Florida Surf Park Advisory

OPERATING MODELS

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The development of a new surf park brings with it challenges and issues. For instance, developers and investors must assess whether such a venture is financially feasible. As the technology is relatively new, developers and operators are tweaking a variety of models to maximize the potential. We have identified two key operating models, which in some ways resemble those of waterparks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Photo Courtesy of Wavegarden

 

Standalone: This type involves the development of only the surf park, with limited retail operations or food and beverage service on site. It is primarily focused on helping customers train and build their skills. During competitions and events, attendance is limited to participants and spectators. Such a venue also can function as a private club for members only. Much like a standalone waterpark, this surf park model would suit developers who have smaller sites and access to limited capital. In addition to private developers, this type would also be appropriate for cities, park districts and schools. The latter can offer surfing as a sport option or can develop surf clubs. Park districts can provide surfing lessons, clinics or camps to residents and visitors. The surfing lagoon can be turned into a giant wave pool during peak summer days for the recreation of residents. A public-private partnership could allow the city to subsidize the surf park development while offering a new and unique amenity to residents.

 

A public-private partnership could allow the city to subsidize the surf park development while offering a new and unique amenity to residents.

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Resort or mixed-used development: In this model, the surf park is part of a larger mixed-use entertainment, retail and/or resort development. This type allows more flexibility and higher revenue potential. The surf park is part of a larger destination development that would offer on-site lodging, retail, restaurants, and/or other recreational and entertainment amenities such as a concert area, waterpark, adventure park, hiking, biking or golf. This model attracts more visitors who may or may not surf, including friends, family and curious visitors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Photo Courtesy of Surf Lakes

 

In addition to drawing residents of the local population, it could also serve as a tourist destination. This would require the surf park to be near or within a large population base. Surf parks will never replace the experience of riding an ocean wave. Instead, they are a means of introducing surfing to a larger population base. An example of something similar has changed how people participate in golf. By focusing on the social aspect, the company TopGolf has expanded the sport’s market base. It focused not only on existing golfers, but also on those who had never played seriously but were curious to try, with new technology and in a more relaxed setting. Similarly, modern-day surf parks can capitalize on the social appeal of surfing while teaching a new generation about it, thus broadening its allure.

 

KEY DRIVERS FOR SUCCESS

Several factors will determine the viability of a surf park:

• Community buy-in: The success of any venture that relies on the local population for attendance must have the community’s backing. Residents should feel invested in the project.

• Programming: Serving the needs of the community and visitors to the region requires a well-rounded and thoughtful slate of programs.

• Pricing: Surf Parks need a pricing strategy. Operators should decide not only how much to charge for sessions, but also assess how customers will react to price fluctuations, and when to raise or lower fees.

• Flexibility: Modern technologies allow for the waves to be tailored to a specific target audience, making it possible to cater to all skill levels. This flexibility is key, as it makes the venue accessible to a wider audience, rather than targeting only existing surfers

• Social aspect: To capture and keep a diverse customer base, surf parks should include family-friendly amenities, along with an active nightlife that involves concerts and music.

• Experience reinvented: A surf park needs to offer the whole package without the need to travel to the ocean. It should offer something new for consumers who are looking for the next exciting experience.

• Competition: High-tech features such as customizable waves allow for venues to turn into competition venues and host or create their own events for local surfers.

 

LOOKING TO THE FUTURE

As the technology catches up with opportunity, surf parks are finding their day in the sun. In a handful of years, these properties have reimagined the sport of surfing. People who might not otherwise consider the sport now will be more inclined to, thanks to these safe, convenient, non-intimidating and accessible venues.

With development costs ranging from $20 million to $50 million, and multiple operating models, developers and investors need to analyze usage, pricing and other on-site revenue-generating outlets to determine total revenue potential. A thorough market feasibility and financial analysis study should be performed to justify that the project is financially viable.

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Credit: Nuresh Maredia, Director of Appraisal & Consulting Services at Hotel & Leisure Advisors (H&LA)

(https://hladvisors.com/the-rise-of-the-surf-park/)

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Mostly by virtue of the sector’s early development stage which requires a determined professionalism to deliver these projects and get them open. The critical challenge has been raising the capital investment for these $50m+ projects. The wider investment market needs to be confident these projects are commercially investable, and de-risked as much as possible.

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• Break it down into stages – the challenge isn’t to raise all the money straight away. Break it down into manageable chunks starting with seed funding, project development funding and then into construction etc.

• Use valuations along the stages – get the project valued at stages along the journey to show project partners how the value proposition is growing and being secured.

• Build your valuations based on solid business planning – a valuation is only as good as the forecasting it is founded on when a project is in the development stage. Get expert, independent market and financial feasibility advice to give investors’ confidence the projections are robust and reliable. Data in a young sector is hard to come by so the benchmarking and reference points an investor seeks aren’t readily available, which is a challenge for building certainty.

• Identify the key risk areas and mitigate them – investors, rightly, will have many hard questions: Is the land formally secured? Are the development permissions in place? Is the surf experience high quality? Is the surf technology reliable and deliverable? Are the capital cost projections realistic and up to date? Does the team have the experience? Has water and energy sustainability – specific to the location – been appropriately resolved? Are the local community in support? All of these need confident, accurate answers.

• The role of land and real-estate – surf park projects need either freehold land ownership to give security, or long leases / ground rents (40 years minimum, 80-100 years ideally). Projects increasingly are part of larger scale mixed-use schemes – that can help dilute the risk in the surf element and allow for developer/investor partners to work with what they know – hotels, residential, workspace, leisure and retail etc. Control of the land also allows for investment vehicles like sales and leaseback.

• HNWI/private investors, followed by institutional investors – the typical first mover investors have been High Net Worth Individuals, Family investment offices or syndicates, often with personal interest in surfing and the ability for quick, independent decision making The sector has the attention of more institutional investors like venture capital/private equity/funds but the growth potential needs to be proven, as well as the exit point. In this sense, they’re less interested in funding one project at $50m, but are more alert to doing five projects deploying $250m.

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Credit: 
Matt Hyslop leads our Destination Consulting team which advises owners, developers, occupiers and investors. His team has advised on more than 25 surf park projects all over the world, building robust business cases for our clients so they have a solid platform to raise money from and deliver their ambitions. 

(https://www.colliers.com/en-gb/news/blog-investments-in-the-surf-park-wave)