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Theme parks: ready for another ride?

The market exploded in the 90s in Europe, and today, once again, new amusement parks are making their way onto the market. Not all of them immediate success and some find themselves confronted with an ever-increasing demand for novelty implicating major investment

Are theme parks in a crisis? In France, in its chase after profit, Euro Disney recently doped its financial structure by raising capital by 253.3 million euros. After opening the second park Disney Studio, this new money will be used to relaunch its appeal with new attractions: Space Mountain 2, this year, will be followed by Buzz Lightyear and Toon City while waiting for the Tower of Terror in 2008. The goal: 16 million visitors necessary for obtaining good results at the site. Another plan for a relaunch is in the making: that of Futuroscope which posted a drop in its revenue by 28% in 2003 with respect to 2001. And we mustn’t ignore the failures of Parc Vulcania in Auvergne or Cap’Découverte in the Tarn. Is this a temporary problem or a deeper malaise? This question does not concern just France. With exception to Disney, American specialists are moving away from the European continent. Six Flags, after taking over 7 parks including the 4 Belgian and French Walibi parks, decided to throw in the sponge and dedicate themselves to the national market. Time Warner’s Movie Park in Spain met with considerable success when it opened, but since then it was taken over by local investors. Final example: Port Aventura, near Barcelona. In 1998, Universal invested a hundred million euros in it. Transformed into a resort, Port Aventura is trying to make the transition from oneday attraction to the higher category of European parks: a short-stay destination in and of its own. In 2004, the studio resold its shares to Caixa Bank and will touch 1.5% of sales in compensation for the license. This was welcome profit taking for pursuing its development towards the new Eldorado in the Far East (see box).In addition to developing customer loyalty, the sector must tackle a rather significant challenge: capture senior citizens. These potential visitors like to stay near home, travel with their grandchildren. Thus they constitute a major pool of customers for theme parks. Even if rollercoasters aren’t their thing any more, “they like to see others enjoying themselves while they taste a fine wine,” remarks Jeff Bertus. Leisure spaces tought to be adapted with restaurants and quality hotels, shopping venues, many shows. Before leaving his position as president of Euro Disney, André Lacroix had planned “a passionate future for his park, with the implementation of a pluri-annual programme of attractions in order to improve the family entertainment offering”. In his own way, he confirms the first condition for success: a constant flux of investments with no guaranteed profit unless the new attraction is out- standing. Like roller- coasters, adrenaline is guaranteed and trend reversals are always possibleDoes this mean Europe trails behind the other continents? Jeff Bertus, vice president Europe for IAAPA (International Association of Amusement Parks and Attractions), is not of this opinion. “Disneyland is a great success. In twelve years, this park became the number-one tourist destination in Europe”, while conceding that “Europe is a difficult market that must be adapted to. American-style operations don’t always work here”. The primary handicaps : the climate - Paris or Northern Europe are not Florida or California - and different mentalities. Nonetheless, the results don’t suggest a major crisis for the sector. Attendance at the 10 top European parks grew by 2.3% last year, within the average of the Top 50 worldwide. This growth is nonetheless lower than that of the Top 50 North American Parks which shows its first real rebound since 2001 (+4%).Disneyland Paris’s first semester this year is reassuring however. Attendance, average spending per visitor, turnover: all these indicators are up. When the park opened in 1992, national leaders trembled. Fifteen years later, it may only be observed that the competition is doing well. The park in Marne-la-Vallée has not cannibalised the sector. The German EuropaPark, the Spanish Port Aventura, the Italian Gardaland and the English Alton Towers - elected best park in the world by Forbes Magazine - each welcomes 3 million visitors in good years and bad alike. Many of those involved come out right alongside these giants. Starparks (ex-Six Flags) and Parc Astérix by Grévin & Cie are in the lead.One of the reasons behind the industry’s solidity is a long tradition throughout the continent. Contrary to popular belief, amusement parks were conceived on this side of the Atlantic. In the 16th century, Baaken at Klampenborg in Denmark was conceived and it continues to welcome 2.5 million visitors today. Even Disney took its inspiration from the precursor of today’s parks, Efteling in the Netherlands, for the opening of its first-born. And this market remains very piecemeal, because it is familial. 80% of Europe’s parks, which are small, enjoy a strong local establishment. They are veritable institutions that have been amusing local clientele from one generation to the next. Riding the wave of recreation, developments have recently accelerated, and the number of parks in France has doubled in 10 years. Some players have succeeded by banking more on knowledge and culture than on rollercoasters. And these historic and fireworks shows are what have made the Puy du Fou in the Vendée with its 760,000 visitors meet with success in 2004 and arouse the jealousy of more than one competitor. Puy du Fou and the Futuroscope are both political initiatives for local development that is backed by Philippe de Villiers and René Monory, respectively. Local officials have understood how they can put this tourism offer to work to enliven their region. Valéry Giscard d’Estaing, president of the Auvergne region, took on the same challenge. A subject of much polemic, Vulcania cost three times more than planned (130 million euros). And the steady erosion of its attendance is upsetting its balance. Its activities still have not succeeded in gaining clientele loyalty. In order to exist on a regional or national scale, cultural and scientific parks must have a successful alchemy, which is difficult. It is necessary to find the right balance between “learning and having fun. People opt for having fun first,” observes Jeff Bertus.Like Vulcania, Cap’Découverte, which banks on leisure - artificial skiing, summer bobsledding at a closed mine - suffers from a lack of recognition. But the example of these parks experiencing difficulty doesn’t dampen ambitions. Centring on the theme of life, the Bioscope, managed by Grévin & Cie, will open its doors in Alsace in 2006 and the ecology Parc végétal near Angers will open in 2007. Many other projects are in the works. And France is not alone. 63 serious projects have been counted in Holland. Is there a public for them? Will they ever be realised? Time will tell. One thing is certain: the only ones that will survive are those able to establish themselves durably in their local environment thanks to an effective concept.However that may be, with growing competition, theme parks must face many challenges in order to grow their profitability. The hotel industry is just one of them. Developing a hotel supply allows them to position themselves on the short stay market. Packages for two days or more open the way for increased revenues for the park. A potentially win-win partnership develops between the two activities, with the occupancy of one closely affecting the attendance of the other and vice versa. EuropaPark has progressively reinforced its supply with the opening of a third property at the Italian theme park Colosseo. “The clientele of a park on this scale live within 150 kilometres but with traffic problems, this distance is tending to shorten to 70 kilometres. The hotel thus becomes an essential element to success,” remarks Jeff Bertus. It is even an imperative when accessibility is difficult, as is the case at Alton Towers.Another advantage, and no less important, is of accommodations: they attract businessmen. In order to draw in Corporate clientele, the all new Italian resort Gardaland, inaugurated last year, added 3 theatres with a total capacity of 1,000 persons to its supply. State of the art technology guaranteed. The organisation of seminars is strategic for filling the park in the beginning or the end of the season as well as for preventing them from being too seasonal. Alton Towers’solution involves playing on one of the major trends of the moment, the covered aquatic park. The launch of Cariba Park allows Alton Towers hotels and Splash Landing to remain open year round, even when the main park is closed from November to March.In order to stay in the race, the sector’s players have no choice but to invest. Competition is ferocious in terms of innovations. Lego- Land in California will spend 5 million dollars on five new attractions. Even a mini-park such as Didiland in Alsace has expenses: 300,000 euros for its Tour Infernale. This constant renewal requires investment. Venture capital firms, such as Palamon Capital Partners, which took over Six Flags parks, are paying attention to this industry. If it is successful, the return on investment may prove to be interesting. Charterhouse resold the group Tussaud’s, proprietor of Alton Towers and the celebrated wax museum, to Dubai International Capital for 800 million euros. Eight years earlier, the acquisition cost it 350 million.Very recently, Blackstone made a remarkable entry onto the leisure market, first with the acquisition of Merlin Entertainement, proprietor of the 19 Sea Life aquariums, for 150 million euros. Then it took the majority of a joint-venture with Lego group that was experiencing difficulty with the operations of 4 Legoland parks. In this way it places itself in the second position in Europe and ninth worldwide with 12 million visitors each year. Yet, this market has not yet experienced the great waves of fusions-acquisitions. With a few exceptional counterexamples: in 2002 the Compagnie des Alpes made a public tender offer for Grévin & Cie, founder of Parc Astérix. The Compagnie des Alpes, which specialises in the management of ski lifts and plays on the synergies between its clientele. Now operational in the winter and summer alike, it is elaborating an pan-European expansion strategy, with a goal to hold 5% of the market in five years versus 1.5% today. Are the park managers’ expectations realistic? “I don’t think this market will explode, instead it should grow gradually,” foresees Jeff Bertus. According to this representative from the world association of theme parks, “there is room. There are 16 million visits annually in the Netherlands. And that is for a population of 12.5 million inhabitants”. On the North American market, a similar observation has been made: 350 million visits to parks for an equivalent population. With only 22 million visitors in Germany and 30 in France, it is easy to see a non-negligible growth margin.

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