Industry Insights | Can Theme Parks Save the Tourism Industry's Decline?

A theme park is a type of park that revolves around a central theme and includes structures and attractions, usually with multiple areas with different themes and other entertainment activities. Unlike temporary amusement parks and mobile carnivals, theme parks are permanent and built for long-term operation. Theme parks are more refined than city parks and focus on designing more complex parks around a specific or group of themes.

Theme parks can be classified according to park type and scale. In terms of park type, theme parks can be mainly divided into amusement parks, water parks, marine parks, and others. In terms of park scale, theme parks can be classified into super-large and large-scale theme parks, as well as medium and small-scale theme parks.

The upstream market of theme park development and operation mainly includes providers of amusement equipment, cultural IPs, land resources, and services. The midstream includes international and local theme park developers and operators. The downstream market mainly includes tourists such as families, couples, and students.

Data source: Analysis by Frost & Sullivan

With the increase in per capita disposable income and the upgrading of consumption structure in the Chinese people, more and more theme parks have emerged in people's lives to meet their entertainment needs. In recent years, the total operating area of theme parks has been continuously increasing. From 2015 to 2020, the operating area of theme parks increased from 178.7 million square meters to 271.6 million square meters, with a compound annual growth rate of 8.7% from 2015 to 2020.

In 2025, Frost & Sullivan expects the total operating area of theme parks to reach 37.09 billion square meters, with a compound annual growth rate of 6.4% from 2020 to 2025.

Data source: Analysis by Frost & Sullivan

From 2015 to 2019, the total revenue of theme park developers and operators increased from 586 billion yuan to 1047 billion yuan. In 2020, affected by the COVID-19 pandemic, many theme parks in China were forced to close for months, resulting in a significant decline in the revenue of theme park operators.

Since 2021, the development and operation market for theme parks in China is expected to grow steadily. In addition, theme park developers and operators are expected to diversify their revenue sources. By 2025, Frost & Sullivan predicts that the total revenue of theme park developers and operators will reach 173.5 million RMB, with a compound annual growth rate of 25.0% from 2020 to 2025.

Data source: Analysis by Frost & Sullivan

• Upgrade of consumption structure

As people's disposable income continues to increase, the consumption structure of Chinese consumers is also upgrading. In the past few years, consumer demand has mainly focused on products and goods. In recent years, with the growth in consumer demand for services, entertainment, leisure, etc., consumers' consumption preferences have gradually shifted from product and goods consumption to popular attractions including theme parks and shopping for leisure. Therefore, the upgrading of the consumption structure is expected to become the leading force driving the growth of the theme park development and operation market in China.

• The pace of theme park construction has accelerated

Currently, internationally renowned theme park developers and operators have entered the Chinese market, such as Disneyland and Universal Studios. At the same time, to meet people's needs for leisure and relaxation, a large number of theme parks are being developed across various regions. In 2020, the number of theme parks in China increased to 1,003, with a compound annual growth rate of 7.7% from 2015 to 2020. In the future, it is expected that China will build more and more theme parks, which will also bring more opportunities for the development and operation of theme parks in China.

• Government support

In recent years, a series of relevant policies have been gradually introduced to support the development and operation market of theme parks. For example, in 2018, the National Development and Reform Commission issued the 'Guiding Opinions on Standardizing the Construction and Development of Theme Parks' (Guiding Opinions on Standardizing the Construction and Development of Theme Parks), which elaborated on the development direction of theme parks' transformation and upgrading from three aspects: enriching cultural connotations, enhancing technological content, and strengthening market entities. Under the guidance of these policies, the development and operation market of theme parks has entered a golden period of development.

• Initial cost of capital

The cost of developing theme parks in China is very high. Purchasing land, constructing theme parks, and daily operations all require sufficient funds, and the investment return of theme parks often takes several years. Therefore, for small and medium-sized theme park developers with limited financing capabilities and low risk tolerance, the cost of capital is a major obstacle to entering the Chinese theme park development and operation market.

• Operational experience and management capabilities

The operation of theme parks is very complex and requires rich experience and strong management capabilities. Mature theme park developers and operators possess experienced operation and management teams with in-depth knowledge, enabling them to adjust their products and services in a timely and effective manner according to customer preferences and taste changes, thereby diversifying their profit models. For newcomers lacking operational and management experience, it may be difficult to successfully operate a theme park.

• Brand awareness

Mature theme parks with high brand awareness are more attractive to tourists. At the same time, well-known theme park developers and operators are more likely to obtain support from local governments and gain market recognition. In addition, theme park developers and operators with a good brand image outperform newcomers in terms of operational experience, creative research and development design, management, and service levels, gradually forming a positive brand effect. New entrants to the theme park development and operation market may need a long time and cost to establish a good reputation. Therefore, brand awareness and brand image have become one of the main entry barriers in the theme park development and operation market.

• Creativity and Design

The excellent creativity and design of theme parks are key factors in attracting tourists. In the preliminary planning stage, architectural design and layout, tourism route design, theme project design, etc., are deeply integrated with creativity. During the operation period, successful theme park operators may timely and effectively add new creative designs during daily operations, thereby increasing the repeat visit rate of tourists. However, newcomers without creativity and design capabilities may lead to a high degree of homogenization and a low repeat visit rate of tourists.

• Opportunity 1: Diversification of Income Sources

With the increase in the number of theme parks in China and the increasingly fierce market competition environment, ticket revenue will no longer be the sole source of income for theme parks. It is expected that the diversification of revenue sources for theme parks will become the main development trend in the future. The IP and derivative products developed by theme parks, such as theme toys, theme clothing, and other related items, as well as special foods and advertising, will provide more diversified profit models for theme parks in the future.

• Opportunity 2: Deep Integration with IP Culture

IP culture is at the core of theme parks and has become an effective way to expand brand influence, enhance brand awareness, and strengthen sustainable competitiveness. In recent years, the rapid development of the domestic and international IP culture industries has driven the rapid development of the theme park development and operation market in China. In the future, local theme park developers and operators are expected to deeply integrate parks with IP culture through cultivating their own IPs, obtaining IP rights, co-creating IPs, and other means, thereby deepening public recognition.

• Opportunity 3: Enhance interactive experience through technology applications

With the rapid development of science and technology in China, many modern technologies have gradually been applied to various facilities in theme parks. Compared to theme parks that are heavily based on traditional amusement facilities and homogenized, the application of modern technology, especially VR and AR technology, can provide visitors with more realistic virtual interactions. This helps theme parks create more authentic interactive scenarios, further enhancing visitors' sensory satisfaction, feelings, and experiences, and improving customer loyalty. Therefore, the application of science and technology will become a major development trend for theme parks, promising to provide more opportunities for their future development.

• Challenge: High homogenization

Currently, except for a few well-known theme parks, most theme parks in China generally suffer from high homogenization, lack of distinctive IPs, leading to low repeat visitor rates and a single profit model. To avoid homogeneous competition, theme park developers and operators in China should promote technological innovation, activity format innovation, cultural content innovation, and management model innovation, thereby establishing well-known and distinctive theme park brands.