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Getting price-gouged by private equity in the UK's happiest resort (2023)

93 points by jjar 2y ago

blitzar 2y ago
This is really a story about EBITDA. "People who use EBITDA are either trying to con you or they're conning themselves."
- thelynchmob1 2y ago
  Author of the article here -- kind of, but the idea here was just to write a piece about a capital-intensive business compared to the couple of capital-light businesses I'd covered in the prior articles I wrote, and how that difference in capital requirements plays through the P&L, balance sheet and cash flow statement. One effect of capital intensity is that EBITDA becomes a less useful measure, sure. Another effect is that the cashflow statement becomes incredibly important to running the business, as does understanding the difference between maintenance capex and growth capex.
- pbhjpbhj 2y ago
  https://en.wikipedia.org/wiki/Earnings_before_interest,_taxes,_depreciation_and_amortization https://en.wikipedia.org/wiki/Earnings_before_interest,_taxe... Earnings Before Investment Taxes Depreciation & Amortisation
  - scoot 2y ago
    "earnings before interest, taxes, depreciation, and amortization"
- kamaal 2y ago
  Im not able to see the context here. How is it a con?
  - blitzar 2y ago
    https://brk-b.com/why-charlie-munger-despised-ebitda_240201.html https://brk-b.com/why-charlie-munger-despised-ebitda_240201....
  - rwmj 2y ago
    It's known colloquially as "Earnings before bad stuff" because you can use it to hide all the stuff in your accounts that doesn't make you look good. It's not a con, more like obfuscation.
    - dspillett 2y ago
      > It's not a con, more like obfuscation. Which is a very subtle and complex distinction, like the difference between tax evasion and tax avoidance.
      - ggm 2y ago
        Feather? Legal. Whole bloody chicken? Pornography.
        dspillett 2y ago
        Nah, the feather is erotic, the chicken is kinky. Both legal by my understanding. Unless the chicken is live.
    - refurb 2y ago
      It's one of many metrics that you can use to evaluate a business. Note that's it's not "bad stuff", it's interest, taxes, depreciation and amortization. I'm not sure anyone consider depreciation bad? It's a metric that strips away things that can distort net income. It allows one to see what the core business produces.
  - indymike 2y ago
    It's not if you use it to understand cash flow. If you use it as a profit replacement, you might be disappointed.
- dmurray 2y ago
  It's just one measure of profitability. Is it a con to report a business's gross revenue? Hardly. It has a useful meaning in its context. If you're going to value a business based on a single number, your problems can't be fixed by blaming the number.
molenzwiebel 2y ago
(2023)
petercooper 2y ago
I've just come back from Center Parcs and have been many times over the past 15 years (but took a break between COVID and now due to their policies over that period). It was fantastic as always, but I'm not sure everything is well. The park has demand-based pricing for the accommodation, but this doesn't apply to activities or restaurants. We dined out every day, yet despite the park being full, the restaurants were at 25-50% capacity, whereas on earlier pre-COVID visits you'd have to reserve weeks in advance. The same was true for the activities - except for the cheapest options like pottery painting. The cost of living crisis seems to have truly hit Center Parcs' guests, and I'm wondering if it has the ability to adapt to this, as well as it adapts the prices of the accommodation.
- grues-dinner 2y ago
  I remember going to Center Parks maybe 25-30 years ago with my parents and another family (all in one lodge). I also remember humping in bags and bags of food and drink and getting the bikes off the car roofs. Perhaps it's just a return to the ancient British Dad tradition of not paying for the optional extras after briefly convincing we millennials that every worthwhile experience has an uplift fee. Even, perhaps especially, if it means organising the stocking of the cars like Captain Scott preparing for a zombie apocalypse. See also NT picnicing: https://www.theguardian.com/lifeandstyle/ng-interactive/2023/mar/31/existential-threat-to-the-national-trust-the-stephen-collins-cartoon https://www.theguardian.com/lifeandstyle/ng-interactive/2023... Of course, the best bit of the holiday was never going to be a manky old restaurant, you can have those anywhere. It was the forest, the cycling without threat of being turned into chunky salsa on an A-road, the unusual accomodation, the pool, the lodge bubble baths and most of all the fact that blocky-cushioned sofas disassembled into amazing fortress construction materials.
  - petercooper 2y ago
    That's a popular way to do it! But I think it may end up being the way to do it, at this rate. The restaurants used to be very popular in spite of the prices. We eat out as we don't want to cook (enough of that when we go camping!) and the quality of the restaurants is genuinely good (especially their gluten free provision). Whoever buys CP will need to adjust to a new reality though and go much further down the price scale for purchases within the park (one place that was always extremely busy was the Starbucks!)
lol768 2y ago
This is really partially the government's fault. Parents are fined and (in a minority of cases) imprisoned for taking children out of school in term-time. Usually it's the ones who are honest that end up getting in trouble, and the others that can pass it off as sickness get away with it. During Covid and recent NASUWT/NAHT/NEU strikes though, it's seemingly not been seen as a problem for kids to miss out significantly on face-to-face learning! I think most teachers would agree that, for pupils without a significant attendance problem, a week away (particularly if it's towards the end of a term) is not going to make a realistic difference when it comes to attainment for most students.
- sksksk 2y ago
  > I think most teachers would agree that, for pupils without a significant attendance problem, a week away (particularly if it's towards the end of a term) is not going to make a realistic difference when it comes to attainment for most students. I generally agree with this, but discretion doesn't scale. If you allow teachers to use discretion to approve absences, it will create the opportunity unfair system, where people who the teacher likes more may get preferential treatment. And even if the system isn't actually unfair, it'll create the perception of unfairness (Joe was allowed to go early, why can't my son?). It's also way easier for a school to say "no early absences, that's the national policy", and not have to get into constant arguments with parents.
  - kwhitefoot 2y ago
    Then don't make it discretionary, make it a right.
  - dspillett 2y ago
    > It's also way easier for a school to say "no early absences, that's the national policy", and not have to get into constant arguments with parents. Also, if the teachers/school approved the holiday for someone who then underperformed in some exam or other assessment, and it could be seen that missing something in that week off, you can bet your last penny that many parents will blame the school for approving the request instead of telling them there might be a problem, and if the school deny a request because there might be a problem many parents will blame the school for there being a problem in the first place. In some cases the problem would be with the school, but it wouldn't be just those cases that get the full-on compo-face-in-the-national-press treatment. Teachers jobs are hard enough as it is, especially given the level of remuneration and other conditions, without asking them to take on this responsibility. Skipping school can have a significantly detrimental effect on a child, it doesn't always, maybe it doesn't most of the time, but it does often enough that it is a significant concern. If people don't like how the school system works, perhaps they should try homeschooling? To be blunt: I don't pay my taxes to fund an education system¹ so someone's offspring can wag off… ---- [1] I don't begrudge funding the education system generally, despite not having (and not planning to have) kids myself² because I'm well aware that good education for all is a huge benefit for society as a whole [2] Before anyone says “you don't have kids, you don't know how hard it can be”: I know full well how hard it can be and that is one of the reasons for my intention to never breed, I can't speak for anyone else's but my decision on the matter is not the one taken from a position of inadequate awareness
rwmj 2y ago
PE is terrible, but this isn't a good example as there's plenty of competition for Center Parcs. Plus they raise their prices during school holidays when there's greatest demand, that's not an unfair practice, that's rationing out a limited resource when demand is greatest, economics 101. Bad PE looks like private equity trying to corner the market in vets[1] and dental practices[2], services that you don't really have a choice over. [1] https://archive.ph/bTwcD https://archive.ph/bTwcD [2] https://www.lincolninternational.com/perspectives/articles/investors-take-a-bite-into-the-uk-and-european-dentistry-markets/ https://www.lincolninternational.com/perspectives/articles/i...
- n4r9 2y ago
  Who do you see as competitors to Center Parcs? Butlins and Pontins spring to mind initially, but are actually pretty different.
- llimos 2y ago
  If the government want to help (and the new government has shown a strange attraction to price interference), they could simply let schools choose their own holidays, as long as they have the right number of school days in the year. It would be a bit harder for families with kids in different schools, but probably most schools would be _more or less_ the same, with just a bit more variation to spread it around a little bit.
  - blitzar 2y ago
    School holidays are already annoyingly staggered +/- a week for different schools.
    - geodel 2y ago
      What's so annoying about it?
      - blitzar 2y ago
        Half-term for one kid is not the same as the other etc
zpeti 2y ago
So building an amazing product (as the author says), and then charging however much you can for it is “price gouging” (Thanks Kamala. The only reason I imagine this article popping up now is the price gouging wording) As far as I knew from econ 101 this is generally just supply and demand and efficient pricing. If the price is too high, don’t buy it!!
- jampekka 2y ago
  What did the PE company build here?
  - rwmj 2y ago
    It says in the article the current PE company invested millions to update the sites.
    - jampekka 2y ago
      Is that building?
    - grues-dinner 2y ago
      That they did, but they're servicing massive amounts of debt to be in the position to do so (i.e. to own the company). It's obviously a thing you may do, and it's what PE does do. Just as the article said, it's fundamentally the same idea as renting out a mortgaged house. But it also means that what's actually going on is that the business is really just the catalyst for the actual transaction of interest: moving money from the consumers to whoever lent the money to the PE firm in the first place. The PE firm business is to get paid to be the middlemen. More is spent paying for the debt then is spent on the capital expenditures. New things and maintenance of existing things combined are well under the approximate £100m debt bill. The thing is, Center Parcs has existed for decades, so the debt is sort of artificial: if it had never been bought on finance by PE, there could be, say, £100m per year more to spend (capex, opex, whatever) without changing prices to the consumer at all. It's a bit like being in that rented house, but the house was sold by an outright owner who could afford a install a new boiler to someone on a 80% LTV mortgage and now the landlord needs to put the prices up to cover the interest because their rates went up. Yes, the new owner couldn't have afforded the house without loading up on debt, so it's nice for them that someone will front the cash to get then into the landlord business. If no one can afford to build outright, it's also good that there are ways to pay for the capex at all, or no one could build any houses in the first place(1). But it's cold comfort to the tenant in question who is now personally paying for all the "value added" for less ability to get a new boiler then they had before. (1) I'm unsure how much debt enabled the original Sherwood Forest site to be built at all, but £32m in 1987 isn't chump change. Then again the base rate was over 8%, so debt was pretty expensive. It was double that at around 15% in 1989 when they opened the second site. So, considering they didn't sink, either they had good profitability straight away or a small debt load.
roenxi 2y ago
Based on the tone of the article, I think "price-gouged" is how this gentleman would describe any holiday based spending. He doesn't seem to like spending money on his holidays one bit. Every time he actually go into detail the practices seem normal and the prices fair. It took me a while to realise that this article does not seem to involve any price-gouging of any sort but is actually about pricing a private equity deal. Still an interesting read.
- thelynchmob1 2y ago
  Author of the article here. That's not what I mean at all. As I said in the article, I love Center Parcs. And I've been on a cruise and spent a ton of money there, and it was totally worth it. The point in here was just that it's interesting to look at the market dynamics of a captive hoilday business like this and how that flows through the P&L and balance sheet. E.g. Center Parcs makes insane gross margins e.g. food and drink because prices for those ARE insanely expensive relative to other places you could go out and eat. BUT that doesn't actually lead to crazy levels of profitability because it's a capital intensive business that requires lots of capex and/or debt financing to sustain. The whole point is to take a deeper dive than most surface-level commentaries of "bloody hell Center Parcs is expensive" and see what's actually going on under the hood of the business. And calling it 'price-gouging' is a bit of a nod to that, and it's a bit of a joke about how expensive a crap steak is there, and it's a way to get people's attention. Like other people have said, Center Parcs is mostly just a function of supply and demand. They have a great product, and people like me are willing to pay for it.
- mattlondon 2y ago
  You are trapped in centre parks and they control the prices for everything. On a normal holiday you have choice of where to eat or what activities to do etc. You don't get that at center parca - it is like a stationary cruise ship where you can only leave when they allow it.
  - roenxi 2y ago
    Well, yes. That does appear to be what the people are paying for. The point here seems to be a sort of naturalist luxury experience in a carefully over-managed environment. I see this as similar to getting on the cruise ship and then being surprised that there isn't an independent marketplace on board. If someone goes to a luxury accommodation experience and then become perturbed at being charged luxury prices, that seems to be a problem with their expectations.
londons_explore 2y ago
Notably... This business owns a lot of forest in the UK. The UK doesn't have much forest. So, they can make themselves appear more valuable by pushing up the price of forest land. Forest land used to be priced based on the lumber value - which is almost nil. There was also the pricing element of the possible agricultural value if it were to be cut down (which is also almost nul, because the land is usually unsuitable for agriculture). There is also the very high value if you were somehow able to build houses on it, but the very low probability of being able to secure permits to do so. However, I have noticed odd real estate transactions in the last ~decade for forest land. Specifically, a few companies have been buying up lots of forest land, dividing it into tiny parcels, often just a few hundred yards in each direction, and selling it for 10x the price. Most don't sell, but a few do - and thats all you need to make the basis of a new market price. Now when you value all of center parcs land, it looks way better!!! And there is a 2nd factor... Center parcs usually get permission to build lodges on their land as temporary forest huts, and since they aren't made for anyone to be resident in, this is normally seen as an okay use of otherwise protected forest. Gradually over many years they can slowly turn it into a brownfield site by trimming out trees. 20 yrs down the line they might get permission to build actual houses on the land. Suddenly it's worth 100x as much. I would 100% not be surprised if center parcs end up making more money by this conversion of forest land to residential (skirting laws designed to protect forests) than they make from decades of running the parks.
- ajb 2y ago
  Oh that's why forest land has gone up so much! Thanks, I'd seen the same rise, and couldn't figure out why.
  - londons_explore 2y ago
    I've been mulling over buying up farmland and planting trees and then just sitting on it for 20 yrs to capitalize on it.
    - dwighttk 2y ago
      In the us sometimes people do that because of an agricultural exemption to property taxes.
deleted 2y ago
[deleted]
NeoTar 2y ago
> which is why it’s spelled in the somewhat Francophile Center Parcs, and not Centre Parks. (I thought this is why we did Brexit?) Pardon me? The French for center/centre is centre - the 're' ending of British English spelling is either taken from the French, or sometimes a direct reference to French spelling (i.e. 'prestige' spelling - like how some American publications will use British English spelling because they 'look more posh' or similar).
- vitus 2y ago
  I imagine the "Francophile" comment is referring to "parcs" instead of "parks", but it's fascinating that they swapped out both spellings rather than choosing to be consistent with a single style.
  - tomrod 2y ago
    My naive mind thought parc was short for parcel.
- pacifika 2y ago
  Stopped reading after the euro bashing as well
  - thelynchmob1 2y ago
    Author of the article here -- it's a joke...
  - petesergeant 2y ago
    You have apparently mistaken a very British word joke for something else
  - widdershins 2y ago
    It's a joke.
- nxobject 2y ago
  A touch of France so it’s classy, a touch of America so it’s trendy.
zuckerma 2y ago
shocker.
snakeyjake 2y ago
I assert that if the occupancy rate is 80%, they're charging exactly what they should be charging. If you own a hotel in the US, you are over the moon if you achieve a >70% occupancy rate. You are a hotel god. You are a master of the hospitality domain, Cornell will give you an honorary degree in Hotel Management, and you have made both supply and demand your bitch. "Oh my! Why is this four bedroom luxury lodge with hot tub and pool table, very obviously meant to be split amongst four couples eight ways, an entire fourteen hundred bucks ($175 ea.) per night?"
- michaelt 2y ago
  Four couples eight ways?! Nah, that four-bedroom lodge spends much more time occupied by two parents with three children.
  - snakeyjake 2y ago
    Based on the three YouTube tours of four bedroom exclusive lodges in Woburn I skimmed through prior to making my comment to be sure I understood the context of the lodge, it appears to me to be configured for adult use. Each of the four "bedrooms" is more like an attached suite, the dining room is configured for eight adults, and three children and their parents do not seem to require a sauna that large. Children can't be ruled out, however, as one of the videos noted that a high chair is available in a storage closet.
    - twic 2y ago
      Center Parcs is a place you take a family. It wouldn't even occur to me to go there with an all-adult group. Also, you can tell it's aimed at children, because the price doubles in the school holidays!
mattlondon 2y ago
We stayed for the first time this year with our two small kids. We went "off season" in Jan when prices were reasonable. I can see the attraction but centre parks does not feel like a great place for small kids. There is no laundry facilities in the lodges, and not even anywhere on site! The heating kept resetting to 14c overnight in January. There are gas ovens (gas! In 2024!) with zero effort at child proofing (I await the inevitable news story about a family getting blown-up when their 18 month old accidentally turned on the gas oven...). You are made to feel very unwelcome if you have the temerity to try to leave the place not at the scheduled time - getting back in by car was like trying to pass through a Berlin Wall checkpoint or something equally unpleasant. Many activities were only for 3 years+. Despite not being allowed to drive your own car, there were a lot of service vehicles and the like driving around the place so it wasn't even safe to cycle around or let the kids run free. There were outdoors playgrounds, but no indoor playgrounds/soft play apart from tiny ones attached to restaurants (perfect combo that: recently fed kid and jumping about....), and the outdoor playgrounds were mostly unsuitable for kids under 5 ... This is the UK - it rains all the time so you need indoor options! You have to wear an electronic wristband everywhere you go to e.g. use a locker or unlock your door, but you can't use it to pay for things. I could go on. We won't go back.
- krisoft 2y ago
  > I await the inevitable news story about a family getting blown-up when their 18 month old accidentally turned on the gas oven... What do you mean "accidentally turned on the gas oven"? Do they not have flame failure devices? > We went "off season" in Jan when prices were reasonable. ... This is the UK - it rains all the time! Now you see why off season is off season. > there were a lot of service vehicles and the like driving around the place so it wasn't even safe to cycle around How many service vehicles would make it "not safe to cycle around"? Do you cycle anywhere?
  - thebruce87m 2y ago
    First time I tried to preheat the oven at Center Parcs I nearly blew us up.
bedhead 2y ago
The author wrongly implies that if Center Parcs was just owned by a public company or an individual, that those controlling entities would simply not care about making a profit and wouldn’t charge the prices they do. Author also ignores inconvenient facts such as how the private equity firms actually spent a lot of money upgrading parks in order to make them the desirable locations they are today. I suppose author would’ve preferred they be kept in disarray but cheap?? I could go on but no point. This kind of left wing economic ignorance (redundant?) is tiring but sadly expected. Private equity isn’t perfect but it’s been made out to be some sort of bogeyman it’s demonstrably not.
- thelynchmob1 2y ago
  Hello! Author of the article here. Thanks for the comments, and appreciate the discusssion. I'll start off by pointing out that I'm not left wing, and I have an economics degree so my old lecturers would be disappointed if I was still described as 'economically ignorant.' And I completely agree that PE isn't perfect and I completely agree that PE isn't a bogeyman of any sort. Like any kind of business, I'm sure there are good PE firms and not-so-good PE firms, and firms at every point along that spectrum. I don't intend to at all imply that Center Parcs would be better off as a public company, or in the hands of a private individual. I'm pointing out that the surface level commentary of "bloody hell Center Parcs is expensive" is misleading, and the reality is much more nuanced than that, hence the need for a deep dive into the financials. Points I make in the article: 1) Center Parcs makes great gross margins on accommodation and food & drink, and EBITDA looks great, but that's a misleading way to look at the business precisely because it's capital-intensive, and the owners -- whether PE, public, or a private individual -- have to continue to reinvest maintenance or growth capex to keep it that way. And that requires either cash or debt, there's no way around that. 2) I contrasted it with a couple of capital-light businesses to show the difference in P&L and balance sheet dynamics, precisely because people often misunderstand capital intensity and the impacts on the business model. 3) I gave a restated measure of profitability (EBDAT), and show the normalised free cash flow which show that Center Parcs is a fairly normal performing business with decent but unspectactular returns. It's definitely not the case that the PE owners are simply pricing things high and raking in the cash. 4) I showed that the expected valuation of £4.5-5bn might be difficult to achieve at a time of rising interest rates, because both capital intense businesses and large PE deals require lots of debt. I make no value judgment on the use of debt -- debt is a tool to use in any business, and just like a surgeon's scalpel, it can be used for good or for harm. Again, this is much more nuanced than 'PE bad, high prices bad' which is the surface-level analysis that I'm poking fun at in the title and in the piece.
_vere 2y ago
would not happen to you at pontins
- buggeryorkshire 2y ago
  It's the only thing that wouldn't happen to you at Pontins!
m101 2y ago
This is not price gouging, but rather it's a price the market supports. The debt shouldn't make a difference to pricing unless debt free owners were reducing pricing below what they could charge (with the trade off being that you won't be able to book except with quick fingers on days of release).
dwighttk 2y ago
“Price-gouged” is sort of a dog-whistle for me these days… most often when it is used it is a person complaining about a limited resource costing more when in high demand. It’s not always 100% that but usually leans heavily that way on the spectrum.
- HeatrayEnjoyer 2y ago
  ...you're describing price gouging.
  - dahart 2y ago
    There is a real (and sometimes large) but also subjective distinction between price gouging and market (supply & demand) pricing. The article discussed higher prices during peak demand school holidays, which isn’t price gouging on its own, and only suggests normal market high-demand pricing. Most importantly, the high demand pricing is regular and predictable: everyone knows when the school holidays are coming and they know in advance when the prices will be higher. Price gouging is most often used to describe selling basic needs at very extreme prices during an emergency. https://en.wikipedia.org/wiki/Price_gouging https://en.wikipedia.org/wiki/Price_gouging Also important to note here, the UK has anti price gouging laws. This doesn’t mean Center Parcs isn’t violating them, but without any specific evidence, I’d guess a good default assumption is that what they’re doing isn’t price gouging by the law’s definition.
    - fransje26 2y ago
      > The article discussed higher prices during peak demand school holidays, which isn’t price gouging on its own, and only suggests normal market high-demand pricing. Most importantly, the high demand pricing is regular and predictable [..] Price gouging is most often used to describe selling basic needs at very extreme prices during an emergency. This is more a defense of price-gouging by bringing in market-based price fixing arguments than a strong argument to defend a "fair" price. We can take the price of insulin in the US as an example fitting that description: - It is a "normal market" high-demand pricing - The demand is regular and predictable. - There no emergency (except for the diabetics that cannot afford the medicine they desperately need) And yet, at 10x the average price of insulin on the European market, it is clearly price-gouging.
SteveSmith16384 2y ago
Jeez, just don't go to Center Parcs already. Everyone knows it's massively expensive.
gklitz 2y ago
> As an example, watch the price of a family-sized lodge miraculously double from one week to the next, thanks to school holidays. This is just market mechanics. School holidays is when families with school aged kids are looking to get a place so the demand is higher. This happens to everything. It’s not some dark conspiracy to gouge out people. If some folks are willing to pay TWICE what you want to pay, just to get the same place then they are allowed to do so and you can’t complain that you don’t get it for half the cost, you could just book your stay outside the school holidays if you want it cheaper.
mamonster 2y ago
I've eyeballed a little bit, but this doesn't even look like 20% IRR. So it's not even a "great" P.E deal.

93 points by jjar 2y ago

This is really a story about EBITDA. "People who use EBITDA are either trying to con you or they're conning themselves."

thelynchmob1 2y ago
Author of the article here -- kind of, but the idea here was just to write a piece about a capital-intensive business compared to the couple of capital-light businesses I'd covered in the prior articles I wrote, and how that difference in capital requirements plays through the P&L, balance sheet and cash flow statement. One effect of capital intensity is that EBITDA becomes a less useful measure, sure. Another effect is that the cashflow statement becomes incredibly important to running the business, as does understanding the difference between maintenance capex and growth capex.
pbhjpbhj 2y ago
https://en.wikipedia.org/wiki/Earnings_before_interest,_taxes,_depreciation_and_amortization https://en.wikipedia.org/wiki/Earnings_before_interest,_taxe... Earnings Before Investment Taxes Depreciation & Amortisation
- scoot 2y ago
  "earnings before interest, taxes, depreciation, and amortization"
kamaal 2y ago
Im not able to see the context here. How is it a con?
- blitzar 2y ago
  https://brk-b.com/why-charlie-munger-despised-ebitda_240201.html https://brk-b.com/why-charlie-munger-despised-ebitda_240201....
- rwmj 2y ago
  It's known colloquially as "Earnings before bad stuff" because you can use it to hide all the stuff in your accounts that doesn't make you look good. It's not a con, more like obfuscation.
  - dspillett 2y ago
    > It's not a con, more like obfuscation. Which is a very subtle and complex distinction, like the difference between tax evasion and tax avoidance.
    - ggm 2y ago
      Feather? Legal. Whole bloody chicken? Pornography.
      - dspillett 2y ago
        Nah, the feather is erotic, the chicken is kinky. Both legal by my understanding. Unless the chicken is live.
  - refurb 2y ago
    It's one of many metrics that you can use to evaluate a business. Note that's it's not "bad stuff", it's interest, taxes, depreciation and amortization. I'm not sure anyone consider depreciation bad? It's a metric that strips away things that can distort net income. It allows one to see what the core business produces.
- indymike 2y ago
  It's not if you use it to understand cash flow. If you use it as a profit replacement, you might be disappointed.
dmurray 2y ago
It's just one measure of profitability. Is it a con to report a business's gross revenue? Hardly. It has a useful meaning in its context. If you're going to value a business based on a single number, your problems can't be fixed by blaming the number.

molenzwiebel 2y ago

(2023)

petercooper 2y ago

I've just come back from Center Parcs and have been many times over the past 15 years (but took a break between COVID and now due to their policies over that period). It was fantastic as always, but I'm not sure everything is well. The park has demand-based pricing for the accommodation, but this doesn't apply to activities or restaurants. We dined out every day, yet despite the park being full, the restaurants were at 25-50% capacity, whereas on earlier pre-COVID visits you'd have to reserve weeks in advance. The same was true for the activities - except for the cheapest options like pottery painting. The cost of living crisis seems to have truly hit Center Parcs' guests, and I'm wondering if it has the ability to adapt to this, as well as it adapts the prices of the accommodation.

grues-dinner 2y ago
I remember going to Center Parks maybe 25-30 years ago with my parents and another family (all in one lodge). I also remember humping in bags and bags of food and drink and getting the bikes off the car roofs. Perhaps it's just a return to the ancient British Dad tradition of not paying for the optional extras after briefly convincing we millennials that every worthwhile experience has an uplift fee. Even, perhaps especially, if it means organising the stocking of the cars like Captain Scott preparing for a zombie apocalypse. See also NT picnicing: https://www.theguardian.com/lifeandstyle/ng-interactive/2023/mar/31/existential-threat-to-the-national-trust-the-stephen-collins-cartoon https://www.theguardian.com/lifeandstyle/ng-interactive/2023... Of course, the best bit of the holiday was never going to be a manky old restaurant, you can have those anywhere. It was the forest, the cycling without threat of being turned into chunky salsa on an A-road, the unusual accomodation, the pool, the lodge bubble baths and most of all the fact that blocky-cushioned sofas disassembled into amazing fortress construction materials.
- petercooper 2y ago
  That's a popular way to do it! But I think it may end up being the way to do it, at this rate. The restaurants used to be very popular in spite of the prices. We eat out as we don't want to cook (enough of that when we go camping!) and the quality of the restaurants is genuinely good (especially their gluten free provision). Whoever buys CP will need to adjust to a new reality though and go much further down the price scale for purchases within the park (one place that was always extremely busy was the Starbucks!)

lol768 2y ago

This is really partially the government's fault. Parents are fined and (in a minority of cases) imprisoned for taking children out of school in term-time. Usually it's the ones who are honest that end up getting in trouble, and the others that can pass it off as sickness get away with it. During Covid and recent NASUWT/NAHT/NEU strikes though, it's seemingly not been seen as a problem for kids to miss out significantly on face-to-face learning! I think most teachers would agree that, for pupils without a significant attendance problem, a week away (particularly if it's towards the end of a term) is not going to make a realistic difference when it comes to attainment for most students.

sksksk 2y ago
> I think most teachers would agree that, for pupils without a significant attendance problem, a week away (particularly if it's towards the end of a term) is not going to make a realistic difference when it comes to attainment for most students. I generally agree with this, but discretion doesn't scale. If you allow teachers to use discretion to approve absences, it will create the opportunity unfair system, where people who the teacher likes more may get preferential treatment. And even if the system isn't actually unfair, it'll create the perception of unfairness (Joe was allowed to go early, why can't my son?). It's also way easier for a school to say "no early absences, that's the national policy", and not have to get into constant arguments with parents.
- kwhitefoot 2y ago
  Then don't make it discretionary, make it a right.
- dspillett 2y ago
  > It's also way easier for a school to say "no early absences, that's the national policy", and not have to get into constant arguments with parents. Also, if the teachers/school approved the holiday for someone who then underperformed in some exam or other assessment, and it could be seen that missing something in that week off, you can bet your last penny that many parents will blame the school for approving the request instead of telling them there might be a problem, and if the school deny a request because there might be a problem many parents will blame the school for there being a problem in the first place. In some cases the problem would be with the school, but it wouldn't be just those cases that get the full-on compo-face-in-the-national-press treatment. Teachers jobs are hard enough as it is, especially given the level of remuneration and other conditions, without asking them to take on this responsibility. Skipping school can have a significantly detrimental effect on a child, it doesn't always, maybe it doesn't most of the time, but it does often enough that it is a significant concern. If people don't like how the school system works, perhaps they should try homeschooling? To be blunt: I don't pay my taxes to fund an education system¹ so someone's offspring can wag off… ---- [1] I don't begrudge funding the education system generally, despite not having (and not planning to have) kids myself² because I'm well aware that good education for all is a huge benefit for society as a whole [2] Before anyone says “you don't have kids, you don't know how hard it can be”: I know full well how hard it can be and that is one of the reasons for my intention to never breed, I can't speak for anyone else's but my decision on the matter is not the one taken from a position of inadequate awareness

rwmj 2y ago

PE is terrible, but this isn't a good example as there's plenty of competition for Center Parcs. Plus they raise their prices during school holidays when there's greatest demand, that's not an unfair practice, that's rationing out a limited resource when demand is greatest, economics 101. Bad PE looks like private equity trying to corner the market in vets[1] and dental practices[2], services that you don't really have a choice over. [1] https://archive.ph/bTwcD https://archive.ph/bTwcD [2] https://www.lincolninternational.com/perspectives/articles/investors-take-a-bite-into-the-uk-and-european-dentistry-markets/ https://www.lincolninternational.com/perspectives/articles/i...

n4r9 2y ago
Who do you see as competitors to Center Parcs? Butlins and Pontins spring to mind initially, but are actually pretty different.
llimos 2y ago
If the government want to help (and the new government has shown a strange attraction to price interference), they could simply let schools choose their own holidays, as long as they have the right number of school days in the year. It would be a bit harder for families with kids in different schools, but probably most schools would be _more or less_ the same, with just a bit more variation to spread it around a little bit.
- blitzar 2y ago
  School holidays are already annoyingly staggered +/- a week for different schools.
  - geodel 2y ago
    What's so annoying about it?
    - blitzar 2y ago
      Half-term for one kid is not the same as the other etc

zpeti 2y ago

So building an amazing product (as the author says), and then charging however much you can for it is “price gouging” (Thanks Kamala. The only reason I imagine this article popping up now is the price gouging wording) As far as I knew from econ 101 this is generally just supply and demand and efficient pricing. If the price is too high, don’t buy it!!

jampekka 2y ago
What did the PE company build here?
- rwmj 2y ago
  It says in the article the current PE company invested millions to update the sites.
  - jampekka 2y ago
    Is that building?
  - grues-dinner 2y ago
    That they did, but they're servicing massive amounts of debt to be in the position to do so (i.e. to own the company). It's obviously a thing you may do, and it's what PE does do. Just as the article said, it's fundamentally the same idea as renting out a mortgaged house. But it also means that what's actually going on is that the business is really just the catalyst for the actual transaction of interest: moving money from the consumers to whoever lent the money to the PE firm in the first place. The PE firm business is to get paid to be the middlemen. More is spent paying for the debt then is spent on the capital expenditures. New things and maintenance of existing things combined are well under the approximate £100m debt bill. The thing is, Center Parcs has existed for decades, so the debt is sort of artificial: if it had never been bought on finance by PE, there could be, say, £100m per year more to spend (capex, opex, whatever) without changing prices to the consumer at all. It's a bit like being in that rented house, but the house was sold by an outright owner who could afford a install a new boiler to someone on a 80% LTV mortgage and now the landlord needs to put the prices up to cover the interest because their rates went up. Yes, the new owner couldn't have afforded the house without loading up on debt, so it's nice for them that someone will front the cash to get then into the landlord business. If no one can afford to build outright, it's also good that there are ways to pay for the capex at all, or no one could build any houses in the first place(1). But it's cold comfort to the tenant in question who is now personally paying for all the "value added" for less ability to get a new boiler then they had before. (1) I'm unsure how much debt enabled the original Sherwood Forest site to be built at all, but £32m in 1987 isn't chump change. Then again the base rate was over 8%, so debt was pretty expensive. It was double that at around 15% in 1989 when they opened the second site. So, considering they didn't sink, either they had good profitability straight away or a small debt load.

roenxi 2y ago

Based on the tone of the article, I think "price-gouged" is how this gentleman would describe any holiday based spending. He doesn't seem to like spending money on his holidays one bit. Every time he actually go into detail the practices seem normal and the prices fair. It took me a while to realise that this article does not seem to involve any price-gouging of any sort but is actually about pricing a private equity deal. Still an interesting read.

thelynchmob1 2y ago
Author of the article here. That's not what I mean at all. As I said in the article, I love Center Parcs. And I've been on a cruise and spent a ton of money there, and it was totally worth it. The point in here was just that it's interesting to look at the market dynamics of a captive hoilday business like this and how that flows through the P&L and balance sheet. E.g. Center Parcs makes insane gross margins e.g. food and drink because prices for those ARE insanely expensive relative to other places you could go out and eat. BUT that doesn't actually lead to crazy levels of profitability because it's a capital intensive business that requires lots of capex and/or debt financing to sustain. The whole point is to take a deeper dive than most surface-level commentaries of "bloody hell Center Parcs is expensive" and see what's actually going on under the hood of the business. And calling it 'price-gouging' is a bit of a nod to that, and it's a bit of a joke about how expensive a crap steak is there, and it's a way to get people's attention. Like other people have said, Center Parcs is mostly just a function of supply and demand. They have a great product, and people like me are willing to pay for it.
mattlondon 2y ago
You are trapped in centre parks and they control the prices for everything. On a normal holiday you have choice of where to eat or what activities to do etc. You don't get that at center parca - it is like a stationary cruise ship where you can only leave when they allow it.
- roenxi 2y ago
  Well, yes. That does appear to be what the people are paying for. The point here seems to be a sort of naturalist luxury experience in a carefully over-managed environment. I see this as similar to getting on the cruise ship and then being surprised that there isn't an independent marketplace on board. If someone goes to a luxury accommodation experience and then become perturbed at being charged luxury prices, that seems to be a problem with their expectations.

londons_explore 2y ago

Notably... This business owns a lot of forest in the UK. The UK doesn't have much forest. So, they can make themselves appear more valuable by pushing up the price of forest land. Forest land used to be priced based on the lumber value - which is almost nil. There was also the pricing element of the possible agricultural value if it were to be cut down (which is also almost nul, because the land is usually unsuitable for agriculture). There is also the very high value if you were somehow able to build houses on it, but the very low probability of being able to secure permits to do so. However, I have noticed odd real estate transactions in the last ~decade for forest land. Specifically, a few companies have been buying up lots of forest land, dividing it into tiny parcels, often just a few hundred yards in each direction, and selling it for 10x the price. Most don't sell, but a few do - and thats all you need to make the basis of a new market price. Now when you value all of center parcs land, it looks way better!!! And there is a 2nd factor... Center parcs usually get permission to build lodges on their land as temporary forest huts, and since they aren't made for anyone to be resident in, this is normally seen as an okay use of otherwise protected forest. Gradually over many years they can slowly turn it into a brownfield site by trimming out trees. 20 yrs down the line they might get permission to build actual houses on the land. Suddenly it's worth 100x as much. I would 100% not be surprised if center parcs end up making more money by this conversion of forest land to residential (skirting laws designed to protect forests) than they make from decades of running the parks.

ajb 2y ago
Oh that's why forest land has gone up so much! Thanks, I'd seen the same rise, and couldn't figure out why.
- londons_explore 2y ago
  I've been mulling over buying up farmland and planting trees and then just sitting on it for 20 yrs to capitalize on it.
  - dwighttk 2y ago
    In the us sometimes people do that because of an agricultural exemption to property taxes.

deleted 2y ago

[deleted]

NeoTar 2y ago

> which is why it’s spelled in the somewhat Francophile Center Parcs, and not Centre Parks. (I thought this is why we did Brexit?) Pardon me? The French for center/centre is centre - the 're' ending of British English spelling is either taken from the French, or sometimes a direct reference to French spelling (i.e. 'prestige' spelling - like how some American publications will use British English spelling because they 'look more posh' or similar).

vitus 2y ago
I imagine the "Francophile" comment is referring to "parcs" instead of "parks", but it's fascinating that they swapped out both spellings rather than choosing to be consistent with a single style.
- tomrod 2y ago
  My naive mind thought parc was short for parcel.
pacifika 2y ago
Stopped reading after the euro bashing as well
- thelynchmob1 2y ago
  Author of the article here -- it's a joke...
- petesergeant 2y ago
  You have apparently mistaken a very British word joke for something else
- widdershins 2y ago
  It's a joke.
nxobject 2y ago
A touch of France so it’s classy, a touch of America so it’s trendy.

zuckerma 2y ago

shocker.

snakeyjake 2y ago

I assert that if the occupancy rate is 80%, they're charging exactly what they should be charging. If you own a hotel in the US, you are over the moon if you achieve a >70% occupancy rate. You are a hotel god. You are a master of the hospitality domain, Cornell will give you an honorary degree in Hotel Management, and you have made both supply and demand your bitch. "Oh my! Why is this four bedroom luxury lodge with hot tub and pool table, very obviously meant to be split amongst four couples eight ways, an entire fourteen hundred bucks ($175 ea.) per night?"

michaelt 2y ago
Four couples eight ways?! Nah, that four-bedroom lodge spends much more time occupied by two parents with three children.
- snakeyjake 2y ago
  Based on the three YouTube tours of four bedroom exclusive lodges in Woburn I skimmed through prior to making my comment to be sure I understood the context of the lodge, it appears to me to be configured for adult use. Each of the four "bedrooms" is more like an attached suite, the dining room is configured for eight adults, and three children and their parents do not seem to require a sauna that large. Children can't be ruled out, however, as one of the videos noted that a high chair is available in a storage closet.
  - twic 2y ago
    Center Parcs is a place you take a family. It wouldn't even occur to me to go there with an all-adult group. Also, you can tell it's aimed at children, because the price doubles in the school holidays!

mattlondon 2y ago

We stayed for the first time this year with our two small kids. We went "off season" in Jan when prices were reasonable. I can see the attraction but centre parks does not feel like a great place for small kids. There is no laundry facilities in the lodges, and not even anywhere on site! The heating kept resetting to 14c overnight in January. There are gas ovens (gas! In 2024!) with zero effort at child proofing (I await the inevitable news story about a family getting blown-up when their 18 month old accidentally turned on the gas oven...). You are made to feel very unwelcome if you have the temerity to try to leave the place not at the scheduled time - getting back in by car was like trying to pass through a Berlin Wall checkpoint or something equally unpleasant. Many activities were only for 3 years+. Despite not being allowed to drive your own car, there were a lot of service vehicles and the like driving around the place so it wasn't even safe to cycle around or let the kids run free. There were outdoors playgrounds, but no indoor playgrounds/soft play apart from tiny ones attached to restaurants (perfect combo that: recently fed kid and jumping about....), and the outdoor playgrounds were mostly unsuitable for kids under 5 ... This is the UK - it rains all the time so you need indoor options! You have to wear an electronic wristband everywhere you go to e.g. use a locker or unlock your door, but you can't use it to pay for things. I could go on. We won't go back.

krisoft 2y ago
> I await the inevitable news story about a family getting blown-up when their 18 month old accidentally turned on the gas oven... What do you mean "accidentally turned on the gas oven"? Do they not have flame failure devices? > We went "off season" in Jan when prices were reasonable. ... This is the UK - it rains all the time! Now you see why off season is off season. > there were a lot of service vehicles and the like driving around the place so it wasn't even safe to cycle around How many service vehicles would make it "not safe to cycle around"? Do you cycle anywhere?
- thebruce87m 2y ago
  First time I tried to preheat the oven at Center Parcs I nearly blew us up.

bedhead 2y ago

The author wrongly implies that if Center Parcs was just owned by a public company or an individual, that those controlling entities would simply not care about making a profit and wouldn’t charge the prices they do. Author also ignores inconvenient facts such as how the private equity firms actually spent a lot of money upgrading parks in order to make them the desirable locations they are today. I suppose author would’ve preferred they be kept in disarray but cheap?? I could go on but no point. This kind of left wing economic ignorance (redundant?) is tiring but sadly expected. Private equity isn’t perfect but it’s been made out to be some sort of bogeyman it’s demonstrably not.

thelynchmob1 2y ago
Hello! Author of the article here. Thanks for the comments, and appreciate the discusssion. I'll start off by pointing out that I'm not left wing, and I have an economics degree so my old lecturers would be disappointed if I was still described as 'economically ignorant.' And I completely agree that PE isn't perfect and I completely agree that PE isn't a bogeyman of any sort. Like any kind of business, I'm sure there are good PE firms and not-so-good PE firms, and firms at every point along that spectrum. I don't intend to at all imply that Center Parcs would be better off as a public company, or in the hands of a private individual. I'm pointing out that the surface level commentary of "bloody hell Center Parcs is expensive" is misleading, and the reality is much more nuanced than that, hence the need for a deep dive into the financials. Points I make in the article: 1) Center Parcs makes great gross margins on accommodation and food & drink, and EBITDA looks great, but that's a misleading way to look at the business precisely because it's capital-intensive, and the owners -- whether PE, public, or a private individual -- have to continue to reinvest maintenance or growth capex to keep it that way. And that requires either cash or debt, there's no way around that. 2) I contrasted it with a couple of capital-light businesses to show the difference in P&L and balance sheet dynamics, precisely because people often misunderstand capital intensity and the impacts on the business model. 3) I gave a restated measure of profitability (EBDAT), and show the normalised free cash flow which show that Center Parcs is a fairly normal performing business with decent but unspectactular returns. It's definitely not the case that the PE owners are simply pricing things high and raking in the cash. 4) I showed that the expected valuation of £4.5-5bn might be difficult to achieve at a time of rising interest rates, because both capital intense businesses and large PE deals require lots of debt. I make no value judgment on the use of debt -- debt is a tool to use in any business, and just like a surgeon's scalpel, it can be used for good or for harm. Again, this is much more nuanced than 'PE bad, high prices bad' which is the surface-level analysis that I'm poking fun at in the title and in the piece.

_vere 2y ago

would not happen to you at pontins

buggeryorkshire 2y ago
It's the only thing that wouldn't happen to you at Pontins!

m101 2y ago

This is not price gouging, but rather it's a price the market supports. The debt shouldn't make a difference to pricing unless debt free owners were reducing pricing below what they could charge (with the trade off being that you won't be able to book except with quick fingers on days of release).

dwighttk 2y ago

“Price-gouged” is sort of a dog-whistle for me these days… most often when it is used it is a person complaining about a limited resource costing more when in high demand. It’s not always 100% that but usually leans heavily that way on the spectrum.

HeatrayEnjoyer 2y ago
...you're describing price gouging.
- dahart 2y ago
  There is a real (and sometimes large) but also subjective distinction between price gouging and market (supply & demand) pricing. The article discussed higher prices during peak demand school holidays, which isn’t price gouging on its own, and only suggests normal market high-demand pricing. Most importantly, the high demand pricing is regular and predictable: everyone knows when the school holidays are coming and they know in advance when the prices will be higher. Price gouging is most often used to describe selling basic needs at very extreme prices during an emergency. https://en.wikipedia.org/wiki/Price_gouging https://en.wikipedia.org/wiki/Price_gouging Also important to note here, the UK has anti price gouging laws. This doesn’t mean Center Parcs isn’t violating them, but without any specific evidence, I’d guess a good default assumption is that what they’re doing isn’t price gouging by the law’s definition.
  - fransje26 2y ago
    > The article discussed higher prices during peak demand school holidays, which isn’t price gouging on its own, and only suggests normal market high-demand pricing. Most importantly, the high demand pricing is regular and predictable [..] Price gouging is most often used to describe selling basic needs at very extreme prices during an emergency. This is more a defense of price-gouging by bringing in market-based price fixing arguments than a strong argument to defend a "fair" price. We can take the price of insulin in the US as an example fitting that description: - It is a "normal market" high-demand pricing - The demand is regular and predictable. - There no emergency (except for the diabetics that cannot afford the medicine they desperately need) And yet, at 10x the average price of insulin on the European market, it is clearly price-gouging.

SteveSmith16384 2y ago

Jeez, just don't go to Center Parcs already. Everyone knows it's massively expensive.

gklitz 2y ago

> As an example, watch the price of a family-sized lodge miraculously double from one week to the next, thanks to school holidays. This is just market mechanics. School holidays is when families with school aged kids are looking to get a place so the demand is higher. This happens to everything. It’s not some dark conspiracy to gouge out people. If some folks are willing to pay TWICE what you want to pay, just to get the same place then they are allowed to do so and you can’t complain that you don’t get it for half the cost, you could just book your stay outside the school holidays if you want it cheaper.

mamonster 2y ago

I've eyeballed a little bit, but this doesn't even look like 20% IRR. So it's not even a "great" P.E deal.