This week, Wanda Group announced that it was reducing its stake in the theme park business, selling a majority of its ownership stake to rival developer Sunac China. So much for the wolves.
I'd like to imagine Bob Iger, ensconced in a Beverly Hills karaoke bar, queuing up the latest Katy Perry song... "Swish, swish, bish." Oh, who am I kidding? Bob Iger cares about the Wang Jianlin the way a Mack windshield cares about a bug.
And so ends the latest challenge to the established players in the multi-billion-dollar global theme park industry. At least a couple times a year, I get calls from reporters in communities across the United States, asking about some local developer's announcement to build "the next Disneyland" in their community. They always promise at least three to five million visitors a year and making tax dollars rain down on the community like Floyd Mayweather booking another payday fight.
And their proposals last as long as a Mayweather opponent.
In recent years, the focus has returned abroad, as new challengers in China and the Middle East vow to cut into the global theme park marketplace. In the past year, we've seen four new theme parks open in Dubai, and a slew of Chinese parks have started moving up the annual TEA/AECOM Theme Index global attendance report. But Disney — and ascendent challenger Universal — remain far above the pack, taking advantage of the decades-long head start they've had in the business, as well as the global appeal of their affiliated entertainment franchises.
Some challengers try to close the gap by signing expensive IP licensing deals, which often end up sending money into Disney's and Universal's bank accounts. IMG Worlds in Dubai licenses Disney's Marvel characters while neighboring Motiongate Dubai licenses Universal's Dreamworks Animation, for example. But just licensing IP doesn't move you beyond the five-million-a-year attendance mark, as any Six Flags executive (or fan) can tell you. To run with the big dogs in the business, you need the patience — and the courage — to spend like Disney and Universal and then lose that money until the public comes around to believing that you are as serious about this business as Disney and Universal are.
You see, the public had been reading all those stories about all those developers promising "the next Disneyland." And after watching developments from Hard Rock Park to Motiongate Dubai over-promise and under-deliver upon opening, theme park fans have grown skeptical of new parks. Even Disney and Universal can't escape this skepticism, as parks such as Hong Kong Disneyland and Universal Studios Singapore struggled for years to build fan bases anywhere near the size of their corporate siblings. Disney learned that lesson and made sure to wow new fans with awe-inspiring new attractions such as Pirates of the Caribbean Battle for the Sunken Treasure and TRON Lightcycle Power Run when it opened Shanghai Disneyland last year.
If you want to open a new park and have it survive — much less take on Disney or Universal — you've either got to spend billions of dollars per park to win over fans immediately or show the patience to endure years of losing money while you build the park up to the point where fans will take it seriously as a vacation destination option.
After all, why take a chance on an unknown when you could just book with Disney and get the real thing?
I don't believe for a moment that Disney never can be beat in the theme park business. But I know that corporate bosses' ego, attitude, and grand ideas don't mean a thing to families thinking about where to spend their money on vacation. They want to see results — well-designed, attractive, engaging and welcoming parks that provide great value for their money. A tiny fraction of theme park fans will run to check out the start-ups. But the vast majority — the big chunk of the market where all the money is — will commit to visit only well-established parks. They can't afford to take a risk on disappointment.
That's the lesson for the Wandas of the world. If you want to get into this business, go big and stay in or don't bother. Developing a park on the cheap or expecting an immediate return? Well, quote the aforementioned Ms. Perry, you'll just be another one in the casket.
TweetPersonally, I think the entire Chinese economy is built on financial speculation and currency games, so it's only a matter of time before it tanks like Japan's economy did 20 years ago. But that's speculation.
Shanghai Disneyland will do fine, as far as theme parks in China go. Maybe Universal Studios Beijing will get built, and if it does, it will succeed, too. Chimelong Ocean Kingdom looks like a long-term player. Beyond that, who knows?
Before Wanda decided to sell off its theme parks, the most recent one they opened was an indoor skiing theme park resort in Harbin China at a reported cost of 6 billion USD which of course is almost as much as Shanghai Disneyland cost.
Wanda's now former theme park in Nanchang China is home to one of the longest GCI coasters in the world and many INTAMIN rides such as the hyper coaster and drop tower there.
They could afford to spend the money but not stay in the business because their priorities are obviously elsewhere.
Many theme parks in China are just simply tacked on to real estate development as a wow factor.
As for the entire Chinese economy is built on financial speculation and currency games, I concur which is why the government props it up, refuses to let the reminbi or Chinese Yuan appreciate because they do not want to experience Stagflation the Japanese economy entered 20 years ago and are still in.
Do a google search on China's Abandoned theme parks and you see some very strange but also stunningly beautiful parks that where abandoned.
The Wanda executive talking smack is funny as he steals ideas from Disney and Universal. Anyways, the agreement means Wanda will still manage and operate the parks. Oh no.
I Respond: I view it as a win for Disney.
Wanda has spent at least $20bn+ on its theme parks and is selling them for $4.5bn. How is that anything but a disastrous firesale? The reason they're selling at these prices is because the parks are heavily indebted and seeing low attendance, i.e. they're not profitable ventures.
Disneyland Shanghai saw over 11 million in its first year.
Universal Beijing's total costs have been upgraded to $7bn+ for just Phase 1 (main theme park + CityWalk + 2 hotels), and the second/third phase will cost a similar amount. But they're probably going to recoup that investment because Universal has the most popular IPs in China (Harry Potter, Transformers, Fast and the Furious, Kung Fu Panda, Despicable Me/Minions).
So as Robert Niles points out, the most important factor here is IP. Disney and Universal have IPs that regularly generate $100m+ at the Chinese box office. Wanda doesn't have that.
Wanda's early Wuhan theme park was only open for a bit more than a year before being shut permanently after seeing attendance fall to the 100s per day. That's just not a sustainable park. Their parks see at most 1-2 million visitors a year; those kinds of numbers are not profitable when you're spending billions on the parks.
Noted
But as Chimelong Group and Shenzhen OCT group have demonstrated, IP is not the be all end all for theme/amusement parks in China.
Chimelong Ocean Kingdom has only been open less than a decade and has already cracked the top 15 in global attendance and it is the group's second park after Chimelong Animal Safari Park which is home to one of the largest water parks on Earth. Chimelong will be opening their third resort park in the next few years.
Shenzhen OCT group, parent of the Happy Valley parks in China is 4th in global theme park attendance ahead of Six Flags but behind Universal Studios
These two theme park groups have demonstrated that it not absolutely necessary to have strong IP for a theme/amusement park in China.
That's true; I was focused more on Wanda because Wanda makes "movie theme parks" like Disney/Universal and was trying to take aim on their model with their cultural tourism centers that they claimed would push out Western IP and take all of the attendance.
But you're right that Chimelong Ocean Kingdom has created its own path and that looks like it'll be a winner; ironically that park is more like a China version of SeaWorld than anything else and is having that level of success.
OCT is another good example of a local player that knows the regional market and can run a regional operation that looks prosperous.
China's market is gigantic and large enough for all of these players; given that Disney/Universal are likely to focus on just their major cities Shanghai/Hong Kong and Beijing, there's a ton of market left for China's local players.
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Rather it is a result of the Mainland Chinese authorities cracking down on Publicly listed companies who either have overextending themselves financially, have dubious financial statements or have made questionable transactions to shore up their bottom line.
Wanda Media was just one who got caught up in it when the banks were made to call in the loans they made to them.
Others caught in this greater scrutiny include Anbang Insurance who tried to buy Starwood Hotels and Resorts last year and HNA Group who own Hainan Airlines