You are assuming the role of Dr. Sara Hartley, CEO of Wilderness Haven Park, in a negotiation in Beijing with the Chinese Association for Zoological Gardens (CAZG). You aim to procure giant pandas for an extended stay at your park. It is the spring of 2024. As an environmental scientist by training and former director of animal care and live collections at Wilderness Haven Park, you took on your current responsibilities 2½ years ago. The last year has been challenging for the park, and you are eager to revitalize it and build its reputation as a world-class institution. You agreed to join the negotiation team, whose other members are from another renowned park, with the understanding that the two parks could partner in their panda acquisition efforts.
Wilderness Haven Park
Located in Ashland, Oregon, Wilderness Haven Park spans over 2,000 acres and is home to over 1,000 animals representing 250 species. The park’s expansive and diverse habitats provide a naturalistic environment for its residents and attract numerous visitors each year.
In 2023, Wilderness Haven Park experienced financial difficulties, but it received an extraordinary grant that allowed annual revenue to exceed expenses by $6.5 million. The park’s primary revenue sources are external funding (35%), admissions and memberships (31%), and food, gifts, and programs (29%). General admission ranges from $16 to $18, depending on the season.
Wilderness Haven Park is renowned for its research on endangered species and its expertise in reintroducing species to the wild. The park has contributed to the population increase of the North American whooping crane from 16 individuals worldwide to over 500 combined in the wild and captivity. Other reintroduction programs have focused on the swift fox, black-footed ferret, and, in collaboration with other parks, the Vancouver Island marmot.
Recently, Wilderness Haven Park has faced negative publicity due to reports of an “unusually high number” of animal deaths in its care. Journalists cited 214 deaths in 2023. In reality, there have been 50 animal deaths over the last five years, 41 of which resulted from a single incident involving stingrays. Any deaths caused by human error have been addressed: responsible staff were reprimanded, enclosure structures were modified, and policies, including training programs, were revised. Despite these efforts, the park’s accreditation may be at risk, its infrastructure is aging, and employee morale is low.
Your Objectives
Partnership with Horizon Wildlife Park
You want to ensure a precise, even if basic, agreement on how the giant pandas would be shared between Wilderness Haven Park and Horizon Wildlife Park. Since the pandas would be transported across the Pacific, it makes sense for them to stay first in Wilderness Haven Park and then go to Horizon Wildlife Park. Additionally, you want the publicity that will accompany the first US park to host the animals. Any agreement should also provide significant opportunities for your park to advance its expertise in captive breeding and species reintroduction to the wild. You know that Horizon Wildlife Park needs your support to afford giant pandas. According to an American newspaper article in 2015, the four zoos in the U.S. with long-term panda agreements collectively spent $33 million more than revenues from their panda exhibits between 2010 and 2013. You are willing to pull out of a partnership if Horizon Wildlife Park does not respect you in a deal.
Negotiations with CAZG
You want to establish research projects and exchanges of scientists, particularly to explore how to raise females born in captivity to become effective mothers in the wild. Regarding financials, the Wilderness Haven Park Board has authorized you to agree to pay up to $5 million in fees for the pandas’ visit. The Board did not stipulate a visit duration or distribution schedule. The park has benefited from the economic growth of its region but is reluctant to pay the typical annual fee of $1 million plus related costs for ten years.
Your research shows that new exhibits have a diminishing rate of return—with each passing year, the additional number of zoo visitors due to the new exhibit decreases. The biggest boost in additional visitors due to a panda exhibit usually occurs during the first three years. That changes only when—and if—a panda cub is born at the zoo. For the first year, you forecast a revenue increase of $4 million. For expenses, you project the following: construction of a panda enclosure (renovation of an existing exhibit), $2 million; annual supply of bamboo for two pandas, $150,000; and all other yearly, panda-related expenses not covered by the park’s normal budget and resources, $200,000.
You must set specific aspiration levels (objectives) and initial offers for the scientific exchanges, visit order, duration, and annual fee. See the exhibit below for the financial effects of different combinations of the latter. Bear in mind that the San Diego Zoo, the first American zoo to obtain a pair of giant pandas for ten years, recently negotiated a 5-year extension of their agreement at a reduced fee of $500,000 per year.
About Dr. Hua Zhang
The chair of Horizon Wildlife Park’s panda task force, Dr. Hua Zhang, is a park’s Board of Management member and a practicing environmental scientist widely known for community involvement and humanitarian work. Among other examples, Dr. Zhang spearheaded the building, just outside Portland, of the largest Chinese cultural center in North America and played critical roles in relief efforts for the SARS crisis, the Sichuan earthquake, and other overseas disasters. Dr. Zhang recently received a recognition award from the President of the United States.
Wilderness Haven Park: Financial Scenarios for a Giant Panda Exhibit
Operations Expenses
- Annual Food Costs: $150,000
- Annual Maintenance Costs: $200,000
Additional Income from Panda Exhibit
| Year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 |
|---|---|---|---|---|---|---|---|---|---|---|
| Additional Income ($) | 4,000,000 | 2,666,000 | 1,333,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Other Factors
- Interest Rate: 5%
Financial Scenarios
| Scenario | Annual Rental Fee ($) | Enclosure Cost ($) | Total Expenses Year 1 ($) | Net Income Year 1 ($) | Total Expenses Year 2-10 ($) | Net Income Year 2 ($) | Net Income Year 3 ($) | Net Income Year 4-10 ($) |
|---|---|---|---|---|---|---|---|---|
| 1 | 500,000 | 2,000,000 | 2,850,000 | 1,150,000 | 850,000 | 1,666,000 | 333,000 | -850,000/year |
| 2 | 600,000 | 2,000,000 | 2,950,000 | 1,050,000 | 950,000 | 1,566,000 | 233,000 | -950,000/year |
| 3 | 700,000 | 2,000,000 | 3,050,000 | 950,000 | 1,050,000 | 1,466,000 | 133,000 | -1,050,000/year |
| 4 | 750,000 | 2,000,000 | 3,100,000 | 900,000 | 1,100,000 | 1,416,000 | 83,000 | -1,100,000/year |
| 5 | 800,000 | 2,000,000 | 3,150,000 | 850,000 | 1,150,000 | 1,366,000 | 33,000 | -1,150,000/year |
| 6 | 900,000 | 2,000,000 | 3,250,000 | 750,000 | 1,250,000 | 1,266,000 | -67,000 | -1,250,000/year |
| 7 | 1,000,000 | 2,000,000 | 3,350,000 | 650,000 | 1,350,000 | 1,166,000 | -167,000 | -1,350,000/year |
| 8 | 1,100,000 | 2,000,000 | 3,450,000 | 550,000 | 1,450,000 | 1,066,000 | -267,000 | -1,450,000/year |
| 9 | 1,200,000 | 2,000,000 | 3,550,000 | 450,000 | 1,550,000 | 966,000 | -367,000 | -1,550,000/year |
Explanation:
- Annual Rental Fee: The cost paid to CAZG annually for the pandas.
- Enclosure Cost: One-time cost to build or renovate the panda enclosure.
- Total Expenses Year 1: Sum of the enclosure cost, annual food costs, annual maintenance costs, and the annual rental fee.
- Net Income Year 1: The profit or loss in the first year, calculated as Total Income minus Total Expenses.
- Total Expenses Year 2-10: Sum of the annual food costs, annual maintenance costs, and the annual rental fee for each subsequent year.
- Net Income Year 2: The profit or loss in the second year, calculated as Additional Income minus Total Expenses for that year.
- Net Income Year 3: The profit or loss in the third year, calculated as Additional Income minus Total Expenses for that year.
- Net Income Year 4-10: The profit or loss in each subsequent year (4 through 10), calculated as Total Expenses for those years since no additional income is expected.