Lo-Q: Busting the theme park queues

Anyone who has ever visited a theme park will know about the mild frustration that can be brought on by having to queue for the most popular rides. You have already paid to get in, you have only a few hours to enjoy the day, so why oh why should you spend half of it queuing?

Thankfully, one Alternative Investment Market-quoted business has come up with a solution to this issue, and it has both increasing revenues and profits as a result.
Founded in August 2000, Lo-Q developed technology that was based on the idea of ‘dynamic virtual queuing’ that was conceived by Leonard Sim (a former electronics engineer and Lo-Q’s founding director) after a two-hour wait for a ride that broke down, at a Florida theme park in the 1990s.

Soon after its foundation, the company completed its IPO, using the proceeds raised to fund a large-scale Lo-Q installation in its first park: the Six Flags Over Georgia attraction, located near Atlanta in the US. The completion of a second round of funding enabled the company to install its system in a further five parks in 2002.

Queuing solutions supplied by Lo-Q include Q-bot. This is a handheld unit that park visitors can rent. After selecting a ride  by using the Q-bot buttons, the system adds that person or group into a virtual queue. Guests are informed via the Q-bot’s display, accompanied by a beep and vibration, that their ride is ready, while the device can also inform users of a ride’s breakdown and allow rescheduling of reservations.

The advantage of Q-bot is that it allows theme park visitors to reserve their rides without having to queue, so a visitor does not have to spend their time waiting in a line and they can spend their time enjoying other attractions or go to a restaurant.

Another solution offered by Lo-Q is Q-txt. This also enables ride reservations, although it uses the visitor’s mobile phone instead of the Q-bot handheld device. Users can book their place in line by sending a simple text and the Q-txt computer then allocates a time to ride for the user.

Although Q-txt’s deployment requires little capital investment from the venue using it, it does require a mobile phone connection. Q-txt is now a well-established virtual queuing system at both Flamingo Land, in the north of England and at Parque Isla Mágica in Seville, Spain.

Lo-Q has patents registered in several countries, including the US and UK, covering its Queue Management System and has patents pending that cover its Q-bot products.  Other patents have also been applied for.

Results for 2009 showed that despite poor weather causing fewer sales of Q-bot in June and October last year, the company still managed to increase revenues by 27.9% to £17.3m during the 10-month period to 31 October 2009 against £13.5m in the 12 months to 31 December 2008.

Lo-Q’s board took a prudent approach in managing its cost base and cash position during the year, which helped the company to boost its pre-tax profits for 2009 by 29.2% to £2.4m, which translated to diluted earnings per share of 11.5 pence (2008: 12 pence).

The firm had a cash position of £4.4m at the end of October, compared with £2.6m at the end of 2008, and it has no debt.
Although Lo-Q’s management team has been cautious with the business since the recession started, keeping a lid on the company’s costs, there is some evidence available that theme parks have been quite resilient in terms of visitor numbers during the economic downturn.

For example, Disney reported in May last year that while the recession had led visitors to spend less money in its theme parks, US attendance had been about even with the previous year. Meanwhile, a report released in March this year from consumer research organisation Mintel found that the theme park sector in the UK has traded strongly through the recession.
Mintel says that a trend towards holidaying at home was a factor in attracting 3% of adults to make a first-time trip to a theme park during 2009, equating to approximately 1.2 million new visitors. In 2010, admission levels to theme parks are set to break the 14 million level for the first time – up from 12.3 million five years ago.

But the theme park industry is not completely resilient against recession, as reflected by Lo-Q’s rollercoaster share price performance since its major customer – Six Flags – filed for Chapter 11 bankruptcy protection in June last year. Despite this blow, not all of the theme park operator’s parks were affected and Lo-Q’s management said back in February that it was hopeful that once the Chapter 11 process has been completed the negative effect on the company’s share price will end.

Indeed, that already appears to have happened. Lo-Q’s shares – 111.5 pence each at the time of writing (having achieved 118.5 pence in late March) – are already up by almost 50% on their level at the beginning of this year.

Helping to spur the shares on was the recent news that Lo-Q had signed renewal agreements with five of its customers to extend their contracts for Lo-Q’s queue management systems. LEGOLAND Windsor, in the UK, has extended for a further three years, as has Dreamworld in Australia. Mirabilandia in Italy has extended its contract for a further four years, while Dollywood of Tennessee, in the US, has extended for a further year.

Meanwhile, Parque Isla Mágica in Seville has extended its one-year rolling contract to use the Q-txt system.

Lo-Q has also entered the US market, having signed an agreement to install its Q-txt queue management system at the Lake Compounce Family Theme Park in Connecticut. Lake Compounce is operated by Palace Entertainment, part of the Parques Reunidos family of parks. Palace Entertainment is the largest operator of waterparks and family entertainment centres in the USA, with over 14 million visitors annually at 38 locations with seven theme parks, 10 waterparks and 21 family entertainment centres. 

Lake Compounce has over 700,000 visitors annually and attendances continue to grow. The theme park offers both ‘waterpark’ and ‘dry’ attractions. Water park growth has been very significant in recent years.

Analyst forecasts estimate that Lo-Q’s revenues should increase to £23.3m this year while pre-tax profit is expected to come in at £2.5m, translating to earnings per share of 12 pence.

http://www.proactiveinvestors.co.uk/companies/news/15686/lo-q-busting-the-theme-park-queues-15686.html