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The benefits of investing in a water park

Opinion
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Breda University graduate Tijn Roovers presents key findings from his research thesis on water park investment at European holiday resorts

My research thesis is the end result of a graduation assignment commissioned by Tourist Development and Attraction Consultants (TDAC).

TDAC is a European consultancy firm founded by former Efteling COO Coen Bertens and former BRC Imagination Arts executive Bart Dohmen. It has indicated that there is an increasing amount of European holiday resorts investing in the development of a water park. TDAC assumes that water parks can have a significant positive effect on the business of European holiday resorts.

whitewater water slide
Image credit: WhiteWater

Nevertheless, there is only limited common industry knowledge about the role of water parks within the business model and strategy of European holiday resorts.

Multiple involved stakeholders such as investors, operators, and suppliers can benefit from this specific knowledge. Therefore, this study functions as an information source to share within the leisure and tourism industry.

A water park is an investment opportunity for holiday resorts

Based on the main conclusion of the research it can be stated that the development of a water park is a great investment opportunity for European holiday resorts. Investing in a water park is a way to create additional product value.

The investment in a water park directly increases the asset value and product value of a holiday resort. In the long term, this investment eventually results in a higher financial return.

family-at-water-park

A water park causes a variety of positive economic influences on the business model and strategy of holiday resorts. For instance, it has positive effects on essential key performance indicators. These positive effects can result in a consolidation of the financial position of a holiday resort. In turn, this strengthens the long-term feasibility.

In the end, it is recommended that European holiday resorts invest in a water park. This attraction creates additional product value which results in significant positive effects on their general strategy and business model.

Influence of key performance indicators

A water park investment has a significant positive influence on the following key performance indicators of holiday resorts.

  • Occupancy rate: Water parks have a significant positive influence on the occupancy rates of holiday resorts. Nevertheless, this effect is relatively bigger for indoor water parks than for outdoor parks.
  • Average length of stay: A water park increases the amount of entertainment value. This results in a longer average length of stay. On top of this, a longer average length of stay also increases the catchment area for the international tourism market.
  • Spending per capita: A longer average length of stay stimulates the strategy to spend as much time as possible at the property of the resort. This results in higher spending per capita.
  • Additional revenue streams: A water park also offers the possibility to generate additional revenue streams from day visitors who also have a higher spending per capita.
  • ADR & RevPAR: Water parks have a positive effect on the average daily rate of a holiday resort. This higher average daily rate in combination with an increased occupancy rate results in significant growth of the revenue per available room.
  • Revisit intention rate: Lastly, a water park significantly increases the revisit intention rate of a holiday resort. This eventually leads to a higher occupancy rate in the future.

Causes, effects and results model

The following model visualizes the influences of a water park investment on the key performance indicators of a holiday resort.

water park investment - causes, effects and results model

Water park investment: influence on strategy and business model

To indicate the general business model of European holiday resorts, there is a defined business model canvas that functions as a rough benchmark. The investment strategy behind this business model is focused on generating income from managing the park as well as increasing asset value. For owners, holiday resorts function as long-term investments in real estate property to generate cash flow and increase capital growth.

Strategy

The business strategy of a water park investment is to achieve a positive financial return on its capital expenditure. Because it takes a relatively high capital expenditure to develop a water park, it takes a longer period to get a positive financial return.

On the other hand, the result of capital expenditure is a direct increase in the asset value of the resort. Next to the capital expenditure, a water park also contains high operational expenses. Due to high operational costs regarding energy, safety, staffing, and maintenance, a water park is considered a high-cost attraction. It significantly increases the operational expenditures of a holiday resort.

Children on water slide at aquapark. Summer holiday

Nonetheless, a resort can spread its overhead costs enabling the OpEx to stay financially feasible for the business model. Despite a relatively high CapEx and OpEx, water parks are still considered in the long term to be a profitable investment.

Business model

The presented business model canvas visualizes the impact that a water park has on the general business model of European holiday resorts. The investment in a water park significantly influences the general business model in a variety of aspects.

Firstly the business model is expanded with a new key partner and an extra revenue stream. Furthermore, the key activities, key resources, channels, revenue streams and value proposition of holiday resorts are positively influenced. Meanwhile, the cost structure and some customer segments are negatively influenced by a water park.

Business Model Canvas European Holiday Resorts with water park

Develop a compatible product mix

The product mix of a water park is one of the most crucial factors that influence the level of success. Therefore it is recommended that European holiday resorts develop a water park product mix that meets the following aspects:

  • Design day: The product mix of a water park needs to be based on a good design day. This will create the perfect balance between necessary capacity and expected demand.
  • Target audience: The product mix needs to be aligned with the target audience to attract the right target group.
  • Guest experience: It is essential to align the product mix with the overall guest experience of a holiday resort to meet the specific wishes and demands of resort guests.
  • Sustainability: It is important to invest in high-quality and sustainable products. This guarantees a high product value for the long term.
  • Differentiation: It is relevant to create a differentiative product mix that stands out from competitive product offers. This will help to gain market share.

Water park investment: how to maintain an effective operation

The extra revenue of a water park investment in the short term does not outweigh the extra operational costs. So, the most challenging part of a water park development is to effectively operate it to achieve a positive financial return.

Most water parks only achieve successful profitability after a long term of effective operation. To maintain effective operation it is recommended to execute the following points:

Cost reduction: It is essential to reduce operational costs and spread the overhead costs over the operation of the whole resort.

Efficiency, cost, quality

Efficient operations: To save costs and it is necessary to operate efficiently.

Regular developments and investments: It is important for effective management of the park to keep developing the operations. Owners should also invest regularly in maintenance to control the quality of the park.

Credits

Source: Roovers, T. (2023). Justification report: Influence of water parks on European holiday resorts. TDAC. Breda University

Involved experts: Bart Dohmen, co-owner TDAC; Inaki Laucirika del Valle, a market intelligence specialist at ProSlide; Ivan Koole, water park manager at Center Parcs Port Zelande; Lars Lenders, former business development manager at ProSlide and van Egdom; Domingo Vergoossen, VP global business development at WhiteWater and Michael Kreft von Byern, general manager of Rulantica at Europa-Park.

Top image: credit ProSlide

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Tijn Roovers

Tijn Roovers

Tijn Roovers is a Dutch young professional with a passion and ambition for the leisure industry. He just graduated from the study of Leisure & Events Management at Breda University. Currently, Tijn is ready to start his career as a young professional and is looking for a new challenge in the field of business development within the leisure industry.

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