This past week, Six Flags and it’s licensing partner for China, Riverside Investment, announced its intentions to build a second Six Flags-branded theme park in Chongqing, the third most populous city in China after Shanghai and Beijing.
Their plan is to build 10 Six Flags theme parks in China in the next ten years. This is just the latest theme park project announcement in a country that some say has 60 theme parks currently under construction. Can the Chinese’s demand for entertainment sustain so much development in the next five years?
That question was raised last month at the blooloopLIVE Asia attractions symposium in Shanghai in light of the tumultuous history of attraction development in China in the last 25 years.
Theme Parks in China: Millenials and the Middle Class
When ‘Splendid China’, the mainland’s first theme park opened in 1989, its success and a growing middle class seeking entertainment brought hundreds of parks online of which many opened in remote locations, had no cohesive theme and gave no reasons for guests to return or tell their family and friends about their experience. The exception was Hong Kong Disneyland, which opened in 2005. Soon after, a government report identified that of the theme parks operating in China 70% were losing money which led to a government ban on new park development which lasted until 2013.
The government very much wants to promote theme park development on a few levels. Firstly, it fits well into the vision of a consumer, service-driven economy. It provides entertainment in areas where non existed before. And most importantly, domestic tourism is rising 10% year over year. Theme parks fit well into the government’s policy of developing “green” industries that can employ the masses. A massive consumer population makes potential profits very alluring.
According to a McKinsey report, the percentage of affluent and mainstream Chinese will be 57% of the population by 2020, a significant increase compared to just 8% in 2010. When the first theme parks opened in the late 1990s, China barely had a middle class with just 5 million households, today that number is 225 million. By 2020, the ranks of the Chinese middle class may well outnumber Europeans.
Wonwhee Kim, of ProForma Advisors presented at the blooloopLIVE Asia some other consumer dynamics driving theme park demand by making the point that the 18-34 in age segment or “millennials” are more populous in China than in North America and Europe combined. Making up 31% of China’s total population, they have become a spending army of over 400 million consumers — prompting Goldman Sachs to call them “the single most important demographic on the planet today.” Some US parks have over 60% of their guests in this age category.
Local and Western Theme Park Operators Accelerate Plans
Much like Six Flags, all the leading operators and media property developers have accelerated their plans for China. The massive, $5 billion Shanghai Disneyland Resort opened last month and has already welcomed 1 million guests which would put it on track for 17 million guests a year in the short term. By comparison, Disney’s Magic Kingdom in Orlando, FL had 20.5 million visitors last year and it has been open since 1971.
DreamWorks Animation plans to open its $2.4 billion DreamCenter in Shanghai next year and Universal Studios is building a $3.5 billion park in Beijing to open in 2019. Lionsgate, LEGOLAND and Nickelodeon all have branded parks in development to open in the coming years.
Local operators have ambitious plans as well. Dalian Wanda Group Co. opened a $3.2 billion “Wanda Cultural Tourism City” in Nanchang last month, the first of 15 entertainment complexes that it plans to build over the next four years. Haichang Ocean Park Holdings will unveil what’s slated to be China’s biggest marine park next year. The US-based consultancy AECOM expects China to surpass the US as the biggest theme park market in the world by 2020, drawing 221 million people by that time, nearly double the number last year.
Whereas the American parks are situating themselves in first-tier cities like Beijing and Shanghai, where 300 million live within 3 hours, Wanda is focusing on places like Xi’an, Dujiangyan and Wuxi, where land is cheaper and consumer expectations are measured. Former head of 20th Century Fox Consumer Products, Jeffrey Godsick observed in an interview a few months ago “China is the only place in the world that has a giant catchment of 50 million people living in a 3-hour drive or train ride away. We are looking at a number of opportunities there.”
There is no doubt that domestic consumption in China will continue to grow in the coming years. However, intellectual property and management expertise are still the keys for running theme parks and these are in short supply. Theme parks without a strong concept and marketing will dissolve as quickly as they are conceived. The history of the Chinese attractions industry looks like it just may repeat itself.