Over 2 decades of development, the China theme park industry has four times sparked a frenzy of investment.  Even today, several theme park businesses are still trying new feats and are itching to try out the capital markets.  These operators have already found that it is more effective to gradually transform theme parks into pan-industrial integrated formats, which gather leisure & amusement, film and real estate & hotel together.  However, it will be very hard for them to transform.  Only with capital, IP and various factors can operators make sustainable profits.

During the 3-day holiday in early April this year, the young and adventurous became the main force to visit China Dinosaur Park.  It is reported by Changzhou TV chancel, the four major theme parks there greeted 362,700 visitors during the holiday.  Nationwide, theme parks have been a new destination for travel.  Has such a large passenger flow resulted in considerable benefit for the theme park industry?  From 2014 to 2017, Fantawild kept its net profit in the RMB 650 million - 750 million (about US$102 million - US$117 million) range without any sharp decline.  Before the accounting policy being changed, Fantawild got RMB 337 million, 247 million and 353 million in subsidies from the government in 2014-2016, which the respective proportion of net revenue at 47.39%, 37.79%, 49.65% .  Because of these high proportions, investors were unsatisfied with Fantawild.  As for government subsidizing theme parks, Mr. Lin Huanjie, the president of the theme park research institute expressed that running theme parks can reach a win-win situation for local government and operators.  But, with subsidies at near 50% of net revenue there is a risk of unstable performance.  Subsidies are not a long-term and fixed income.  Once they are removed, theme parks should improve their operating indicators to create more income and keep healthy development.  

Up until now, there are still several companies that focus on running theme parks in a-share markets.  Admittedly, theme parks as destinations of culture and tourism become more and more attractive to consumers and capitalists.  According to the latest data by Dalian Shengya Tourism Holding Co., Ltd. and Haichang Ocean Park, the gross profit rates of its tourism service, operation and live performance in 2017 were 60.32%, 54.3% and 73.81%.  Because of the high gross profit rate, the market is under high expectation and more and more theme parks are springing up.  According to incomplete statistics tallied by Mr. Lin, companies who operate theme parks from other industries account for about 70% of all companies.

Looking back to 2017, the economic growth of the culture & tourism industry increased day by day. Theme parks became one of the most attractive projects with investors, including developers, large film and television companies, contracting projects companies, coal enterprises, and car companies.  “The first and foremost challenge for theme parks are high investment, high risk and slow return.  As a result, theme parks need to rely on the support of large capital,” said by Mr. Lin, “What is large capital?  The most direct one is the real estate developer.  They will drive the area’s economic development to heat its value by investing in theme parks.”   Nowadays, theme parks of Evergrande have spread all over the country.  Up to now, there are 7 culture & tourism projects finished by Wenda.

If real estate companies provide food to theme parks, film and television companies bring warmth to them.  In recent years, as the competition has become more and more fierce and incomes have fallen slower, the film and television industry has seen a downturn.  Most of the companies in this industry such as Huayi Brothers, Enlight Media and Wenda have started to join in the tourism industry positively and actively.  Alpha Group invested 27.5 million to set up a new company and try to get involved in the outdoor theme park format after entering into the theme park industry last year.  What’s more, Enlight Media will build a television & film complex gathering film shooting and production, educational training, tourism, recreation an so on.

Mr. Duan Dongong, the general manager of the marketing center at Wenda Entertainment said, China’s theme park industry is also in the initial stage that “sells ticket”. In the future, it should upgrade to “sell environment”. “ To be a successful theme park, firstly, it should be special and exclusive. Its core is to attract visitors, and then to retain them. In China, the biggest problems for culture & tourism projects are that while they have resources they lack branding, with elements but lacking integration, with culture but without themes and with potential but lacking promotion,” indicated Yu Liming, the founder of FIDA Architecture International Co., Ltd., one of the companies that designed and built Disneyland theme park.
※The article is published in the GTI Magazine Issue No. 164 in May 2018