|by Raymond Braun
Let me begin with a little background on how our firm views the theme park industry in the U.S. and in Asia. As is commonly acknowledged, Disneyland in Anaheim, California, which opened in 1955, was the first real theme park. Since then, the theme park industry in the United States has grown dramatically. The theme park industry is now a $4 billion per year business based on an annual attendance of about 130 million visitors at the 42 largest parks in the U. S.
Moderate-sized parks, with attendance of half a million to a million visitors per year add another $600 million in revenue. Total revenue for the U.S. park industry is estimated at $4.5 billion, making this a major industry. The growth of the theme park industry in the U.S. has been followed by development of the industry elsewhere, in particular in Asia and Europe. Europe has grown in size to approximately $1 billion in current revenue coming from approximately 19 major parks. Of course, the big recent news in Europe was the opening of EuroDisneyland in Paris which has entertained approximately 9 million visitors. Although results in the first year may have been a bit disappointing, we expect that EuroDisneyland will be the catalyst to a substantial growth cycle for the theme park industry in Europe.
The theme park industry in Asia is also in a growth mode. We estimate that a total of approximately 35 large parks attract attendance of about 71 million visitors, generating a total of nearly $1.5 billion in revenue (U.S. dollars). An additional 49 moderate-sized parks generate $350 million in annual revenue. The total industry has roughly $1.8 billion in annual revenue. Although these figures are dominated by parks in Japan, there is high growth potential in other parts of the region, including Korea, Taiwan, Indonesia, and Malaysia. Figures for the Peoples Republic of China are not included in this chart, but China does represent a substantial growth area for developing themed amusement parks as well. An interesting aspect of this data is that, although there has been substantial growth of the industry in Western Europe and Asia, a real potential for further growth exists. Measurements of population per major park and visits to theme parks on a per-capita basis indicate that both Western Europe and Asia (again excluding China) are significantly below the U.S. profile.
This potential is also made clear by analyzing the growth of the U.S. theme park industry over time, compared with the European and Asian industries (signified by Japan). This shows that the U.S. industry has gone through a substantial growth cycle and is now at a fairly steady-state level. Both Europe and Asia are farther back on the growth curve.
As further background, I want to review some major trends and issues for the U.S. theme park industry. Perhaps some of these will suggest where the industry elsewhere in the world is headed. First, the U.S. theme park industry is a mature industry and is no longer experiencing high growth in terms of new development. In a mature industry, there are several typical signs - one of which is consolidation of control. We see this in the U.S. as major companies are acquiring individual parks and chains of parks. We now have major corporate owners in the industry consolidating control: Disney, Time Warner (Six Flags), Universal Studios, Anheuser-Busch (Sea World), Paramount (Kings Entertainment). These major corporations control the dominant share of attendance and revenues in the industry. Re-investment is, of course, a key factor in the operation of a park. We note several current trends:
The “Arms Race” continues whereby parks must build the biggest, highest, fastest, steepest, most complicated roller coasters.
Another factor is the aging of the population, which suggests the need for a more balanced entertainment offering, with emphasis on shows and lighter entertainment compared to hard rides.
New technology will be a powerful force in the theme park industry. New products will include high-definition film, ride simulators, and virtual reality. Not all these techniques are fully developed yet, but we can expect them to be important in the near future.
When the U.S. theme park industry went through its high growth development phase in the late ë60s and the ë70s, most parks were regional resident market parks. Since then, in the ë80s and into the ë90s, most parks have been developed in destination, tourist-market areas. The key multipark-destination markets in the U.S. are Southern California, Central Florida and more recently Texas.
The final point is that many U.S. park developer/owner/operators are looking beyond the U.S. border for future growth markets, including looking at Europe and Asia. Certainly Disney has been most active, but other major park operators are also looking for opportunities throughout the world as fewer new opportunities are available for major theme park development in the U.S.
There are a number of different ways to categorize theme parks: they can be categorized in terms of scale (as measured by attendance or investment); by whether the parks are located in destination-tourist markets or whether most of their attendance derives from their close-in regional markets; by whether they are primarily ride-oriented or show-oriented; and by whether or not they operate year-round or seasonally.
When the owner group in San Antonio, Texas began to think in terms of developing a major theme park, they faced significant competition in the area. There were parks in Dallas, Houston, and the more recent Sea World Park in San Antonio itself. Based on the competition, the opportunity in San Antonio and the direction of the theme park industry in the U.S., the concept for Fiesta Texas was defined as: a destination market, musical show park. The development team of USAA, a major insurance company in the U.S. which owned the property, and Opryland USA, a theme park operator with a musical show park in Nashville, Tennessee, combined to undertake this development Their thinking was that San Antonio was a destination market for tourists in the region. In order to compete with major parks in Dallas and Houston, the park in San Antonio had to offer something unique, something in addition to the rides available in those markets, and something complementary to the existing park in San Antonio. Therefore the show emphasis, focusing on Southwest musical traditions, was identified.
I would like to review the planning process representing the typical development cycle for a theme park. The first stage of the development cycle involves generating the original idea, getting a firm definition of the concept, understanding of the economic feasibility of the project, organizing the ownership group, and developing the master plan. All of this we include in just the first step in a long process. There are 10 steps to this overall process, listed below. After the concept, feasibility, and the master plan have been established, then comes the public approval process, design development, financing of the project, construction drawings, actual construction of the park, procuring the rides and other equipment for the park, installing those rides and equipment and show facilities, and pre-opening which includes the operating plan for the park. The final step is actually opening the park and operating and expanding the park over time.
The master plan for the project was developed over the course of approximately one year. The process began with site investigations and discussions with the client group and consultants, theme park operators and others. This led to initial concept plans for the park, development of theming for different areas of the park, creation of models to study the park layout, and ultimately to the master plan.
It is important for me to note that the master plan, sizing factors for components and investment for the park were based on the detailed economic feasibility study. This process moved from concept drawings to models to the actual master plan.
The final master plan that was actually utilized to design the park in detail was labeled Master Plan # 11. Any project as complicated as a theme park requires very careful planning with constant review and multiple revisions before becoming ready for construction.
Following preparation of the master plan and as detailed design goes forward, various project management functions became important to the process. The overall project manager performs several tasks to help keep the project on time and in budget, including the master program, the master schedule, and value engineering. The master program outlines everything to be included in the park in terms of size, capacity, and cost. This program is constantly reviewed in terms of the design changes to the master plan, always with the factory from the feasibility study as the benchmark.
The master schedule translates the master program into a time frame. It outlines the process to develop the park over the three-year development cycle and assigns responsibility to accomplish each task. The project manager's job is to stick to the goals and objectives of the master schedule.
A very important step in developing a park on time and on budget is value engineering. This task involves the analysis of each component of the project to determine the most cost-effective way to build or buy that component. In every project in which I have been involved, budgets seem to want to expand as the process moves forward. However, the overall economics of the project do not change and cannot handle budget increases. Therefore, there is an ongoing process from concept planning to construction completion to value engineering of the project to make it cost effective and to control the budget. In this process it is important to measure the tradeoffs of lower costs with other considerations such as future maintenance costs and the entertainment value of the park.
The project management and owner group at Fiesta Texas followed key strategies to build the park on time and within budget, in addition to the careful project management program that I have just outlined. The key element of this strategy was not to begin the big cost items in the park until guaranteed prices were set for those items. These items included the construction contracts and major rides and equipment. The methods followed included a guaranteed maximum construction contract, advance ride purchase contracts, and ultimate control over all key decisions by the owner group.
Actual construction of the park took approximately 23 months, running from early 1990 to park opening in March 1992. To document the construction of the park, the owner group photographed the park from approximately 50 different viewpoints every month during the entire construction process. This uncommon procedure provides a very thorough picture of the development of the park.
A key area of planning in the development of a theme park, equal in importance to the physical master plan, is the operational plan for the park. The pre-opening phase of project is critical. The pre-opening budget for a major theme park is significant and can easily total $10 to $20 million or more.
Key items in the pre-opening budget include 1) general management, 2) marketing, 3) development of shows and entertainment aspects of the park, and 4) all of the other functional areas of park operations. Spending for pre-opening accelerates as the opening date for the park approaches, with about 40 percent of the total budget spent in the three months immediately prior to opening.
As the park is being developed key personnel are hired well in advance of opening. The overall project manager, of course, is on board from early in the planning process. The general manager should also be hired early in the planning process, because the ultimate operation of the park will be his responsibility. The general manager needs the assistance of the finance director who begins to develop budgets for various aspects of the operating plan of the park.
Marketing is also a key area which must begin well in advance of park opening; to develop public relations programs, advance group sales and advertising. Other operating managers of the park are also hired in advance of opening. The operational master plan for the park is focused on people planning. After the general manager and other key managers are hired, it is their job to define the goals and objectives for the operating plan of the park. Next they undertake a detailed staffing analysis, defining all key functions, and operating personnel requirements. From this a staffing master plan is developed, and job descriptions and policy manuals for all employees are prepared.
Following a major recruiting effort, an employee training program is undertaken. Every employee in the park requires general and specialized training. Even part-time employees require several hours of training to understand the overall mission and operating style of the park. Crew leaders or supervisors require additional hours of specialized training, while management positions require over 40 hours of intensive training. The major departments or functions include finance, marketing, sponsorship sales, operations, entertainment, administration and personnel, maintenance and general services. All of these report to the general manager of the park. In the case of Fiesta Texas, there are 2,500 employees organized into one of each of these functional areas.
Now it is time to describe the finished product. Let me lead you on an imaginary walk through of the park, pointing out how people circulate on the site, the major themed areas and some of the major rides and shows which form the anchors and draw people through the park.
First, after parking in the parking lot, we come in through the park entry. The first thing that catches our attention is the roller coaster, which is the tallest, fastest, and steepest wood roller coaster in the world. Notice how it utilizes the quarry wall to attain its height. Much of the roller coaster structure was actually built on top of the quarry. We can barely make out the individual people on the roller coaster, called The Rattler, at its peak just before making its first steep drop.
Next we come to the rapids ride, another of the park's major rides. After these impressive rides, we move on to check out the shows in the park. Remember, this is a musical show park emphasizing music from the southwest United States.
The first show is the "Festival Folklorico" in the Zaragosa Theater. This is a major theater, an expensive building. It is used for two different shows on an alternating schedule The second show is called "The Heart of Texas". The Zaragosa Theater is a major facility fully capable of television productions and all types of theater presentations, and seats about 2,200 people.
There is also the Fest Hall in the German area of the park, which features continuous entertainment and food. This facility seats about 900. Another major show is in the 1950's area which plays off of the early days of rock n' roll in the U.S. This show is called "Rockville High" and it is very popular. There are a number of smaller shows throughout the park, such as the "Saloon" show in Crackaxle Canyon. The final show at Fiesta Texas every day is the "Finale", featuring laser light projections and a fireworks spectacular. It utilizes the quarry wall as a 100-foot high screen. This show has been successful in keeping people in the park until 9:00 P.M., increasing length of stay in the park which in turn increases per capita expenditures.
Although not without surprises, which are common in the theme park business, it had a successful opening.
The attendance target for the first year was approximately 2.1 million visitors. Actual attendance of about 2 million visitors was realized over the seasonal operation of the park (March to October). In addition, it ran a special Christmas show with partial operation of the park. Special off-season operations is a growing trend in the United States. Including this special opening, attendance at the park was over 2.1 million visitors. The park achieved very high guest satisfaction levels. As measured by daily surveys. the overall rating for the park was 94 percent-rated it good to excellent by visitors. I should note that surveys are very important for a new park, in particular, A new park has to understand its customers - it doesn't have a long track record of experience to rely on. Therefore, very frequent surveys to test where people are coming from, and what they liked and what they didn't like about the park, are extremely important.
Key Success Factors
I want to emphasize the next factor - the need for operational master planning. Pre-opening planning is critical to the success of theme parks. In fact, you can find many examples of unsuccessful parks due to a lack of planning, particularly in the areas of operations and advance marketing, prior to opening. Finally, the focus of the whole development process needs to be concentrated on opening day - bringing it all together. Everything - facilities, marketing, employees - has to be ready for visitors on opening day. If you can make that day successful, you are off to a great start as far as creating a winning project.
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