A theme for the future

For decades South Sky Column, a 1,080-metre sandstone pillar, has been a must-see for visitors to Zhangjiajie in Hunan province.

In 2010 the authorities at the national park renamed the popular spot ‘Hallelujah Mountain’ because it was said to have inspired the flying islands in James Cameron’s Avatar. Local officials rebuffed criticism that they were fawning over Hollywood fare and insisted the rebrand could promote one of China’s greatest natural wonders and lure foreign tourists.

Officials there are still fascinated with avatar-ish reality. In November they unveiled the Zhangjiajie Metaverse Research and Development Centre, with aspirations to build a metaverse-based theme park. “We are not just going after a hype concept. We seriously want to do this,” the head of the park’s R&D team assured the Global Times.

Mixing theme parks and the metaverse offers a new twist to the story as Chinese companies and tourism bureaus renew their efforts to create a domestic rival for Disney. One of the country’s biggest conglomerates – Wanda – has already tried to beat the ‘House of Mouse’, before retrenching rather miserably. Will domestic players really achieve parity with the formidable American giant? And how are Shanghai Disneyland and the newly opened Universal Studios in Beijing coping with Covid-19 and the Omicron variant?

How might the metaverse be a game changer for theme parks?

The metaverse – once a fringe concept debated by geeks and dreamers – is getting more mainstream by the day. Microsoft’s stunning announcement this week of its $69 billion acquisition of Activision Blizzard (a developer of blockbuster games such as World of Warcraft and Diablo) is being lauded by analysts as a major push to create “the Disney of the metaverse”, for example. A couple of days earlier the Financial Times had looked at other contenders in the sector, describing Sony’s combination of “cutting edge hardware” and games, video and music content as offering a compelling “gateway to the metaverse”.

Disney must be feeling the threat, although its executives have been keen to showcase how they are working on their own ideas for the metaverse for some time, especially on ways to blend the brand’s physical and digital assets through the deployment of augmented reality, artificial intelligence and the Internet of Things.

As another example: at the end of December Disney announced that it had been granted a patent for a simulator that allows multiple users to experience a 3D virtual world from multiple vantage points without any glasses, goggles or digital devices.

Theme park operators around the world have had a paralysing two years because of the pandemic. Restricted to their homes, people have also turned to the internet more than ever before for games and entertainment. But as Covid subsides, park bosses will be counting on the return of the crowds.

Their challenge is how to incorporate metaverse technologies in park design. The possibilities are intriguing. Visitors to the Magic Kingdom might request digital overlays of their favourite characters that are programmed to greet guests by name and engage them in conversation, for instance. Attractions in physical form could also be spiced up with augmented reality features: Wild West saloons frequented by avatar gunslingers, perhaps, or spaceships under attack from aliens.

Rollercoasters – whose manufacturers are already incorporating virtual reality into their product ranges – are another of the sweet spots for metaverse creatives.

Purists might argue that virtual rollercoasters will never be able to replicate the physical highs (and lows) of the real thing. But trackless rides offer other advantages with experiences that can be tailored to rider preferences. Rides in the metaverse can also be shoehorned into much smaller spaces and refreshed or redesigned on a regular basis, unlike their steel-framed equivalents.

How have China’s best-known theme parks been doing?

Disneyland in Shanghai has made most of its headlines in recent months for its efforts to counter Covid-19, after a single case of infection was identified in the park’s grounds last October.

Local authorities locked down the park’s 963 acres instantly, putting 34,000 visitors through a compulsory testing process.

During the week-long National Day holiday earlier that month visitors numbers had already dropped 15% from a year earlier, according to the news portal 36Kr. Rigid quarantine measures were probably less to blame than the emergence of a new rival – Universal Studios, which opened to much fanfare in Beijing in September.

After more than 20 years in the planning and development stage and an investment of Rmb50 billion ($7.8 billion), the state-of-the-art resort caused a huge stir, helping Beijing to overtake Shanghai as the most visited Chinese city during October’s Golden Week, 36Kr also reported. To avoid long lines at the attractions, VIP passes were on offer for Rmb1,200. But the high prices did not seem to diminish the enthusiasm of visitors. Tickets for the first day were sold out within 30 minutes, leading to a temporary crash of Universal’s booking system (see WiC556).

Many of the world’s biggest theme parks are located in warmer climes such as Florida, where outdoor activities are less affected by freezing weather. But the winters of Beijing are going to create some major challenges for the Universal resort. Planners have done their best to battle the elements: two thirds of the attractions are indoors and heating is provided at the waiting areas for outside equivalents.

An upbeat columnist for China Daily wrote glowingly this month on how her own winter visit to Universal Studios came with “plenty of inner warmth” despite the cold temperatures (she was especially delighted with the free hot water dispensers that allowed people to refill their thermoses around the park).

The article was published amid reports from other media outlets that the new resort has been struggling amid northern China’s chilly winter, however. According to Prism, an investigative news channel operated by Tencent, visitor numbers to the park have fallen sharply, underlined by much shorter queues at popular attractions such as Harry Potter’s Hogwarts castle.

“Universal Studios is cooling faster than the Beijing winter,” an article in Jiemian claimed further this week, adding that ticket sales had dropped 17% in December from November. Part of that decline is because the initial wow factor has been fading faster than expected because of disruption caused by the pandemic, it added. For example, the Beijing-based computer maker Lenovo planned to hire out the entire resort for a day this week for a massive employee event. But the day was cancelled after one of its staff tested positive for Covid-19.

Beijing Tourism Group, the Chinese partner in the Universal resort, has said it expects to receive up to 12 million tourists a year, or about 40,000 people a day. Yet based on the waiting time required on popular facilities, Prism projected that the actual numbers might have dropped to about 10,000 on the warmer days this winter.

Here there could be some benefits for metaverse-inspired attractions, perhaps, which would bring more people indoors, sheltering them from the worst of the weather.

How about the local competitors?

That said, China being China, a resort with such iconic intellectual property (IP) as Universal is almost guaranteed to get good crowds during public holiday periods. Photos of Chinese tourists sardined into visitor hotspots like sections of the Great Wall near the capital show that trend clearly. The upcoming Chinese New Year and Winter Olympics – both of which start next month – are expected to drive up visitor numbers at the Beijing park once again, Jiemian also forecasts.

China is still the holy grail for the international amusement park players. UK-based Merlin Entertainment announced a plan last year to build the world’s largest Legoland there, with the first visitors scheduled for welcome in 2024. There are reports that Dreamworks and Time Warner have set their sights on a new theme park in Zhuhai as well.

Of course there has been no shortage of local competitors. The Hong Kong-listed state travel agency China Travel was one of the first-movers, launching The Window of the World park in 1993, which featured 130 replicas of the world’s most famous tourist attractions on a 48-hectare site in Shenzhen (the likely inspiration was Disney’s World Showcase at its Epcot park in Florida).

Since then private sector firms have joined the fray but many have proven to be pretenders rather than real contenders. Take Huayi Brothers. The movie studio set out with ambitions to rival Warner Brothers. It opened its first amusement park in 2014 in Hainan’s Haikou, promising to expand to 20 more Chinese cities. But the Shenzhen-listed firm then ran into financial trouble, despite creating some of the highest-grossing franchises among Chinese film studios. The company’s parks haven’t been popular with local tourists, 21CN Business Herald has noted.

Another candidate for Disney’s crown was Wang Jianlin’s Wanda Group. Just a few years ago, when Wang still bore mention as “China’s richest man”, the tycoon talked up plans to create a series of Wanda theme parks around the country as a “wolf pack” to hunt down Disney. But his ambitions never became reality, as regular WiC readers will know, because Wanda was forced to sell most of its real estate and tourism assets to fend off a debt crisis (see WiC395).

Some of the more recent newcomers to the theme park sector are younger companies. One of them is Pop Mart. Founded in 2010, it started with a playful idea of selling ‘blind boxes’ that contain miniature items, although buyers only know what they are getting after they unwrap the packaging.

After listing its shares in Hong Kong in December 2020, Pop Mart is now trading at a market value of more than HK$60 billion ($7.7 billion) – despite a 50% decline in its share price since its IPO.

Backing the investment thesis for the 10 year-old firm is a stable of its own popular characters, such as the Molly Dolls, which look like a cuter version of Barbie (see WiC468). Pop Mart wants to milk the series further as hosts of a theme park of its own. Last week it announced that it will partner with local authorities and use its intellectual property (IP) to build a “trendy cultural park” in Beijing’s Chaoyang Park. Planning is at the early stage and no further details have been released on the new attraction. Nevertheless it underlines how Chinese firms are seeking to monetise their more successful IP – in the manner that Disney and Universal Studios have been doing for decades.

In another intriguing example of the trend, the gardening design house SPI Landscape even made an announcement on the Shenzhen bourse this month that it had signed a strategic agreement to develop what it claimed to be “China’s first metaverse theme park”. The new facility will also feature The Little Prince of Adventure, a cartoon series developed by another Shenzhen firm.

Can Wanda be a winner?

Wanda Group has just announced its return to the theme park stage, with the shrunken property conglomerate doing a deal with a Beijing-based studio to develop its own metaverse business.

Wanda’s plan is relatively simple, ThePaper.cn noted, as it intends to leverage its movie unit’s IP, as well as the physical presence of more than 700 Wanda cinemas. That could provide a less capital-intensive shortcut to a metaverse theme park, ThePaper.cn noted, although it remains to be seen whether Wanda has the technical knowhow to pull this off.

Having once positioned itself as the world’s biggest commercial landlord, Wanda was the first property heavyweight in China to go into debt-reduction mode. Its early downsizing proved to be a blessing in disguise, as major rivals like Evergrande and Sunac (the buyer of Wanda’s erstwhile theme park business) have been struggling with a liquidity crunch brought on by government restrictions on access to new financing.

In October last year, it filed a listing application for its property management unit in Hong Kong. By benchmarking it against Hong Kong-listed peers such as Country Garden Services, some property analysts have put the company’s valuation as high as Rmb1 trillion. That would be twice the price that Wanda needed to pay to take private its Hong Kong-listed commercial property unit in 2016, a move that marked the beginning of its business overhaul.

Wanda’s revamp may be winning over more friends from the state sector too. The Zhuhai government, for instance, has signed up as a key shareholder in its property management unit. This month the company also announced that it will start to distribute carmaker FAW’s iconic Red Flag limousines. Experiential stores for the luxury Red Flag are planned for Wanda’s various tourism projects and the 300 malls that it still manages directly. Perhaps potential buyers will soon be able to test-drive virtual Red Flags at a Wanda metaverse theme park?

The real threat to Disney – tech titans like Tencent?

Talk of a new challenge from Wanda may be misleading, however, as backgrounds in real estate becomes less relevant to theme park success than previously. Perhaps the bigger threat to the incumbents is going to come from companies that build virtual attractions, opening up new worlds to guests through immersive online experiences.

Some of the benefits of these attractions would seem to put traditional theme parks at a serious disadvantage. Metaverse parks would have tremendous appeal as 24-hour operations, with almost limitless capacity to host visitors, for instance. There would be no need to worry about problems like Covid outbreaks or cold and rainy weather. Visitors would surely be happy with no queues for the attractions (and no need to spend on overpriced food and drinks).

Trends like these signpost how companies like Tencent have most to gain from a reimagining of the theme park experience. The whole point of the metaverse is bringing people together to share experiences in virtual reality, which is already happening in sectors like multiplayer gaming. These online worlds are ripe with opportunity for tech firms to build out a fuller range of immersive experiences. Some of that could be achieved in partnerships with owners of popular IP from China’s most-loved cartoons, movies and entertainment franchises. That would give the theme park contenders even more of a chance to challenge perennial favourites like Disney.

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