2017June
feasibility studyMAGNOLIA AQUATIC CENTER & PLAYING FIELDS
IN MAGNOLIA, AR
Prepared for:
The City of Magnolia
Prepared by:
Leisure and Recreation Concepts, Inc
2151 Fort Worth Avenue
Dallas, Texas 75211
www.larcinc.com
Project No. 1101
LARC, Inc. Table of Contents
Table of Contents
Description Section Page
Introduction I
Project Introduction I 1
Who is LARC? 2
Executive Summary II
Basic Conclusions II-1 1
Market Demand II-2 3
Operating Expenses II-4 5
EBITDA from Operations II-5 6
Net Warranted Investment II-6 7
General Assessment II-7 8
Concept and Programming III
Participation in Youth Sports III-1 1
Know Your Customer III-2 4
Free Play and Fun III-2.1 5
Swimming III-2.2 7
Aquatic Center Programming III-3 7
Aquatic Center Concept Considerations III-3.1 9
Sports Complex Programming III-4 9
Market Analysis IV
Resident Market IV-1 1
Resident Market Characteristics IV-2 3
Population Growth IV-2.1 4
Households IV-2.2 5
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 1
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Section Table of Contents
Market Analysis (Continued) IV
Age IV-2.3 7
Income IV-2.4 9
University Presence IV-3 11
Southern Arkansas University IV-3.1 11
Economic Impact IV-4 12
Market Demand Analysis V
Capturing the Market V-1 1
Patterns of Market Penetration V-1.1 3
Penetration Rates V-1.2 6
Attendance V-1.4 8
Market Mix V-1.5 10
Playing Field Participation V-2 11
Baseball/Softball V-2.1 12
Soccer/Multipurpose Outdoor Field Use V-2.2 15
Financial Analysis VI
Establishing Revenue VI-1 1
Pricing Policy VI-1.1 2
Aquatic Center Admission Prices VI-1.2 3
Projected Operating Revenues VI-2 4
Admission Revenues VI-2.1 4
Food and Beverage Revenue VI-2.2 6
Merchandise Revenue VI-2.3 7
Swim Lessons VI-2.4 7
Table of Contents
Description Section Page
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 2
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Section Table of Contents
Financial Analysis (Continued) VI
Miscellaneous Revenue VI-2.5 7
Total Per Capita Revenue V-2.6 7
Operating Revenue Aquatic Center VI-2.7 8
Operating Revenue Sports Complex VI-2.8 9
Operating Expenses VI-3 10
Cost of Goods Sold VI-3.1 11
Payroll and Related Expenses VI-3.2 12
Advertising and Promotion VI-3.3 13
Maintenance and Operating Supplies VI-3.4 13
Insurance VI-3.5 13
Utilities VI-3.6 14
Management Fees VI-3.7 14
Other Expenses VI-3.8 14
Operating Earnings Analysis VI-4 16
Net Warranted Investment VI-5 18
Table of Contents
Description Section Page
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 3
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LARC, Inc.Section I - Introduction
Leisure and Recreation Concepts, Inc. (LARC) was originally engaged by the
City of Magnolia to conduct a feasibility analysis for an aquatic center. As the
research uncovered various opportunities for the area, the objectives of the
study evolved to include the potential for and playing field complex.
Throughout the course of the study, LARC proceeded to address the main
objectives study, which are:
• to increase the options for entertainment in and around Magnolia;
• stimulate development and tourism in the region;
• create a destination for sports teams and special events;
• enhance economic development in the area; and,
• establish a concept that will generate a feasible cash flow while meeting
demand.
The project will provide the facilities required for area field and aquatic sports
while providing new venues for leisure and entertainment. A significant piece of
the concept for both projects (either separate or in conjunction) is to provide
supporting amenities for the town of Magnolia and provide facilities to attract
events to the area, rather than funneling the potential outside of the
community. Both projects will provide the type of entertainment experiences for
which people are searching in surrounding markets.
Specifically, the envisioned projects would act as economic generators (through
attracting events, tournaments, competitions and meets) and public resources
for local residents (accommodating local sports and recreation activities).
Potential investment could include both new and enhanced facilities to
accommodate a range of sports and activities including: baseball, softball,
soccer, football, swimming, outdoor court sports, lacrosse, water polo,
recreational water play and other field sports and aquatic activities.
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 1
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Section I Introduction
With these objectives in mind, Leisure and Recreation Concepts, Inc. has
prepared this analysis of the economic feasibility of a proposed aquatic center
and playing field complex and determined potential levels of attendance for
both projects during the first five years of operation. Based upon this, design
criteria are established and financial projections prepared, utilizing
assumptions derived from established industry criteria.
Following this Introduction are the detailed findings of this report. Section II
presents the major findings and conclusions established in this study. Section
III presents the concept. Section IV presents the market research that supports
the market demand analysis, including all attendance parameters presented in
Section V. Section VI documents the facility requirements for the project.
Section VII will analyze the financial aspects of the development of each
project.
Who is LARC?
In 1970, LARC’s president and founder, Michael A. Jenkins, sought to create a
company, unique to the entertainment and tourism industries, that could
provide a turnkey solution to every aspect of project development. Since that
time, LARC has been at the entertainment consulting forefront, as
demonstrated by a long list of clients and projects in 35 countries.
LARC is one of the most established entertainment consulting and
management firms in the industry. Regardless of the type of project and
whether it requires economic analysis, concept planning or design, LARC
provides a valuable service by addressing the fundamentals.
• What is the market and the visitor profile?
• What concept will best fit the development?
• Will the facility be self-sustaining and succeed in the marketplace?
• How should the facility be financed and operated?
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 2
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Section I Introduction
• How will the development be of the best benefit to the community?
• Will there be a return on the investment?
LARC is divided into six main departments: research, design, management,
construction, rides and equipment, and tourism development.
Each project receives the personal attention and detail required to make it
successful. The core of the LARC team is comprised of professionals who
collectively bring over 250 years of experience in the industry to each project.
No other firm within the entertainment consulting industry offers the complete
turnkey approach LARC brings to every project. From initial economic and
market analysis through concept design, financing, construction and
management, all projects are granted the expertise necessary to bring a vision to
fruition.
Feasibility Report Magnolia Aquatic Center and Playing Fields I-! 3
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LARC, Inc. Section II - Executive Summary
This segment of the report presents an abstract of the results of the research,
statistics and analysis contained in the body of the report and introduces
LARC’s basic conclusions and recommendations based on this data. The
supporting documentation and analysis used in developing the conclusions are
shown in considerable detail in subsequent sections of the report.
II-1Basic Conclusions
1. Specifically, the envisioned facilities would act both as economic generators
(through attracting tournaments, competitions, and meets with non-local
participants and attendees) and public resources for local residents (by
accommodating local sports and recreation activities). Potential investment
could involve new and/or enhanced facility products designed to
accommodate one or more sports and recreation types including, but not
limited to: swimming, water play, baseball, softball, soccer, football, rugby,
lacrosse, and other niche sports/recreation.
2. The complex would be designed to be “tournament ready,” and the aquatic
center would be designed to be “meet ready” in order to effectively compete
for non-local tournaments/meets (largely occurring on the weekends) that
would represent key generators of new visitation and economic impact in
Magnolia. The facilities would be positioned to accommodate local league
and tournament play by residents, which would ideally allow for the growth
of local programs, leagues, clinics and training.
3. Each facility should be designed with sufficient flexibility and standards to
attract a variety of sports/recreational activities. Each facility should offer
high-quality surfaces and equipment, spectator seating and other modern
amenities that allow them to effectively compete for tournaments,
competitions and matches, many of which represent participants and
spectators that do not reside locally—resulting in new visitation and
economic impact.
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 1
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Section II Executive Summary
4. The aquatic center should be designed to be appropriate for
accommodating competitive swimming and potentially diving programs and
local swim clubs, attracting non-local competitions/meets as well as
accommodating swim lessons, therapy and general recreation purposes.
5. Non-local tournament, meet and competition organizers and participants
can focus, in part, on the appeal of a destination when making a decision on
whether to attend. The variety and number of attractions available in and
around Magnolia may serve as a foundation on which to increase the
economic benefits associated with increased non-local attendance at
tournaments, meets and competitions held at potential new amateur and
recreational sports facilities.
6. Overall, the market research and analysis conducted for this study suggests
measurable market demand for non-local sports tournaments, competitions
and meets that is currently unmet by existing local facilities. In addition, the
existing inventory of sports/recreation facilities (in terms of number, quality
and decentralized nature) may be constraining long-term growth and
development of, and participation in, local sports leagues, clubs and
programs.
7. To ensure successful programming for the facility, the proposed events
center must strive for as large an initial impact as possible. The image and
word-of-mouth opinion of the facility among the market area population
during the initial operating years will greatly influence the degree of
subsequent success obtainable.
Based on the primary assumption that the proposed projects will be developed
as high quality sports complexes with imaginative design, outstanding
implementation, proper capitalization, and professional management and
operation, LARC has developed an economic profile to assess the feasibility of
the project. The findings of this report are summarized as follows:
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 2
Prepared by Leisure and Recreation Concepts, Inc.
Section II Executive Summary
II-2 Market Demand
Total attendance for the aquatic center in the first operating year is projected to
be 97,000 persons. Attendance is projected to increase annually, reaching
approximately 109,200 persons in the fifth year of operation. An estimated
average market demand for the participation in the sports programming of the
sports complex is 51,300 increasing to a level of 62,355.
Table II-1 presents attendance for the aquatic center by market segment for the
first and fifth operating years. See Section V for more detail.
II-3 Operating Revenue
Gross operating revenues are anticipated to be $1,861,000 for the aquatic
center and $1,248,930 for the sports complex during the first year, assuming the
estimated attendance and participation levels are achieved. Gross revenues are
expected to increase annually, reaching approximately $2,395,427 in the fifth
year of operation of the aquatic center and $1,832,064 for the sports complex.
Tables II-2 and II-3 present operating revenues by category for the first and
fifth operating years.
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 3
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Table II-1 Projected Attendance
Market Segment 1 5
0 to 20-mile market 26,700 25,116
21 to 40-mile market 32,000 36,036
41 to 60-mile market 38,300 48,048
Total Aquatic Center 97,000 109,200
Total Average Sports Complex 51,300 62,355
Source: LARC
Section II Executive Summary
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 4
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Table II-2 Gross Revenue Aquatic Center
Category 1 5
Admissions $815,000 $1,055,000
Swim Lessons $53,000 $73,000
Food & Beverage $260,000 $356,000
Merchandise $293,000 $373,000
Miscellaneous $90,000 $112,000
Special Events $150,000 $183,326
Facility Rental $200,000 $243,101
Gross Revenue $1,861,000 $2,395,427
Source: LARC
Table II-3 Gross Revenue Sports Complex
Category 1 5
Youth Tournaments $483,000 $714,000
Adult Tournaments $272,916 $403,221
Youth Leagues $40,014 $59,119
Camps $0 $53,623
Food & Beverage $115,000 $171,000
Merchandise $90,000 $124,000
Miscellaneous $48,000 $64,000
Special Events $150,000 $182,326
Facility Rental $50,000 $60,775
Gross Revenue $1,248,930 $1,832,064
Source: LARC
Section II Executive Summary
II-4 Operating Expenses
Cost of goods sold and operating expenses, exclusive of depreciation, debt
service, and income taxes, are projected to be $1,286,000 during the first
operating year at the aquatic center and $1,152,000 at the sports complex. Cost
of goods sold and operating expenses are expected to be $1,672,000 in the fifth
year of operation for the aquatic center and $1,501,000 for the sports complex.
The following tables present cost of goods sold and operating expenses for the
first and fifth operating years for both facilities.
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 5
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Table II-4 Operating Expenses Aquatic Center
Cost of Goods Sold 1 5
Food & Beverage $83,000 $114,000
Merchandise $73,000 $93,000
Miscellaneous $14,000 $17,000
Total Cost of Goods Sold $170,000 $224,000
Operating Expenses 1 5
Payroll & Related $597,000 $783,000
Advertising & Promotion $156,000 $197,000
Maintenance & Repairs $67,000 $85,000
Operating Supplies $56,000 $68,000
Management Fee $45,000 $54,000
Insurance $47,000 $59,000
Utilities $115,000 $157,000
Miscellaneous $33,000 $45,000
Total Operating Expense $1,116,000 $1,448,000
Total Expenses $1,286,000 $1,672,000
As a % of Revenue 60.0% 60.5%
Source: LARC
Section II Executive Summary
II-5 EBITDA from Operations
Financial projections for the proposed attraction produce positive EBITDA for
each of the first five operating years. EBITDA are projected to be $575,000 in
the first operating year for the aquatic center and $96,930 for the sports
complex. EBITDA increases over the five-year planning period to a level of
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 6
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Table II-5 Operating Expenses Sports Complex
Cost of Goods Sold 1 5
Food & Beverage $37,000 $55,000
Merchandise $23,000 $31,000
Miscellaneous $7,000 $10,000
Total Cost of Goods Sold $67,000 $96,000
Operating Expenses 1 5
Payroll & Related $570,000 $748,000
Advertising & Promotion $152,000 $192,000
Maintenance & Repairs $65,000 $82,000
Operating Supplies $43,000 $51,000
Management Fee $65,000 $79,000
Insurance $35,000 $43,000
Utilities $101,000 $137,000
Miscellaneous $54,000 $73,000
Total Operating Expense $1,085,000 $1,405,000
Total Expenses $1,152,000 $1,501,000
As a % of Revenue
Source: LARC
Section II Executive Summary
$722,427 in the fifth year for the aquatic center and $331,064 for the sports
complex. Table II-6 presents this information.
II-6 Net Warranted Investment
Based on a projected principal payback to the investor of between six and eight
years, the net warranted investment in the proposed aquatic center is between
$3,855,000 and $5,138,000. The net warranted investment for the sports
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 7
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Table II-6 Earnings
Aquatic Center
Category 1 5
Total Revenue $1,861,000 $2,394,427
Less: CGS -$170,000 -$224,000
Gross Margin $1,691,000 $2,170,427
Less:Operating Expense -$1,116,000 -$1,448,000
EBITDA $575,000 $722,427
As a % of Revenue 30.9% 30.2%
Sports Complex
Total Revenue $1,248,930 $1,832,064
Less: CGS -$67,000 -$96,000
Gross Margin $1,181,930 $1,736,064
Less:Operating Expense -$1,085,000 -$1,405,000
EBITDA $96,930 $331,064
As a % of Revenue 7.8% 18.1%
Source: LARC
Section II Executive Summary
complex between six and eight years is between $1,265,000 and $1,686,000.
The calculation is based on a five-year average EBITDA of $210,700 for the
sports complex and $642,194 for the aquatic center, exclusive of sponsorship
revenue and capital improvements.
II-7 General Assessment
LARC believes that, if built to high standards as planned, developed as family
attractions for participatory and spectators sports, adequately capitalized, and
maintained and operated by a professional operating group, the proposed
attractions should be financially viable and generate economic impact for the
city of Magnolia. If these factors are combined with adequate demand, event
promotion and creative event planning, conditions will be advantageous for the
development of the projects.
Feasibility Report Magnolia Aquatic Center and Playing Fields II- ! 8
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LARC, Inc. Section III - Concept and Programming
Multiple factors relating to the location of the project site will tend to influence
the ability of the proposed center to generate attendance at various events.
These include: site-specific characteristics, available supporting amenities,
available hotel rooms, the economic health of the region, and the presence of
existing competitive and complementary entertainment facilities in the market
area and region.
III-1Participation in Youth Sports
Over the last two decades, sports facilities have become destination tourism
generators, particularly when marketing strategies and event planning is
targeted to regional market areas. Whereas two decades ago the common tactic
was to develop single-purpose facilities with the intent to serve as a local
community resource, today’s facilities are often developed with the intent of
attracting a multipurpose niche of visitors to an area. As a result, they are
portrayed based on their ability to induce economic activity through an
increasingly diversified demand. As this has occurred, society has also become
more mobile and time constraints for families much greater, which has
translated to the rise of short duration, purpose-driven trips that coincide with
tournament and competition lengths.
For communities, the recreation and sports market has led to changes in
development strategies and the emergence of facilities and attractions that offer
either niche-focused venues or multipurpose multi-sport venues, and fee-for-
service amenities that appeal to everyone. In addition to the factors mentioned
above, the following characteristics have also contributed to this evolution.
• Heightened expectations that facilities or programs demonstrate some degree
of “return.” Historically, facilities were built by municipal departments for
civic and social service. For sports facilities that are typically not self-
supporting, the rationale for development is often infused with discussion of
the value it creates for the community through increased visitation and, thus
fiscal return based on increased lodging, restaurants, or retail spending. In
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 1
Prepared by Leisure and Recreation Concepts, Inc.
Section III Concept and Programming
this instance, sports facilities are positioned or portrayed as an economic
development vehicle, rather than a community resource.
• Increasing expectation by elected officials who selected public sector
functions can be operated as enterprise accounts (e.g. use fees to minimize
operating support). This trend is most notable in sports facility operations
where recent fiscal constraints have led to increased reliance on revenue self-
generation for programs ranging from leagues to tournaments to skills
training sessions.
• Tournament and league organizers are looking to maximize the yield for
staging events and, as such, look for the facility that offers the best mix of
concessions, rental rates, capacity, and hotel packages.
• A more competitive environment has been fueled by an increased range of
facility types. As the development of private recreation offerings has increased,
so have the range of options available to the users. In the instance of sports,
the community recreation center or YMCA were once the only options, today
there may be numerous options. In the instance of zoos, for example, the
emergence of private game reserves, themed destinations, and the infusion of
“entertainment” into natural attractions has changed the landscape. As such,
each facility works hard to distinguish itself in a region, and often relies on
the continual addition (or subtraction) of amenities such as multiple fields and
courts, high-end locker rooms, increased seating or concessions to maintain
appeal.
• Increased specialization and sophistication in design and makeup of the
facilities has also changed. Facilities are now designed with the specific
mission of the building in mind and create an atmosphere with amenities that
drive the specialized business of the facility, such as “Championship
Stadiums” that target national and regional tournament play.
For the Magnolia region, the challenges inherent in developing a new
destination oriented sporting venue such as a sports complex, or nature-based
destinations, are to design specialized facilities that will accommodate enough
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 2
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Section III Concept and Programming
demand (e.g., attract visitors and events) to justify development and to ensure
that these facilities are distinct in relation to other regional, or even national,
offerings. The underlying intent is to create a total destination package that
builds on and supplements current offerings and introduces a new level of
appeal that extends the economic role and contribution of travel and tourism to
Magnolia.
The following analysis of team sports participation is based upon data
presented by the Aspen Institute in the State of Play Report for 2016. The
report presents a variety of trends in relation to the sports participation
industry, including those very revealing of the state of decline in sports
participation and the active health of both children and adults. The report finds,
for example, that girls were less active to a healthy level than boys. Additionally,
a very strong differentiator in participation of various sports is the result of
household disposable income. Only one in five children 6 to12 years old from
homes with less than $25,000 in income participated in any kind of sport; and
while activity levels were higher for youth ages 13 to 17 (27.5 percent), the gap
widens between them and kids from households with $100,000 or more in
income (45.5 percent).
In most market areas it is found very often that those kids who have the greatest
opportunity to continue playing into adolescence are those who can afford the
club teams, training, and equipment required to advance through the system. It
is also important to note that participation in team sports is up slightly from
2014 among children 6 to 12. Rates jumped in 2015 more than three points, to
56.6 percent of kids. Among “core participants,” those who play on a regular
basis, the rate moved from 37.3 percent to 40 percent.
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 3
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Section III Concept and Programming
III-2 Know Your Customer
One of the most fascinating conclusions to be derived from the State of Play
study is the conclusion that youth sports are not designed with the kid in mind.
Although the kids are the main participant, the kid “experience” is not
considered a part of the programming, scheduling for even design of the
facilities. Video games (and the technology industry, more broadly) are very
often the culprit when it comes to understanding the sedentary nature of
younger generations. However, in surveys, children and teens revealed that
video games and even e-sports provide much of what children want out of a
sport experience, including: “lots of action, freedom to experiment, competition
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 4
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Table III-1 Core Participation in Team Sports
Sport 2011 2012 2013 2014 2015
Basketball 15.5% 14.1% 16.0% 14.7% 14.7%
Baseball 14.9% 12.5% 14.2% 12.9% 13.2%
Outdoor Soccer 11.2% 9.2% 9.3% 9.1% 8.9%
Tackle Football 3.2% 3.6% 3.5% 3.3% 3.3%
Gymnastics 4.1% 3.5% 2.9% 3.0% 2.7%
Flag Football 3.0% 2.8% 2.8% 2.4% 2.6%
Volleyball (court) 1.8% 2.4% 2.7% 2.8% 2.5%
Ice Hockey 0.9% 0.8% 1.1% 1.1% 1.1%
Track and Field 1.5% 1.7% 1.1% 1.2% 1.0%
Lacrosse 0.9% 0.7% 0.8% 0.9% 0.7%
Wrestling 1.0% 0.8% 0.7% 0.6% 0.7%
Field Hockey 0.3% 0.5% 0.6% 0.4% 0.5%
Source: Derived from 2016 State of Play by Aspen Institute Project Play
Section III Concept and Programming
without exclusion, social connection with friends as co-players, customization,
and a measure of control over the activity – plus, no parents critiquing their
every move.” The children become the masters of their own experience, all
made possible by research and feedback loops that seek input from its young
customers.
This type of interaction and kid-shaped experience has not been translated into
youth sports. According to the results of surveys, sports organizations continue
to design policies, for the most part, with little input from children, their main
“customers.” For example: the US Soccer Federation mandated that affiliated
youth organizations move to the birth year in assigning players to teams, as is
done in European countries. Until this year, most teams were segmented by
school calendar year, allowing classmates to play together. In academic surveys,
many participants cited that playing with friends was a priority. Skye Eddy
Bruce of the Institute for Soccer Parenting stated, “I believe this will
significantly impact the number of kids we have playing soccer.”
III-2.1 Free Play and Fun
Due to a reluctance of parents to allow their children to venture out in
neighborhoods on foot or bike, children are less likely to engage in free play or
pick-up games that once was a staple of older generations. Programs are being
introduced to this generation of children to not only encourage more free play
and finding the fun in sports, but to increase participation in organized sports
by adding a free play component.
The academic, social, and sport performance benefits of free play has seeped
into the vernacular of coaches, educators and parents. It has become a topic of
interest for many major media outlets including NPR, Washington Post,
Psychology Today. This rise in the awareness of the success and social
implications of free play has encouraged some sport providers to include kid-
led programming. For example, at Giraldo Elite Futbol Club, in Corpus Christi,
TX, every fourth training session is organized by kids, and winter league is
entirely run by the enrolled participants.
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 5
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Section III Concept and Programming
Pressure is also growing from parents for schools to add daily recess. A report
prepared in 2016 found that only eight states require elementary schools to
offer as much, largely unchanged from 2012. In fact, one school district in Texas
implemented a 2nd recess program in specific schools throughout the district.
This program includes an additional recess period executed in morning hours
during which kids can create their own games and play freely before the day
begins. Though the program is still in its infancy and has not been mandated
throughout the district, although parents continue to lobby for the change.
Major sports organizations (which are fed by the interest in participation in
team sports) are also seeing the value in free play enhancing sports activities.
Major League Baseball and USA Baseball created a program called Play Ball, a
$30 million initiative designed to encourage participation in all forms of
baseball activities. Whiffle ball, stickball, skills competitions like Pitch, Hit &
Run, home run derby, and just playing catch in the backyard are all part of the
Play Ball program. The program was created in a response to decreasing
participation in a sport that is increasingly being dominated by organized
leagues and travel team ball which can ask a lot of families in terms of financial
and time commitments. The program was introduced in 140 cities through the
US Conference of Mayors.
One very important revelation in the programming of athletic complexes and
sports centers is the lack of diversity in the participation. The report detailed
the efforts of some municipalities that are acting to engage low-income children
in programming efforts. In Salida, Colorado, for example, the local parks and
recreation department has created a fund that provides up to $100 in program
fees to any child who qualifies for free or reduced-price lunch at school. In
Sylvania, Ohio, the city analyzed its participation numbers against the economic
data from seven neighborhoods and found disparities by income. As a result, it
created new programs to engage underserved children more effectively. In
Lancaster, Pennsylvania, the parks and recreation department joined forces with
the school district, Police Athletic League and other local sport organizations
and providers to leverage the assets of each including facilities, high school
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Section III Concept and Programming
athletes as coaches, curricula and scholarships. and create joint programming.
As a result, according to the city, the partnership has increased sports
opportunities in four sports, with more planned.
III-2.2 Swimming
Based on national statistics, there are approximately 85 million regular
swimmers or water play participants, 21 million individuals who are
characterized as “fitness” swimmers, and 2.4 million individuals that swam
competitively at least once within the past year. Of these amounts,
approximately 17% (3.6 million) were considered frequent participants, having
participated in swimming more than 100 times in the last year. Of the 2.4
million competitive swimmers, approximately 37 percent (882,000) were
considered frequent participants, having participated 100 or more days in the
last year. Approximately 35% (7.5 million) of “fitness” swimmers and 63% (1.5
million) competitive swimmers participated at le7ast 50 times.
III-3 Aquatic Center Programming
The requirements of an aquatic center vary depending on identified uses and
area groups that will be regularly participating in events or meets. These
requirements are further detailed below.
• Competition pools are lacking in the city, as the current pool remains
outdated and ill-equipped to handle the needs of the community and the
needs of competitive swimming.
• It is possible that clubs cap their participants based on the lack of available
facilities which limits participation and use.
• Magnolia faces a limited ability to host meets due to limited pool size, lack of
seating, and age of facilities.
• Cost of swimming lessons in the community can be cost prohibitive due to
lack of facilities.
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Section III Concept and Programming
• Competitions could last 2 to 3 days depending on the participation and the
size of the event.
• An aquatic complex could expect to attract 200 to 300 participants for
relatively smaller-sized meets.
• There are typically 2 to 2.5 people that will attend an aquatic activity per
participant.
• Most clubs host one meet per month; potential exists to host 2 to 3 large
competitions per season (4 to 6 large competitions annually).
• Attractions and activities should be created in the aquatic center to attract the
general public and welcome the community.
• A range of activities need to be created to enhance the experience and
encourage visitation from members of the community, particularly due to a
new, increased admission fee.
• Season and family passes can be made available to present a reasonable
pricing structure to regular visitation.
• The various components of the aquatic center will provide a relatively
inexpensive outing for the family. Active participation of visitors will be
emphasized in the design, and attractions will be included to ensure this
aspect of the facility. It is envisioned that the facility will be upscale and
attractive to all market segments. This mixture of leisure activities will be a
draw to a family seeking a unique entertainment experience in the Magnolia
area.
• The development of the aquatic center in Magnolia should achieve the
valuable objective of creating an additional reason for residents to spend
leisure time and money within the community as well as visitors from outside
of the designated market areas.
• With careful planning, marketing and an efficient operating system, the
proposed aquatic center should make a significant contribution toward
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Section III Concept and Programming
increasing visitation to the area, raising the self-esteem of the local populace
and promoting economic growth within the region. Differing from leisure
facilities offered elsewhere, the proposed aquatic center will lead, rather than
follow, the leisure and participatory sports trends in the area. It will also
provide a unique and innovative facility in which Magnolia and area residents
can take pride.
III-3.1 Aquatic Center Concept
Considerations
The concept of the aquatic center should include specific attributes to meet the
market needs. In order to accommodate the potential market demand, the
following facilities should be considered an integral part of the development.
• 6 to 10-lane 25 to 50 meter competitive pool
• Diving well and platform for diving competitions
• Bleacher seating
• Leisure pool for community and guests
• Additional attractions to include for guests and community use
including splash pad, a slide and diving board.
• Locker/changing rooms
• Restrooms
• Concession area
• Administration and coach offices
• Admission desk and controlled entry
III-4 Sports Complex Programming
There is currently inadequate space and capacity in the municipal fields and
the boys and girls club to host tournaments and hold any regional
programming. The lack of a sizable conglomeration of fields prevents local
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 9
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Section III Concept and Programming
leagues from hosting large tournaments that can generate larger economic
impacts.
The following requirements would be necessary to host events to extend
practice spaces and game spaces to organizations that struggle with finding
locations for regular practices and games.
• The sports complex would require a minimum of 4 to 6 baseball/softball fields
to accommodate tournament and event demand.
• Ideally, youth infields would be skinned (dirt) with portable mounds available
and adjustable base lengths and portable fencing.
• Skinned infields would accommodate all softball demand and youth baseball
demand up to 13-year olds, assuming fields have portable mounds available.
• Potential exists to host regional tournaments that typically attract 20 to 40
teams per tournament.
• In order to attract state tournaments, the complex first needs to establish its
reputation by successfully hosting regional and other invitational
tournaments.
• Accessibility to and from the sports complex needs to be considered during
larger-sized tournaments. Non-local participants need to be able to easily find
and access the sports complex without a hindrance to the local market.
• Tournament play generally requires one field per ten participating teams.
• Tournament organizers often cite that natural infields can provide a high
quality game experience consistent with anticipated future tournament field
conditions.
• Teams average 12 to 13 kids per team and approximately 1.5 people travel per
participant for 13 and under baseball or softball.
• Directors from comparable nationwide venues suggest that facility concession
sales and the overall economic impact generated through softball
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Section III Concept and Programming
tournaments tends to be greater than that of comparable baseball
tournaments (in terms of size, origin of participants, age group, etc.), as more
family members generally travel with girls’ softball teams than boys’ baseball
teams.
• Older youth baseball (14U through 18U) and adult baseball teams can often be
accommodated at a single field or two field complexes; potential exists to grow
this demand through redevelopment of existing infrastructure to improve to
industry standard fields.
• Lighting for all fields would be required to offer extended play and practice
days.
• Concession facilities will be a necessity for operations.
• Equipment storage on site would aid in the transition to different sports and
different levels of play.
• Include 2 to 4 soccer/football fields in addition to the baseball/softball fields
to expand programming and potential for hosting other types of events. The
additional fields can also be used as practice areas for any field sport.
• Restroom facilities.
Feasibility Report Magnolia Aquatic Center and Playing Fields III- ! 11
Prepared by Leisure and Recreation Concepts, Inc.
LARC, Inc. Section IV - Market Analysis
Potential attendance at any type of sports facility or community aquatic center
is the function of several factors, including market size and characteristics,
competition, propensity to spend on leisure and sports, and local attitudes
toward attractions. Market characteristics to be considered include the size,
economic well-being and distribution of the available markets, and the number
of similar types of attractions in the market. Of equal importance is the scope
and quality of the proposed project. While all these factors interrelate, it is
obvious that a larger, more affluent market normally offers the greatest potential
support for an attraction. However, smaller niche markets, particularly when
related to unique attractions or experiences, should not be discounted or
ignored.
While demographic indications such as population and income levels are not
strict predictors of market support for use of sports facilities and aquatic
centers, they do provide valuable insight into the overall capacity of a market to
support such facilities and sporting events. In addition, other economic
indicators such as a region’s employment and business market can affect the
performance of facilities developed for a particular market. This section
provides an overview of the market area’s demographic and economic
characteristics, and will provide a foundation for other analyses that appear
later in this report.
IV-1Resident Market
The resident market is generally very important to attendance results at smaller-
sized facilities and sports complexes that may not be located in large cities.
Within the leisure industry, however, the impact of this market varies
accordingly to the nature of the facility and its location. For example, recent
surveys indicate that water parks generally attract from 50-90% of their total
attendance from within 50 miles of the park site. Industry data for outdoor
dramas reveals that approximately 25% of total attendance comes from within
100 miles of the theater site, the remainder of the attendance coming from
Feasibility Report Magnolia Aquatic Center and Playing Fields IV-! 1
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Section IV Market Analysis
beyond this distance. Major theme parks normally attract approximately 65% of
total attendance from within 150 miles, or roughly a three-hour drive of the site,
depending on the population of the near-in market area and population density
in the outlying areas. On the other hand, other parks and attractions located in
highly popular tourist destinations (such as Central Florida, Southern
California, and other coastal regions like Myrtle Beach, South Carolina) attract
greater than 50% of total attendance from beyond 150 miles of the site. These
facilities are promoted on a regional and national basis.
The propensity to visit attractions quite often decreases as the distance between
the residence and the facility increases. As a result, analysis of the resident
market begins with segmenting, by driving distance and time, areas from the
proposed site for further analysis. The total resident market population for the
analysis of the aquatic center has been defined as those persons living within 60
miles of the proposed project. These persons would not necessarily be staying
overnight in the Magnolia area when visiting the project, since they should be
able to travel from their residence to the project and return home within the
same day. It is, however, anticipated that those traveling to Magnolia from
outside this resident market would be in the area for other organized events. As
a result, the aquatic center could anticipate that some of the visitors originating
from outside of the 60-mile market area would be attending the facility.
While there would presumably be some overlapping in the operation of both
facilities, examining the market for the aquatic center and the market for the
sports complex requires specific sets of data in determining potential demand.
In this section, the demographic data presented for the resident market applies
to either concept, however, further analysis of sports participation was utilized
to determine the potential for the playing fields.
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Section IV Market Analysis
IV-2 Resident Market Characteristics
The permanent resident market population has been divided, as noted, into the
following three segments defined by distance (and time) from the site: 0 to 20
miles (within 30 minutes), 21 to 40 miles (30 minutes to 50 minutes) and 41 to 60
miles (50 minutes to 1 hour and 10 minutes). The data is analyzed in this
manner because the relationship between drive time or distance from an
aquatic center or sports complex and the achievable participation levels is well
documented. The populations for these market segments are listed in the
following table. The current estimate of the permanent resident population in
each segment, as provided by ESRI and the U.S. Census Bureau, was projected
as follows for 2016:
Examination of the demographic characteristics and trends relating to the
resident population provides insight into the viability and the potential of the
local marketplace to contribute its support to the proposed facilities.
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Table IV-1 Population of Resident Market Segments in 2016
Market Segment Drive Time Population
0 to 20-mile market Within 30 minutes 31,586
21 to 40-mile market 30 to 50 minutes 125,667
41 to 60-mile market 50 mins to 1 hour and 10 mins 376,271
Total Within 1 hour and 10 mins 533,524
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
IV-2.1 Population Growth
Between 2010 and 2016, there was only a slight increase in the overall market
with the near-in market segments showing a decrease. The 60-mile market area
demonstrated the largest compound annual growth rate of 0.47% during the
six-year period. The annual growth rate of the total resident market between
2016 and 2021 is anticipated to increase, but at a slower rate of 0.41%.
The following table demonstrates the historical and anticipated growth of the
resident market segments from 2010 to 2021.
Population in the overall resident market is projected to increase by 1.7%
between 2016 and 2021. This annual rate of growth (0.41%) is lower than the
national annual rate of growth (0.74%) during this same period. The 0 to 20-mile
resident market is projected to have an annual growth of -0.22% between 2016
and 2021, the 21 to 40-mile resident market is projected to have a slightly slower
annual growth rate of -0.23%, and the 41 to 60-mile resident market is projected
to have the highest annual growth of 0.56%.
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Table IV-2 Historical and Projected Resident Market Population
Year 0 to 20 miles 21 to 40 miles 41 to 60 miles Total
2021 31,244 124,231 386,959 542,434
2016 31,586 125,667 376,271 533,524
2010 31,268 126,377 361,156 518,801
CAGR (2016-2021) -0.22% -0.23% 0.56% 0.41%
CAGR (2010-2016) -0.01% -0.29% 1.16% 0.47%
CAGR (2010-2021) -0.01% -0.16% 0.63% 0.33%
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
IV-2.2 Households
Within the United States, demographers have noted that for several years the
number of households has been increasing at a much more rapid rate than the
population has increased. This trend is supported by several factors relating to
household formation. Americans have been marrying at a later age, but this is
the same age group of young adults that has continued to form independent
households, either as singles or with other non-married persons. One result has
been a rapid increase in the number of households without the parallel
increase in population. Essentially, the households are forming, but the
population in those households are remaining stagnant (families are not being
formed).
This trend is also apparent in the near-in resident market areas, albeit to a
lesser degree in recent years. Although this trend was greatest between 1980
and 1990, it is continuing, to a lesser degree, in the current decade.
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Table IV-3 Historical and Projected Resident Households
Year 0 to 20 miles 21 to 40 miles 41 to 60 miles Total
2021 12,324 49,479 152,707 214,510
2016 12,513 49,942 148,158 210,613
2010 12,607 50,077 141,658 204,342
CAGR (2016-2021) -0.21% -0.11% 0.69% 0.44%
CAGR (2010-2016) -0.12% -0.04% 0.75% 0.51%
CAGR (2010-2021) -0.30% -0.19% 0.61% 0.37%
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
Between 2016 and 2021, households in the overall market are projected to
continue to increase. As detailed in Table IV-3, households in the 41 to 60-mile
market segment are projected to increase by 0.69% from 2016 to 2021. This
increase is higher than the increase projected for the population (0.56%) of this
market segment during the same period of time.
A second characteristic of households that impacts available discretionary
income is the number of persons per household. As the number of persons per
household decreases, the available household discretionary income may
increase. Households with fewer persons tend to have more discretionary
income to spend on activities such as dining out, travel, entertainment and
recreation.
Household size has remained relatively the same in each of the 20-mile market
areas. From 2016 to 2021, the households in the near-in market areas increase
slightly, while the households in the 21 to 40-mile and the 41 to 60-mile market
areas stay the same. The estimated increase in the near-in resident market
household size is from 2.39 to 2.40 persons per household. The relatively
stagnant growth in household size is consistent with national trends. Household
sizes are further detailed in Table IV-4.
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Table IV-4 Historical and Projected Resident Households
Year 0 to 20 miles 21 to 40 miles 41 to 60 miles
2021 2.40 2.41 2.45
2016 2.39 2.41 2.45
2010 2.37 2.42 2.46
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
IV-2.3 Age
In evaluating the suitability of a market for an entertainment attraction, the age
distribution of the resident population is an important consideration. The
market areas must have a sustainable number of persons in the age categories
that tend to visit similar aquatic centers and sports complexes. In this study
area, the majority of the permanent resident population was below the age of 44
in 2012. This group constituted 61.6%, 59.2%, and 56.7% of the total resident
populations of the 0 to 20, 21 to 40 and 41 to 60-mile market segments,
respectively. It is important to note that while a younger age guest may be more
apt to participate in sports or aquatic plan, the facilities quite effectively
combine experiences for a variety of ages. No part of the project is age
restrictive.
The population under 45 years is of importance to aquatic centers and sports
parks in general. Statistics published by the National Sporting Goods
Association (NSGA) and the Sporting Goods Manufacturers Association
(SGMA) reveal various levels of sports participation in the United States.
Participation rates for selected activities are available by region, age group (age
7+), frequency, gender, and other variables. These rates are based on
participation levels, including by age and sport. Each market area includes a
large percentage of the population of age groups known to participate in a
variety of field sports.
Likewise, statistics published by the International Association of Amusement
Parks and Attractions indicate that, on average, over 80% of the persons
attending theme and amusement parks and attractions in the United States
with attendance over 975,000 guests are 45 years of age or younger. While the
proposed aquatic attraction would not fit into the amusement park category,
this statistic reveals that a younger age group may be attracted to this type of
leisure entertainment.
As previously stated, the concept of each project is designed to appeal to a
range of age groups. It is important to not exclude specific age groups for a
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Section IV Market Analysis
number of reasons, including building attendance, generating interest in the
project and keeping the visitors in the area longer, as each age range of visitor
will find something appealing within the experience.
The resident population is only slightly older than the median age of the
United States population (38.1). This project will appeal to the family market, in
particular, within these age groups. This is indicative of the importance of
wholesome family entertainment sought by many. as a result, the attendance
Feasibility Report Magnolia Aquatic Center and Playing Fields IV-! 8
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Table IV-5 Historical and Projected Resident Households
Age 0 to 20 miles 21 to 40 miles 41 to 60 miles
0 to 4 5.7% 6.2% 6.5%
5 to 9 5.8% 6.2% 6.4%
10 to 14 5.8% 6.2% 6.4%
15 to 19 8.0% 6.3% 6.2%
20 to 24 7.8% 6.3% 6.4%
25 to 34 12.6% 12.4% 13.2%
35 to 44 10.5% 11.4% 12.1%
45 to 54 12.3% 13.0% 12.9%
55 to 64 13.1% 13.9% 13.2%
65 to 74 10.1% 10.3% 9.7%
75 to 84 5.7% 5.5% 5.0%
85 and older 2.6% 2.3% 2.0%
Median Age 39.2 40.7 39.0
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
projections in this report have been approached on the basis of a conservative-
likely-optimistic range of market penetration and their corresponding levels of
attendance. The size of each facility and, therefore, the size of the investment
and resources that are needed for operation depend directly on the size of the
market potential.
IV-2.4 Income
Income levels and household income trends in the resident market are
important indicators of the ability of a market segment to contribute
significantly to the support of either facility. Based on data from ESRI and the
United States Census Bureau, income (per capita and household) are projected
to increase during the period from 2016 to 2021, as shown in Table IV-6.
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Table IV-6 Income Characteristics of the Resident Market
Type Year 0 to 20 miles 21 to 40 miles 41 to 60 miles
Per Capita 2016 $21,024 $20,739 $23,240
2021 $22,970 $22,609 $25,306
% Increase 9.3% 9.0% 8.9%
CAGR 1.8% 1.7% 1.7%
Average Household 2016 $51,261 $50,769 $57,341
2021 $56,410 $55,423 $62,492
% Increase 10.0% 9.2% 9.0%
CAGR 1.9% 1.8% 1.7%
Median Household 2016 $36,736 $36,520 $40,533
2021 $40,192 $39,377 $43,982
% Increase 9.4% 7.8% 8.5%
CAGR 1.8% 1.5% 1.6%
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
The 60-mile resident market has slightly higher income levels than the other
two market segments, and the levels are projected to continue to increase into
2021.
In addition to the income figures presented in Table IV-6, the distribution of
households within income ranges can have an effect on the discretionary
spending ability of the population. The next table presents the distribution of
households by total household income in 2016 and 2021. During this five-year
span, in each resident market segment, households earning less than $35,000
are projected to annually decrease, while the households in the resident
markets earning more than $50,000 are projected to increase between 2016 and
2021. As households move into higher income categories, they tend to have
more discretionary income for leisure activities and sports events.
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Table IV-7 Distribution of Households by Total Household Income
Age 0 to 20 miles 21 to 40 miles 41 to 60 miles
2016 2021 2016 2021 2016 2021
Less than $15,000 21.5% 22.5% 21.3% 21.8% 19.0% 19.1%
$15,000 to $24,999 14.5% 12.1% 14.5% 13.1% 13.2% 12.9%
$25,000 to $34,999 11.6% 8.8% 12.0% 9.7% 11.2% 9.6%
$35,000 to $49,999 15.1% 15.7% 15.4% 14.7% 14.7% 12.6%
$50,000 to $74,999 16.3% 16.1% 16.6% 17.0% 17.1% 16.8%
$75,000 to $99,999 8.9% 9.9% 9.2% 10.5% 10.3% 12.1%
$100,000 to $149,999 8.4% 10.7% 7.3% 9.0% 9.2% 10.8%
$150,000 to $199,999 2.2% 2.7% 2.1% 2.5% 2.9% 3.5%
$200,000 and over 1.5% 1.5% 1.6% 1.7% 2.4% 2.6%
Source: U.S. Census Bureau; ESRI
Section IV Market Analysis
IV-3 University Presence
The presence of colleges, universities and educational institutions within a
market area can serve as a significant source of event demand for a public
assembly facility, such as a proposed multi-use sports facility. The number of
college students in the area is important because it represents a target audience
for education-related events, intramural and club sports. Colleges and
universities are not only a large source of event demand (for tournaments,
camps and exhibition games), but are also among the most active within the
athletic community and, as a result, would be likely spectators and participants
at sporting events.
IV-3.1 Southern Arkansas University
The enrollment of Southern Arkansas University has steadily risen since 2012
and continues to grow in development of new courses of study and the physical
expansion of the campus. Current Spring 2017 enrollment is 4,341 with no
signs of slowing down. The new construction and improvements of the nursing
program, science and engineering programs, and agriculture education present
well-rounded programs to attract a larger student body each year. The health of
the university and the retention of its students can be a significant factor in the
success of any sports complex within a community. The healthier the city
becomes, as a whole, the more likely it will be to attract students to the
university and for the university retention rates to steadily increase. Currently,
the retention rate is 65.5%.
Although sports facilities exist on the university campus, the primary use rests
with the athletic and physical education programs. Student athletes and
students have regular use of the facilities, but outside groups are unable to use
the facilities for events and tournaments. Potential exists in coordinating with
the university to book tournaments or events for intramural teams or non-
sanctioned athletic competitions.
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Section IV Market Analysis
IV-4 Economic Impact
The operation of a sports and recreation complex can impact the local economy
in a variety of ways. Initial direct spending is generated during construction on
materials and labor and during operations at events on registration fees, facility
rentals, concessions and advertising, as well as before and after events
throughout local hotel, restaurant, retail and other establishments.
Although not all spending is likely to impact the local economy, a large amount
related to the operation of either facility will directly affect the community.
Adjustments must be made to account for the fact that a certain amount of
spending associated with the potential facilities will be made by local residents
and, therefore, likely represents money already spent in the economy in another
form. This phenomenon is called displacement and reduces the overall new
impacts. This type of spending is not considered net new to the local economy.
Additionally, not all spending associated with the potential facilities will take
place in the local economy. A portion of this spending is likely to occur outside
the immediate area. This phenomenon is called leakage and reduces the overall
impact.
Indirect effects refer to re-spending of the initial or direct expenditures. These
indirect impacts extend further as the dollars constituting the direct
expenditures continue to change hands. This process, in principle, could
continue indefinitely. However, recipients of these expenditures may spend all
or part of it on goods and services outside the market area, put part of these
earnings into savings, or pay taxes. This spending halts the process of
subsequent expenditure flows and does not generate additional spending or
impact within the community after a period of time.
Induced effects consist of the positive changes in spending, employment,
earnings and tax collections generated by personal income associated with the
operations of a sports and recreation complex. Specifically, as the economic
impact process continues, wages and salaries are earned, increased employment
and population are generated, and spending occurs in virtually all business,
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Section IV Market Analysis
household and governmental sectors. This represents the induced spending
impacts generated by direct expenditures.
Both facilities, particularly with the eventual planning of regional events and
tournaments, have the capabilities to generate a turnover of revenue in the
community 2 or 3 times. As travelers come to Magnolia from outside of the
designated market area and spend money on hotels, restaurants, fuel and other
required necessities, new revenues are being generated in local businesses
without tapping into the support of the local community. This type of economic
impact requires that both facilities work to host events that will attract visitors
from outside of the designated market areas.
Feasibility Report Magnolia Aquatic Center and Playing Fields IV-! 13
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LARC, Inc. Section V - Market Demand
The most accurate method of projecting attendance to an aquatic center, such
as the proposed facility is by applying reasonable market “penetration” or
capture rates to the available resident and visitor markets. This is the approach
used to forecast attendance at other entertainment attractions throughout the
United States and this same method will be used to project the attendance
levels for the proposed aquatic center. An explanation of this process and how it
applies to the proposed concept is further detailed in this section.
Projecting attendance to playing fields, however, requires a different method of
analysis. A variety of techniques were used to estimate the market demand and
use characteristics of the potential field complex. These techniques include, but
are not limited to:
• interviews with local community stakeholders, business leaders,
potential users and recreational sports teams;
• acquiring information from regional, state and national youth
tournament organizations;
• a review of industry trends in youth sports and the various
participation levels;
• a comparison of demographic, socioeconomic, transportation and other
visitor industry infrastructure elements among markets hosting
comparable facilities; and,
• a review of the historical utilization levels at comparable facilities.
This section has been divided into two parts. The first part details the market
demand of the aquatic center and the second part details the market demand of
the playing fields.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 1
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Section V Market Demand
V-1 Capturing the market
The success of an aquatic attraction is determined by several variables.
Historically, an analysis of the experience of most of the major North American
themed attractions indicates that market penetration is a function of attraction
size and scope, and that it varies inversely with distance, i.e., that the propensity
to attend the attraction tends to drop off demonstrably as the travel time
increases. Only in a select few situations is the placement of a project deemed
ideal to its financial success. In all other cases, it is necessary to establish certain
parameters and analytical processes to result in acceptable alternatives for
considering how the location will affect the proposed entertainment project,
such as the aquatic center that is proposed. It is essential to understand that
one of the main reasons for the failure of certain aquatic attractions can be the
choice of location.
Certainly, other elements exist that can affect the choice of location such as
tangible and intangible costs. Additionally, large-sized themed attractions are
often situated in regions of significant tourism visitation, and each capitalizes
on the popularity of its respective components and themes. The components
and concepts around which these facilities are developed are wide in variety
and include themes such as eco-tourism, botanical gardens, natural wonders,
recreated historic events or settings, marine life, technology, popular lore,
culture and legends. By assigning a theme or a group of themes to a
development, an overall image and identity can be gained and associated
throughout the project’s components and future development. Essentially, there
are three factors for situational aspects of a themed attraction:
• the size and characteristics of the market;
• the concept; and,
• the requirements for management and operation.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 2
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Section V Market Demand
V-1.1 Patterns of Market Penetration
The method of applying penetration or capture rates to the available market
segments will be used to forecast anticipated attendance for the purposes of
this report. However, other factors influence the anticipated penetration rates:
• Uncertainty of attendee perception
• Project concept, particularly in relation to other market area
entertainment
• Competition for the leisure dollar
• Time in the marketplace
As a result, the attendance projections in this report have been approached on
the basis of a conservative-likely-optimistic range of market penetration and
their corresponding levels of attendance. The size of the park and, therefore, the
size of the investment and resources that are needed for operation depend
directly on the size of the market potential.
These influencing factors should not be considered as deterrents to the
development of the themed entertainment attraction but should be recognized
realistically when approaching project development in a prudent manner. If the
project is well-planned and executed, and its operation and promotion are
perceived to be of similar quality within the industry, this project should prove
successful.
It is important to establish an effective market within the geographical reach of
a park. The effective market is defined as those who would potentially visit
entertainment attractions such as an aquatic center either on occasion or more
than once per year. Additional market groups can also be established by
examining socio-demographic and motivational characteristics such as age, sex,
family status, income level, origin market, type of transportation available to get
to the park, personality, lifestyle and expectations. When primary data is
unavailable, the estimated penetration rates rely on a culmination of the market
characteristics.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 3
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Section V Market Demand
The key aspects of deriving a themed attraction’s penetration rates include:
discovering the target market, how many people are going to visit, the sphere of
influence and when visitors are expected. Aquatic centers in smaller
communities typically anticipate to be a regional draw during special events,
competitions, city festivals or university events. An aquatic center developed in
a smaller populated area can expect to flourish by serving a wide range of
aquatic needs and the entire community by:
• engaging a wider range of community residents in aquatic activities;
• offering a great variety of programs and activities for youth, teens,
adults and seniors; and,
• providing the ability to host swim competitions, tournaments and
events to generate great cost recovery and economic development by
inviting cash expenditures from outside of the community.
The most significant aspect of the effective market within an hour drive is the
proximity to larger markets and established regional visitor markets. While it is
important to note that this is just as similar as a near-in resident market
because of the proximity to the site, the origin markets are potentially far-
reaching beyond a typical drive time analysis. This project is, therefore, not
depending on visitors to come from other parts of Southern Arkansas, Texas
and Louisiana just to visit the project, rather, and most significantly, those
visitors are already coming to the area for events and sports activities.
After applying estimated penetration/capture rates to each segment of the
resident population, it is possible to calculate the resultant attendance
anticipated from each category. These components of anticipated attendance,
when added together, total the overall attendance figure and penetration/
capture rate for the project.
The propensity to visit attractions quite often decreases as the distances
between the residence and the site increases. As a result, analysis of the
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 4
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Section V Market Demand
resident market begins with segmented areas from the proposed site for further
analysis.
The following markets should be distinguished when applying penetration
rates.
• Resident Market - typically defined as the total number of inhabitants that
reside in the catchment area of influence. The resident market is that area
from which a trip can be made to the attraction without a required overnight
stay. This area is often broken down by distance to the project and sub-
grouped into primary, secondary and tertiary markets. There are differences in
the approach to park radius, depending on the concept and surrounding area.
The following table details the typical approach to market segmentation:
➡ For the purposes of this report, the resident market has been
segmented by the drive times typical for the industry: 20, 40 and 60
miles.
• Visitor Market Beyond Segmented Resident Market - This market is the
number of potential visitors who may require an overnight stay during their
visit to the themed attraction. This market is not available to every type of
aquatic attraction and depends entirely on proximity to resident market areas
beyond the tertiary border.
Table V-1 Typical Resident Market Segmentation
Segment Regional Water Park Community Aquatic Center
Primary Up to 30 miles Up to 20 miles
Secondary Up to 60 miles Up to 40 miles
Tertiary Up to 90 miles Up to 60 miles
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 5
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Section V Market Demand
➡ For the purposes of this report, since this market is based upon the
participation in events, festivals or regional tournaments it is not
accounted for in the market segments, rather as potential attendees to
events.
V-1.2 Penetration Rates
Projected first-year penetration rates from the proposed aquatic center are
presented in the following table. This table illustrates the anticipated
penetration rates for the three different levels of planning (conservative-likely-
optimistic) for each segment of the resident and visitor markets. The attendance
of each market segment for each level is determined by applying the relevant
penetration rate to the appropriate market segment population. The rates are
based on industry averages, the potential in the market area, a synthesis of data
provided by comparable facilities, and LARC’s experience within the industry
and are consistent with rates achieved by similar attractions in their first
operating years. Additionally, proposed admission prices for the attraction are
lower than those for many similar parks, a factor that should allow for greater
penetration of the resident market segments.
Table V-2 Initial Year Penetration Rates
Market Segment Conservative Likely Optimistic
0 to 20-mile market 74.0% 85.1% 97.0%
21 to 40-mile market 22.1% 25.7% 29.2%
41 to 60-mile market 8.5% 10.0% 11.4%
Total 15.4% 18.0% 20.5%
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 6
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Section V Market Demand
The penetration rate in the first year of operation for the 0 to 20-mile market is
projected to range from a conservative 74% to an optimistic 97%. The likely
penetration rate is estimated to be 85.1%. While these penetration rates may
seem rather high, it is important to remember that these numbers take into
account a higher frequency level the closer the market is to the aquatic center.
Within the 21 to 40-mile market segment, the likely penetration rate is
projected to range from a conservative 22.1% to an optimistic 29.2%.
Penetration rates within the 41 to 60-mile market area are projected to range
from 8.5% to 11.4%. The likely total market penetration rate for the proposed
aquatic center is expected to be 18.0%. This includes visits from all specified
market segments.
Resulting penetration rates by market segment are presented in Table V-3.
Although the table demonstrates that penetration rates in the two furthest
market segments remain nearly the same rate in year two due to the hangover
effect of the heavy promotion in year one, it is anticipated that penetration rates
in all market segments will increase by year five. Total market penetration in
year five is anticipated to be 20%, a slight increase from 18% in year one.
These rates should be considered conservative, as penetration rates after the
first year will depend on the project’s initial perception amongst guests,
marketing success and execution, and the addition of new attractions. Our
estimates are based on typical, or average, reception in those areas.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 7
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Section V Market Demand
In addition to a range of small to mid-sized municipal water park projects,
LARC also examined a number of aquatic centers for the purposes of this study.
The following aquatic centers were used as comparable for generating marked
demand data:
• Capitol Federal Natatorium in Topeka, KS
• Matthew T. Doyle Natatorium in Texas City, TX
• Tualatin Hills Aquatic Center in Beaver, OR
• Greensboro Aquatic Complex in Greensboro, NC
• St, Peters Rec-Plex Aquatic Operations in St. Peters, MO
• Holland Community Aquatic Center in Holland, MI
• Mecklenburg County Aquatic Center in Charlotte, NC
V-1.4 Attendance
Based upon the penetration rates, attendance at the aquatic center in the first
operating year is projected to be approximately 97,000 persons, within a
predicted range of 83,200 to 110,600 persons. This data is shown in Table V-4.
Table V-3 Projected Penetration Rates
Market Segment 1 2 3 4 5
0 to 20-mile market area 85.1% 79.8% 79.2% 81.8% 81.0%
21 to 40-mile market area 25.7% 27.3% 28.2% 28.2% 29.2%
41 to 60-mile market area 10.0% 10.6% 11.2% 11.7% 12.3%
Total 18.0% 18.5% 19.0% 19.5% 20.0%
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 8
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Section V Market Demand
Attendance for the proposed aquatic center has been projected for the first five
years of operation. This forecast has been based on the assumption that the
facility will be well-designed and executed and operated in a high-quality
manner associated with successful themed attractions. Also, capital must be
invested in the attraction in the form of new features, landscaping, attractions
or events.
As presented in the following table, attendance is expected to increase annually,
with an overall increase of 12.6% during the first five operating years, reaching
a forecast level of approximately 109,200 persons during the fifth year. This
growth is also based on the attraction introducing new components and
attracting more guests from the visitor market sectors.
Table V-5 Project Attendance for the First Five Operating Years
Market Segment 1 2 3 4 5
0 to 20-mile market 26,700 24,975 24,696 25,440 25,116
21 to 40-mile market 32,000 33,966 34,986 34,980 36,036
41 to 60-mile market 38,300 40,959 43,218 45,580 48,048
Total 97,000 99,900 102,900 106,000 109,200
% Increase 3.0% 3.0% 3.0% 3.0%
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 9
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Table V-4 Projected Initial Year Attendance Range
Market Segment Conservative Likely Optimistic
0 to 20-mile market 23,200 26,700 30,500
21 to 40-mile market 27,500 32,000 36,500
41 to 60-mile market 32,500 38,300 43,600
Total 83,200 97,000 110,600
Source: LARC
Section V Market Demand
V-1.5 Market Mix
The proportion of attendance that originates from each market segment is
relatively even. For the project to be successful, it must effectively penetrate
each market segment, particularly when there are events and festivals planned
in the town. It is important to note, here, that the proposed project will rely on
the support of the local community.
A strong marketing program, begun early, will be necessary. The resident
markets will account for any repeat visitation to the facility, and, until the
facility becomes well-known in more distant market areas through promotions
and word-of-mouth publicity, it will rely heavily upon internet marketing and
advertising to bring visitors to the attraction.
Table V-6 presents the attendance mix by market segment forecasted for the first
five operating years. The proportion of attendance from the near-in resident
market segment is expected to decrease slightly over the five-year period, while
the furthest resident markets are expected to increase their share somewhat.
As the word-of-mouth knowledge of the project radiates geographically over
time, the popularity of the themed attraction can be expected to grow in the
market segments more distant from the site. By the fifth year of operation, the
project should generate 44% of its attendance beyond the 40-mile market area.
Table V-6 Projected Attendance Market Mix
Market Segment 1 2 3 4 5
0 to 20-mile market 27.5% 25.0% 24.0% 24.0% 23.0%
21 to 40-mile market 33.0% 34.0% 34.0% 33.0% 33.0%
41 to 60-mile market 39.5% 41.0% 42.0% 43.0% 44.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 10
Prepared by Leisure and Recreation Concepts, Inc.
Section V Market Demand
V-2 Playing Field Participation
Participation in organized team sports through youth leagues and high schools
across the country has remained steady in recent years. The prevalence of
organized participation illustrates the shift sway from the spontaneous pick-up
play of individuals or small groups to more serious adult-directed activities that
are less like play and more like competition. Sports participation for youth now
begins at an earlier age than in previous generations. This trend of younger and
younger play can be attributed to a number of factors including:
• Pressures of college scholarships;
• Professional success of famous athletes; and,
• Stress and importance of activity in the battle against childhood obesity
and juvenile diabetes.
Amateur and recreational sports facilities, like those evaluated for this study,
typically host a mix of local and non-local sports and recreation activities. In
most cases, these facilities are conceived, developed and operated with the
intent of providing optimized venues to best compete for tournaments that
draw new visitors to the area (participants and spectators), thereby generating
new economic impact in the host communities. Nevertheless, local usage of
these facilities (through local league play, recreation, clinics and camps) is
typically critical in sustaining utilization levels and generating operating
revenue, in addition to providing an attractive community resource and
enhancing quality of life for local residents.
Local, regional, state and national athletic associations were contacted or
researched to understand the level and type of use that could result upon
completion of new amateur and recreational sports playing fields in Magnolia.
Additionally, a variety of field sports were considered in the determination of
user levels including baseball, softball and soccer.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 11
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Section V Market Demand
V-2.1 Baseball/Softball
Based on national statistics, there are approximately 13.6 million individuals
that participated in baseball at least once in the past year. Of this amount,
approximately 52% (7.1 million) were considered frequent participants, having
participated 25 more days in the past year. Further, there are approximately 10.2
million individuals that participated in softball at least once in the past year in
the U.S. Of this amount, 36 million were considered frequent participants,
having participated 25 or more days in the last year.
A variety of techniques were used to estimate the market demand and use
characteristics of a potential playing field complex in Magnolia. These include:
interviews with local community stakeholders; determination of potential
complex users; information provided by regional, state and national youth
tournament and competition organizers, a review of industry trends and youth
sports participation levels; and a review of historical utilization levels and
comparable facilities.
The following comparable projects were researched and used as a basis of this
analysis:
• Terry Sims Diamond Sports Comlex in Batesville, AR
• Field of Dreams Sports Complex in Van Buren, AR
• Sheridan Sports Complex in Sheridan, AR
• Overland Park Soccer Complex in Overland, KS
• Lawrence Soccer Complex in Lawrence, IN
• Ethel S. Abbot Sports Complex in Lincoln, NE
• Tyson Sports Complex in Springdale, AR
• James W. Cownie Soccer Park in Des Moines, IA
• Ballfields and Craig Ranch in McKinney, TX
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Section V Market Demand
• Vandalia Sports Complex in Vandalia, OH
• Alma Baseball Complex in Alma, AR
• Eligin Sports Complex in Elgin, IL
• CB Rec Complex in Council Bluffs, IA
• Plano Sports Authority Star Center in Plano, TX
• East Cobb Baseball Complex in Marietta, GA
Data was collected with respect to the historical and expected number of
participants of each of the tournaments/competitions, average number of family
members/spectators per participant, hotel requirements, facility complex
requirements, facility/complex requirements (specifications, amenities, number
of courts/fields, parking, etc.), and expected rental rates. All of this information
was utilized in the study to determine the most appropriate programmatic
elements of the potential baseball/softball complex and use characteristics, to be
subsequently discussed.
Potential users of a new baseball/softball complex include:
• Cal Ripken Baseball
• Babe Ruth Baseball
• Independent tournament organizers
• USA Baseball
• USSSA Baseball
• U.S. Specialty Sports Association
• USA Softball
• AFA Fastpitch Softball
• ASA Fastpitch Softball
• AAU Baseball
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Section V Market Demand
• AAU Fastpitch Softball
Based on the results of the research and trends across the country, and the
southern United States in particular, it was deduced that there are strong
interest levels among both baseball and softball user groups. Although there is a
strong interest in both programs within and around Magnolia, there is a
significant lack of resources to support larger events or tournaments. There is a
limited access to practice facilities and batting cages, leaving teams with few
options outside of game and tournament play. It was estimated that the local
and near-in market teams spent in excess of $5,000 annually per team traveling
out of the area to participate in league play and tournaments.
After reviewing a variety of complexes that host a range of field events, it was
determined that the Magnolia playing field complex would require a minimum
of 4 to 6 youth fields to accommodate tournament play and 2 to 4 to
accommodate regular, continued local usage. The demands for tournament play
require that specific elements be in place to act as the hosting facility. A review
of these demands is not only a significant factor in developing the concept of
the complex, but the potential tournament and events schedule. The demands
include the following:
• Dirt infields for both baseball and softball.
• Portable mounds for fast pitch.
• The capability in hotels and area amenities to host regional tournaments that
could attract up to 30 teams.
• Two to four weekend tournaments per month for fundraisers.
• Facilities must be available to and accessible to residential areas, local
communities and local youth sports teams.
• The baseball and softball fields currently available to the Magnolia community
would not be able to accommodate larger sized tournaments, nor are they up
to the condition required for regular play.
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Section V Market Demand
• Teams average 12 to 13 players per team and approximately 1.5 people travel
per participant for 13 and under baseball/softball.
• Facility directions from comparable nationwide venues suggest that facility
concession sales and the overall economic impact generated through softball
tournaments tends to be greater than that of comparable baseball
tournaments.
• Some facilities estimated a non-local participation rate as high as 30 to 40
percent and growing to levels of 50 to 70 percent as events continue to grow.
• More than 20 baseball and softball tournaments per year could be attracted to
a new facility in Magnolia, with an average of approximately 25 teams per
tournament.
• Older youth baseball/softball and adult baseball/softball can often be
accommodated at a single field or two field complexes.
V-2.2 Soccer/Multipurpose Outdoor field use
Based on national statistics, there are approximately 13.6 million individuals
that played outdoor soccer at least once in the past year. Of this amount,
approximately 3 million were considered frequent participants, having
participated 52 or more days in the last year. Approximately 6.4 million played
soccer at least 26 times in the last year.
In terms of football, there are approximately 12.7 million individuals that played
football at least once in the last year. Of this amount, 4.2 million were
considered frequent participants, having participated 25 or more days in the last
year. Approximately 52 percent (6.6 million) played football at least 13 times in
the last year.
Lacrosse, rugby, flag football, and field hockey are other sports that utilize
“rectangle” outdoor fields of this nature. Many of these sports are rapidly
gaining popularity throughout the country. Although no interest in league in
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Section V Market Demand
these sports could not be determined at the time of the study, the demand for
fields for a range of sports still exists and the potential for these sports to utilize
the complex is an important factor to consider in later years.
The following observations were significant in determining the potential for
soccer and other field sports in Magnolia
• There is moderate interest levels among those interested in soccer and
football usage.
• Event organizers typically search for a complex that offers 3 to 5 soccer/
football fields to be able to accommodate events and plan for growth.
• Existing area fields do not offer enough space to accommodate events or are
overused and not well-maintained.
• On average there are 12 participants per team and 2.5 attendees per athlete.
• The ability to host these events has previously seemed limited due to the lack
of facilities and fields.
Feasibility Report Magnolia Aquatic Center and Playing Fields V- ! 16
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LARC, Inc. Section VI - Financial Analysis
Certain analyses must be performed so that the viability of an idea may be
assessed and for conceptual and operational strategies to be developed to meet
those expectations. LARC determines that an attraction is financially viable to
the extent that its development can support itself without relying on significant
subsidies or outside investment. The projections presented in this section are a
measure for establishing an investment level that can be supported with a
forecast of the balance of revenues and costs associated with the operations.
It is important to note that while many of the perceived benefits of the potential
aquatic center and playing fields are intangible, including providing enhanced
sports and recreation participation opportunities and stimulating community
pride among other qualitative benefits, the annual operations can provide
quantifiable benefits to an area. Specifically, the annually recurring impacts of
an amateur sports and recreation complex begin with the initial direct spending
made during operations related to participant fees, camps, clinics, facility
rentals, concessions, advertising and other income as well as expenditures made
before and after events throughout local hotels, restaurants, retail,
entertainment and other establishments.
VI-1 Establishing Revenue
The revenue projected to be generated by the anticipated attendance, the
estimated operating expenses and the resultant earnings from operations are
discussed in this section. These financial projections will be based on the
results of previous sections of this report. The largest percentage of projected
revenue is anticipated from tournaments and admissions. However, before this
category can be properly forecast, it is necessary to first establish the pricing
policy.
Aquatic centers/water parks and sports complexes generate income primarily in
two ways. Firstly, the well-developed concept aids in establishing a quality
experience for which visitors will choose to pay an admission. The pay-one-
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 1
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Section VI Financial Analysis
price concept established by Six Flags in the 1960s is well known in the
industry as the most common entry policy for an attraction. Although this
policy will fare differently for tournament play, the idea is still the same: pay to
play. Secondly, income through per capita expenditures will support both
projects. Attractions and sports complexes can generate up to 25% of their
income from merchandise and food and beverage sales, particularly when both
aspects are well-organized and well-selected. The viability of an aquatic center
and a sports complex is, therefore, reliant upon participations levels and guest
expenditures during events, games and typical visits.
VI-1.1 Pricing Policy
The pricing policy established by the aquatic center and for sports participation
is an important factor in the initial market response and acceptance of the
facility. It is critical that the marketplace perceive both projects as excellent
entertainment value in relation to the total expenditure and as adequate
facilities to host sporting events. This can be best accomplished by offering a
variety of options for guest participation. Through the use of a combination of
admissions and a pay-for-play sports structure, visitors would be allowed
admittance to the designated areas and participation in specific activities.
Spectators would be required to pay to enter either facility and watch sporting
events.
Tickets would allow guests unlimited visits for the day only. Guests may leave
the park and re-enter the park on the same day with one admission ticket if it is
for the same sporting event. Additionally, the community may want to consider
discount structures for members of the communities, parents of players or
coaches.
It is necessary that the planner of the facilities offer a carefully planned mix to
ensure adequate guest distribution and participation. This is one of the reasons
why design criteria are developed. Capacity of specific areas must be sufficient
to handle the increased demand levels resulting from the combination of guests
who are attending the sporting event or some other area of the complex.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 2
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Section VI Financial Analysis
For the purposes of this report, it has been assumed that both facilities will
include the elements necessary to successfully market the admission policy and
sport team fees. The actual price of the admission, in LARC’s opinion, must be
analyzed and carefully positioned with regard to the attraction product and to
competitive facilities in order to ensure marketplace acceptance through its
awareness of a high value/price relationship.
In today’s economy, it is important that the facilities be reasonably priced to
encourage early trial and acceptance in the marketplace. The resident market
and visitors from surrounding communities will be able to afford the admission
rates set for the proposed facilities because relatively low prices have been
projected. The attraction will have a slightly lower admission price than other
attractions of similar size and scope, as a method for enhancing market
penetration. This practice will allow the project to penetrate a larger
percentage of its market and gain a foothold in the sport hosting industry.
VI-1.2 Aquatic Center Admission Prices
Table VI-1 presents admission prices for the first five years of operation for the
aquatic center. As the table indicates, admission prices vary depending on the
age. This pricing should place the facility in a strong value to price relationship
that should help reinforce positive “word-of-mouth” advertising from those
persons attending the attraction. Admission prices are anticipated to increase
over the course of the first five operating years to keep pace with inflation and
as new attractions or activities are added.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 3
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Section VI Financial Analysis
VI-2 Projected Operating Revenues
In addition to carefully projecting the market penetration of a themed
attraction is the method of establishing pricing levels and per capita
expenditures. As mentioned previously, setting pricing to encourage
participation and additional spending with a high value relationship to the
concept is a major factor in generating revenue. The concept and mix of events
and activities is significant to both the overall experience and the
encouragement for guests to increase their length of stay in the facilities and in
the town of Magnolia.
VI-2.1 Admission Revenues
Assuming the proposed aquatic center adopts in its first operating year the
recommended admission of $10 for adults, $8 for children, $7 for seniors and
$8 for groups of 15 or more, the anticipated non-discounted per capita revenue
is $8.40. The per capita figures are based on the total number of attendees of
each admission type sold and the corresponding price of that ticket.
The ratio between adult, child, and group ticket pricing is similar to that found
in other area attractions and in other themed attractions, in general. Attendance
levels are based on the ratio of three adults to each child or senior ticket sold, a
ratio considered normal at similar themed attractions in the United States. Also,
group sales tickets are assumed to be 10% of all tickets sold. The following table
Table VI-1 Admission Prices for the Aquatic Center
Category 1 2 3 4 5
Adult $10.00 $10.00 $11.00 $11.00 $11.50
Child $8.00 $8.00 $9.00 $9.00 $9.50
Senior $7.00 $7.00 $8.00 $8.00 $8.50
Group $8.00 $8.00 $9.00 $9.00 $9.50
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 4
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Section VI Financial Analysis
presents the estimated tickets sold by ticket type for the first five operating
years.
As the project will need to assume an aggressive marketing posture within the
local market, the effective admission discount rate can be expected to be 10% of
all full-priced adult and child admissions in each of the first five years of
operation. Therefore, the effective admission per capita revenue is $8.40. The
following table presents the total admission revenue by ticket type and effective
admission per capita for the first five years.
The discount factor considers all promotions, coupons and agency rebates
within each market area. Because it is projected that a percentage of the
attendance will originate from beyond the resident market, the area where the
discounting will be heavily focused, a 10% discount factor should be adequate
and in keeping with industry norms.
Table VI-2 Projected Attendance by Admission Type
Category 1 2 3 4 5
Adult 64,700 65,930 67,910 69,960 72,080
Child 19,840 20,220 20,830 21,450 22,100
Senior 1,730 1,760 1,810 1,870 1,920
Group 9,700 9,990 10,290 10,600 10,920
Comp 1,030 2,000 2,060 2,120 2,180
Total Attendance 97,000 99,900 102,900 106,000 109,200
Source: LARC
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 5
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Section VI Financial Analysis
VI-2.2 Food and Beverage Revenue
The projected per capita revenue for food and beverage is estimated at $2.68
during the first operating year. Allowing for inflation and the expansion of food
and beverage services justifies this projection. This figure is comparable to food
and beverage revenue generated at other aquatic centers, taking into account
the income levels and expenditures within the market segments. Per capita
revenue during the study period is presented in Table VI-4. This revenue
category is expected to increase by approximately 5% annually, reaching $3.26
in the fifth operating year.
This per capita revenue is from the project-operated food and beverage only.
Other food and beverage opportunities are included in leased space. Therefore,
the revenue generated for the project will come in the form of lease payments.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 6
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Table VI-3 Admission Revenue by Ticket Type
Category 1 2 3 4 5
Adult $647,000 $659,300 $747,010 $769,560 $828,920
Child 158,720 161,760 187,470 193,050 209,950
Senior 12,110 12,320 14,480 14,960 16,320
Group 77,600 79,920 92,610 95,400 103,740
Comp 0 0 0 0 0
Total Admission Revenue $895,430 $913,300 $1,041,570 $1,072,970 $1,158,930
Base Per Capita $9.23 $9.14 $10.12 $10.12 $10.61
Discount Factor 10% 10% 10% 10% 10%
Per Capita Discount $0.83 $0.82 $0.91 $0.91 $0.95
Effective Per Capita $8.40 $8.32 $9.21 $9.21 $9.66
Source: LARC
Section VI Financial Analysis
VI-2.3 Merchandise Revenue
Revenue from the sale of merchandise is projected to be approximately $3.02
during the first operating year. Merchandise per capita revenues are expected
to increase by approximately 5% each year thereafter. This results in per capita
income of approximately $3.41 during the fifth year’s operation.
VI-2.4 Swim Lessons
Offering swim lessons as a part of the programming at the aquatic center allows
for an additional use of the facility while also extending safety and training
potential to the public. The cost for these programs would be minimal, but
would make use of the facility in off-hours or during periods with no events
planned. LARC has assumed a cost per lesson of $50.
VI-2.5 Miscellaneous Revenue
Miscellaneous revenues include those items not covered in the other categories.
These may include revenues such as vending, rentals and similar products or
services. This category is expected to generate approximately $0.93 in the first
operating year. Revenue in this category has been forecast to increase at the
rate of approximately 2.5% annually, as prices are increased and additional
products or services are offered. This results in estimated revenues of $1.03 per
capita in the fifth operating year.
VI-2.6 Total Per Capita Revenue
Total per capita revenue (excluding admissions and swim lessons) is projected
to be approximately $6.63 during the first year of operation, as shown in Table
VI-4. In this scenario as discussed formerly in this section, all categories of
revenue are expected to increase annually, resulting in a total per capita revenue
of $7.70 in the fifth operating year. This results in an increase of $1.07 per
capita, or approximately 16.1%, during the study period. In practice, actual
economic conditions and opportunities in the marketplace may allow additional
increases beyond those projected.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 7
Prepared by Leisure and Recreation Concepts, Inc.
Section VI Financial Analysis
All per capita operating revenue projections are presented in Table VI-4.
VI-2.7 Operating Revenue Aquatic Center
Total operating revenues for the project are presented by category for each
operating year of the planning period in Table VI-4.
Total operating revenue from the aquatic center during the first year of
operation is forecast to be in excess of $1.8 million. Total revenue is projected
to increase annually, reaching more than $2.3 million during the fifth year of
operation, a growth in revenues of 28.7%. This results from increases in per
capita revenues, increases in attendance and increases in the number of special
events and competitions booked as the project grows in popularity.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 8
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-4 Per Capita Revenue
Category 1 2 3 4 5
Admissions $8.40 $8.32 $9.21 $9.21 $9.66
Food & Beverage $2.68 $2.81 $2.95 $3.10 $3.26
Merchandise $3.02 $3.17 $3.25 $3.33 $3.41
Miscellaneous $0.93 $0.95 $0.98 $1.00 $1.03
Total Per Capita Revenue $15.03 $15.25 $16.39 $16.64 $17.36
Source: LARC
Section VI Financial Analysis
VI-2.8 Operating Revenue Sports Complex
As an initial step in assessing the revenue associated with the potential sports
facility/complex, a detailed analysis was conducted to estimate use, participation
and attendance. A detailed market, financial and economic model was
developed for the analysis. Included in this analysis are estimates of league play,
tournaments, and the organization of baseball clinics and camps. As expected,
tournaments generate the highest level of participation and attract the largest
number of spectators. Increased attendance from year one to five is primarily
driven by the ability to attract and host more small, medium, and large
tournaments after the facility establishes its name and operations.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 9
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Table VI-5 Gross Revenue Aquatic Center
Category 1 2 3 4 5
Admissions $815,000 $831,000 $948,000 $976,000 $1,055,000
Swim Lessons $53,000 $58,000 $62,000 $67,000 $73,000
Food & Beverage $260,000 $281,000 $304,000 $329,000 $356,000
Merchandise $293,000 $317,000 $334,000 $353,000 $373,000
Miscellaneous $90,000 $95,000 $101,000 $106,000 $112,000
Special Events $150,000 $157,500 $165,375 $173,644 $183,326
Facility Rental $200,000 $210,000 $220,500 $231,525 $243,101
Gross Revenue $1,861,000 $1,949,500 $2,134,875 $2,236,169 $2,395,427
Source: LARC
Section VI Financial Analysis
VI-3 Operating Expenses
Expenses incurred by aquatic centers and sports complexes vary widely,
depending upon attendance levels, operating schedules, location and the scope
of facilities. Also, company policies and operating philosophies impact total
operating expenses. The distribution of operating expenses at two selected
facilities (one an aquatic center and one a sports complex) and those projected
for the proposed facilities are presented in Table VI-7. Facility A is the existing
aquatic center, Facility B is an existing sports complex. The two facilities are
used as examples in this analysis because of their similarity to the proposed
attraction regarding size, scope and market. They are also attractions for which
very accurate data, provided to LARC confidentially, is available.
The ratio of operating expenses to total revenue is normally higher during the
first year due to lower attendance and a less efficient operation. Expenses
should decline as a percent of revenue during the five-year planning period.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 10
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-5 Gross Revenue Sports Complex
Category 1 2 3 4 5
Youth Tournaments $483,000 $533,000 $587,000 $648,000 $714,000
Adult Tournaments $272,916 $300,890 $331,731 $365,734 $403,221
Youth Leagues $40,014 $44,115 $48,637 $53,623 $59,119
Camps $0 $0 $44,115 $48,637 $53,623
Food & Beverage $115,000 $127,000 $140,000 $155,000 $171,000
Merchandise $90,000 $100,000 $107,000 $115,000 $124,000
Miscellaneous $48,000 $51,000 $55,000 $59,000 $64,000
Special Events $150,000 $157,500 $165,375 $173,644 $182,326
Facility Rental $50,000 $52,500 $55,125 $57,881 $60,775
Gross Revenue $1,248,930 $1,366,005 $1,533,983 $1,676,519 $1,832,064
Source: LARC
Section VI Financial Analysis
The distribution of operating expenses projected for the proposed facilities are
presented inTable VI-9. Operating expenses, excluding cost of goods sold, are
projected to be approximately $1,116,000 in the first operating year for the
aquatic center and $1,085,000 for the sports complex. Operating expenses
increase in each of the first five operating years to a level of $1,405,000 for the
sports complex in year five and $1,448,000 for the aquatic center.
VI-3.1 Cost of Goods Sold
Expenses incurred for cost of goods sold are a function of volume of goods sold
and revenues generated by each type. In Table VI-8, the total cost of goods sold
for the first operating year is projected to be $170,000 for the aquatic center
Table VI-7 Comparison of Operating Expense Distribution
Category1 A2 B2 Aquatic
Center
Sports
Complex
Payroll and Related Expense 55.3% 53.0% 53.5% 52.5%
Advertising/Promotion 13.0% 13.1% 14.0% 14.0%
Maintenance and Supplies 10.1% 8.0% 11.0% 10.0%
Utilities 9.0% 9.6% 10.3% 9.3%
Insurance 4.0% 3.8% 4.2% 3.2%
Other3 8.6% 12.5% 7.0% 11.0%
Total 100.0% 100.0% 100.0% 100.0%
Operating Expense Ratio4 60.2% 78.0% 60.0% 87.0%
1:Excludes cost of goods sold, debt service, depreciation and income taxes
2: New facility within its first five operating years
3: Includes commissions, rents, misc. operating expense, professional fees and other taxes
4: Operating expense divided by total operating revenue
Source:LARC; Individual Attractions
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 11
Prepared by Leisure and Recreation Concepts, Inc.
Section VI Financial Analysis
and $67,000 for the sports complex. The cost of goods sold will increase
annually for the first five operating years to $224,000 in the fifth year of
operation for the aquatic center and $96,000 for the sports complex.
Projected ratios of costs to sales should remain constant throughout the first
five operating years. The cost of goods sold, as a percent of applicable revenue
of each type, is projected as follows.
VI-3.2 Payroll and Related Expenses
Payroll and related expenses consist of salaries, wages, benefits, and payroll
taxes. For the aquatic center, this expense is expected to be $597,000 in the first
operating year, increasing 7% annually. Expenses for this category account for
approximately 53.5% of the total operating expenses and 32.1% of revenue
during the first year of operation. For the sports complex, this expense is
expected to be $570,000 accounting for 52.5% of the budget and 45.7% of
revenue.
These percentages are based on standards of new aquatic attractions within the
industry similar to the proposed attraction in size, scope and theme. The
expense, however, does not include management fees, which is a separate cost.
For the individual operating year expense, see Table VI-9.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 12
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-8 Cost of Goods Sold Ratios
Category % of Applicable Revenue
Food & Beverage 32%
Merchandise 25%
Miscellaneous 15%
Source: LARC
Section VI Financial Analysis
VI-3.3 Advertising and Promotion
Advertising and promotion are based on a rate of approximately $1.61 per guest
for the aquatic center and $1.52 per guest for the sports complex in the first
year of operation. Based on industry standards, this is necessary to penetrate
the resident markets. Marketing expenses are expected to increase 6% annually.
The expenses include those for direct advertising, web design, public relations,
social networking, merchandising, agency fees, special promotions and all other
marketing expenses. There is typically a relationship between marketing
expense and attendance or number of planned events, and, in order for the
facility to successfully achieve the assumptions of tournament success and
attendance, the facility should not underspend in this area. Until a full
marketing plan has been established, these figures should be used as budgetary
goals.
VI-3.4 Maintenance and Operating Supplies
This combined expense is estimated to be $123,000 in the first year of
operation for the aquatic center and $108,000 for the sports complex.
Maintenance and repair costs are expected to increase 6% annually throughout
the first five operating years and operating supplies are expected to increase 5%.
In the course of operating the business, various supplies such as those for the
administrative offices, tickets, guest supplies, office supplies, light bulbs, paper,
register rolls, etc. will be required. After the first five operating years, repair and
maintenance expenses often increase more rapidly to accommodate aging and
necessary replacement.
VI-3.5 Insurance
Based on operating results at similar facilities and industry standards, the
estimated cost for insurance in the first operating year for the aquatic center is
$47,000 and $35,000 for the sports complex. Until each facility is completed
and a written quotation is given, this figure should suffice for budgetary
consideration. Because of the uncertainty of increases in insurance costs, it is
estimated that this expense will increase 6% annually.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 13
Prepared by Leisure and Recreation Concepts, Inc.
Section VI Financial Analysis
VI-3.6 Utilities
Energy costs for the facility are projected to be $115,000 in the first operating
year for the aquatic center and $101,000 for the sports complex. This includes
electricity, water, gas, sewer, internet, cable and telephone. Because of the long-
term instability of these costs, they are projected to increase 8% annually
throughout the first five operating years.
VI-3.7 Management Fees
The management fee refers to the fees to be paid to a professional operating
group for a sports authority to manage the types of facilities. These fees vary
from company to company depending on the services and provisions. An
average range is 2% of the operating budget or 1% of the operating revenue. For
this project this fee has been projected at $45,000 in the first operating year for
the aquatic center and $65,000 for the sports complex. While this arrangement
is not imperative to the operation, it is important that the operational structure
include professionals with experience in the industry. More details are
presented in Table VI-9.
VI-3.8 Other Expenses
Miscellaneous expenses are based on the experience of other similar facilities
and are projected to increase at an annual rate of 8%. This expense category
should include such items as licenses, commission, professional fees and other
non-identifiable operating costs. The higher annual increase accounts for the
unknown nature of these expenses.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 14
Prepared by Leisure and Recreation Concepts, Inc.
Section VI Financial Analysis
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 15
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-9 Operating Expenses
Aquatic Center
Cost of Goods Sold 1 2 3 4 5
Food & Beverage $83,000 $90,000 $97,000 $105,000 $114,000
Merchandise $73,000 $79,000 $84,000 $88,000 $93,000
Miscellaneous $14,000 $14,000 $15,000 $16,000 $17,000
Total Cost of Goods Sold $170,000 $183,000 $196,000 $209,000 $224,000
Operating Expenses 1 2 3 4 5
Payroll & Related $597,000 $639,000 $684,000 $732,000 $783,000
Advertising & Promotion $156,000 $165,000 $175,000 $186,000 $197,000
Maintenance & Repairs $67,000 $71,000 $75,000 $80,000 $85,000
Operating Supplies $56,000 $59,000 $62,000 $65,000 $68,000
Management Fee $45,000 $47,000 $49,000 $51,000 $54,000
Insurance $47,000 $50,000 $53,000 $56,000 $59,000
Utilities $115,000 $124,000 $134,000 $145,000 $157,000
Miscellaneous $33,000 $36,000 $39,000 $42,000 $45,000
Total Operating Expense $1,116,000 $1,191,000 $1,271,000 $1,357,000 $1,448,000
Total Expenses $1,286,000 $1,374,000 $1,467,000 $1,566,000 $1,672,000
As a % of Revenue 60.0% 61.1% 59.5% 60.7% 60.5%
Source: LARC
Section VI Financial Analysis
VI-4 Operating Earnings Analysis
While the operating expenses are components in the calculation of earnings,
there are also other critical inputs, such as additional expenses and capital
improvements to include new attractions. The following table presents the
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 16
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-9 Operating Expenses
Sports Complex
Cost of Goods Sold 1 2 3 4 5
Food & Beverage $37,000 $41,000 $45,000 $50,000 $55,000
Merchandise $23,000 $25,000 $27,000 $29,000 $31,000
Miscellaneous $7,000 $8,000 $8,000 $9,000 $10,000
Total Cost of Goods Sold $67,000 $74,000 $80,000 $88,000 $96,000
Operating Expenses 1 2 3 4 5
Payroll & Related $570,000 $610,000 $653,000 $699,000 $748,000
Advertising & Promotion $152,000 $161,000 $171,000 $181,000 $192,000
Maintenance & Repairs $65,000 $69,000 $73,000 $77,000 $82,000
Operating Supplies $43,000 $45,000 $47,000 $49,000 $51,000
Management Fee $65,000 $68,000 $71,000 $75,000 $79,000
Insurance $35,000 $37,000 $39,000 $41,000 $43,000
Utilities $101,000 $109,000 $118,000 $127,000 $137,000
Miscellaneous $54,000 $58,000 $63,000 $68,000 $73,000
Total Operating Expense $1,085,000 $1,157,000 $1,235,000 $1,317,000 $1,405,000
Total Expenses $1,152,000 $1,231,000 $1,315,000 $1,405,000 $1,501,000
As a % of Revenue
Source: LARC
Section VI Financial Analysis
operating earnings for each project before interest, taxes, depreciation and
amortization (EBITDA).
This financial analysis indicates a positive EBITDA is projected for each of the
five operating years analyzed. It is expected to begin at $575,000 for the aquatic
center in the first year and $96,930 for the sports complex. Cumulative
EBITDA during the first five years is projected to be $3,210,971 for the aquatic
center and $1,053,501 for the sports complex or an annual average of $642,000
and $351,167, respectively. This average represents 20% and 33% of total
revenue collected during the period. All financial projections are based upon
the market demand data presented in Section 5.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 17
Prepared by Leisure and Recreation Concepts, Inc.
Section VI Financial Analysis
VI-5 Net Warranted Investment
The technique of capitalizing income allows the investment which is warranted
in any project to be determined as a function of projected future income,
effectively determining the amount a prudent investor would pay to secure a
particular stream of income. Based on industry criteria, it would be appropriate
to capitalize earnings at a rate between 12.5% and 16.6% -- a rate which reflects
the perceived level of inherent risk in an endeavor such as developing an
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 18
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-9 Earnings
Aquatic Center
Category 1 2 3 4 5
Total Revenue $1,861,000 $1,949,500 $2,134,875 $2,236,169 $2,394,427
Less: CGS -$170,000 -$183,000 -$196,000 -$209,000 -$224,000
Gross Margin $1,691,000 $1,766,500 $1,938,875 $2,027,169 $2,170,427
Less:Operating Expense -$1,116,000 -$1,191,000 -$1,271,000 -$1,357,000 -$1,448,000
EBITDA $575,000 $575,500 $667,875 $670,169 $722,427
As a % of Revenue 30.9% 29.5% 31.3% 30.0% 30.2%
Sports Complex
Total Revenue $1,248,930 $1,366,005 $1,533,984 $1,676,518 $1,832,064
Less: CGS -$67,000 -$74,000 -$80,000 -$88,000 -$96,000
Gross Margin $1,181,930 $1,292,005 $1,453,984 $1,588,518 $1,736,064
Less:Operating Expense -$1,085,000 -$1,157,000 -$1,235,000 -$1,317,000 -$1,405,000
EBITDA $96,930 $135,005 $218,984 $271,518 $331,064
As a % of Revenue 7.8% 9.9% 14.3% 16.2% 18.1%
Source: LARC
Section VI Financial Analysis
aquatic center or sports complex. These percentages relate to a six to eight-year
payback of principal for the investor.
Based on average annual operating earnings during the first five years of
$642,194, the warranted investment in the proposed aquatic center is between
$3.8 and $5.1 million, as presented in Table VI-11. The warranted supportable
investment range for the sports complex is projected to be between $1.2 million
and $1.6 million base on five-year average earnings of $210,700.
Feasibility Report Magnolia Aquatic Center and Playing Fields VI- ! 19
Prepared by Leisure and Recreation Concepts, Inc.
Table VI-11 Warranted Supportable Investment
Aquatic Center
Average 5 Year Earning $642,194
Payback Required Cap Rate Investment
3 Year 33.70% $1,906,000
4 Year 25.00% $2,569,000
5 Year 20.00% $32,111,000
6 Year 16.66% $3,855,000
7 Year 14.29% $4,495,000
8 Year 12.50% $5,138,000
Sports Complex
Average 5 Year Earning $210,700
Payback Required Cap Rate Investment
3 Year 33.70% $625,000
4 Year 25.00% $843,000
5 Year 20.00% $1,054,000
6 Year 16.66% $1,265,000
7 Year 14.29% $1,475,000
8 Year 12.50% $1,686,000
Source: LARC