China looks to crack down on theme park developments

April 10, 2018, 11:39 AM · The Chinese market has been fueling much of the growth in the theme park industry over the past few years. But the Chinese government now is taking steps to control the runaway growth of theme park developments in the nation.

Chinese media reports that regulators are taking a harder stand on approving theme park projects. If you don't read Chinese (or trust Google's automatic translation), you can find a good English-language summary of the changes here.

And the TL;DR (in any language) is that China wants to stop the development of crappy knock-off parks that no one is going to pay to visit anyway, as well as park developments that depend upon associated real estate deals to be viable. (Yes, this is where everyone at Disney associated with the original Disneyland Paris business plan whistles quietly while staring at the ceiling.)

So is crackdown the bad news for theme park design industry that Variety seems to be making it out to be? While volume = income for design firms, one might question just how much money was going to reputable design firms from the fly-by-night projects. Culling the industry by shutting down projects doomed to fail offers the potential of delivering more market share to solid projects, strengthening parks from Disney, Universal, Fantawild, Chimelong, and other players with the money and expertise to deliver successful developments in the Chinese market.

Real estate developers around the world have learned that one of the fastest ways to get local governments and banks to open their wallets for your project is to promise them the next Disneyland. Offer normally steel-eyed business cynics the chance to invest in a theme park (or a movie production), and many of them turn into willing, no-questions-asked suckers, eager to turn over their money for what they think will be an easy payday that makes their community famous. Every few months I get a phone call or email from some local reporter somewhere in the United States asking me to comment on a local developer's proposal to bring "the next Disneyland" to their community. Inevitably, the reporter seems disappointed when I point out that's not going to happen.

Anyone who's tried to buy or rent a home on the west coast of the United States already knows that Chinese investors are flush with cash and looking to spend. It's even crazier within China, and the sharps are out looking for marks. That's generated countless number of theme park development proposals from people who don't have the knowledge or experience to make it in what is actually a highly competitive and unforgiving industry.

The Chinese market is underserved with world-class theme parks at this point, given the growing purchasing power of its citizens. But the key phrase there is "world class." Theme parks demand an enormous amount of capital, including land, utilities, and transportation infrastructure, as well as the rides, show buildings, stores, restaurants, and support facilities built within them. Even a "cheap" theme park that fails can be devastatingly expensive mistake for a community.

As with just about everything else in life, if you want to pass the test, you'd better do your homework first.

Replies (7)

April 10, 2018 at 3:36 PM ·

Despite bad construction and look-alikes, revenue hit a new high $6.27 billion, a 27% increase, according to Variety. It won't stop existing projects and it might not immediately stop projects that are imminent of getting approved. I'm more than certain the developers will get more clever with better designs and concepts. Money finds a way. Then again, speculation in China means empty malls, vacant residential towers, and ghost cities.

April 10, 2018 at 3:52 PM ·

Wouldn't the Chinese basically be calling the winners and losers of theme parks in their country? While I understand the spirit of the crackdown, it gives them quite a bit of control on what succeeds and what fails in China.

Perhaps that is the same in the US, but nobody really has put it down on paper. Then again, if Orlando or LA didn't want theme parks, they could have blocked them too I guess.

It is interesting, but I fear there will be lots of abuse.

April 10, 2018 at 4:43 PM ·

Banks, local councils and zoning boards call winners and losers in the US all the time, by granting or withholding approval of proposed developments. Things are quite a bit more centralized in China, so you can't venue-shop the way you can in the US, but it's not like major projects in the US don't need some external approval to move forward.

I think this development shows one of two things: 1) That China now has more data on what does and does not work in its market and is taking steps to stop bad developments before they can damage a community or (2) China is throwing up a bunch of new regulations and tests to keep closer tabs on developments so it can get a larger taste of the action.

Of course, it's possible that "why not both?" applies here, too.

April 12, 2018 at 9:44 AM ·

The Chinese would be much better served letting the market determine what theme parks are "viable" and which aren't, but that's just not how they roll.

April 12, 2018 at 10:22 AM ·

Letting "the market" decide the viability of billion-dollar investments that disrupt entire communities is not only socially irresponsible, it's financial suicide for communities where investors and developers fail. That's why no responsible person believes the fantasy of pure libertarianism (given the economic and environmental destruction it inevitably creates), and every government in the world - including the United States - exercises some level of control over private development.

April 12, 2018 at 1:51 PM ·

Robert. You are comparing the united states and china, like they are in any way comparable. Just citing "the government exercising some level of control". In china, that "some level of control is chinese (their word for counties), owning a majority stake in the theme park. Thankfully, that doesn't happen in the european and north american market. (how much of disney does a gov unit in france hold?).

You have no critical eye or even examination, of the idea of a government owning a theme park? That is a million years different, than giving reglatory approvals because a park would increase traffic congestion or require more spending on schools.

I mean, the whole reason you started this website (tell me if I'm wrong), was you say an unserved market (free enterprise capitalism). And, you had a desire to be your own boss (i.e escape rules by the "authority" of news governments/corporations).

April 14, 2018 at 12:29 PM ·

Because of Disney's billion dollar profits, every fly by night operator thinks he can make a fortune in the theme park industry. The result is a rapidly oversaturated market and third rate parks that turn into money pits. I don't blame China for wanting to put some brakes on that insanity.

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