Fantasy worlds

Underwater business: Haichang

It took just two years to construct Hong Kong’s Disneyland but seven more before the theme park stopped bleeding cash and went into the black.

In February, Disney announced that the park had posted net profit of $31.2 million for the 2013 fiscal year – more than double its profit from the previous year. But now the less welcome news: its performance pales in comparison with Tokyo’s Disney park, which saw profit for the nine months through December rise 34% to $619 million.

Still, Disney’s relatively upbeat results may be a boon for Dalian-based theme park operator Haichang. It has announced plans to list in Hong Kong, and is hoping to raise up to $346 million in an IPO later this month. Haichang, which operates China’s version of Sea World, has theme parks in Dalian, Qingdao, Tianjin, Yantai, Wuhan and Chengdu. The majority of the proceeds from the IPO will go towards developing new marine parks in Shanghai and Sanya, according to the company prospectus. Haichang welcomed 7.2 million visitors in 2012, and should appeal to investors. “It’s got the unique factor that’s for sure. It’s the largest theme park operator in China. The theme here is domestic tourism,” one banker enthused to FinanceAsia.

Haichang is at the vanguard of a wider trend. Guangming Daily reports that as much as Rmb150 billion ($24.5 billion) has been invested in theme park construction since 1989. And if anything, the spend is accelerating. Shanghai’s forthcoming Disney park – which started construction in 2011 – is scheduled to open at the end of 2015. Universal Studios and DreamWorks have also announced plans to build parks in China.

But perhaps the most impressive plan to be unveiled is Dalian Wanda’s Wuxi Film Complex. The developer will build a film studio complex in Wuxi, that will also include an outdoor amusement park, a “film city” with 3D cinemas, an indoor children’s theme park, an “extreme sports hall”, seven resort hotels, and a commercial centre housing over 200 shops.

In spite of the rush to create such projects, they’re rarely lucrative. In fact, over 70% of the theme parks in China lose money, says 21CN Business Herald (10% are profitable, the remainder break-even). Why? The majority are poorly planned and executed. Take Nanchang’s Universal Park. It was labelled Jiangxi’s Disney when it first opened in 1998 and was the largest theme park in the province. Covering an area of 68,000 square metres, it contains replicas of many of the world’s most famous tourist attractions (everything from the Statue of Liberty to one of Kyoto’s famed zen gardens). However, Universal Park has been losing money since 2005 and now has the local reputation as being instead the city’s biggest “barbecue pit”, says Jiangxi Daily – a reference to the main reason that families now choose to go there.

Cao Guoxin, an associate professor at Jiangxi University, says that parks must maintain high visitor numbers to survive. For instance, the reason that Window of the World and Splendid China Folk Village have done well financially is first and foremost because they are located in a city – Shenzhen – that has sufficient population to sustain them. Both sites also welcome a large influx of tourists. But for Nanchang – without much supporting tourist infrastructure – attracting visitors isn’t so easy.

Moreover, many ‘themes’ are being overused by park owners. For example, there are over 50 parks that are themed around the Chinese classic Journey to the West alone (this is the tale that involves the Monkey King). Similarly, inspired by the success of Window of the World, which features 130 reproductions of some of the most famous tourist attractions globally, 30 more theme parks soon sprang with a similar idea (Nanchang’s Universal Park being one of them). Water parks, too, have been widely replicated, making up 7 of the 14 new theme parks that opened in 2012 and 2013.

“Compared with Disney, which has only constructed five theme parks since 1955, the development of China’s domestic theme parks has been a mad rush,” Guangming Daily laments. Judged by their hasty construction, oversupply and tendency to copy, the sector even offers something of a metaphor for the worst aspects of China’s economy…

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