Halloween haunted houses are a spooky business model, say operators

The faint of heart should think twice before setting foot in a haunted house this Halloween. The same goes for those thinking about running a haunted house.

“The barriers to entry are much higher to get into the haunted house attraction business — rules, regulations and the cost of entry, even what people perceive as entertainment,” said Billy Messina, co-creator of Netherworld, an attraction that has been scaring people since The people of Stone Mountain, Georgia for almost 30 years. “A bunch of teenagers going 'Boo!' say – that won’t fly anymore,” Messina told CBS MoneyWatch.

Unlike the haunted house fundraisers run by civic organizations like the United States Junior Chamber, also known as the Jaycees, Netherworld is among about a dozen haunted houses that can be likened to a full-scale Broadway production. And unlike the neighborhood house, which is haunted by volunteers, these Halloween attractions are professional establishments that are staffed all year round, even if the time period to turn a profit is much smaller, viz just a month or two around Halloween.

“Our revenue cycle is very short, with the lion's share of our revenue coming in a two to three month window,” said Chris Stafford, CEO and founding partner of Thirteenth Floor Entertain Group. Thirteenth Floor, based in Denver, Colorado, operates 32 attractions, including haunted houses and Halloween festivals across the country, and sells hundreds of thousands of tickets each year.

“We hold most of our properties year-round, so we have an annual operating plan to ensure the expected revenue comes in,” said Stafford, who worked in the banking industry for 12 years before turning the company around from a beloved one Hobby turned into a full-time career.

“It's a tough business with a staff and a mortgage that's open all year round and then you have 20 to 30 days to make sure you can cover all the basic costs. It’s a challenge,” said Messina, who started out in the film industry as a makeup artist and special effects artist. Still, “it’s pretty amazing that you can make a living doing this,” he added.

They both share a passion for haunted houses that developed during their childhood.

“I worked at a local haunted house with a high school friend. “I just loved everything about it, some of my fondest memories come from there,” Stafford recalls of his experiences as a 15-year-old working at a family-run haunted house in Denver.

Growing up in New York City, Messina remembers seeing commercials on television for haunted houses on the Jersey Shore and longing to go but not being able to.

Like many other companies, Messina and Stafford view labor as a major challenge.

With a full-time workforce of about 15 employees, Netherworld also hires about 500 seasonal workers to work as parking attendants, food service and customer service employees, and, of course, to scare people. “For new employees, the hiring push begins sometime in August and really gets going in mid-September. We have students all the way up to employees who just want to be a part of it,” Messina said.

Netherworld's base salary starts at $8.50 per hour. “People aren’t there for the money and work as horror actors,” Messina said.

Thirteenth Floor has full-time employees in marketing and finance, and “then comes the season when we ramp up and hire literally thousands of people – the biggest challenge is probably putting together such a large workforce in such a short period of time,” he said Stafford. “Most of our horror actors are not professional actors but are interested in learning,” he added, referring to the positions that pay just above minimum wage.

A large percentage of seasonal workers return every year, both men reported.

Ticket sales keep Netherworld afloat, and external factors such as weather and sport can have an impact that is beyond Messina's control. “Rain is devastating for attendance or when the (Atlanta) Braves are in the (National Baseball League) playoffs,” he cites as examples. “Concessions and the gift shop are not enough to keep the lights on. We don’t lose money on it, but they are by no means a cash cow,” Messina noted.

Both men named Netflix as their main competitor. “It's hard to get people off the couch,” Stafford said, adding that Thirteenth Floor strives to give people a reason to get together socially. “Too much of our lives are lived digitally behind the screen,” he said.