Research: China theme parks
New era

China is now the second largest market for theme parks globally. A new report from McKinsey


Driven by strong consumer enthusiasm, China’s theme park industry has transformed considerably over the past few decades, with hundreds of local players tapping into a rapidly growing market.

International brands with strong intellectual property have upped the game, and by the end of 2021, three new international theme parks had opened in China including Disneyland Shanghai and Hong Kong, and Universal Studios Beijing.

The market has huge potential – McKinsey’s latest report, titled China’s theme parks face a new era suggests that only 27 per cent of China’s population has ever visited a theme park, less than half the average for developed markets, at 68 per cent. And the market size could more than double from RMB40bn (£4.7bn, $5.8bn, E5.2bn) in 2019, to over RMB90bn (£10.5bn, $131bn, E11.9bn) by the end of 2025.

The challenges
Even before COVID19-related restrictions, only half of the country’s parks turned a profit. During the pandemic, theme park attendance declined globally – theme parks had to comply with attendance caps, limits on individual rides, and a ban on indoor performances. Some theme parks shut down and those that remained open saw sharp drops in visitor numbers. Parks in Shanghai and Beijing closed for a few months, but visitor numbers rebounded quickly after reopening, with some theme parks hosting events.

Given the highly competitive environment, volatility due to COVID-19, and the fact that visitors are looking for new experiences after lockdowns, operators may have work to do to capture market share. But the good news is that there’s still enormous potential in the market, says McKinsey.

Despite pressure from leading international operators such as Legoland, Universal Studios, and Disneyland, local operators such as Happy Valley, Fantawild, and Chimelong are likely to draw more visitors than international brands. Leading local operators attract the majority of visitors thanks to the sheer size of their portfolios, number of chains, and their broad geographical coverage. In 2019, 81 per cent of visitors chose local operators. It’s expected that by 2025, local theme parks will serve around 70 to 75 per cent of visitors.

Looking ahead, a number of trends are shaping visitor expectations according to the report:

1. New experiences can draw repeat customers
During COVID-19, trips around hometown cities became the first choice for leisure travel. A McKinsey survey of Chinese tourist attitudes revealed that nearly half of consumers said their first choice for travel would be a short trip to a new destination and over 80 per cent of consumers said they preferred short breaks of one or two nights.

Operators can stay relevant by updating their offering regularly and integrating entertainment and events to provide repeat visitors with new experiences. For example, the Disney characters dressed in traditional Chinese Hanfu attire to celebrate the Spring Festival in Shanghai soon captured visitors’ attention and became a trending topic on social media, gaining over 20 million views on TikTok. And when Chengdu Happy Valley launched its Dunhuang-themed event, cosplayers and influencers arrived in Bodhisattva and Feitian costumes, creating a hype on social media with over 1.5 million views on TikTok.

2. Digitisation is enhancing theme park experiences
Consumers are increasingly looking for interactive and immersive storytelling experiences, not just rides. Operators are now introducing wearable devices as well as AR and VR technology to elevate the in-park experience.

Super Nintendo World at Universal Studios in Japan allows guests to play video games in real life, throughout the park. Players wear tracking devices and collect coins with interactive coin blocks and mini-games throughout the area, and can check their real-time ranking via mobile app.

3. Social media experiences are promoting engagement
COVID-19 pushed people to spend more time online – now short-form videos and livestreaming have become the top online entertainment options. These categories have seen exponential growth, and in the first half of 2022, short videos accounted for 30 per cent of mobile internet use time in China.

As a result, theme park operators are doubling down on social content. When Disneyland Shanghai premiered LinaBell through a promotional video and influencer/celebrity endorsements, the character quickly became ubiquitous online. LinaBell-related hashtags gathered an estimated 940 million views on Weibo and 200 million views on Tiktok, drawing visitors to the park.

4. Greenfield parks need a strong IP
While new theme park developments provide an opportunity to introduce something original to the market, they’re capital-intensive and take at least five years from initial planning to launch – often longer.

To help ensure their success, they need a strong brand identity or IP, a unique product concept based on consumer insight and innovative technology so the park retains its ‘wow factor.

5. Build a strong identity based on IP
Global brands have invested heavily in IP, often over many years and such success can be difficult to emulate, so operators looking to use an IP could take a partnership approach, with the IP owner supervising the conceptual design phase and staying involved until construction is complete, so the end product aligns with the storyline.

Examples of IP-related partnerships include Haichang Ocean Park in Shanghai adding an Ultraman-themed pavilion to its offering, including a theatre, restaurant, and entertainment centre with interactive facilities. Global examples include Universal’s Wizarding World of Harry Potter in Orlando and Pandora – The World of Avatar at Disney’s Animal Kingdom.

For operators without their own IP, the brand itself can become a key element in building a strong identity. For example, Chimelong built nationwide brand awareness with its Guangdong theme park complex, that includes an animal park, amusement park, waterpark, ocean park and circuses.

6. Deliver a unique concept
Concepts should be developed with reference to consumer insights to ensure the end product provides a unique experience consumers want.

Leading operators incorporate consumer perspectives early on, for example, by drawing on a design-thinking process or running ‘innovation garage’ initiatives to test concepts with consumers and then adjusting and optimising the product design accordingly.

7. Think two steps ahead
Keeping abreast of recent tech developments is key to ensuring the visitor experience will be exciting, easy to navigate, and on-trend.

Examples include VR/AR devices and RFID systems which can be used to create immersive experiences and ensure a seamless customer journey.

For example, Universal Studios’ Super Nintendo World features a Mario Kart-themed ride including AR headsets for an immersive experience. Other operators are creating customised solutions for visitor identification, including wearable devices and mobile apps, for more frictionless ticketless experience.

8. Elevating brownfield theme parks
For operators looking to elevate established parks, it’s critical to understand the value-creation process right across the customer journey, from visitor acquisition and value conversion (including ticket sales, and non-ticket sales), to customer retention.

In terms of visitor acquisition, local operators often invest in one-size-fits-all mass marketing campaigns through traditional and offline media, such as TV, newspapers and outdoor advertising.

Considering the increase in consumers’ time spent online, operators could instead invest in online presence – and use customer insights to tailor messages to different segments and personas. Operators could also consider stimulating demand by promoting holidays or events that fall outside peak periods and by creating themed events that cater to local interest. They could also collaborate with partners, across industries, to reach new customers – for example, Universal Studios Beijing leveraged Tencent’s Honor of Kings mobile game to attract gamers by holding themed events at the park.

9. Growing revenue from ticket sales
To grow revenue from ticket sales, operators could consider taking a tailored approach to travel agency management. Travel agencies accounted for around 45 per cent of Chinese tourism bookings in 2019. Theme parks may be able to manage these sales in a more efficient manner.

Local online shopping channels and apps such as Meituan are gaining traction too. Theme parks can partner to better leverage these online platforms’ capabilities when it comes to planning and executing marketing campaigns.

Although use of direct-to-consumer channels by visitor attractions operators is on the rise, they have generally been under-utilised when compared to other industries, such as retail.

These online shopping channels could be more effective in gaining traction with consumers than operators’ official brand websites and mobile apps, says McKinsey.

10. Boosting non-ticket revenue
Operators can increase non-ticket revenue, which accounts for between 30 and 40 per cent of total income for industry leaders, but usually makes up less than 20 per cent of revenue for local operators.

To do this, McKinsey advocates operators develop more premium experiences, including VIP tours, backstage passes, fast passes and exclusive services.

They could also provide edutainment in the form of tailored offerings for families, designed around educating and entertaining children. These offerings are relatively new in the market.

Festivals, holidays, and special occasions also create the opportunity to boost non-ticket revenues through the sale of special dining experiences, costumes and limited-edition merchandise.

11. Improving customer retention
To boost retention, operators can increase efforts to build long-term relationships with customers and keep them engaged – inside and outside the park.

Touchpoints outside park help keep the brand top of mind. For example, Universal Studios partnered with Nintendo to provide a wearable power-up band to visitors. This is more than an in-park accessory, it’s a Nintendo amiibo with game characters that can be connected to Nintendo consoles for at-home use, extending the park experience.

Customer retention can also be improved by a tiered annual pass that meets different needs. For example, a weekday pass can cater for visitors with more flexible schedules.

Brands are investing heavily in IP, such as Universal’s Wizarding World of Harry Potter Credit: Photo: Shutterstock / Photo Spirit
Spring Festival celebrations at Shanghai Disney Resort trended on social media Credit: Photo: Disney
Operators could boost revenue with educational offerings Credit: Photo: shutterstock / Tom Wang
Universal Studios Beijing attracts gamers with Honor of Kings shows and events Credit: Photo: Universal Theme Park Shanghai
 


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SELECTED ISSUE
Attractions Management
2023 issue 2

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Leisure Management - New era

Research: China theme parks

New era


China is now the second largest market for theme parks globally. A new report from McKinsey

Shanghai Disney Resort opened in 2016, following Hong Kong Disneyland Photo: Shanghai Disney
Brands are investing heavily in IP, such as Universal’s Wizarding World of Harry Potter Photo: Shutterstock / Photo Spirit
Spring Festival celebrations at Shanghai Disney Resort trended on social media Photo: Disney
Operators could boost revenue with educational offerings Photo: shutterstock / Tom Wang
Universal Studios Beijing attracts gamers with Honor of Kings shows and events Photo: Universal Theme Park Shanghai

Driven by strong consumer enthusiasm, China’s theme park industry has transformed considerably over the past few decades, with hundreds of local players tapping into a rapidly growing market.

International brands with strong intellectual property have upped the game, and by the end of 2021, three new international theme parks had opened in China including Disneyland Shanghai and Hong Kong, and Universal Studios Beijing.

The market has huge potential – McKinsey’s latest report, titled China’s theme parks face a new era suggests that only 27 per cent of China’s population has ever visited a theme park, less than half the average for developed markets, at 68 per cent. And the market size could more than double from RMB40bn (£4.7bn, $5.8bn, E5.2bn) in 2019, to over RMB90bn (£10.5bn, $131bn, E11.9bn) by the end of 2025.

The challenges
Even before COVID19-related restrictions, only half of the country’s parks turned a profit. During the pandemic, theme park attendance declined globally – theme parks had to comply with attendance caps, limits on individual rides, and a ban on indoor performances. Some theme parks shut down and those that remained open saw sharp drops in visitor numbers. Parks in Shanghai and Beijing closed for a few months, but visitor numbers rebounded quickly after reopening, with some theme parks hosting events.

Given the highly competitive environment, volatility due to COVID-19, and the fact that visitors are looking for new experiences after lockdowns, operators may have work to do to capture market share. But the good news is that there’s still enormous potential in the market, says McKinsey.

Despite pressure from leading international operators such as Legoland, Universal Studios, and Disneyland, local operators such as Happy Valley, Fantawild, and Chimelong are likely to draw more visitors than international brands. Leading local operators attract the majority of visitors thanks to the sheer size of their portfolios, number of chains, and their broad geographical coverage. In 2019, 81 per cent of visitors chose local operators. It’s expected that by 2025, local theme parks will serve around 70 to 75 per cent of visitors.

Looking ahead, a number of trends are shaping visitor expectations according to the report:

1. New experiences can draw repeat customers
During COVID-19, trips around hometown cities became the first choice for leisure travel. A McKinsey survey of Chinese tourist attitudes revealed that nearly half of consumers said their first choice for travel would be a short trip to a new destination and over 80 per cent of consumers said they preferred short breaks of one or two nights.

Operators can stay relevant by updating their offering regularly and integrating entertainment and events to provide repeat visitors with new experiences. For example, the Disney characters dressed in traditional Chinese Hanfu attire to celebrate the Spring Festival in Shanghai soon captured visitors’ attention and became a trending topic on social media, gaining over 20 million views on TikTok. And when Chengdu Happy Valley launched its Dunhuang-themed event, cosplayers and influencers arrived in Bodhisattva and Feitian costumes, creating a hype on social media with over 1.5 million views on TikTok.

2. Digitisation is enhancing theme park experiences
Consumers are increasingly looking for interactive and immersive storytelling experiences, not just rides. Operators are now introducing wearable devices as well as AR and VR technology to elevate the in-park experience.

Super Nintendo World at Universal Studios in Japan allows guests to play video games in real life, throughout the park. Players wear tracking devices and collect coins with interactive coin blocks and mini-games throughout the area, and can check their real-time ranking via mobile app.

3. Social media experiences are promoting engagement
COVID-19 pushed people to spend more time online – now short-form videos and livestreaming have become the top online entertainment options. These categories have seen exponential growth, and in the first half of 2022, short videos accounted for 30 per cent of mobile internet use time in China.

As a result, theme park operators are doubling down on social content. When Disneyland Shanghai premiered LinaBell through a promotional video and influencer/celebrity endorsements, the character quickly became ubiquitous online. LinaBell-related hashtags gathered an estimated 940 million views on Weibo and 200 million views on Tiktok, drawing visitors to the park.

4. Greenfield parks need a strong IP
While new theme park developments provide an opportunity to introduce something original to the market, they’re capital-intensive and take at least five years from initial planning to launch – often longer.

To help ensure their success, they need a strong brand identity or IP, a unique product concept based on consumer insight and innovative technology so the park retains its ‘wow factor.

5. Build a strong identity based on IP
Global brands have invested heavily in IP, often over many years and such success can be difficult to emulate, so operators looking to use an IP could take a partnership approach, with the IP owner supervising the conceptual design phase and staying involved until construction is complete, so the end product aligns with the storyline.

Examples of IP-related partnerships include Haichang Ocean Park in Shanghai adding an Ultraman-themed pavilion to its offering, including a theatre, restaurant, and entertainment centre with interactive facilities. Global examples include Universal’s Wizarding World of Harry Potter in Orlando and Pandora – The World of Avatar at Disney’s Animal Kingdom.

For operators without their own IP, the brand itself can become a key element in building a strong identity. For example, Chimelong built nationwide brand awareness with its Guangdong theme park complex, that includes an animal park, amusement park, waterpark, ocean park and circuses.

6. Deliver a unique concept
Concepts should be developed with reference to consumer insights to ensure the end product provides a unique experience consumers want.

Leading operators incorporate consumer perspectives early on, for example, by drawing on a design-thinking process or running ‘innovation garage’ initiatives to test concepts with consumers and then adjusting and optimising the product design accordingly.

7. Think two steps ahead
Keeping abreast of recent tech developments is key to ensuring the visitor experience will be exciting, easy to navigate, and on-trend.

Examples include VR/AR devices and RFID systems which can be used to create immersive experiences and ensure a seamless customer journey.

For example, Universal Studios’ Super Nintendo World features a Mario Kart-themed ride including AR headsets for an immersive experience. Other operators are creating customised solutions for visitor identification, including wearable devices and mobile apps, for more frictionless ticketless experience.

8. Elevating brownfield theme parks
For operators looking to elevate established parks, it’s critical to understand the value-creation process right across the customer journey, from visitor acquisition and value conversion (including ticket sales, and non-ticket sales), to customer retention.

In terms of visitor acquisition, local operators often invest in one-size-fits-all mass marketing campaigns through traditional and offline media, such as TV, newspapers and outdoor advertising.

Considering the increase in consumers’ time spent online, operators could instead invest in online presence – and use customer insights to tailor messages to different segments and personas. Operators could also consider stimulating demand by promoting holidays or events that fall outside peak periods and by creating themed events that cater to local interest. They could also collaborate with partners, across industries, to reach new customers – for example, Universal Studios Beijing leveraged Tencent’s Honor of Kings mobile game to attract gamers by holding themed events at the park.

9. Growing revenue from ticket sales
To grow revenue from ticket sales, operators could consider taking a tailored approach to travel agency management. Travel agencies accounted for around 45 per cent of Chinese tourism bookings in 2019. Theme parks may be able to manage these sales in a more efficient manner.

Local online shopping channels and apps such as Meituan are gaining traction too. Theme parks can partner to better leverage these online platforms’ capabilities when it comes to planning and executing marketing campaigns.

Although use of direct-to-consumer channels by visitor attractions operators is on the rise, they have generally been under-utilised when compared to other industries, such as retail.

These online shopping channels could be more effective in gaining traction with consumers than operators’ official brand websites and mobile apps, says McKinsey.

10. Boosting non-ticket revenue
Operators can increase non-ticket revenue, which accounts for between 30 and 40 per cent of total income for industry leaders, but usually makes up less than 20 per cent of revenue for local operators.

To do this, McKinsey advocates operators develop more premium experiences, including VIP tours, backstage passes, fast passes and exclusive services.

They could also provide edutainment in the form of tailored offerings for families, designed around educating and entertaining children. These offerings are relatively new in the market.

Festivals, holidays, and special occasions also create the opportunity to boost non-ticket revenues through the sale of special dining experiences, costumes and limited-edition merchandise.

11. Improving customer retention
To boost retention, operators can increase efforts to build long-term relationships with customers and keep them engaged – inside and outside the park.

Touchpoints outside park help keep the brand top of mind. For example, Universal Studios partnered with Nintendo to provide a wearable power-up band to visitors. This is more than an in-park accessory, it’s a Nintendo amiibo with game characters that can be connected to Nintendo consoles for at-home use, extending the park experience.

Customer retention can also be improved by a tiered annual pass that meets different needs. For example, a weekday pass can cater for visitors with more flexible schedules.


Originally published in Attractions Management 2023 issue 2

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