The Economist have recently published an interesting article
regarding the development, highlighting how Disneyland Paris' losses and PortAventura's falling profits could make it difficult for the park to be successful.
Bumpy rides ahead
A surprising investment boom for an industry still not over the last slump
THE Swanscombe peninsula, a wasteland strewn with rubbish south-east of London (pictured), draws few tourists. But if all goes according to a plan announced on April 27th, by 2020 throngs of them will be coming to visit London Paramount, a film-and-television theme park costing £2.5 billion ($3.8 billion). The theme-park business, which earns annual revenues of $7.5 billion in western Europe, is attracting other new entrants. Last July Cinecittà, an Italian film studio, opened its first theme park near Rome. And a giant theme park and resort with 15,000 hotel rooms, also based on Paramount Pictures’ films, is due to open in south-eastern Spain next year.
The developers’ enthusiasm is surprising, given the poor performance of Disneyland Paris, Europe’s largest theme park. Hit hard by the recession and heavily debt-laden, its owner, Euro Disney, last turned a profit in 2008. In October it had to ask shareholders to approve a €1 billion ($1.3 billion) recapitalisation plan. On May 5th it said its losses had shrunk slightly, to €119m, in the six months to March. Such financial woes can be seen across the industry. PortAventura, near Barcelona, the only Spanish theme park making money, said in November that its profits had fallen year on year by 18% to just €13m.
To balance the books, parks are trying to get visitors to spend more rather than seeking to attract greater numbers. Merlin Entertainments has built new hotels at Legoland and Chessington in Britain, and at Heide Park in Germany. Others are trying to appeal to richer consumers. Last month PortAventura opened its first five-star hotel. Since 2012 Disneyland Paris has spent more than €400m smartening up. Burger joints have been joined by new gourmet restaurants. Expensive new rides that take guests on different routes each visit, such as “Ratatouille”, named after a film of the same name, have been opened. And Euro Disney says it has stepped up efforts to market the resort to wealthy Russians and Arabs, who may pay $10,000 or more to stay in the resort’s best hotel suites and enjoy VIP park tours.
According to Euromonitor, a research firm, theme-park visits in Europe have stayed flat since 2011. But its analysts think the strategy of trying to squeeze more out of each visitor will produce returns, and that the industry’s revenues will rise twice as fast as footfall over the next three years.
That does not mean it makes sense to build more parks. London Paramount hopes to draw 15m thrill-seekers a year, but Mintel, another research outfit, reckons that all Britain’s theme parks together will not get more than 17m. The park’s developers may be pinning their hopes on the rising numbers of Asian visitors to Britain. But with Paramount, Disney and Legoland all planning new parks in Asia, it is unclear why people would travel so far for something they can enjoy closer to home.
One reason such grand designs are still on the table is state help. The EU has contributed €16m to Paramount’s new park in Spain. Russia’s government is helping to finance a nationalist-themed park near Moscow. But official handouts are no guarantee of success: 70% of the 2,500 theme parks built in China, many with generous state help, have closed down or are losing money. Their derelict rides and overgrown landscapes should serve as a warning for overambitious developers in Europe.
They raise some important points about the current state of European parks, but I find it particularly interesting how they have highlighted the recent strategies of getting visitors to spend more, of which has been demonstrated many times with Merlin over recent seasons. I'd like to think that Paramount will be a different scenario, as they'll first have to focus on the experience to get visitors in, rather than getting them to immediately spend more.
Whilst it is clear that they are somewhat skeptical about the development, I still have high hopes that it will be successful given its continuous positive feedback