Theme parks are no mickey mouse industry

The multi-billion-dollar theme park industry is celebrating its 60th anniversary this year, at a time of continued innovation and accelerating change

When legendary animator Walt Disney opened his first Disneyland park in 1955, he laid the foundations in California of an industry which was to grow into a worldwide phenomenon of competing attractions.

Behind the fun and thrilling rides, there is an army of skilled professionals striving to be the best in a competitive world of entertainment, facing the challenge of increasing customer expectations in a high-tech era of innovation.

We see that the sooner you can get intellectual property to move from screen to a physical environment, the sooner you reap the rewards and the larger those rewards may be

Blockbuster parks cost more than $1 billion to build in a global leisure market where theme park revenues rise above $30 billion a year. According to consultancy firm PwC, theme park revenues worldwide grew 50 per cent from $20.5 billion in 2003 to around $30.7 billion in 2012, with the United States comprising the bulk with $14.5 billion of spending. The US is followed by $8.4 billion in Asia and $6.8 billion in Europe, the Middle East and Africa.

Cost and profits

New openings fuel this growth as they lure guests through the turnstiles. Although the objective isn’t to just get visitors on the rides, but into the gift shops which are usually cunningly located at ride exits so guests have to pass through them.

The costs of running a theme park are huge. The operating expenses of Disney’s parks and resorts alone came to $9.7 billion last year, according to company accounts. Park entry tickets only cover part of the costs, while the margins on food, beverage and merchandise bring in the big money.

Profits are used to invest in new rides which draw in more guests and promote the movie characters they are based on. At the same time, the DVDs and merchandise on sale outside the parks attract guests to them and the marketing cycle begins again.

“We see that the sooner you can get intellectual property to move from screen to a physical environment, the sooner you reap the rewards and the larger those rewards may be,” says Brian Sands, economics and planning vice president in the Americas for global infrastructure firm AECOM.

Exporting internationally

Attendance at the top ten theme park groups worldwide rose 5.1 per cent last year to 392 million, according to the Themed Entertainment Association/AECOM 2014 Theme Index. Growth in Asia outpaced that in the US, rising 4.9 per cent compared with 2.2 per cent in North America.

This is partly due to saturation in the US, which already boasts major parks in every corner of the country. You can ride Pirates of the Caribbean in Disney World, battle with robots in Transformers at Universal Studios and get creative at LEGOLAND, all without leaving Orlando.

It explains why park operators make sure many of their new attractions can be exported internationally. A great deal of the growth in Asia last year came from Universal Studios Japan which got a lift from the opening of a new land themed on the Harry Potter movies. The attractions made their debut at Universal Studios Florida and will also open at the company’s Hollywood site next year.

Harry Potter boosted attendance at Universal Studios Japan by 16.8 per cent to 11.8 million in 2014, making it the world’s fifth most-visited theme park. However, it is still dwarfed by Disney, operator of all the other nine parks in the top ten attendance ranking, which is crowned by the Magic Kingdom, the fairy tale-themed flagship of Disney World in Orlando.

“Driving this were the renovation and significant expansion of the Magic Kingdom’s Fantasyland,” says AECOM’s Mr Sands. “This investment built strongly on Disney’s traditional focus on families with young children, leveraging recent movie and DVD releases.”

A similar trend has been seen at Disneyland Paris which is Europe’s most-visited theme park. Attendance there has grown by two million from 2004 to 2014 when its results showed visitor numbers hit 14.9 million, following the launch of a new ride themed on the Oscar-winning movie Ratatouille.

Visitor numbers

Cementing Disney’s status as the world’s most-attended theme park operator, Magic Kingdom in Disney World pulled in 4 per cent more visitors last year giving a total of 19.3 million. Its visitor numbers increased 1.3 per cent in 2014 to 134.3 million. This is more than double Disney’s closest rival, Merlin Entertainments at 62.8million, followed by Universal at 40.2 million.

However, a new challenger may be on the horizon. Recent research from PwC forecasts that theme park revenues in the United Arab Emirates will rise 78 per cent to $837 million by 2019 with the region becoming a serious competitor to Orlando by 2021. PwC predicts the growth will come from the Dubai Parks & Resorts project which is due to open next year, and includes LEGOLAND Dubai, the movie-themed Motiongate Dubai and Bollywood Parks Dubai. They are expected to generate $653 million in revenue in their first year and create 5,000 new jobs.

According to AECOM, none of the top 25 best-attended parks are in the UAE so there is a lot of ground to make up. “Globally, theme parks in Europe, the Far East and the US, Orlando in particular, dominate the market,” says Philip Shepherd, Middle East hospitality and leisure leader at PwC. “However, theme parks in the UAE have the potential to see over 18 million visits by 2021.” Time will tell whether this fairy tale comes true.