Theme Park Industry: General Market Overview
A theme park industry is an amusement creative environment, where a single or multiple themes are used to enjoy the consumers with diverse rides, landscapes, entertaining attractions and other amusement services. The idea of mass-entertainment places emerged in the nineteenth century when the first amusement gardens appeared in the US. They offered rides on animals, simple attractions and beautiful natural landscapes. Later the trolley parks have evolved into innovative amusement theme parks known for their sophisticated attractions and services (Abercrombie, et al., 2011). Such parks are usually divided into domestic/national parks or international depending on the target audience or theme. Among such well-known parks are Disneyland (educational theme park), Six Flags (national regional park), SeaWorld (the US national parks), Universal Studios theme parks and others. The mentioned four theme industry parks can perfectly provide an insight into the dynamics and most popular trends emerging in the theme park market. In this report, the global market size in the United States of America will be covered together with the description of growth dynamics and forecasts for the industry. The major players in the market will be analyzed from the perspectives of their future development and contribution to the international amusement industry. The TOP 20 American theme parks are clustering in Orlando and California generating the majority of revenues and attendance rate on the entertainment market in the US (Chart 1).
Chart 1. TOP 20 American Theme Parks clustering (adopted from TEA, 2014)
This industry seems to have recovered from the recession stage provoked by the global financial crisis. Compared to other forms of leisure activities, the theme park industry has gained a tremendous popularity and extremely high visitors’ attendance developing much faster than any other entertainment industry. A pool of new attractions combined with a flexible pricing strategy to meet the budget constraints of any family has become the remarkable feature of this business (Abercrombie, et al., 2011). Presently, the major players on the entertainment market proceed to upgrade their theme parks enriching them with the new trends. The record-breaking financial reports inspire experts to acknowledge the unrivaled opportunities in incorporating of multiple leisure activities (gaming, The Internet, attractions) into the theme parks market.
Certainly, the theme park industry has survived through a period of global challenges such as an obvious stagnation of low and middle-incomes resulting in market volatility. It provoked the question of adequate ticket pricing strategy applicable to residents and tourists. Considering the fact that the local residents having minor incomes have become the majority of visiting population, the theme park industry had to rethink certain marketing models such as the visitor demographic policy, working with touristic groups and better availability of services (Abercrombie, et al., 2011). The spreading of mobile technologies made it possible to make tickets cheaper ordering them on-line or optimizing the set of amusements offered by a certain ticket. Thus, the real-time monitoring and quick response to any issue have become the trademark of theme parks servicing. According to Themed Entertainment Association (2014), the top 20 US parks represent the core of the industry with all possible know-hows’ implemented for the convenience of visitors. Innovational ideas leading to significant cost decrease for middle and low-income class families helped the TOP 20 American parks to substantially increase the attendance rate. Thus, the Universal Studios managed to increase attendance rate to 11% in 2014. Overall industry attendance rate increase has resulted in 2,2% with 138 144 000 million visitors having amusement in Theme Parks of America (Table 1).
The attendance statistics explicitly demonstrates the huge brand recognition and development perspectives for the industry. Beyond the strongest amusement function, entertainment business in the US has an extremely important economic impact-producing in general around $219 billion revenues . A total direct revenue of the US theme parks in 2014-2015 generated around $55.4 billion. The theme park industry is also a leader in the creation of jobs, employing directly more than 1,5 million people. This industry offers more than 700 000 year-round jobs and approximately the same number of seasonal works for students, immigrants and residents of the country (IAAPA, 2014).
Disneyland: Market Analysis
This company is the pioneer in amusement industry having an unparalleled brand recognition. Disneyland being one of the most visited theme parks in the US demonstrates an unrivaled merchandising capacity and generates significant incomes annually. The FY 2014-2015 was extremely successful for the company showing the positive statistics dynamics and a substantial growth in revenues from $11,5 billion in 2008 to $15,1 billion on 2014 (Chart 2).
Graph 2. Disneyland revenues statistics (adopted from Statistics Portal.com)
The Disneyland segment statistics demonstrates that only theme parks industry occupies around 30% of business . The graph below shows explicitly the scale of the company operating in the worldwide arena (Chart 3).
Chart 3. Disneyland business segmentation (adopted from Janik & Lansberry, 2014)
Disneyland is a proven top destination in the US with more than 16 million visitors annually. However, compared to the major competitors Disneyland is often claimed to be very expensive and at times problematic place due to the steady number of accidents in attractions. There are certain opportunities for Disneyland, which can leverage the strong brand recognition worldwide. One of such opportunities is a potential expansion of Disneyland theme parks to Asia and Eastern Europe as market segments offering an increasing spending capacity and touristic interest in growing economies as well as high-expected return on investment .
SeaWorld Theme Park
Following the financial statement in 2014, the SeaWorld theme park is a leading entertainment company offering not only amusement and interactive services but educational services as well. SeaWorld represents a mixture of leisure and learning about nature. Over the 50-year history, the company managed to create a diversified portfolio of various theme parks demonstrating rich flora and fauna to the visitors (SeaWorld, 2015). Approximately 90 000 marine species are presented to the public during the various shows, rides, and other attractions. The purpose of the company is to deliver the memorable and breathe-taking experiences to all visitors. Except for unique amusement strategies, the SeaWorld demonstrated quite convincing financial results in 2014 ending the FY with 3.7 million attendances and $264 million revenues. Compared to 2013 the financial results of 2014 are more moderate mainly due to the scandal occurred with the orca whales in 2014, whose violent behavior resulted in deaths of the three people. Mass media challenged the brand with the news that the orca whales were mistreated during the training sessions. This news collapsed the company’s profits up to 84%. The NYSE SEAS stock index demonstrates a vivid fall tendency in 2014 (Chart 4).
Chart 4. SEAS stock price index reaction after 2013 scandal
However, negative attendance rate (-12% in 2014 compared to 2013) and fall in revenues, the company has a quite stable position and managed to stay on the market. Though the company is struggling to make use of future perspectives and new digital opportunities, it still has to work for the brand’s reputation. This is the major threat and obstacle to the flourishing of the business.
Universal Studios Theme Park
Universal Studios theme parks represent the subsidiary of Comcast/NBCUniversal and known for the excellent attractions and landscapes based on plots of familiar movies, cartoons, games and soap operas. This park being the third largest global amusement operator welcomed more than 7 million guests in 2014. It is able to provide an extensive safety and exquisite services for the visitors . To stay in the TOP 20 of the best theme parks the company dedicates time and effort to safety measures designing their attractions. Universal Studios Company is known for its best practices in the entertainment industry and meticulously elaborated safety technologies. The key success points of the company are concluded in consistent analysis/monitoring of attractions operations. The same practice applies to consumer safety. Thus, Universal Studios theme parks are known for their low accident rate compared to major competitors in amusement parks business. This theme park has demonstrated a significant attendance rate increase (11%) in 2014. Besides, considering the attendance rate and per capita revenues, the Universal Studios theme parks company is among the leaders (Chart 5).
Chart 5. Market share and position of the Universal Studios theme parks (adopted from Kim, 2014)
Leisure analysts predict that Universal Studios amusement business is expected to grow in terms of both revenues and attendance rates . The financial performance of 2014-2015 is estimated at $636 million on the domestic level while the worldwide revenue is $1,6 billion. During the last 5 years, Universal Studios theme parks have more than doubled their domestic market share outpacing the medium sized Six Flags theme park in size and profit. It should be noted that this company has tremendous plans for the future. Preliminary project scope (2016-2022) of possible entertainment parks includes the building of Universal Studios theme parks in Volcano Bay, South Korea, Beijing, and Moscow.
Six Flags theme parks
Six Flags theme parks are occupying the moderate share of domestic American business. In the chart 6 below, Six Flags stands apart from the giant entertainment companies, representing a medium size amusement industry.
Chart 6. Six Flags market position among the competitors
Founded in 1961 Six Flags Entertainment is positioned as one of the largest regional operators with $1.1 billion revenue. There are 16 parks in the US allowing investors to enjoy the diversified portfolio of leisure business flourishing domestically.
Chart 7. Six Flags attendance rate vs revenue (adopted from Kim, 2014)
The revenue models of Six Flags company differs from that of the competitors because the company is specializing mainly in the seasonal (80% of all operations) rather than on year round operations. This theme park devotes much more importance to analyzing the ticket yields to make them more affordable for low and middle-class income families. The primary target of Six Flags is to achieve the $700 million of EBITDA by 2018 in order to successfully invest the generated income into the future development of business paying growing dividend and offer adequate ticket prices to visitors.
Conclusion and Recommendations
The theme park industry is a rapidly developing and flexible market open to new trends and opportunities. Analyzing the four well-known entertainment theme parks, it makes sense to present the following recommendations:
Consumer preferences should be the core of any business, especially when it deals with the amusement industry; therefore, large scale and medium size businesses should be able to track even slightest changes in consumer behavior patterns in order to stay afloat;
Visiting sequences, seasonality, and guests satisfaction are the feature, which should be carefully monitored via on-line systems, questionnaires, surveys, and interviews;
Introduction of the route recommendation systems easing the guests the choice of their entertaining facilities;
Meticulously elaborated a ticket-pricing strategy to meet the budget of low and middle-class income visitors.
References
Abercrombie, N., Austin, R., Elia, J., Reed, J., & Torres, J. (2011). Entertainment Industry Analysis. California State University Sacramento, pp. 1-30.
IAAPA. (2014). International Amusement Park and Attractions Industry Statistics (IAAPA). Alexandria: IAAPA Press Office.
Janik, S., & Lansberry, K. (2014). Financial Analysis Behind the Magic at Walt Disney World Resort. Walt Disney World, pp. 1-26.
Kim, W. (2014). How Much Money Do Theme Parks Generate? Pro Forma Advisors, pp. 1-5.
SeaWorld, E. (2015). SeaWorld Entertainment, Inc. Reports Fourth Quarter and Full Year 2014 Results. PRNewswire, SeaWorld Entertainment, Inc, pp. 1-13.
Statista. com (2014, April 10). Revenue of The Walt Disney Company's Parks and Resorts Segment Worldwide from 2008 to 2014 . Retrieved from The Statistics Portal: http://www.statista.com/statistics/193221/revenue-of-walt-disneys-parks-and-resorts-since-2008/
The Theme, Index (2014). Themed Entertainment Association (TEA). Orlando, Florida, U.S.: Global Attractions Attendance Report.
