & Resort WaterparksMost waterparks are resident biased, particularly typical indoor parks. In tourism resort destinationssome perform well with tourist market segments. Those that are able to target tourists in significantnumbers are located in very strong tourist markets and are typically within a couple of minutes ofleisure orientated hotels, resorts and beaches.

Despite the strong performance of some of the parks in their tourist markets, resident marketpenetration rates are typically higher than tourist market penetration rates with an average ofaround seven percent as compared to two percent and slightly less than three percent in thedomestic and international tourist market respectively. This illustrates that although some of theparks are tourist focused, take up among tourists is still relatively modest, with parks requiring largemarkets.

Resort orientated waterparks linked with accommodation have a slightly different penetration oftourist as they get a good majority of their visitation from on-site guests. Typically they achieve 30-50 percent of total visits from their on-site resort guests. Nevertheless, they are still able to achievestrong penetration rates of the regional resident markets.

The following chart (figure 7) shows levels of penetration amongst the varied types of waterparks.


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FIGURE 7 – WATERPARK MARKET PENETRATION

Market Penetration0-60 60-120 Domestic International

US regional waterparksMAX 50.2% 11.4% 9.0% 0.9%MIN 1.4% 0.5% 0.1% 0.6%MEDIAN 8.0% 1.1% 1.8% 0.8%AVERAGE 11.9% 3.2% 2.8% 0.8%

US waterparks including destination parks in OrlandoMAX 61.1% 11.4% 9.0% 6.1%MIN 1.4% 0.0% 0.1% 0.4%MEDIAN 7.6% 0.7% 1.8% 2.2%AVERAGE 12.3% 2.1% 2.6% 2.5%

European Water ParksMaximum 16.50% - 4.90% 9.60%Minimum 3.70% - 0.40% 0.40%Median 7.20% - 2.00% 2.80%Weighted Average 6.80% - 2.10% 3.50%

Resort Water Parks 13-15% 4-6% 0-5% 7-11%

Source: LDP

REVENUES

Revenues from waterparks are driven primarily from admission, with the exception of waterparkhotels where it is often included in the room rate. The following table (figure 8) shows thedistribution of revenues amongst more typical stand-alone waterparks in the Europe and the US.

As shown, admissions typically account for the greatest share of total waterpark expenditures,representing between 65 and 70 percent at European parks, and a similar, if slightly broader rangeof between 59 and 74 percent at US parks. Next is food and beverage, typically accounting foraround a fifth of revenues.

Merchandise comprises on average just one percent of total visitor spending at European parkslargely due to a lack of merchandise outlets, little or no theming or branding, and a high proportionof resident visitors at these facilities. US parks, which tend to offer a wider range of brandedmerchandise and in some cases derive a higher proportion of visits from tourist markets, generateslightly more revenue from this source but it still represents only a modest income stream.


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FIGURE 8 – COMPARATIVE PER CAPITA EXPENDITURE LEVELS AT EUROPEAN AND US WATERPARKS

Selected European Waterparks Selected US Waterparks

Category Range Average Range Average

Admissions 65% - 70% 67% 59% - 74% 64%

Food & Beverage 18% - 30% 22% 15% - 22% 18%

Merchandise 0% - 4% 1% 4% - 8% 5%

Other 5% - 12% 10% 6% - 17% 13%

Total 100% 100%

Source: World Waterpark Association, Individual parks and LDP

In cases such as the fully themed Orlando parks, and the recently opened Yas WaterWorld in AbuDhabi, retail expenditure has managed to surpass F&B as the variety and quality of the offer hasappealed to tourists as part of the overall experience.

Other miscellaneous expenditures, including locker rentals, tube rentals (for use on certain slide)and photos can be important, bringing in around a tenth of the total revenue.

Revenues from water sports facilities can vary significantly based on the activities on offer, similar toadventure sports parks. As they are capacity constrained, pricing and throughput by individualactivity is the norm.

Admission yield is a typical key performance indicator for all forms of visitor attractions andrepresents the average spend on admissions expressed as a percentage of the full adult admissionprice. In the UK there has been some downward pressure on yields over the past decade or so, withan increasing expectation of promotions. Yields which were typical in the region of 65-75 percent,now range from around 55 percent to approximately 70 percent (although some outliers exceed thisrange). At the lower end of that typical range, we see some of the large theme parks which have ahigh price for peak season with heavy discounting elsewhere. Within our analysis we have assumeda less aggressive summer season pricing policy.

COST OF GOODS SOLD

The cost of goods sold is a major area of expense at all attractions. The cost of goods sold generallyconsists of the purchase of food, merchandise and game prizes. The ratios are extremely consistentacross all attraction types and across the world. Things that might lead to a variation in these figuresmight, for example, include the presence of branded merchandise which would push up the


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merchandise cost of goods sold up or the large buying power of a major group which can reducecost of sales:

Cost of sales for food and beverage at most attractions is generally between 28 and 35percent of related revenues

o we have seen instances in the mid to high 20s, sometimes where the food offer issimple, or where buying power is very high, but these cases are rare

o we have also seen very sophisticated food offers, or specialist food offers at as muchas 40 percent , although around 30 percent is very typical

The industry range for merchandising cost of goods is broadly 45 to 55 percent.o again there is little variation between attraction typeso in general a focus on particularly high quality or branded merchandise can push

towards the upper end of the range and simple souvenirs and confectionary cansometimes be lower than the illustrated range

OPERATING EXPENSES

Operating expenses within commercial attractions fall in to relatively tight ranges for the most partbut with some variation depending on attraction type. The following Figure 9 shows typicaloperating costs as a percentage of revenues. Labour costs always constitute the largest part ofoperating costs, followed typically by marketing.

Utilities can be above the range shown for indoor waterparks which consume large amounts ofelectricity for climate control, as well as water costs. Maintenance is a factor clearly at all forms ofattraction and particularly those which are hardware dependent. Waterparks tend to have relativelyhigh costs for the maintenance and renewal of plant and the fabric of their buildings. Slidesthemselves compare favourably in maintenance terms to ride based attractions.

FIGURE 9 – OPERATING COSTS (MIN, MEDIAN & MAX) AS A % OF REVENUES

Source: Individual Attractions and LDP

Operating costs among more traditional outdoor waterparks are fairly consistent with theme parks,with the majority of costs attributable to labour (representing up to 50-60% of total costs). Normallyoutdoor waterparks can achieve EBITDA margins of 35-45%.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Staff Marketing Maintenance Utilities Admin & Other


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Operating costs amongst indoor parks are typically higher due to the increased utility costs forclimate controlled environments. Although smaller in footprint than outdoor parks, the increasedutility costs can have an impact on overall profitability. As a result, many indoor waterpark hotelstend to package many of the operating costs within the overall opex of the hotel. Similar to outdoorparks, staff costs make up the majority of the costs and need to be built up to reflect the individualsize of the park, throughput and local market labour costs. While municipal and basic indoorwaterparks have sometimes struggled to make reasonable operating margins, more commercialventures can achieve significant margins, into the 30s percent and even close to 40 percent EBITDAmargin in strong markets and with solid management.

SUMMARY AND IMPLICATIONS

Waterparks are a diverse attraction industry segment with many different forms with variation interms of scale, capital, weatherization, activities and other factors. There are many different typesof waterparks and we feel that this project represents both an indoor and a resort waterpark and isbeing planned to provide the increased intensity and quality of service and presentation that isbecoming prevalent across the waterpark sector.

Penetration rates at waterparks in general are easily highest across the primary resident markets,although resort waterparks tend to achieve strong penetration across the tourist markets. Revenuesat waterparks are primarily driven but admissions, although recent waterpark developments haveprovided better food and beverage and retail offers and have succeeded in increasing spend levels.


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Revenue Forecast

INTRODUCTION

In the following section we review both the attendance potential and the revenue potential for theproposed Waterpark. The attendance, which is the primary driver of revenues, is calculated bymeasuring the likely capture of the available markets. We have analysed benchmark penetrationrates and the scale of the available markets in earlier sections of this report. Clearly there is astrong relationship between price and volume and as such we address both of these key drivers inunison.

ATTENDANCE & MARKETS

The success of any attraction is a function of the scope, scale and nature of the markets there tosupport it, as well as other external factors, such as levels of competition, disposable income etc. Aspart of the analysis for the project, we have conducted an analysis looking at levels of potentialattendance, based on potential drawing power of the attraction given the markets and levels ofcompetition.

Market Penetration and AttendanceWhile there are attractions in Scarborough such as the Sea Life Centre, some amusement rides,museums, play centers and family activities, we feel that as they largely serve the tourist market andthey are for the most part fairly low key, the addition of the waterpark is likely to strengthen theoverall offer. Other attractions are short stay, with the exception of Flamingo Land which is furtheraway and a weekend or long stay visitor can enjoy multiple attractions during a single visit.

Figure 10 shows the forecast potential attendance for the waterpark. We have based our attendanceon an opening year of 2016. We discuss what we view as potential stable year penetration rates,but in the financial model, we have allowed for an evolution of rates typical of new attractions(often nearby resident uptake enjoys a champagne effect on opening, while more distant marketstake longer to reach full awareness for example).

The penetration rates associated with each market are based on the comparables we reviewedearlier and other operational examples. We have assumed a penetration rate of 11 percent acrossthe 0 to 60 minute market which in order to be prudent is lower than the UK’s leading examples butnevertheless represents a strong performance reflecting a relatively small market size and littlerelevant competition. Typically penetration is often high in modest markets, where it is relativelyeasy to reach people through marketing efforts. To achieve this level it is imperative that thewaterpark is not prohibitively expensive.

Scarborough is a well-established day trip destination for residents beyond an hour drive away andwe feel this relatively large market offers extremely solid potential. We have assumed a penetrationrate of three percent in this market segment. We feel that a great deal of this will come from themarket area just beyond one hour, where this is the natural seaside and waterpark destination ofchoice and in terms of perception is only just over an hour drive. To the more extreme boundariesof this catchment there is more competition for guests’ leisure spend and we feel demand will bemore muted.


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At three percent, the penetration forecast for secondary residents is slightly above average indoorwaterparks but significantly lower than leading examples. We believe with a modern and appealingoffer and given Scarborough’s proven day trip prowess with this market segment, that this isachievable and could be exceeded if the park is particularly well received.

The site at the core of Scarborough tourism is well placed to attract overnight guests to Scarboroughand elsewhere within the catchment market. Many Scarborough guests will find the waterpark tobe walkable from their accommodation and for all it will be extremely accessible. We feel thissegment offer very strong potential and have forecast what we believe is a conservative 4.5 percentpenetration rate. Within overnight guests to Scarborough itself this will likely be exceeded but asoutlined in the catchment market analysis the available market includes other towns. Thisperformance exceeds that of the more basic indoor waterparks but is lower than achieved by manyEuropean seaside waterparks and resort focused waterparks.

As seen in figure 10, we estimate potential attendance to range between approximately 300,000 and400,000 per annum, with the mid-case attendance equating to 350,000. We have reviewed theclient team/operator forecasts and feel that the while the highest scenario is somewhat ambitiousthat the worst case should be easily exceeded with the right pricing policy and assuming the qualityof the offer is as strong as described to us. For the purposes of the following financial analysis weuse our medium case.

FIGURE 10 - SCARBOROUGH HIGH MEDIUM AND LOW ATTENDANCE FORECASTS

2016 Low Medium High Low Medium HighResident

Primary 445,993 10.0% 11.0% 12.0% 44,599 49,059 53,519

Secondary 6,486,442 2.5% 3.0% 3.5% 162,161 194,593 227,025

Total 6,932,434 206,760 243,652 280,545

Tourist

Qualified Arrivals 2,329,393 3.5% 4.5% 5.5% 81,529 104,823 128,117

Total Forecast Attendance 288,289 348,475 408,661

Source: Leisure Development Partners

As a further sense check of the attendance forecasts, we performed an additional analysiscomparing paying visits at theme parks, with paying visits at waterparks operating nearby. Ingeneral terms theme parks, which are far more heavily invested, tend to achieve significantly higher


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attendance and penetration than waterparks, which although extremely effective in penetratingtheir markets, fall some way behind full theme parks.

We made comparison of parks such as: the Blackpool Sandcastle to the Pleasure Beach, Blackpool;Disney’s Typhoon Lagoon to Disney’s Animal Kingdom; Aquabouleveard in Paris to Parc Asterix; andAlton Towers Waterpark to Alton Towers. We found that the majority fell into a reasonably tightrange with the waterpark accounting for between 16 and 27 percent of the nearby theme parksvisits. Drawing comparison with Flamingo Land and applying the range of 16 to 27 percent suggestsa range of just less than 250,000 to slightly more than 400,000. While this is not as scientific andnuanced a process as the above penetration assessment in nevertheless serves as an interestingsense check.

ADMISSION AND REVENUES

Total admission revenues are a function of the perceived value of the experience as well as thelength of stay of the visitor. To gauge pricing and perceived value we use a measure calledentertainment value (EV) this expresses prices on an hourly basis to allow for comparison betweenattraction types. The undiscounted adult price divided by the average length of time spent on siteprovides the entertainment value or price per hour.

A key reason we review the entertainment value (EV) is to gain an understanding of the current levelof value the average consumer places per hour of entertainment at an attraction. This allows us tolook at other attractions around the country and region and apply our learnings.

In general the longer a guest stays at an experience, the more they are willing to pay for saidexperience. However, it is important to note that this is often based on the headline price (i.e. the‘perceived’ price) and not necessarily the amount they spend. The guest has a certain expectation ofthe quality and level of the experience and as such will take their perception of value form otherexperiences and apply it to this one.

Pricing must match the visitors experience and the link between willingness to spend and averageduration of stay at attractions is extremely strong, with visitors willing to pay more for a longer visit.It will be critical to balance the price for the entertainment with an appropriate average length ofstay. Based on the most similar comparables and our review of the plans and our discussion withthe project team we feel an average stay of 3.5 hours should be achievable. We are aware thatmanagement plan to exceed this and have discussed sound strategies to do so with us, but we aretaking a more cautious view as an annual average.

We have assumed that the spa is provided within the entry cost and understand this is the plannedapproach. There may well be opportunities over time to add up-charge treatments that could offerupside beyond the revenues calculated here but we have chosen to take a prudent view and havenot included these.

Based on the average EV calculated from a wide range of UK comparables, we would recommendusing an hourly EV of approximately £5.50 in 2014 values. This measure even compares withcommercial leisure activities such as cinemas and bowling. By way of comparison the average EVfor the regional attractions reviewed in Appendix Figure 1 was found to be £5.62 which is just abovethe UK current average. Flamingo Land is estimated at £5.83 and Sea Life is estimated at almost


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£6.50, significantly above our assumption (although this is not uncommon for Merlin attractionsgiven their discounting policies). While EV at the local attractions is on the high side, there is also adiscounting culture and we reflect this in our later yield calculation.

At current values this would suggest a lead adult price of £19.25. This reflects an average length ofstay of 3.5 hours and if sufficient entertainment content cannot be provided to allow for this thenpricing should be revised downwards. We feel such a price represents an affordable price point. Itmay be that this can be exceeded yielding some upside but again we take a prudent view ofpotential. Clearly this is the undiscounted, high season adult price and therefore the most anyonewould pay for single day entry. There will also be child prices, group prices, concessions, seasonpasses and low season discounts all of which will reduce the average paid.

Per Capita SpendPer capita spend by visitors is a mix of admission as well as other on site spend on items such asretail, F&B etc. Of this, the revenue from admission normally makes up the largest proportion.

However, admission per capita is not a simple reflection of the lead price mentioned earlier. Itneeds to be adjusted to reflect the yield the attraction can achieve. The admission yield measuresthe ratio of per capita expenditures on admission to the lead admission price. The yield reflects thefact that as mentioned many visitors will enter on some form of discounted ticket.

Admission yields typically range from 55 to 80 percent, with an average yield ranging from 60 to 70percent. In this case, we believe that a yield of 65% would be appropriate assumption in line withmany UK attractions. This suggests average per capita revenue from admissions would be about£12.50 including VAT in current values.

This yield assumption, twinned with a prudent lead price reflects the likely price sensitivity of thelocal market where there are above average numbers of low income residents (and in general reflectthe UK’s discounting culture). We would anticipate the attraction discounting little during peakmonths, other than for standard family offers, children and discounts for standard concessiongroups. During the shoulder months and low season we would anticipate more discounting with anaim to provide low cost visits to local residents.

We note that our assumption is more conservative than even the worst case within the client teambusiness plan. If the length of stay on site can be pushed beyond our assumption towards the clientteam assumption, then this could very well be an area of upside. We have taken a prudent viewbased on the market norm and if a perception of significant quality above that of the marketcomparators can be achieved, again it may be possible to exceed this figure.

In addition to revenue from admission, the attraction has the opportunity to earn from food andbeverage operations. At leading attractions, revenue from food & beverage typically accounts forbetween 18 and 30 percent of total visitor revenues. Catering spend tends to rise with time spent atan attraction. Attractions with a one to two hour average stays generate demand for snacks anddrinks among visitors. Attractions that have average length of stays of over three hours lead visitorsto require a meal. As mentioned, we feel a stay of around 3.5 hours would represent a solidaverage (although management feel this can be exceeded and that may be the case). The mix ofguests we anticipate will include some more price conscious than others and will also include localslikely to eat before and after a visit, as such we feel some caution is wise at this stage.


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Indoor waterparks have faced the challenge of generating strong secondary spends on food andbeverage and retail due to people being in swimwear. Technologies such as rechargeable paymentbracelets are making it easier for customers to spend, as well as the thoughtful provision of humandryers and readily accessible changing and drying facilities. Clearly management must make it easyand comfortable for people to spend whilst in the facility.

We have assumed a per capita spend of £4 including VAT at current values. This is one third lessthan management’s assumption, which is not without precedent and is similar to UK theme parks.UK waterparks have not been successful for the most part in providing high quality food and apleasant environment in which to eat and drink. We feel this project has the potential to change thisbut have made a cautious forecast based on more typical spending. At £4.00 in current values thisequates to 21 percent of total assumed revenues, well within the described range and towards thelower end of it.

Merchandise income at indoor waterparks in the UK has typically been minimal, as the quality andrange of offers has tended to be weak. We have recently seen much improved retail within someinternational resort waterparks and hope that management will perform in this regard. In order totake a prudent view though we have assumed, just £1.00 of retail spend on souvenirs, confectionaryand other forms of retail. Typically waterparks have succeeded in selling volume of floats, goggles,rash vests, suntan lotion (where there are outdoor elements) etc. The UK attraction market has notalways embraced souvenir spending as well as say the US market and we have taken a morecautious view on this than within the operator’s plan.

Areas of ‘other’ spending can include locker rentals, human dryers, coin operated experiences, tubehire and upcharge experiences. All of these could present opportunity and we have assumed aspend of £1.00 in current values which is well within norms.

In conclusion, we estimate that average per capita spend in the attraction will total some £18.50 (in2014 values) including VAT, and £15.43 net of VAT for the typical visitor. This is approximately £5.00below the management worst case and we feel is a very prudent position. That said, themanagement case does assume lower attendance along with a higher value and clearly a trade-offcan be made in terms of price and visitors (or value vs volume). If much improved food andbeverage, retail and service are in place as compared to typical British parks, then there is thepotential to exceed our forecast significantly as in the operator’s plan.

Other RevenuesThere may be opportunities for other revenues, such as the special out of hours hire of the facilityfor events or sponsorship or perhaps even spa treatments. We feel any such additional revenuesshould be considered upside and have not included these.

IMPLICATIONS

We have performed a detailed market penetration based analysis of attendance potential as well asa further sense check based on relative performance of waterparks versus nearby theme parks. Ourforecasting shows that an attendance range of 300,000 to 400,000 visits is an achievable target witha mid-case estimate of approximately 350,000. This requires competitive pricing and strongmarketing alongside an excellent offer but is grounded in the real world performance of otherwaterparks. We feel the mid case estimate is a sold and achievable target.


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Physical Planning

DESIGN DAY ASSESSMENT

The following dimensioning assessment (figure 11) has been performed for the three attendancescenarios: low, medium and high.

Design day is the average busy day rather than the peak day. Designing an attraction for the peakday leads to an attraction which is expensive to operate and feels empty during periods of low tonormal demand, while developing an attraction for the design day creates an attraction which canbe run more efficiently and feels atmospheric without being overcrowded during periods of normalto relatively high demand.

We have reflected upon the findings from the benchmarking assessment as well as seasonality in thearea in assessing peak month and typical weekly and daily throughput. While the indoor nature ofthe park means it can be visited in any weather, there will inevitably still be a bias towards thesummer holidays. Various materials we have digested on tourism in the region suggest much isbeing done to address skewed seasonality but inevitably both holiday patterns for overnight guestsand day visitor patterns will retain an overall typical summer bias even where shoulder and offseason visits can be attracted. To be cautious we have assumed a peak month of 20 percent.

Based on our review of tourism seasonality, waterpark seasonality and broader UK attractionseasonality and considering the benefits of the spa element and indoor waterpark, we consider thefollowing seasonal pattern reasonable as an assumption, although clearly the operator has somecontrol over this through variable pricing, soft programming and marketing.

January: 2% February: 3% March: 5% April: 11% May: 7% June: 10% July: 16% August: 20% September: 12% October: 6% November: 3% December: 5%


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FOOD & BEVERAGE AND RETAIL

We have used rules of thumb turns per hour and front and back of house space to estimate coversrequirements and area requirements as summarized in Figure 12. Under this scenario we estimate aneed for around 250 sqm of space dedicated to food and beverage. This is not intended to beprescriptive as every operator has their own style but it acts as sense check of the plans. We wouldalso note that the operator food and beverage assumptions are more ambitious than forecast byLDP and therefore that could suggest a requirement for more space than shown in the figure below.

FIGURE 11 – DESIGN DAY, CAPACITY & ATTRACTION PLANNING ASSUMPTIONS

Low Medium High

Attendance (000s)288,289 348,475 408,661

Peak Month (% of annual) 20.0% 20.0% 20.0%Week % of Month 22.5% 22.5% 22.5%Design Day % Week 20.0% 20.0% 20.0%Peak on Site (% of day) 50.0% 50.0% 50.0%

Peak Month Attendance 57,658 69,695 81,732Weekly Attendance 12,973 15,681 18,390Design Day Attendance 2,595 3,136 3,678Peak on Site Attendance 1,297 1,568 1,839

Source: LDP

FIGURE 12 –FOOD & BEVERAGE PLANNING ASSUMPTIONS

Low Medium High

Total Demand For F&B (of Peak on Site) 40.0% 40.0% 40.0%Over Period (Hours) 2.0 2.0 2.0Percentage of Design Day Eating Per Hour 20.0% 20.0% 20.0%

% By TypeCafeteria 50.0% 50.0% 50.0%Kiosks 50.0% 50.0% 50.0%

Turns Per Hour By TypeCafeteria 1.5 1.5 1.5Kiosks 4.0 4.0 4.0

F&B Hourly DemandCafeteria 130 157 184Kiosks 130 157 184


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In terms of retail space, our analysis suggests that around 100 sqm of retail space would be requiredat medium levels of attendance (figure 13). This could be linked with reception or the food andbeverage offer to reduce space and staffing requirements.

PARKING

We reviewed total parking requirement for project. For the most part visitors to attractions tendtowards their own cars, often as high as 90 percent or more. However, in this case the waterpark is

259 314 368

Seating Requirement (Covers)Cafeteria 86 105 123Kiosks 32 39 46

119 144 169

Front of House Space (Sqm / Seat)Cafeteria 1.2 1.2 1.2Kiosks 1.0 1.0 1.0

Kitchen (Sqm / Seat)Cafeteria 0.80 0.80 0.80

Front of House Space (sqm)Cafeteria 104 125 147Kiosks 32 39 46

Kitchen (sqm)Cafeteria 69 84 98

F&B Totals (sqm)Cafeteria 173 209 245Kiosks 32 39 46

Total 205 248 291

Source: LDP

FIGURE 13 –RETAIL PLANNING ADDITIONAL ASSUMPTIONS

Low Medium High

Retail per capita spend (excl sales tax) £1.00 £1.00 £1.00

Merchandise revenues 288,289 348,475 408,661

Revenues per sqm £ 3,500 3,500 3,500

Required area sqm 82 100 117

Source: LDP


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walkable or within easy public transport for many tourists and as such we have assumed 70 percentarrive with their own car. For many large UK attractions the average visitors per car is around 2.5and we feel this is a reasonable assumption. The analysis suggests a need for around 550 parkingspaces (including employees) and a few dedicated coach spaces (figure 14). It is important to notethat the parking assessment is provided for peak times and that this would not be required most ofthe time. Clearly given the location, some visitors may park elsewhere and walk to the site.

FIGURE 14 –PARKING ASSUMPTIONS

Low Medium High

Peak Day as % of Peak On Site 120% 120% 120%Proportion of Arrivals by Car 70% 70% 70%

Visitors per Car 2.5 2.5 2.5Proportion of Arrivals by Coach 5.0% 5.0% 5.0%

Visitors per Coach 35 35 35Employee Parking 5% 5% 5%

Peak Day as % of Peak On Site 1,557 1,882 2,207Car borne 1,090 1,317 1,545Car Spaces 436 527 618By Coach 78 94 110Coach Spaces 2 3 3Employee Parking Spaces 22 26 31

Source: LDP


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Operating Expenses and Profit & Loss

INTRODUCTION

The following section outlines our review of likely operating expenses and profit and loss and isbased on our mid-case attendance. We have developed an outline staffing plan in order to test thesingle largest area of operating expense in more depth.

STAFFING REQUIREMENTS

Full Time Management TeamWhile this is a feasibility study rather than an operational business plan, we have built out a reviewof likely staffing on a position by position basis for full time staff and hourly wage staff. Clearly thisdoes not substitute the operators own plan, but is intended to provide LDP comfort that there issufficient operating budget within our forecasts. Figure 15 provides our view on the full time staffroster which could be appropriate for this type of attraction. We have also sense checked this totalagainst the full time team for some other attractions.

These positions are an element of fixed costs and are unlikely to vary throughout the year. Thisincludes the core management, operations, maintenance, marketing and administrative teams.Given the scale of operation we have assumed that some highly specialised maintenance services forexample will be outsourced and have sense checked operating expenses to ensure that sufficientoperating budget is likely to be available.

Part-Time & Seasonal TeamThe next step in the analysis is to estimate the non-salaried staff, most of which will be lifeguards,customer service, retail/food service, cleaning and other staff. These are assumed to be paid by thehour with rosters designed to fit the anticipated operating patterns and which can be adjusted in afluid manner based on demand. We have reviewed the potential demand for hourly staff based onhigh season, shoulder season and low season throughputs with a corresponding high, medium andlow day within each of the three seasons. We have assumed a 364 day operating season. We haveallowed for wages well above the national minimum wage to allow for a high level of service. Basedon this staffing model (which goes beyond our scope of work but is intended to provide us comfortthat the operating budget is reasonable) allowing £0.7 million for part time employees appearsappropriate. Since during the low days on low season we estimate a head count of 13 employeescould be required, we have included this within the FTE estimate in Figure 15.

We estimate that head count could peak at just less than 90 during high days in the high season.Our staffing estimates are not intended as an operational business plan but rather a view based onwhat has worked well elsewhere. Using modern technologies for safety monitoring it may well bepossible to reduce head count. We have assumed staff to oversee the staff but have not assumedtreatment practitioners, neither have we assumed any revenue from treatments (there could be anupside case around this).

Staff costs are typically the biggest cost associated with the waterpark operations, and can accountfor around 20– 40 percent of total revenues, and the staff build up presented above comfortably sitswithin this range at around 26 percent. We note that the operators plan shared with us includes


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some staff costs related to food and beverage within the food and beverage expenses and istherefore not directly comparable with our cost assessment. Adjusting the food and beverageelement suggests that under the higher attendance scenario the overall staffing budget in theoperator’s plan is very similar to the LDP assessment.

FIGURE 15 - ESTIMATED FULL TIME STAFF

PositionEstimated

Wage

Number ofEmployees

(Stable Year)

General Manager 68,750 1.0Finance Manager 62,500 1.0Marketing Manager 62,500 1.0Operations Manager 50,000 1.0HR 37,500 1.0Maintenance Manager 43,750 1.0Administration 22,500 2.0Financial Controller 43,750 1.0Sales and PR 37,500 2.0Catering & Retail Manager 31,250 1.0Retail and Catering Supervisor 25,000 2.0Cleaning 16,250 2.0Security 18,750 1.0Cashier 18,750 2.0Maintenance 22,500 2.0

Low season, low day wage staff 13.0

Estimated Full Time Staff 34.0Note: Estimated social costs included

Source: LDP

OTHER OPERATING COSTS

Cost of Goods SoldThe ratios of cost of goods sold are relatively predictable at attractions worldwide. For the proposeddevelopment, we have incorporated the following cost of goods sold:

Food & beverage - 30 percent of total food & beverage revenue

Merchandise - 45 percent of total merchandise revenue.

Other – 20 percent of other revenue.

MarketingThe total annual spend on marketing is usually in the region of 8 to 15 percent of total operatingrevenues.


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We have allowed for some pre-opening budget to generate awareness. We have assumed a strongmarketing programme in the opening year, gradually decreasing in year two and stabilizing in yearthree, once market awareness has been maximized. We have incorporated a marketing spend of 12percent of revenues in year one, leveling off to 8 percent as awareness is established. We note thatthe level of marketing spend in the management case is low and although many UK parks invest littlein marketing, we feel to achieve the penetration expressed in our forecasts it will be important tohave strong marketing campaigns and budgets. Regional tourism organizations should clearly alsosupport the park in their marketing efforts as they have a vested interest in doing so. It may be thatwith significant support from the Council, regional tourism and cooperation with other businesses inleisure, some marketing burden can be taken off the operation. That said, we view it as necessary tomarket the attraction aggressively to attract day trip visits from more distant markets and as suchwe show a generous budget (in excess of that available to many UK waterparks).

Repairs & MaintenanceRepairs and maintenance charges typically account for between two and ten percent of totalrevenues for attractions, dependent on the level of technology and overall throughput and otherfactors. It will be important for the waterpark to have high standards in terms of maintenance costs.We have assumed that this cost centre includes the chemicals and consumables also required formaintenance. We have assumed maintenance at 5.5 percent of gross revenues increasing to 7.0percent over the first few years of operating, as pools, slides, plant and equipment will require lessmajor maintenance projects when new. This does not include the addition of new visitorexperiences, which we have considered under reinvestment. We have included outsourcedmaintenance and other services within this category.

Administration & GeneralAdministration and general is one of the larger costs associated with operating a specializedattraction experience, after staffing and marketing. From our comparable review, it appears thatadministration and general typically equates to between two and five percent of total revenues. Wehave assumed our administration costs will be slightly above this range at six percent, to allow forhigh levels of service and to recognize the year round operation.

Water, Energy and UtilitiesAs mentioned earlier, utility costs can be one of the greater burdens of indoor waterparks, as thereis a need to have them operational or at least climate controlled throughout the year. Utility orenergy costs typically equate to between two and eight percent of total revenues (in rare cases alittle higher). We have allowed for costs in the order of eight percent of revenues to take a prudentview.

Insurance, Rates and Other CostsOther costs can include special event-related costs, uniforms, security, rates, insurance and othermiscellaneous items. In general, these equate to between two and six percent of total revenues. Wehave assumed other costs will be six percent of gross revenues.


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Pre-Opening ExpensesPrior to opening there are likely to be a number of costs incurred such as management costs, costsfor training staff, and important marketing pre-opening. As a result we have incorporated pre-opening expenses in our analysis for payroll, marketing, energy and other.

RentWe have incorporated the turnover rent of 20 percent of revenues described to us but note that inour analysis the rent reaches the capped amount (of £780,000) in every year. As such the rentalfigure shown equates to the £780,000 plus inflation from 2014.

ReinvestmentWe understand the operator is to put aside eight percent of turnover for reinvestment. This iswithin industry norms for major commercial attractions and exceeds the budgets that have been putaside by some UK waterparks which have over time grown tired. This is a very positive andimportant element of the contracts described to us and is in our view essential for the project tomaintain a strong performance. This budget is for reinvestment in new features and attractions.Given waterpark norms this allows for some very significant refreshments, which will be critical indelivering new marketing messages, keeping the product offer current and appealing.

FINANCIAL APPRAISAL

In order to attract a high level of visitation and to fulfill the goals outlined earlier in the report, werecommend the following pre-requisites and within the analysis we have assumed these are met:

The analysis relates to the operating business and projects profit and loss linked with ouranalysis of market demand and the mid-case stabilized attendance– we have assumed thatthe initial capital will be sufficient to provide the envisaged scale and scope of facilities.

Presentation and environment will be important and quality of finish and decoration. Ouranalysis assumes exemplary finish appropriate to the target markets and the concept,providing an attractive, clean and well maintained destination throughout and with a highlevel theming or decoration to create atmosphere.

We believe offering some outdoor elements will be received positively by the market andfeel that as the park reinvests, outdoor elements should be added to ensure that the parkdoes not suffer during good weather (clearly it will naturally be well suited to attract visitorswhen the weather is poor during the tourist season).

We assume that a professional and experienced management team will run the facility (suchas Alpamare or another top flight operator).

It is imperative that the attraction be maintained to high standards. Lack of care to thisdetail often results in higher reinvestment and repair costs later on and is a factor which hasnegatively impacted a couple of UK waterparks.

Similarly it is imperative that reinvestment is ongoing, providing new attractions and reasonsto visit (sometimes this may mean removing older elements as they become outdated or asnewer technologies and experiences emerge).


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Model is for a 15 year period, reflecting the long term operating nature of the business.

Our analysis assumed sufficient marketing budgets and strong and ongoing marketing todrive visits from residents and tourists. The analysis assumes no major changes in thewaterpark competitive environment.

We are aware of the plans for leisure water within the Bridlington Leisure World development. It isour understanding that the Bridlington scheme is community sports and swimming focused withcompetitive swimming facilities, learner pool, spectator areas, health and fitness, sports hall, courtsetc. We understand there is a leisure pool with a couple of slides and some basic play elements butthis is not a waterpark scheme. The water leisure offer we have seen is very basic in comparison andis only likely to account for a fraction of the capital costs of the entire scheme. It is clear that this is aleisure centre not an entertainment-focused waterpark.

In our view the Bridlington scheme should be of significant benefit to local residents but the waterleisure offer is not comparable and we would not expect it to drive distant visits as we anticipate forthe waterpark under review. The water leisure within the Bridlington scheme is, in our view, not ofa scale to cause visitors to drive significant distances and will largely serve its community. A visit tosuch a water leisure offer is a low cost ‘swim’ rather than an occasional destination visit. Ourunderstanding is that two slides are planned, both of which are modest. Clearly should the plans berevised to include a waterpark then it would likely cannibalise, potentially significantly, but it doesnot appear that this is the case.

The Bridlington Leisure World scheme has more in common with the planned Scarborough SportsVillage, which again is community and sports focused as opposed to an entertainment and spaorientated occasional visit. We similarly do not view the swimming element of the Sports Village asa threat to the waterpark and feel the two projects should complement each other well.

When appropriate, we always take the care to highlight any competitive environment changes andwe have made enquiries regarding potential projects within the two hour resident market. Therehave been a number of other schemes discussed over the years but we are not aware of anyproceeding. Clearly if a major waterpark was built locally this could have an impact.

Financial Bases TablesWe provide the key inputs from our financial model in summary tables. These bases form the inputsfor the financial model and illustrate the assumed business case for each use. In developing thefinancial model bases we have called upon the comparable attraction research performed for thisstudy and our experience and benchmarks developed through our many leisure and entertainmentprojects.

As discussed in the attendance forecast section of the report, we have allowed for an initial‘champagne effect’ with a two percentage point uplift in primary market penetration over the stableforecast level and subsequent reduction over the first three years. The market growth consideredwithin the resident and tourist market assessment is applied to market sizes within the financialmodel.

At well managed, marketed attractions with regular reinvestment, relative stability in penetration isoften common place. Certain attraction types which are not particularly repeatable, such as


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aquariums, are more prone to a tapering off in attendance. Most major waterparks and themeparks do tend to enjoy relatively stable attendance as long as they continue to invest and marketthemselves well.

The reinvestment within our assumptions is a key to this and most important if relative stability is tobe expected. The technical and operating team have discussed initial expansion plans with us andwe see these as very positive. It will be important to provide periodic new additions and marketingbuzz - typically every two to three years there should be a new message/reason to visit. In thefinancial forecasts we show the reinvestment reserve being put aside every year but in practice wewould view a major reinvestment every two to three years being an appropriate strategy for howbest to spend this accumulated fund.

Waterparks are inherently repeatable since the experience is active and the visitor to some degreemakes their own fun; combined with the natural turnover in the tourist market and strongreinvestment, stability in penetration is a reasonable expectation. Our extensive benchmarking datahighlights the perils of not reinvesting but shows that many attractions can and do achieve long-term stability with often underlying growth in attendance (based on market growth, not typicallypenetration). We include very modest forecast market growth as discussed.

The initial expansion plans discussed with us could add a lazy river and another ride and these notonly add capacity but provide for a major marketing boost (we have maintained stable penetrationdespite this and subsequent significant expansions and have allowed modest real increases in percapita admission spend).


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FIGURE 16 – FINANCIAL MODEL BASES, CORE ASSUMPTIONS

Inflation 2.0%VAT 20%

Opening Year 2016

Core Revenue Stream Pay-one-price admissionSupplementary Revenuestreams

Food and beverage, retail, hire, coin operatedfacilities etc.

Source: LDP

FIGURE 17 – FINANCIAL MODEL BASES, VISITOR SPEND AND COST OF SALES

(2016 PRICES)

Per Capita In-Park Spend (Excl VAT)Admission 10.85Food and beverage 3.47Merchandise 0.87Other 0.87

Real Increases

We have allowed for real increases in admission spend of 5%every other year from 2017 until 2023. This ties in with theinitial expansions that should further enhance perceivedvalue and attractiveness of the scheme. During this periodsome £4 million of reinvestment in new features is assumedwithin the forecasts, which could of course provide significantupside in terms of length of stay, with positive impactsbeyond this real price increase.

Cost of SalesFood and Beverage 30%Merchandise 45%Other 20%

Source: LDP


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FIGURE 18 – FINANCIAL MODEL BASES, OPERATING EXPENSES

% of Revenues % of OpexYear 1 Year 3 Year 1 Year 3

Staff Costs 25.9% 25.3% 33.5% 33.7%Marketing Expenses 12.0% 9.0% 15.5% 12.0%Repairs and Maintenance 5.5% 7.0% 7.1% 9.3%Utilities, Water etc. 8.0% 8.0% 10.3% 10.7%Admin & General 6.0% 6.0% 7.7% 8.0%Other (Rates, Insurance etc.) 6.0% 6.0% 7.7% 8.0%Rent 14.1% 13.7% 18.2% 18.3%

Total 77.5% 75.0% 100.0% 100.0%

Note: May not add due to rounding.

Source: LDP

PROFIT & LOSS & IMPLICATIONS

The projected profit and loss for the attraction is provided in Appendix Figure 3. This analysisillustrates the potential to generate revenues from the envisaged attraction of in excess of £5.5million initially, increasing towards £8.0 million over the first ten years.

In our view, it will be important that the attraction is professionally managed to a high standard toachieve the envisaged level of revenues and operating profit. The revenue projections are highlyreliant on a well presented and exciting visitor experience, compelling slides and play features, andstrong marketing to drive visitation. One of the most critical success factors for this project is thefact that most potential visitors live outside the one hour drive-time and therefore marketing andmaking the presence of the park known beyond one hour, is extremely important.

Similarly important, we view the reinvestment as critical to maintaining attendance as the residentmarket will require new reasons to revisit and the tourist market has many repeat guests who willbehave much like residents, having already been to the waterpark on prior stays.

We feel that the project has the operating potential to meet its rental obligations and reinvestmentplans with a surplus and that it presents a business case with a high likelihood of viability.

We feel this project is well placed to have a major impact in Scarborough, it plugs a gap in the touristoffer and has the potential to drive resident visits from distant markets as well as benefiting existingday trippers. It similarly has the potential to prove extremely popular with overnight tourists,strengthening the overall destination. The benefit of a poor weather facility should be significant inScarborough but we are pleased to see plans incorporate outdoor elements and the aim to grow thepark’s outdoor offer, and feel this is important and should be a priority during early reinvestmentprojects.


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We believe the impacts of this project for Scarborough can be far reaching in terms of employmentand tourist appeal. We stress that the park must be operated to very high standards and believeAlpamare has the requisite experience and operating style. Should Alpamare ever exit the operationan equally experienced operator should be brought in. There are a number of operators andmanagement companies that would be suited and which have European experience.

While we have not been asked to review capital for this project, we have assumed it is developed toa very high standard and based on a sense check of investment per attendee we would expect thecosts to be in excess of £16 million to perhaps £20 million (although clearly a cost consultant will berequired as it is not our core area of expertise). It will be critical that the park is delivered to thequality levels described to us. It will also be imperative that both the park and tourism agenciescommit to strong and ongoing marketing campaigns.

In summary, we feel this is a compelling project with a good fit with the market and if well run andmarketed it has the potential to provide a solid operating surplus.

While sensitivity analysis lies beyond our scope we have reviewed simple sensitivity to decreasedattendance and revenues and there is a significant buffer in the forecasts before the facility wouldbe unable to meet its obligations in terms of rent and reinvestment reserve.


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Economic Impact

INTRODUCTION

While economic impact analysis is beyond our scope of work, we provide some discussion of potentialimpacts in this section. The waterpark initiative is a project of significant importance for Scarboroughand the region. While its benefits will be felt most strongly in Scarborough itself, there will be positiveimpacts within the wider area.

We set out below a summary of the key benefits to the region. We expand upon some of these keybenefits within this report section.

A minimum project value estimated to reach £14 million over the development period.Development of this magnitude will provide employment in construction and associatedservices.

Increased revenues for local businesses both directly and indirectly. A significant volume of employment opportunities. Enhanced tourism offer and infrastructure providing more reasons to visit, to stay longer and

to return. Water attractions promote active entertainment with health and fitness and recreation

benefits to the local population, improving quality of life. Similarly the spa element has aquality of life benefit.

The development is likely to have a positive catalytic effect in terms of development on nearbysites and for tourism development throughout the area.

IMAGE IMPACTThe project will potentially strengthen the image of the Scarborough District due to the profile andquality of the development. It will provide a quality of life benefit to those in the local market anddue to the recommended price points, which will be affordable and will offer the opportunity to visitregularly. The benefits of major leisure schemes (including significant recreational elements) cansometimes increase the overall ‘liveability’ factor and increase the appeal of the area.

From the tourism perspective, although the area is already attractive and has many draws for tourism,there is a lack of heavily invested entertainment and moreover poor weather options. The waterparkis a major statement of intent in terms of the provision of leisure and entertainment in Scarboroughand should be a key element of the marketing message for years to come. It is likely that such adevelopment would create opportunity and interest for other developments.

DIRECT & INDIRECT ECONOMIC IMPACTThe direct economic impact of this project will be significant relative to other developments inScarborough; it will enhance spending in the local and broader market. Visits may be induced fromup to two hours away in the resident market and from tourists from further away. The mid-caseattendance forecast suggests close to 350,000 visits. These people will of course spend in the localarea on dining, services, accommodation etc.

Direct impact can be measured by looking at revenues from the attraction. Clearly, indirect impactswould benefit the hospitality industry, retail/dining, and basic household goods as employees then


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spend their earnings in the area. The indirect impacts of this new income for the region being spentand re-spent will of course be very important. We would anticipate strong multiplier effects creatingsignificant economic impacts.

Typically 1.5 times total revenue is used as a rule of thumb for assessing the gross economic impactcreated by a major leisure project. In addition, a recent review of induced impact from theme parksand theme park hotels showed a higher multiplier effect on average of 1.95 Europe wide. However,as this project is not a full scale theme park, but rather a waterpark (with penetration that typicallydraws a smaller proportion of distant and induced visits), we are using the more conservative 1.5 timesrule of thumb. This implies that the total revenues from the project forecast at £5.8 million in theopening year to over £8 million within ten years, could result in an implied economic impact of almost£9 million initially and £12 million by operational year ten. While this is only a rough estimate itprovides a sense of the broad potential for impacts from the project.

Additional fiscal benefits could also occur given new revenues and income generated by the projectover time. LDP are not tax specialists however, and would be hesitant to comment overly in thisarea. Tax specialists could be retained to measure the true level of fiscal impact generated. Key areasof fiscal impact could include increased VAT from earned revenues, rates and income taxes caused bythe new employment.

Tourism impact will be a major factor as the attraction will provide a key reason to visit or stay longerin the region. Currently, it is expected that around 30 percent of visits will be generated from theovernight tourism market. An attraction of this scale will enhance the regional offer and could inducesome visits, although stronger impacts are more likely in term of extended stay and increased spend.There will be an impact through the project’s ability to increase the length of stay of existing tourists,causing them to demand more goods, services and accommodation.

Scarborough is a well-established day trip destination and the existing day trippers will benefit fromthe park. Within this segment there is a strong opportunity for the waterpark to induce day trips(some of which may convert to overnights) encouraging lapsed or new visits.

EMPLOYMENT IMPACTThe waterpark development would create significant employment for residents of the local area,with positions created at all levels from highly skilled positions and senior management, to flexiblesummer jobs for youngsters and students.

Unlike many forms of industry, attractions and tourism infrastructure projects are non-transferableand the development will continue to provide these employment opportunities for the long-term.There are two different types of employment impact-- construction jobs are one and would be an areafor the design and planning team to consider. We have forecast full time salaried, and full and parttime hourly wage staff based on our experience. This suggests a core team of up to 34 full timers witha peak season head count of up to as many as 89. Clearly the operator’s operating style andoperational business plan will dictate actual staffing and as such this is only a guide based on otherbenchmarks and our appraisal.

The development will require well trained staff and the operators training procedures should ensureit provides a programme that would provide its employees with skills in areas such as customer


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service, first aid, maintenance, management, IT and so on, which would continue to benefit theeconomy and staff for many years to come.

The construction impact of building the project will also have a benefit for the local economy,providing man-years of employment and demand for materials.

IMPLICATIONS

The development is being tested and planned to help ensure its quality and sustainability, and shoulddrive residents and tourists to the project. It will create image benefits and can be used to effectivelystrengthen marketing for the town for years to come and to the benefit of all businesses in the tourismindustry. The project should be a catalyst for significant change in the marketplace.

Attractions are valuable employers as they create large numbers of non-transferable jobs and offerextensive training in skills which benefit their workforce for their entire careers whether inside oroutside the leisure industry.


AppendixFIGURE 1 – REGIONAL ATTRACTIONS AND LEISURE BUSINESSES

VENUE (by type) LOCATION OVERVIEW ADULT ENTRY CHILD ENTRY OFFERS

ANIMALS/WILDLIFEBetton Farm Visitor Centre East Ayton, Working farm with children's play areas, honey bee

visitor centre, tea rooms & restaurant, & camping.Free Free Farm: free entry

Camping: from £7.50 per personFiley Bird Garden and Animal Park Filey 5 acre petting & feeding zoo, pond, basic F&B (café)

and picnic tables.£4.50 Under 2: free

Over 2: £4.00Family: £18.50OAP: £4

Pesky Husky Trekking Centre Staintondale Husky centre: meet and work with Siberian Huskydogs. Season: October to end of March only.

£15 Under 16: £5 Family concessions 'available'

Playdale Farm Park Cayton,Scarborough

Farm with animal barn and 'interactive paddocks'(feeding ), go-kart track, indoor children's play area(ball pool, tractor zone & adventure trail) & basicF&B (café).

£5.50 Under 2: freeOver 2: £5

OAP: £5Parties: £10.50 per child

Scarborough Donkey Rides, SouthBay Beach

Scarborough Short donkey rides along 2,500ft long South BayBeach.

n/a £2 per ride None

AQUARIA/SEA LIFESea Life Marine Sanctuary Scarborough Indoor and outdoor displays (marine life) in three

triangular buildings.£16.20 Under 3's: free

Over 3's: £16.20Family ticket: £13.20 per person.Annual Pass available.Joint entry with Pirate Adventure MiniGolf: £19.20 (save 45% with onlinebooking). Save 40% by booking online.

The Deep Hull Aquarium with over 3,500 fish, F&B and outdoorpicnic areas.

Over 16:£10.75

3-15: £8.75 Birthday parties & sleepoverspackages.Day Plus ticket: free return visits over12mths. Save 10% by booking online.

Whitby Whale Watching Centre Whitby Sailing trips on 17m wildlife yacht (capacity: 12people). Each trip: up to four hours.

No prices onwebsite

No prices onwebsite

No prices on website

Source: LDP


FIGURE 1 – REGIONAL ATTRACTIONS AND LEISURE BUSINESSES CONTINUED

BOWLINGAMF Hollywood Bowl Stockton Stockton on

Tees26 lane bowling, arcade, pool tables, bar, F&B. £5.25 Under 16: £4.25 Family ticket: £17.50

Discount for pre-bookingMeal & bowl offers (from £5.95 perchild). Party packages.

Olympia Bowl & Softplay Scarborough 12 lane bowling alley, F&B (snacks). See 'Soft Play'section for soft play details.

£4.95 pergame

£4.95 per game Bowling, food & drink for £6.75 pp.Children's parties and group offers.

Tenpin York York 28 lane bowling, laser play, arcade, pool tables, barand F&B.

£7.25 pergame

£5.75 per game Laser quest: £6 adult, £5.75 childFamily ticket: save 20%

CINEMA COMPLEXESHollywood Plaza Scarborough One screen with 275 seats, basic F&B. £7 Under 14: £6 OAP & students: £6CHILDREN'S PLAY CENTRES/SOFTPLAYCandy Kingdom Bridlington Indoor soft play centre, basic F&B. One free per

child, then50p per adult

6-12mths: £11-4yrs: £3.855-12yrs: £4.45

Prices quoted are peak. Off peakprices: approx £1 cheaperChild minders free off peakMeal deals and party packages

Dizzy Rascals Pickering Indoor soft play, farmyard themed, basic F&B(snacks/teas) for 0-10yr olds.

One free perchild, then50p per adult

Under 1: freeUnder 4: £3.50Over 4: £4.25

Loyalty cards: 4 visits, get 5th free

Little Hoppers Adventure World Scarborough Indoor soft play areas (9,000ft²), four age-specificplay areas, craft rooms and F&B.

1 adult freeper child,then £1.25per adult

7-11mths:£1.50 1-4yrs: £4.255-12yrs: £4.75

Under six months: free entry.Membership (annual) : £10 per child

Mini Monsterz Scarborough Indoor play area (9,000ft²): soft play, 5.5m highslide, laser tag, toddler specific play areas, potteryplay, go karts, basic F&B. Up to age 16 (laser playincludes adults).

£1 6-11mth: £1.75.12-17mth:£4.7518mth-16yrs:£5.25

Under six months: free entry.Go karts: £1 per rideLaser tag parties: from £12.95 perperson. Loyalty card

Source: LDP



Neptune's Kingdom Hornsea,EastYorkshire

Indoor play with chutes and ball pools, 'walking onwater' pool, F&B.

£6.00 £3.50 Parties: various options. From £5pp.

Olympia Bowl & Softplay Scarborough Soft play. Also has rides (kart track for 4-10yr olds)and games. See 'Bowling' section for bowlingdetails. F&B (snacks).

n/a (adultsonly pay forbowling)

From £5 Parties: children and teen parties from£6.75pp

CLIMBING/ACTIVITYPurple Mountain Cycle Centre Dalby Outdoor cycling venue/centre: bike hire, forest

routes and picnic areas, and basic F&B (café).Longest trail: 42km. Annual footfall estimated at450,000.

See H See H Entry to trails: free but £7 forest entrytoll charge (per car) appliesBike hire: price varies according tobike type and length of hireCorporate and party packages

Go Ape Dalby Forest Outdoor tree-top adventure park (for over 10's). From £30 From £17 Entry price dependant on activity(three different adventures)Team building corporate packagesGroup and party packages

GOLFPirate Adventure Mini Golf Scarborough 12 hole outdoor mini golf. £5.95 £5.95 Joint entry with Sea Life Sanctuary

£19.20

KARTINGScarborough Indoor Karting Scarborough Indoor go-karting 300m circuit, ages 8 upwards. £13.99 £13.99 £13.99 fee: 30 laps

Group bookings: from £512.99 for tenpeopleChildren's parties/stag & hen do offers

LASER PLAYLittle Hoppers Laser Zone (seeLittle Hoppers Adventure World)

Scarborough Laser play (4,500ft²) for over 6's. £4.75 £4.75 Charged per 30min game.Child entry plus meal: £7.50Birthday party package: £11.95 perchild.

Source: LDP



MUSEUMS/GALLERIES/HERITAGEBeck Isle Museum Pickering Local heritage re: Pickering. 27 rooms of exhibits

indoors, outdoor riverside picnic areas and farmcourtyard. Basic F&B. Crafts and fossil days.

Over 16: £6 Under 5: free5-16: £3

Local residents get 50% reduced entryfee. Value family ticket: £15.Events: pay per event (£5)

Captain Cook Memorial Museum Whitby Heritage museum re: Captain Cook. £4.80 £3.30 Schools & group offersOAP/concessions: £3.30Family: £12

Eden Camp Modern HistoryMuseum

Nr Malton Modern military history museum set in a 4.5 acreformer prisoner of war camp. Children's play andpicnic areas, F&B. Occasional special events.£100,000 refurb in 1992.

£6 5-16: £5 OAP/concessions: £5Group tickets: £5 adults, £4 child

Rotunda Museum Scarborough Museum on the geology of the north coast withinteractive exhibitions. Includes Scarborough's LostDinosaurs exhibition and Scarborough art gallery.Annual footfall: 19,865.

Day ticket:£4.50

Under 18: free Concessions: £4 entryOpen return ticket: £9 (valid for12mths)

Scarborough Castle (EnglishHeritage)

Scarborough Castle ruins and surrounding grounds set in 16acres. Exhibitions, tea rooms and live events in thesummer.

£5 5-15: £3 Membership (English Heritage: £48per year): free entryConcessions: £4.50Family ticket: £13

MUSIC/EVENTS VENUESScarborough Open Air Theatre Scarborough Events and concerts (eg: Last Night of the

Proms/Boyzone) on lakeside stage. 6,500 capacity.£3.5m refurb in 2010.

See H See H Tickets vary per event/concert(bought via Ticketmaster website)

Scarborough Spa Scarborough Complete entertainment and events venue:concerts, pantomimes etc. F&B.

See H See H Tickets vary per event. Eg: pantoticket £14.85 adult/£8.50 childBooking charges wen bookingonline/via booking officeWedding, banquet & party packages

Source: LDP


FIGURE 1 – REGIONAL ATTRACTIONS AND LEISURE BUSINESSES CONTINUEDRAILWAYS (leisure)North Yorkshire Moors Railway Whitby Heritage steam train 18 mile long railway. Learning

centre with occasional exhibitions. Sometrains/stations along the route carry basic F&B.Annual footfall: 300,000. Recent Whitby stationrefurb: £1.4m

From £14 Under 5: free5-15: from £7

Special events (pay per event)

Scarborough North Bay miniatureRailway

Scarborough Miniature seaside 3/4 mile long railway, lake withwater chutes and paddle boats, F&B. Annualfootfall: 300,000.

Return: £3.30 Under 3's: freeReturn: £2.70

Season tickets and group offers'Be a train driver': £80Charter a train: £80 (max 65 people)

SWIMMING/SPORTBridlington Leisure World Bridlington Swimming & sports leisure centre with three indoor

pools: learner pool, wave/splash/flume/rain pool &a 25m pool, spa & sauna, gym etc. Café. Planned£20m redevelopment investment for 2014/15.

Various (peak= £6.00)

Various (peak =£3.50)

Pay per activityPeak and off-peak prices (peak adultswim: £6, peak child swim: £3.50)Children's party packages

Helmsley Open Air Swimming Pool Helmsley 20m long open air heated pool. £4.50 Under 16: £3.50 Summer only. Family ticket: £15OAP: £3.50. Private hire: £25 per hour.Season tickets on request

THEME/ENTERTAINMENT/FAMILYPARKSFlamingo Land Malton Theme park: 400 acres with seven themed areas,

eight 'extreme' rides, free shows, 4D cinema, zooand F&B. Annual footfall: 1.8m.

Over 13: £10High Season£35

Under 3: free4-12: £7.50High Season£35

Seasonal and variable pricing offersprovided on line and throughoperators

Peasholm Park Scarborough 40 acre park: lake with rowing, canoes and pedaloboats, sailing and model boat sailing, wildlife, livemusic, picnic areas, mini golf, tea and ice creamshops. Events in the summer.

Free Free Some events chargeable: Adults £10,Children: free

Terror Tower Scarborough Haunted house attraction - walk through interactiveexperience with "live actors, animated scenes andspecial effects". Over 5's.

£4 Under 13's: £3 Family of 4: £12Group booking discountsSpecial scare nights

Source: LDP


APPENDIX FIGURE 2 -TOP TEN PAID ATTRACTIONS IN YORKSHIRE AND THE HUMBER 2010Attraction Type Footfall Ranking

Flamingo Land Theme park and zoo 1,268,619 1

York Minster Place of worship 512,075 2

Tropical World Garden attraction 346,142 3

Jorvik Viking Centre Museum/gallery 345,017 4

Fountains Abbey Historic 342,499 5

Lightwater Valley Theme/leisure park 324,896 6

York Castle Museum Museum/gallery 309,332 7

Eureka Children’s museum 247,831 8

Harewood House Historic 247,745 9

RHS Garden Harlow Garden attraction 246,563 10

Source: Visit England

Appendix Figure 3: Projected Account of Profit & Loss for the Proposed Waterpark

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 20282 3 4 5 6 7 8 9 10 11 12 13 14 15

Estimated Annual Attendance - 358,952 357,537 356,078 359,140 360,622 361,713 362,815 363,927 365,051 366,186 367,333 368,491 369,660

Visitor IncomeAdmission - 3,894,029 4,150,194 4,215,917 4,549,829 4,659,975 5,001,256 5,116,818 5,491,787 5,618,921 5,749,120 5,882,461 6,019,024 6,158,889Food & Beverage - 1,244,845 1,264,738 1,284,767 1,321,733 1,353,731 1,384,982 1,416,984 1,449,757 1,483,318 1,517,689 1,552,889 1,588,940 1,625,863Merchandise - 311,211 316,185 321,192 330,433 338,433 346,246 354,246 362,439 370,830 379,422 388,222 397,235 406,466Other - 311,211 316,185 321,192 330,433 338,433 346,246 354,246 362,439 370,830 379,422 388,222 397,235 406,466Total Revenues - 5,761,296 6,047,301 6,143,068 6,532,429 6,690,572 7,078,729 7,242,295 7,666,422 7,843,898 8,025,653 8,211,795 8,402,434 8,597,682

Cost of Goods Sold - 575,741 584,941 594,205 611,302 626,101 640,554 655,355 670,512 686,035 701,931 718,211 734,885 751,961Gross Margin - 5,185,555 5,462,360 5,548,863 5,921,127 6,064,471 6,438,174 6,586,939 6,995,909 7,157,863 7,323,722 7,493,584 7,667,549 7,845,721

Staff Costs 328,038 1,494,078 1,523,959 1,554,438 1,585,527 1,617,238 1,649,582 1,682,574 1,716,226 1,750,550 1,785,561 1,821,272 1,857,698 1,894,852Marketing Expenses 138,271 691,356 604,730 552,876 522,594 535,246 566,298 579,384 613,314 627,512 642,052 656,944 672,195 687,815Repairs and Maintenance & Services - 316,871 362,838 430,015 457,270 468,340 495,511 506,961 536,650 549,073 561,796 574,826 588,170 601,838Utilities, Water etc. 92,181 460,904 483,784 491,445 522,594 535,246 566,298 579,384 613,314 627,512 642,052 656,944 672,195 687,815Admin & General 86,419 345,678 362,838 368,584 391,946 401,434 424,724 434,538 459,985 470,634 481,539 492,708 504,146 515,861Other (Rates, Insurance etc.) Expenses 69,136 345,678 362,838 368,584 391,946 401,434 424,724 434,538 459,985 470,634 481,539 492,708 504,146 515,861Rent - 811,512 827,742 844,297 861,183 878,407 895,975 913,894 932,172 950,816 969,832 989,229 1,009,013 1,029,193Total 714,045 4,466,076 4,528,730 4,610,240 4,733,060 4,837,344 5,023,112 5,131,271 5,331,645 5,446,730 5,564,372 5,684,629 5,807,563 5,933,234

EBITDA (714,045) 719,480 933,630 938,623 1,188,067 1,227,127 1,415,062 1,455,668 1,664,264 1,711,133 1,759,351 1,808,955 1,859,986 1,912,487EBITDA Margin 0.0% 12.5% 15.4% 15.3% 18.2% 18.3% 20.0% 20.1% 21.7% 21.8% 21.9% 22.0% 22.1% 22.2%

Reinvestment Allowance - 460,904 483,784 491,445 522,594 535,246 566,298 579,384 613,314 627,512 642,052 656,944 672,195 687,815EBITDA less reinvestment (714,045) 258,576 449,846 447,178 665,473 691,881 848,764 876,284 1,050,950 1,083,621 1,117,298 1,152,011 1,187,792 1,224,672

Source: Leisure Development Partners


APPENDIX FIGURE 4Age Profile Comparison, Scarborough, the North East & England

Source: The ONS, 2011 Census

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Under 16 16-44 45 ‒ 64 65 and over

Scarborough

North Yorkshire

North East

England

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