Dinner Theater Is a Tough Sell in Capital of Tourism.

TWELVE years ago, Mark Miller and his wife Galen swapped their jobs and their Arabian horse-breeding farm for a chance to build their entrepreneurial dream -- a dinner-theater horse show.

But they weren't quite ready for the fierce competition for tourist dollars in Orlando, Fla. -- the tourist capital of the planet. There, visitors spend $17.3 billion a year on fun, and are being constantly wooed to visit 12 other dinner-theater attractions.

"I had no idea about the level of competition here," said Mark Miller, owner of the Arabian Nights show. "When you live next door to Walt Disney, there's a standard of excellence you have to meet."

Based in Kissimmee, just outside Orlando, Arabian Nights competes not only with Disney but with numerous other tourist attractions, including Sea World, MGM Studios and the largest dinner theater of all, Medieval Times. Despite the competition, Arabian Nights has flourished while 16 other dinner theaters in the area have opened and closed.

Like every small business, the first months were rocky. Soon after opening their doors, a lousy review by a local reporter kept the crowds away.

"For a small business with no big name, one bad review really hurt," said Miller. "We were losing $7,500 a week; I had no idea money could go out the door that fast."

Desperate for customers, the Millers distributed 40,000 complimentary tickets to surrounding hotels and restaurants. Slowly, the crowds returned. The Millers, who have no plans to expand, have managed to keep their show running for a dozen years, drawing 1,200 guests each night, and posting annual revenue of about $7 million.

Keeping their international customers happy also proved daunting. For example, when a group of Europeans bit into their smoked chicken, which is naturally reddish in color, they thought it was raw. The Millers no longer serve smoked chicken, switching to the all-American favorite, beef prime rib.

Unlike Medieval Times, which pits jousting knight against knight, Arabian Nights is more like a Broadway show. It features a cast of 60 horses, 30 performers, 300 theater lights, 30 doves, recorded music, a live drummer, pyrotechnics, two different fogs, snow, special effects and a three-course dinner.

"We thought if our show was different enough, it would stand out," said Miller. "And we are different from Medieval Times. The only reason people group us in the same category is because we both serve dinner, and we both have a show with horses."

Other small dinner theaters in the Orlando area face similar marketing challenges to the ones faced by the Millers.

"When we opened in 1996, the whole sequence of our dinner show wasn't fully pieced together, and that was a huge problem," said Andres Cibotti, vice president of Pirate's Dinner Adventure. "We had a new product that wasn't 100 percent well-defined."

Attracting a crowd was also tough for Cibotti. His firm relied on strong word of mouth to bring in the audience and reworked the show to emphasize the pirate theme.

"The pirate theme is very popular and appeals to families," said Cibotti. "Focusing on our theme has brought in a 35-40 percent increase in profit." (His show attracts 175,000 people a year, and earns about $6 million annually.)

Both Pirate's Dinner Adventure and Arabian Nights struggle against the vast marketing budget and clout of their giant competitor, Medieval Times, which also has a presence in Kissimmee.

Medieval Times has seven locations nationwide and one in Toronto. A spokes-woman for Medieval Times said the company is aware of Arabian Nights, but the bigger outfit's show appeals to a much wider audience.

"We appeal to all ages," said Donna Turner, director of marketing for Medieval Times. "Everyone from a 2-year-old child to a 90-year-old grandmother can enjoy our show."

Miller said rather than being a "wrestling match," Arabian Nights is based on Walter Farley's fairy tale "The Black Stallion." Farley's daughter, Alice, owner of New York's Looking Glass Theater Co., designed the costumes.

Miller, a former automotive reporter for the Chicago Tribune, had no theater experience, although he met horse-show entertainers who often stopped to rest their horses at his mother's farm outside Washington, D.C.

"I was a philosophy major in college, but I was introduced to a lot of people because of my mother's horse farm," said Miller.

Prior to opening Arabian Nights, the Millers owned their own Arabian horse farm in Florida. They contributed $5 million worth of horses to start the show. His wealthy Chicago-area family contributed the $12 million he needed to build the attraction. Looking back on his decision to dive into Orlando's cutthroat entertainment market, Miller now feels that a different location might have provided the show with better opportunities.

"Before we started in Orlando I thought, the market is so good here, there's got to be room for me," said Miller. "But I'm no longer under that illusion. I think there are other cities like Atlanta or Miami that may have given us more financial support."

Still, he manages to keep the doors open and the horses and people fed in the ultra-competitive Orlando market.

"We are here like everyone else because this is where the world comes," said Miller.

Generally speaking, smaller companies can compete against much bigger ones if they keep a step ahead. Here are a few tips:

* Know your competition. Attend their shows, buy their products, speak to their customers, and find out what they like and don't like about their business.

* Study their marketing materials and advertisements.

* Figure out what's unusual about your product or service, and emphasize those aspects.

* If you can't compete on price, you have to offer better service, longer hours, free delivery, and so on.

* Make sure the market area can support another similar business.

Reporting by Julieanne Neal. Jane Applegate is the author of "201 Great Ideas for Your Small Business," and is founder of ApplegateWay.com, a multimedia Web site for busy entrepreneurs. She can be reached via e-mail at [e-mail].