Theme Park Investment

With the largest population in the world, China has attracted more than one kind of investment in the past several years. In June of 2016, Disney opened a resort in Shanghai which cost about $5.5 billion. The project represents Disney’s biggest foreign investment in history, beating out the cost of Disneylands in Tokyo, Paris, and Hong Kong. In its early stages, however, the park has failed to live up to expectations, and has brought in about 20,000 visitors per day as of October of last year. Projected B O China Vs N Am Thru Long waits, expensive food, and close alternatives have plagued the beginning of what many hope will be a fruitful long-term investment. Despite the projected return on investment shown to the left, Disney Shanghai has gotten off to a slow start, partly because of local competition.

 

Local businessmen have not been happy with the establishment of Shanghai Disney, and have looked to find ways to drive out the mega-company with smaller, cheaper surrounding theme parks. These parks are aimed at residents of smaller villages, however, and Disney remains optimistic that it can bring in a huge profit on the project. This may take time, as China has never seen a mega theme park which compares to the size of any in the US or Japan. Disney is optimistic that the expanding middle class of China will support the entertainment industry, and they may be onto something. Legoland, developed by a British-based company, has announced that it will build a $300 million resort in Shanghai. They hope the project will be completed by 2022 and will provide competition in the entertainment industry in Shanghai.

 

Legoland’s move represents the 65 major amusement parks which have begun plans to build in China following Disney’s move. The US companies’ move in the market has spurred domestic brands to step up their games. One report shows that Chinese preferences are shifting to an interest in Western brands. But to successfully bring people to the theme parks, the popular culture ideas must be transformed into a marketable product. “It’s not just dressing up in the traditional costumes,” and the parks’ Chinese administrators must figure out how to create a product which draws in Chinese customers: As everyone in this market prepares for the huge influx of American companies, safety becomes the biggest concern. American companies are trying to build the parks quickly, and this sometimes comes with sloppy design and an invitation to risk and accidents. This is especially risky in China, where the culture often says “ok, we have an accident… hide everything” (SCMP article). Moving forward, safety concerns and marketing will be two key aspects of this industry which, until now, has been unknown to the Chinese.

http://money.cnn.com/2016/10/05/media/disney-shanghai-china-visitors/

http://traveltips.usatoday.com/disney-theme-parks-around-world-3689.html

http://www.youngchinabiz.com/en/leisure-legoland-builds-shanghai-carnival-steers-clear-korea/

http://www.scmp.com/business/china-business/article/2041636/chinas-theme-park-industry-become-worlds-largest-2020

https://www.fool.com/investing/general/2014/05/20/disney-is-about-to-see-even-bigger-returns-from-ch.aspx

This entry was posted in Home. Bookmark the permalink.

12 Responses to Theme Park Investment

  1. hendersonn17 says:

    As we have read in Hessler, China’s rapid industrialization has spurred growth of the middle class. With extra disposable income, it seems only fitting that entertainment companies view China as the next attractive avenue of growth. That being said, I think that one challenge these companies will face is how they are able to adapt to the culture differences in China. Children in China haven’t grown up watching the same cartoons as children in America, and it will be interesting to see if and how they change their business models to accommodate this.

  2. Alden Schade says:

    With so many companies planning to enter the theme park industry, one wonders if the Chinese market is ready for such growth only shortly after the entry of China’s first theme park in the form of Disney Land. Could overbuilding and lackluster demand result in park shutdowns?

  3. choia18 says:

    The fortune cookie struggles to actually find a footing in China because of how American the Chinese perceive the cookie. Why would the Chinese view an American amusement park any differently? Perhaps the increase in disposable income and curiosity in American culture might convince a couple of Chinese to go visit these amusement parks but overall I think these parks will fail not because of accidents or a surplus of buildings but rather simply the culture barrier this brings. What Shanghai Disney does next to combat this will definitely be innovative to say the least.

    https://dinersjournal.blogs.nytimes.com/2008/08/26/funny-little-curved-cookies/

    • sackettm18 says:

      An alternative to this hypothesis is that, while initially hindered by cultural differences, these expansions by western entertainment group could result in Chinese culture starting to look more American. We already see that to some extent. It all depends on how fast Chinese attitudes change with regards to American culture.

      • choia18 says:

        Absolutely. A lot of people have a fascination for the West and the West’s influence has creeped in to the Country. I can’t discern whether this simply a curiosity or an actual desire to assimilate some parts of the Western culture but only time would tell.

  4. Ryan Curto says:

    Its interesting, but understandable, that local companies would be attempting to drive out Disneyland in Shanghai with smaller theme parks. A smarter move would be to take advantage of the increased tourism and general population flow through the surrounding area. This sounds like a great opportunity for hotels, tourist agencies, and travel agencies.

  5. feldsteinp18 says:

    Interestingly, this isn’t the first time that the Chinese market has been sluggish in response to new theme parks. In 1998, “Wonderland” began construction and after ten years, lost funding and is now a barren wasteland. The pictures in the article linked tell a very similar story to those read in ‘Ghost Cities’. I think that the issue Mason outlined is another example of overdevelopment and overgrowth; I don’t think that this is a sustainable model to capture the demand of China’s middle class and the revenue growth figures above reflect this.

    http://www.dailymail.co.uk/news/article-2074041/Walt-Disney-turn-grave-Inside-deserted-Chinese-replica-Disneyland-opened-doors.html

  6. bonesc18 says:

    I read an article on abandoned theme park a while back both in the United States and overseas. It wasn’t particularly well written, however the attached photographs were striking. Throughout this post I was thinking about those pictures. Theme parks are built typically under good economic times to reflect a particular time and place. They are of the present. We’re doing well right now, but it could always change. From what I’ve read, theme parks are not always forward looking investments. While Disney is a huge corporation with abundant resources, it begs the question; will this be long lived? Will Disney continue this move if the economy slows down (or slows down more)?

  7. march zheng says:

    I have definitely noticed the average Chinese people I talk to expressing interest in western culture, especially Disney Theme Parks. For some reason, Disney also appeals broadly to the millennial female demographic in China, and western culture is remnant all over their clothing and dress styles. I think they find the Disney mascot/brand very cute, a characteristic that this younger Chinese generation values above all else. Theme park developments are still relatively young in China, and it will be interesting to see how consumer preferences for this type of entertainment shifts throughout time.

    • Charlie says:

      That’s very insightful information; I wonder how popular the Lego theme park brand can be in China. I presume the toys are popular there if Lego intends to build a new Legoland, but will the popularity of the building toys translate into a desire to patronize Lego-themed roller coasters and tilt-a-whirls? I would be skeptical, especially after Disney’s rocky start in their new Chinese location.

  8. masonw17 says:

    One thing I noticed when I was in China last year is that tourist culture is pretty different there; tourists expect experiences to be significantly more packaged, group oriented, and are much more tolerant of obviously manufactured tourist attractions than US tourists are. I wonder if Disney will have to meet Chinese tourist attractions halfway in terms of entertainment options and overall ambiance, or if this move will signal a shift in standards for the highest quality entertainment available in China.

Leave a Reply for Students & Prof