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Theme Park China ; do the economics add up?


Mickey Mouse waves at the children, parents grimace through a water chute drenching and teenagers ensconce themselves in the games arcade. These are familiar scenes at amusement parks the world over but behind the music, lights, colour and popcorn is a multi-billion dollar industry driven by the economics of amusement. And the fun business is zoning in on China…

“This is the largest amusement industry trade show in Asia, ” announced Rob Norris, Chairman of the International Association of Amusement Parks and Attractions (IAAPA) at the July opening of the IAAPA Asian Expo at Shanghai New International Exhibition Centre. “We expect over 3, 000 delegates from 50 countries. They are coming here because they know that fun translates into any language.” Mandarin, it seems, is no exception.

The show followed closely behind PricewaterhouseCoopers’ forecast that the attractions and amusement industry in Asia Pacific will grow faster than any other region of the world – generating average annual revenue increases of 5.9 per cent and total revenues of USD8.2bn by 2010. China, the report says, currently has “an estimated 2, 000 theme parks across the country” of varying age, maintenance and sophistication. With rapid growth predicted annual theme park spending in China is set to rise from USD1, 030m in 2001 to USD1, 775m by 2010.

Driving Asian Growth

Hoping to capitalise is a new trade magazine, China Connections, touted as “China’s first and only international magazine focusing on attractions, entertainment and tourism.” Foreign trade publishers are also watching China. “We will be publishing more stories on Chinese parks and developments, ” says Owen Ralph, Editor of Park World magazine. This is no surprise, given the sluggish growth in the North American and European amusement park industry, which prompted Dutch media organisation VNU to close its U.S.-based Amusement Business magazine.

“It has been tough for the amusement industry , ” says Ralph. “Nearly all magazines have witnessed the knock-on effect as suppliers cut back on advertising.”

China, it seems, is viewed as the industry’s salvation. “Our decision to choose Shanghai for this show was an obvious one, ” says Bob Masterson, Vice Chairman of IAAPA. “We could not ignore China given the vast amount of money being spent in the industry here.”

Charlie Bray, President and CEO of IAAPA, concurs. “We are fascinated by the potential growth of theme and amusement parks in China, ” Bray says. He points to rising urban incomes and travel opportunities, as well as greater familiarity with leading brands such as Universal and Disney. “Asia is the fastest-growing region in the world for the amusement industry, ” Bray says. “While South Korea and Japan provide stability to our industry here in Asia, future growth is going to be driven by China.

From Disney to Outer Space

China’s top amusement parks are Hong Kong Disneyland, which opened in 2005 but has been beset by problems and expects a 500, 000 first-year shortfall from its original projection of 6.4 million visitors; the 29-year-old Ocean Park amusement and aquatic centre, also in Hong Kong, whose chairman is Allan Zeman – founder of the Lan Kwai Fong development – and which has secured an HKD5.5bn loan to double its attractions by 2010; and the 170, 000-sq.-km Happy Valley park in Shenzhen. Potential challengers, though, are plentiful. In 2005, China opened five major new state-of-the-art theme parks – and many further parks and attractions are on the way.

In May, Tianjin announced the USD623m Paramount theme park, featuring rides, shows and attractions using licensed characters from Viacom Inc.’s Paramount Pictures films and Nickelodeon children’s network. In Beijing, a 100, 000-sq.-m, RMB1bn indoor amusement park is planned and the Beijing Shijingshan Amusement Park will open the most advanced indoor amusement attraction in China – a 4D theatre ride that mechanically lifts 80 audience members into the sky to watch films cast onto a 22-metre hemispherical screen. In Shenzhen, a USD3bn joint venture park between Shenzhen Sanguo Culture City and Canada-based Bedford International Financial Group – based on the legend of the Three Kingdoms – is scheduled to open in 2010.

The project announcements keep on coming. Ningbo will open the 20-hectare HarborLand Park, themed around a fairytale story of the phoenix firebird. The park was created by Cincinnati-based Jack Rouse Associates (JRA). “It’s one of  multiple projects we are  currently pursuing in China, ” says Dan Schultz, Executive Vice President, JRA. “The opportunity to work with HarborLand came at an industry tradeshow. That initial connection provided a competition in which we were  awarded the scope of master planning, concept design, schematic design and detail design.”

"Chinese expectations for attractions are similar to the rest of the world in terms of demanding a high level of quality, safety and cleanliness, " says Don Jewett, Design Director for JRA.  “The only real difference is one of content more than quality. American theme parks tend to focus more on the thrill factor than the Chinese at this point, ” Jewett says. “The Chinese thrill factor will probably evolve toward the American standard, and it will happen faster than it did in the States. In the near future, Chinese theme parks and attractions will likely see a higher ‘thrill quotient.’”

Shanghai is also raising the amusement stakes. The Kiss, a sci-fi take on a Ferris wheel, is rumoured to open on the revamped North Bund area later this decade. Meanwhile, the city seems almost certain to confirm a Disney park in Nanhui district in the not-too-distant future. As part of its ambitious tourism planning, the nearby canal town of Zhouzhuang has earmarked USD40m to be spent on a Chinese history-themed park.

But the marquee local project will be more other-worldly. The 100 hectare, USD272m Shanghai Space Centre is already being touted as “China’s answer to NASA’s Kennedy Space Centre, minus the launch pad.” Endorsed by the China Aerospace Science & Industry Corp., and to be located in Pujiang, the Space Centre will showcase one of the Shenzhou vessels used in China’s first manned space missions, models of spacecraft and satellites, astronaut training facilities and a low-gravity simulator.

In part 2 Gary continues his analysis with a review of the 2006 Asian IAAPA expo,  looks at the Chinese players in the market and their experience, how marketing stragegy is vital and how some US companies areapproaching the market.

Gary Bowerman writes for the Shanghai Business Review and this article appears with their kind permission. 

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