IBISWorld Industry Report 71311 Amusement Parks in the US

WWW.IBISWORLD.COM Amusement Parks in the US April 2016 1

IBISWorld Industry Report 71311Amusement Parks in the USApril 2016 Nick Petrillo

Thrills and chills: Ingraining popular films into park attractions will generate massive returns

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products & Markets12 Supply Chains

12 Products & Services

13 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18 Competitive Landscape18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

20 Basis of Competition

21 Barriers to Entry

21 Industry Globalization

23 Major Companies23 The Walt Disney Company

24 NBCUniversal Media LLC

25 SeaWorld Parks & Entertainment

26 Cedar Fair LP

27 Six Flags Inc.

29 Operating Conditions29 Capital Intensity

30 Technology & Systems

31 Revenue Volatility

32 Regulation & Policy

33 Industry Assistance

34 Key Statistics34 Industry Data

34 Annual Change

34 Key Ratios

35 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


Amusement and theme park companies operate mechanical rides, water rides, games, shows, themed exhibits,

refreshment stands and other attractions. Establishments may also lease space on a contract basis.

The primary activities of this industry are

Operating theme parks

Operating water parks

Operating amusement piers

71312 Arcade, Food & Entertainment Complexes in the USBusinesses in this industry hire or purchase arcade games that customers play for a small fee. Arcades may also sell food and beverages.

71321 Non-Hotel Casinos in the USBusinesses in this industry consists of gambling facilities that offer table wagering games and other gambling activities such as slot machines and sports betting.

71329 Lotteries & Native American Casinos in the USBusinesses in this industry supply and service coin-operated gambling devices (e.g. slot machines) in places of business operated by others.

71399 Golf Driving Ranges & Family Fun Centers in the USBusinesses in this industry operate mechanical or water rides on a concession basis in amusement parks, fairs and carnivals.

71133 Concert & Event Promotion in the USBusinesses in this industry organize, promote or manage events such as carnivals and fairs.

72221b Coffee & Snack Shops in the USBusinesses in this industry operate refreshment stands on a concession basis.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.aecom.com AECOM

www.iaapa.org International Association of Amusement Parks and Attractions

www.teaconnect.org Themed Entertainment Association

The major products and services in this industry are

Admissions, rides and games

Food and beverages

Merchandise

Other


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2107 09 11 13 15 17 19Year

Domestic trips by US residents

SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2016)

62.5%Admissions, rides and games

16.6%Food and beverages

13.4%Merchandise

7.5%Other


Key Statistics Snapshot

Industry at a GlanceAmusement Parks in 2016

Industry Structure Life Cycle Stage Growth

Revenue Volatility Medium

Capital Intensity Medium

Industry Assistance None

Concentration Level High

Regulation Level Medium

Technology Change Medium

Barriers to Entry High

Industry Globalization Low

Competition Level High

Revenue

$16.0bnProfit

$3.9bnWages

$3.7bnBusinesses

519

Annual Growth 16-21

2.4%Annual Growth 11-16

3.7%

Key External DriversDomestic trips by US residentsConsumer spendingInbound trips by non-US residentsNumber of adolescents aged 10 to 19Time spent on leisure and sports

Market ShareThe Walt Disney Company 52.4%NBCUniversal Media LLC 22.1%SeaWorld Parks & Entertainment 8.3%Cedar Fair LP 8.1%Six Flags Inc. 7.5%

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FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 34



Key External Drivers Domestic trips by US residentsAny economic, social, political or environmental factor that affects consumer sentiment or the ability to travel domestically will also affect the industry. These factors include changes to the price of fuel for cars or airlines (which affect airline ticket prices), reduced consumer sentiment caused by geopolitical tension and fears of terrorism and contagious diseases. Domestic trips by US residents are expected to

increase in 2016, presenting a potential opportunity for the industry.

Consumer spendingConsumer spending levels have a direct effect on travel demand and the amount of money people have available for leisure activities. When consumers have higher disposable incomes and are spending more money, they are more likely to spend money on trips to

Executive Summary

The Amusement Parks industry has grown strongly over the past five years, driven by a rise in international and domestic visitor numbers and rising consumer spending. Five major players dominate the industry: The Walt Disney Company, Universal Parks & Resorts, SeaWorld Entertainment, Six Flags and Cedar Fair, all of which have experienced at least some form of growth over the past five years. Although the industry is highly competitive, the major amusement park operators have used their intellectual property rights to major film franchises and entertainment to their advantage. In

recent years, operators of many of the major amusement parks have employed this tactic to propel revenue and increase profit margins. Over the five years to 2016, IBISWorld expects revenue to grow at an annualized rate of 3.7% to $16.0 billion. This includes anticipated growth of 2.0% in 2016.

The state of the economy and travel-related trends are the main factors driving the Amusement Parks industry. The gradual expansion of the domestic economy and reduction in unemployment has enabled consumers to

increase spending on amusement park admissions and vacation packages. Consumer spending has consistently improved and families are far more likely to spend money on recreational activities and luxuries than they were five years prior. Since 2011 there has been a marked turnaround in travel rates, income levels and consumer spending. As people have returned to amusement parks in earnest, operators have ramped up capital investment in an attempt to remain at the forefront of the industry with the most thrilling and technologically advanced rides. Amusement parks have also become savvier at garnering revenue from their guests through sales beyond the cost of admission; these include purchases of food, merchandise and games, which has helped push up industry revenue and profit.

The industry is dominated by a small number of massive entertainment companies. These companies have pursued both domestic and international expansion opportunities, including China and the Middle East. Domestic opportunities still exist, especially for the industry’s largest players; however, growth over the next five years is expected to be subdued compared with the previous period. Over the five years to 2021, industry revenue is anticipated to rise at an annualized rate of 2.4% to $17.9 billion.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

The state of the economy and travel-related trends are the main factors driving the industry


Industry Performance

Key External Driverscontinued

amusement parks. Consumer spending is expected to increase in 2016.

Inbound trips by non-US residentsAny economic, social, political or environmental factor that affects consumer sentiment or international travel to the United States for vacation or recreational purposes affects the industry. These factors include changes to the price of airline fuel (which affects airline ticket prices), exchange rates and reduced consumer sentiment caused by geopolitical tension. The number of inbound trips by non-US residents is expected to increase in 2016.

Number of adolescents aged 10 to 19Families with adolescent children and teenagers make up the primary

consumer market for the Amusement Parks industry, so an increase in the size of this age group will consequently indicate a rise in demand for industry services. The number of adolescents aged 10 to 19 is expected to slowly increase during 2016.

Time spent on leisure and sportsTime spent on leisure and sports includes a variety of activities and reflects available time that consumers may use to visit amusement parks. With more leisure time, Americans have more time to spend on entertainment options. Time spent on leisure and sports is expected to decrease slowly in 2016, posing a potential threat to the industry.

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Consumer spending


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2107 09 11 13 15 17 19Year

Domestic trips by US residents



Attendance returns As the economy gradually recovered and unemployment levels fell to more sustainable levels, consumers have become more confident in their overall spending on nonessential goods. This trend was not the case prior to the five-year period, during which households had struggled to generate sufficient incomes to pay for basic consumer staples and necessities. Consumer spending is expected to increase at an estimated average annual rate of 2.4% over the five years to 2016, and more people will likely visit theme parks with this additional spending. According to the Themed Entertainment Association (TEA), which tracks trends in theme park attendance, total attendance for the top 10 theme parks in North America increased 5.1% between 2013 and 2014. In 2016, consumer spending is expected to grow an additional 3.0%, leading to a rise in attendance and industry revenue.

Domestic travel rates and international arrivals into the United States have both performed strongly over the five years to 2016, increasing at an annualized 2.0% and 5.4%, respectively. This growth has fueled the industry as it relies heavily on both foreign and domestic tourists. Inbound travel over the past five years has been led by visitors from emerging economies, although looming recessionary fears across China may hinder one of the industry’s most promising sources of new revenue. The additional infusion of tourist dollars from elsewhere across the globe has greatly benefited amusement parks.

Industry structure The industry is highly concentrated, with the top five players (Disney, Universal Parks & Resorts, SeaWorld Entertainment, Cedar Fair and Six Flags) accounting for the vast majority of total industry revenue. Disney alone is estimated to earn more than half of the industry’s revenue in 2016 and owns the top five most visited amusement parks in the United States. The number of amusement parks in the United States

has risen 2.0% per year on average to 622 locations over the past five years. However, the majority of these are small parks catering to a local or seasonal audience. Disney and Universal Parks & Resorts attract millions of visitors each year from all around the world and are seen as must-see destination amusement parks. Of the top 20 most visited amusement parks in the United States in 2016, only one, Hershey Park in

The Amusement Parks industry is experiencing steady growth as revenue and profit margins continue to expand amid brightening economic conditions. Industry revenue has consistently improved as consumers increased spending and trips to and within the United States. As consumer sentiment improved markedly over the

past five years, more Americans increased leisure spending, resulting in higher amusement park attendance and greater in-park spending. Over the five years to 2016, industry revenue is expected to increase at an average annual rate of 3.7% to $16.0 billion, including anticipated growth of 2.0% in 2016.

Current Performance

The infusion of international tourist dollars from has greatly benefited amusement parks



Profit volatility Amusement parks typically generate substantial profit margins, particularly in the years after initial investments on new rides and attractions have been fully covered. Larger operators have used intellectual property from film franchises and television series to create new massive attractions, and these companies have come to dominate the industry in terms of both annual attendance and ticket sales. Since 2011, industry profit margins have improved, reaching an estimated 24.5% of industry revenue in 2016 due to increased attendance and in-park spending. As attendance levels improved and profit margins increased, many operators invested heavily in new attractions to draw more people through their gates. This has contributed to a rise in the level of depreciation for many operators, especially the larger players that have easy access to capital.

Industry wages have also remained sturdy over the past five years. Amusement park operators require a high degree of labor input throughout every area of park operation and employment figures have grown alongside the industry’s surge. Over the five years to 2016, industry employment is expected to grow an annualized 3.4% to 134,623 workers. In 2016, there will be an estimated 216 employees per industry establishment, earning an average wage of $27,493 each. The industry’s workforce largely consists of seasonal employees that do not generate income for the entire year.

Pennsylvania, was not owned by one of the industry’s five biggest players.

Many amusement parks are subject to extreme revenue volatility throughout the calendar year, mainly due to seasonal factors such as weather. It is common for amusement parks to earn close to two-thirds of their annual revenue between Memorial Day and Labor Day. School vacations and school start dates also cause fluctuations in amusement park revenue on a seasonal basis. For parks that are

open year-round, many incur losses during the winter, which reverses once high-season rolls around. Many parks in the northeast of the country, where heavy snowfall and low temperatures are common, choose to shut down entirely during the winter. To help increase revenue despite the industry’s cyclical changes, some water parks in the Northeast and Midwest have transitioned to combination indoor-outdoor parks in order to earn revenue year-round.

Industry structure continued

Many amusement parks are subject to extreme revenue volatility throughout the year



Consolidation to continue

The market share controlled by the top five players is expected to increase slightly as the domestic market becomes saturated with large destination theme parks. Instead of growing domestically, major operators are expected to continue expanding internationally, building new parks in potentially high-growth regions and using the intellectual property rights of major film franchises for massive

merchandise-driven, immersive park attractions. At the bottom end of the industry, consolidation among smaller regional players will likely continue over the next five years as they are forced to band together to compete with bigger, powerful chains, such as Disney and Universal. Small amusement parks will find it increasingly difficult to compete without investing heavily in facilities

New attractions drive interest

Major investments by the top amusement parks into new rides and attractions is expected to pay off over the next five years as guests flock to visit new attractions and try exciting new thrill rides. The Walt Disney Company is currently designing a massive Star Wars-themed attraction that will open by the latter half of the five-year period to 2021, while Universal Parks & Resorts recently debuted its Wizarding World of Harry Potter in Hollywood. This new attraction is one of the most

expensive additions in the history of themed entertainment, with a cost estimated at $400.0 million. The first Harry Potter attraction, which opened in 2010, helped boost attendance at Universal’s Orlando Resort by 50.0% between 2009 and 2013. While the Diagon Alley attraction is not expected to garner such results, attendance will likely spike at Universal’s parks. Likewise, the Seven Dwarfs Mine Train at Disney World’s New Fantasyland is expected to attract guests.

Industry Outlook

The Amusement Parks industry’s stable growth is expected to continue over the next five years as a number of drivers continue to have a positive influence on the industry. Travel spending is anticipated to increase as the economy grows over the next five years. The additional infusion of tourist dollars is expected to bolster revenue for regional and destination amusement parks. Over the five years to 2021, IBISWorld forecasts that domestic travel will increase at an average annual rate of 1.6%, while international trips into the United States will increase an annualized 4.4%. The industry will also benefit as global unemployment rates decline, the US economy improves and consumers continue to spend money, particularly on recreational activities. Consumer spending is expected to increase at an annualized rate of 2.8% in the five

years to 2021. As a result, IBISWorld expects revenue to increase at an annualized rate of 2.4% to total $17.9 billion over the five years to 2021, which includes a projected 2.5% increase in 2017.

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upgrades and building rides and attractions with significant pulling power.

Over the five years to 2021, IBISWorld projects operator numbers to grow at an average rate of 2.4% per year to 584 companies. Over the same period, industry employment is forecast to increase at an annualized rate of 2.3% to 150,560 workers. The industry will also continue to employ a large number of

part-time and seasonal workers during peak visitor periods. Profit margins are forecast to widen as amusement park attendance steadily rises over the next five years and the industry exhibits healthy revenue growth. Assuming industry operators can avoid over-expansion and egregious capital investments, they should be well poised to improve their bottom lines.

Consolidation to continue continued

The industry has achieved maturity and has a very high population penetration rate in the domestic market, making strong growth in visitor numbers and revenue increasingly difficult. In addition, over the next five years, the industry will contend with increasing competition for consumers’ leisure time and discretionary expenditure as consumers become more selective about where they visit. A high level of repeat customers is desirable for operators, but they will likely have to invest in new rides and attractions to entice these visitors to return. Major operators will also likely concentrate more heavily on the international tourist market by focusing more advertising on overseas visitors, especially in areas of high population and income growth, such as Asia.

The industry must offer increasingly attractive packages and discounts to continue to draw favorable visitor numbers. Vacation packages that offer all-inclusive resort and park admissions accommodations are particularly advantageous for the industry’s largest theme parks. As consumers’ disposable income increases, the convenience of these packages presents a valuable and convenient option for families looking for vacation options at major amusement parks.

Future challenges The industry must offer increasingly attractive packages and discounts


Industry PerformanceA small number of very large operators dominate the industry

Overall growth in visitor numbers is increasing

Intellectual property rights will provide huge growth opportunities for parks with new major attractions

Life Cycle Stage

SOURCE: WWW.IBISWORLD.COM.AU

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DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Growth Industry

Revenue grows faster than the economyMany new companies enter the marketRapid technology & process changeGrowing customer acceptance of productRapid introduction of products & brands

Concert & Event PromotionConfectionery Wholesaling Arcade, Food & Entertainment ComplexesBeer Wholesaling

Non-Hotel CasinosAmusement Parks



Industry Life Cycle The Amusement Parks industry is in the growth phase of its life cycle. During the past decade industry concentration has increased dramatically, but the industry’s largest players have increasingly developed new ways to expand market share. The use of intellectual property, particularly from blockbuster film franchises, has spawned enormous park attractions that attract revenue through sales of merchandise, food and general admissions. Meanwhile, mergers and acquisitions have intensified as smaller players struggle to compete against large destination amusement parks and against other forms of entertainment. The industry is now highly concentrated, and global players such as the Walt Disney Company and Universal Parks and Resorts dominate the top end of the market with destination parks that attract upward of one million visitors per year. Three companies control the top 10 attended water parks in the United States.

During the 10 years to 2021, industry value added, which measures an industry’s contribution to GDP, is expected to grow at an annualized rate of 3.7% per year. During the same period, US GDP is expected to grow at an average annual rate of 2.2%, indicating the industry is growing faster than the overall

economy. Such high growth is typically indicative of an industry that is in the growth stage of its life cycle.

Amusement park operators need to constantly invest in new rides and upgrade facilities to attract new patrons. An arms race of sorts has occurred in recent years, with large industry players trying to attract consumers with impressive new rides and attractions. Also, in the water parks segment, some parks in the Northeast and Midwest have transitioned to combination indoor/outdoor parks in order to earn revenue year-round. This method has been effective as water park visitor numbers have grown consistently since the recession. In an increasingly competitive industry, water amusement park operators will continue to seek to earn additional revenue through ancillary sources such as merchandise sales, ticket upgrades and even spas that offer massages and pedicures.

The industry has achieved a very high penetration rate within the domestic market, which has led to low revenue growth in the past. Some of the largest operators have turned to emerging economies overseas to generate increased revenue and profit. This trend is expected to continue over the next five years.

This industry is Growing


Products & Services Admissions, rides and gamesThe Amusement Parks industry derives the majority of its revenue from sales of entrance tickets. In addition to entrance tickets, the industry may also charge customers once they have entered the amusement park for additional entertainment such as coin operated games, arcade games, carnival rides, mechanical rides, access to water parks, access to limited-time rides and other attractions. Sales generated from admissions represent 62.5% of the industry’s revenue. This segment has held a steady share of revenue in the five years to 2016, and it is expected to continue providing the majority of industry revenue in the five years to 2021. While some water parks are contained within other theme parks, industry operators typically charge separate fees or sell a higher-priced ticket for patrons to gain access to these parts of

the park. For example, Six Flags locations typically operate water parks alongside its amusement parks, while Disney’s Typhoon Lagoon is an amusement park entirely consisting of water attractions. As consumer confidence and spending returns to the US economy, amusement parks will likely continue to bolster ticket prices to drive revenue growth.

Food and beveragesAttending an amusement park is typically an all-day event for visitors. As such, industry operators generate a significant portion of revenue from the sale of food and beverages. In 2016, IBISWorld estimates that food and beverages will generate 16.6% of industry revenue. The largest industry operators provide a variety of food options for visitors, including restaurants, vendors, snack bars and additional alcoholic beverages.

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

9901 Consumers in the US Demand is largely derived from households visiting theme and amusement parks.

KEY SELLING INDUSTRIES

42445 Confectionery Wholesaling in the US The industry purchases confectionery products for sale to guests.

42481 Beer Wholesaling in the US The industry purchases beer and malt beverages for sale to guests.

42482 Wine & Spirits Wholesaling in the US The industry purchases wines and spirits for sale to guests.

45421 Vending Machine Operators in the US The industry purchases food and beverage vending machines for food stalls and outlets at parks.

54181 Advertising Agencies in the US The industry purchases advertising and other promotional services to parks to attract visitors.

71113 Musical Groups & Artists in the US The industry books artists for shows and special performances at parks.

72111 Hotels & Motels in the US The industry partners with various accommodations within the parks of some of the largest operators.

72231 Food Service Contractors in the US The industry purchases food services, on contract, at various outlets for guests.

Supply Chain


Products & Markets

Demand Determinants

Consumer spending, travel and weather largely drive demand for the Amusement Parks industry. Storms and natural disasters can have negative impacts on demand for the industry if these events occur during the peak summer months

when consumers are most likely to travel to amusement parks. Additionally, consumers with limited disposable income may opt to avoid traveling long distances to amusement park destinations. International travelers also

Products & Servicescontinued

Smaller industry operators have more limited options for consumers, but because visitors normally dedicate an entire day to an amusement park visit, providing food is an essential service. In the five years to 2021, this segment is expected to remain steady.

MerchandiseWhile smaller amusement parks sell merchandise to promote their branded rides and attractions, the largest industry operators, such as Walt Disney and Universal Parks and Resorts, benefit from holding licensing rights of popular brands and characters. These licensing rights enable large operators to generate significant revenue from merchandise sales. As economic conditions improve, amusement park visitors are expected to be more inclined to spend money on discretionary items such as novelty products sold at major amusement parks.

Merchandise can also include memorabilia, apparel, books, periodicals and packaged branded snacks. Merchandise generates an estimated 13.4% of industry revenue in 2016. In the five years to 2021, this segment is expected to remain relatively steady.

OtherAmusement parks engage in myriad activities intended to enhance patrons’ experience. These activities generate a relatively slim 7.5% of industry revenue and benefit both corporate and individual customers. Sales of advertising space, corporate event hosting, connecting travelers with travel services, on-site room accommodations, storage locker rentals, parking and valet services, rentals of equipment, rentals of non-residential space in buildings and concierge services all contribute to the industry’s total services provided.

Products and services segmentation (2016)

Total $16.0bn

62.5%Admissions, rides and games

16.6%Food and beverages

13.4%Merchandise

7.5%Other



Products & Markets

Major Markets Domestic visitorsThe Amusement Parks industry caters primarily to US residents, and IBISWorld estimates that 80.0% of the industry’s total market is composed of domestic visitors in 2016. The largest demographic of domestic visitors is teenagers and children younger than 18, representing 25.6% of the total market. Due to the limited disposable income of this group, typically consumers between 35 and 54 years old will be attend alongside these visitors. As such, consumers between the ages of 35 to 54 accounts for 21.6% of the industry’s consumer base. Domestic visitors over the age of 54 are expected to

account for 19.2% of total visitors in 2016. These demographic trends are expected to continue in the five years to 2021. Younger generations typically will continue driving demand for the industry, and young children and teenagers’ parents and grandparents are anticipated to maintain steady shares of attendance.

International visitorsInternational travelers are more likely to attend the large destination water park locations, such as Disney World and Universal Studios, than domestic visitors. This is largely due to the costs associated with traveling to the United States.

Demand Determinantscontinued

generate revenue for the industry, so geopolitical events that affect international travel may also negatively impact the industry.

Destination amusement parksThe top end of the Amusement Parks industry is dominated by all-inclusive resorts, most notably Walt Disney’s Disneyland and Walt Disney World Resort. Most of the resorts run by major industry players provide all-in-one travel packages, which include hotel accommodations, park admission and special events. While these larger amusement parks attract visitors from all over the United States and from abroad, they are more expensive than smaller regional parks. As such, consumer spending and overall economic conditions drive demand for these parks. If economic conditions are poor, consumers can opt to travel shorter distances to cheaper amusement parks.

Weather and travelConsumers seeking to escape the heat of summer consider amusement and water parks to be an attractive vacation option. Consequently, the majority of

amusement parks, including the major destination locations, derive a significant portion of revenue through the summer months each year. Natural disasters can deter consumers from traveling to major locations, many of which are located in Florida. Tropical storms and hurricanes are major deterrents to potential travelers, and industry operators must be mindful of weather conditions in planning concessions and events. International travelers also factor in geopolitical events that make international journeys difficult.

OfferingsMajor amusement park destinations provide a plethora of activities and accommodations to consumers to differentiate themselves from smaller regional parks. While consumers may opt to save money and travel to smaller local parks, major amusement parks provide an experience beyond what is available at small local parks. Families with children aged 10 to 19 are more likely to attend amusement parks, and if these families opt to travel to the major amusement park resorts, parents are likely to demand activities and offerings that extend beyond rides.


Products & Markets

International Trade The majority of industry revenue is derived from domestic vacationers, who account for the majority of total visitors and generate most of the industry’s revenue. Most major water parks, however, also attract international visitors to the United States. While

spending from international visitors is considered to be foreign source of revenue, this does not represent an international exchange of goods. There is no international trade of goods in this industry due to the service-based nature of this industry’s services.

Major Marketscontinued

Smaller regional water parks do not provide the variety of amenities that larger destination water parks can, including hotels and special events. International visitors are expected to account for 20.0% of the industry’s market in 2016, and, moving forward, this segment has potential to expand. If larger destination parks continue

investing in expanded offerings and services, international travelers are more likely to value the experience enough to add water parks to their travel itineraries. However, competition for international tourists will remain high, especially as more theme parks are developed in emerging economies such as in Asia and the Middle East.

Major market segmentation (2016)

Total $16.0bn

25.6%Visitors younger than 189.6%

Visitors aged 45 to 54

20.0%International visitors

8.8%Visitors aged 55 to 64



10.4%Visitors older than 65



Products & Markets

Business Locations 2016

MO3.1

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.0

MA1.4

RI0.4

NJ5.2

DE0.8

NH2.5

CT0.8

MD1.2

DC0.0

1

5

3

7

2

6

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Additional States (as marked on map)

AZ2.7

CA9.9

NV0.6

OR0.4

WA1.2

MT1.0

NE0.8

MN1.4

IA0.8

OH3.5 VA

1.7

FL11.0

KS0.4

CO1.7

UT1.4

ID0.8

TX10.8

OK1.9

NC3.5

AK0.4

WY0.4

TN0.6

KY1.2

GA1.9

IL2.5

ME0.8

ND0.0

WI1.7 MI

1.7 PA4.8

WV0.4

SD0.6

NM0.4

AR1.0

MS0.6

AL1.0

SC1.9

LA0.6

HI0.2

IN0.8

NY5.2 5

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321

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Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations The industry is spread mostly according to share of domestic and international visitors both within and to the United States. The size of the local population in the area is also important for attendance. The industry is most heavily concentrated in the Southeast, West, Southwest and Mid-Atlantic regions, all of which are major tourist destinations. The Southeast represents the largest region for the industry as well as the most densely populated area of the US; it accounts for 25.5% of the US population and 25.5% of industry establishments. These regions also have favorable year-round weather conditions that prevent any significant problems with seasonality with respect to operations and visitors. However, water parks will almost always have some seasonal use issues.

In terms of physical size, revenue and employment, the largest theme parks are located in Florida, Texas and California and overwhelm all operators in other locations. These locations offer year-round operations and facilities due to favorable climatic conditions and are major domestic and international visitor destinations. In particular, Orlando, FL, has seven of the largest amusement parks

in the United States. Industry players have found that there are synergies, promotional benefits and other advantages in having a number of major operators located in the same area. The ability to offer joint and single ticketing arrangements with discounts, such as a three-park pass, has expanded the interconnectedness of these otherwise competing parks.

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EstablishmentsPopulation

Distribution of establishments vs. population



Cost Structure Benchmarks

ProfitThe industry has high fixed costs associated with land, equipment and rides, which can affect profit and returns

if visitor numbers rise or fall significantly. If visitor numbers increase, some increased labor costs are necessary to cater for the larger volume of people. The

Key Success Factors Access to multiskilled and flexible workforceDue to seasonal variations in the amount of visitors, it is important for operators to have access to a large pool of multiskilled and part-time workers.

Close monitoring of competitionOperators should closely monitor the nearby competition in terms of admission prices and investment; if possible, they should consider developing a joint visitor ticket promotion to attract and hold visitors in the area longer.

Ability to quickly adopt new technologyOperators should continually change visitor displays, thrill rides and other attractions to ensure a high degree of interest and repeat visits.

Membership of joint marketing/distribution operationsOperators should take advantage of joint ticketing arrangements between nearby entertainers and service providers (not necessarily all theme park operators) in the local area.

Proximity to key marketsOperators should choose locations near areas with significant populations and domestic and international visitors.

Carrying out all necessary maintenance to keep facilities in good conditionOperators must uphold a high level of maintenance and safety so that the park remains attractive and appealing for visitors.

Market Share Concentration

IBISWorld expects that in 2015, the top four players in this industry will account for 89.5% of total industry revenue. The industry’s largest player is the Walt Disney Company, which accounts for about one-half of total domestic industry revenue. Disney dominates the top end of the market, owning the five most visited amusement parks in North America. Universal Parks and Resorts, SeaWorld Entertainment and Cedar Fair each own a number of parks that each attract millions of visitors each year, giving them large market shares in terms of revenue.

While there are over 400 enterprises operating in this industry, many of these run small, local amusement parks and own only one venue. Many of these parks operate seasonally based on weather

conditions and tourist numbers and only attract a few hundred thousand visitors a year. This compares with giants like Disney that attract tens of millions of visitors every year.

Industry concentration has increased over the past decade, with the larger operators adding venues or acquiring venues from smaller operators. The industry is increasingly specialized and capital intensive, meaning operators need unique skill-sets and access to significant funds to compete. For this reason, the industry’s most successful companies are publicly listed. IBISWorld expects industry concentration will increase gradually in the coming years due to continued consolidation through acquisitions.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is High

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

average operator profit margin of 24.5% is largely skewed by several of the industry’s largest international parks. For example, Universal Parks and Resorts’ industry-specific operating margin is expected to reach a staggering 47.6% in 2016, while Cedar Fair consistently earns a profit margin over 20.0%. The average industry profit margin improved between 2011 and 2016 as demand picked up substantially from the middle of the five-year period.

WagesWages are a major cost for an amusement park, accounting for 23.2% of total industry revenue in 2016. The industry is labor intensive in all areas: from administration, ticket selling, food and beverage and merchandise sales, to operation and maintenance of rides, displays and equipment, and theater and other performances. Due to the seasonal, weekly

and daily variations in visitor patterns, the industry relies on a large component of part-time staff to control costs. Over the past five years, wage costs have remained relatively steady, and the average wage per employee has increased gradually.

Purchases and DepreciationCapital costs are high for this industry, as rides and attractions need to be updated regularly to attract new and repeat visitors. A lack of investment in new rides and attractions usually has an adverse effect on visitor numbers, although many rides can operate and be maintained far more affordably than simply replacing entire attractions. The annual capital investment required in this area can be significant, thus depreciation is a significant annual expense that affects many of the industry’s purchase decisions. Operators invest heavily in facilities upgrades to

Sector vs. Industry Costs

n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent & Utilitiesn Other

Average Costs of all Industries in sector (2016)

Industry Costs (2016)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100


18.8 24.5

18.2

13.24.07.79.2

23.2

23.4

5.73.1

4.6

21.8

22.6



Basis of Competition The industry has achieved a very high penetration rate within the domestic market and operates in the mature phase of its life cycle. Industry consolidation is likely to continue, and operators are expanding internationally in search of new revenue and profit growth opportunities. There are a few very large and dominant industry players, and many small, seasonal operators.

Quality of experienceTo be successful, the most important feature water parks need to have is exciting rides and attractions. Patrons will travel thousands of miles to visit water parks that can offer new, thrilling and unique rides. Successful operators make significant capital investments in new rides and undertake regular maintenance to ensure they can compete with rivals. Branding is also important in this regard because operators need to position themselves as fun, family-friendly destinations. For this reason, amusement parks usually have appealing names like Typhoon Lagoon, Adventure Island and Raging Waters that are specifically geared toward adolescent patrons and their parents.

PriceAmusement parks need to offer visitors value for money, but price is not a huge competitive factor among operators. More important is the amount of time attractions can entertain visitors and the perceived value for money they offer. In many cases, major amusement parks command a large share of a particular market and are geographically distant from any other major parks. Still, because families are the industry’s biggest market, tickets must be priced affordably.

LocationLocation is another important factor because warm conditions are generally more conducive to amusement park demand, especially in the case of water parks. Amusement parks in Southern California, Texas and Florida can stay open year-round due to the warm climate, while parks in the Northeast and Midwest often only open during summer months and earn all their revenue during that time. Location has become a less important competitive factor during the past decade as combination indoor/outdoor parks have hit the market. These parks offer state-of-the-art water rides

Cost Structure Benchmarkscontinued

generate revenue from new and existing customers. For example, The Walt Disney Company plans to dedicate extensive park space to its Star Wars film franchise, the rights to which the company acquired in 2012. Depreciation represents an estimated 7.7% of industry revenue in 2016, while purchases represent 9.2% of industry revenue.

OtherMost operators earn more than half of their annual revenue through admissions and ticket sales (with the rest coming from sales of merchandise and food and

beverages). Miscellaneous substantial costs include public liability insurance, employee insurance and benefit costs, marketing, advertising and promotional expenditure on attracting repeat visitors as new features are added, and rent and utilities expense. Repairs and maintenance to existing attractions and rides and facilities are also significant and are important in maintaining a safe environment for guests. Rent and utilities represent a combined 13.2% of industry revenue, and both are major costs required to occupy and run their parks with minimal interruption.

Level & Trend Competition in this industry is High and the trend is Increasing



Barriers to Entry The Amusement Park industry has high barriers to entry, particularly for theme parks with major roller coasters and other attractions. The industry has a high level of concentration, with the four largest players expected to account for more than 80.0% of total industry revenue in 2016. This can pose a significant barrier to entry for new major players, since the sheer cost of constructing worthwhile rides and attractions represent an enormous initial investment. However, significant opportunities exist for smaller and niche players operating in local or regional markets.

At the upper end of this industry, there are significant costs for entry associated with the area of land required, which can vary anywhere between 100 acres to over 300 acres, and the initial capital investment required for buildings (including public facilities), displays and rides. However, not all of the buildings and rides have to be provided initially,

since there will be an ongoing requirement to invest in new facilities and displays over time to attract new and repeat visitors.

At the lower end of the industry, entry costs may be relatively lower, but there is still a high need for significant upfront capital investment. For example, the land purchases, installation of public facilities, rides, attractions and concessions all represent costs that industry amusement parks share, regardless of their overall market share.

Basis of Competitioncontinued

and recreation areas in the comfort of an enclosed space, thereby allowing popular attractions to continually generate revenue throughout the entire year.

External competitionMost of the industry’s external competition simply comes from alternative ways that consumers choose to spend their leisure

time. The industry operates in a very competitive environment, and there are many other free and ticketed events for consumers to enjoy during the summer months. Live sporting events, music festivals, theatrical performances, outdoor food festivals and other free outdoor events all represent substitutable activities for those who visit amusement parks.

Barriers to Entry checklist

Competition HighConcentration HighLife Cycle Stage GrowthCapital Intensity MediumTechnology Change MediumRegulation & Policy MediumIndustry Assistance None


Level & Trend Barriers to Entry in this industry are High and Increasing

Industry Globalization

Level & Trend Globalization in this industry is Low and the trend is Increasing

The industry has a low but increasing level of globalization. The major amusement parks in the United States are owned and operated domestically. Major players such as SeaWorld, Universal Parks and Resorts and the Walt Disney Company, own and operate amusement parks the industry’s most popular major parks, but these companies have also expanded their branded parks throughout

the world. Over the past five years much focus has been on international markets such as Asia where the industry is growing at a faster rate than in the United States. Major park operators are, therefore, shifting their focus to these growth markets, seeking development opportunities to take advantage of the newfound spending power of the growing middle class in Asia.



International visitors account for a fairly small portion of industry revenue. The largest amusement parks are the most popular among international tourists, although parks of all sizes attract a global base of consumers. As operators expand and upgrade their

offerings, international travelers are more likely to value the experience enough to add water parks to their travel itineraries. This is particularly true among international consumers whose home countries do not have large amusements parks.

Industry Globalization continued


Player Performance The Walt Disney Company is a global entertainment company headquartered in Burbank, CA. Disney was founded in 1923 as a cartoon studio and expanded its operations through the 20th century to a number of ventures, including film production, television, parks and resorts and travel. The company has about 185,000 employees and earned global revenue of $52.5 billion in 2015.

Disney’s operations are contained under five business segments: media networks; parks and resorts; studio entertainment; consumer products; and interactive. The company operates in the Amusement Parks industry through its parks and resorts segment. Disney’s origins in owning and running amusement parks stretch back to 1955 when the company opened Disneyland in Anaheim, CA. Today, Disney also owns Disney California Adventure in Anaheim

and the Walt Disney World Resort near Orlando, FL, which includes the Magic Kingdom, Epcot, Disney’s Hollywood Studios, Disney’s Animal Kingdom, Disney’s Blizzard Beach and Disney’s Typhoon Lagoon. The Orlando resort is North America’s most frequently visited tourist attraction.

Over the past five years, the company has undertaken a complete redesign and expansion of its California Adventure park. Several less popular attractions were removed, while others were redesigned or replaced with a larger focus on Disney characters and stories; the project was completed in June 2012. Outside of the United States, the company has a 77.0% interest in Euro Disney in Paris and earns royalties from Tokyo Disneyland. Disney, together with the Hong Kong government, built a 310-acre Hong Kong park estimated to

Major CompaniesThe Walt Disney Company | NBCUniversal Media LLC | SeaWorld Parks & Entertainment Cedar Fair LP | Six Flags Inc. | Other Companies

The Walt Disney Company 52.4%

NBCUniversal Media LLC 22.1%

SeaWorld Parks & Entertainment 8.3%

Cedar Fair LP 8.1%

Six Flags Inc. 7.5% SOURCE: WWW.IBISWORLD.COM

Major players(Market share)

Walt Disney Company (US parks and resorts segment) - fi nancial performance*

Year**Revenue

($ million) (% change)Operating Income

($ million) (% change)

2011 5,780.5 9.6 761.0 17.8

2012 6,330.8 9.5 932.0 22.5

2013 6,902.6 9.0 1,087.8 16.7

2014 7,398.5 7.2 1,304.9 20.0

2015 7,919.4 7.0 1,485.2 13.8

2016* 8,365.6 5.6 1,809.9 21.9

*Estimates; **Year-end September SOURCE: ANNUAL REPORT AND IBISWORLD

The Walt Disney Company Market share: 52.4% Industry Brand Names Disneyland Walt Disney World Resort

1.6%Other


Major Companies

Player Performance Universal Parks & Resorts is the theme parks division of NBCUniversal, a wholly owned subsidiary of Comcast Corporation. Universal operates three theme parks in two locations: Universal Studios Hollywood in Los Angeles and Universal Studios Florida and Islands of Adventure in Orlando, FL. The company also receives fees from third parties that own and operate Universal Studios theme parks in Japan and Singapore. The company is estimated to host more than 20.0 million guests per year throughout their Universal Studios theme parks in the United States.

Universal’s strategy revolves around creating themed rides and attractions

that are largely based on Universal Studios films. Over the past five years, attendance at Universal’s domestic theme parks has been boosted by new attractions, particularly the Wizarding World of Harry Potter attraction in Orlando and the Transformers attractions in both Orlando and Hollywood. A new themed ride based on The Simpsons TV series also helped attendance spike at the company’s Florida park in 2013. Universal invested heavily in its theme parks over the past five years. Much of this increased investment was dedicated to its Harry Potter attraction in Orlando, a 20-acre

Player Performancecontinued

cost $4.1 billion. Disney contributed $325.0 million to the cost of development, with the Hong Kong government, which owns 57.0% of the venture, contributing the remainder. The company has outplayed close to $10.0 billion over the past five years in capital expenditures in an effort to win back consumers following the recession.

Financial performanceOver the five years to fiscal 2016, Walt Disney’s US-specific revenue related to the Amusement Parks industry is

estimated to grow an annualized 7.7% to $8.4 billion. Financial performance over the past five years has been influenced by an increase in visitor numbers; higher average ticket prices; and growth in in-park food, beverage and souvenir expenditures. This revenue growth has been partly offset by a rise in costs, as the company has invested heavily in a number of its facilities over the past five years. The company is currently developing a Star Wars-themed section of the park that is scheduled to be open by the end of the five-year period to 2021.

NBCUniversal (US theme parks segment) - fi nancial performance

YearRevenue



2011 1,874.0 17.1 830.0 40.4

2012 2,085.0 11.3 953.0 14.8

2013 2,235.0 7.2 1,004.0 5.4

2014 2,623.0 17.4 1,168.0 16.3

2015 3,339.0 27.3 1,464.0 25.3

2016* 3,527.2 5.6 1,678.2 14.6

*Estimates SOURCE: ANNUAL REPORT

NBCUniversal Media LLC Market share: 22.1% Industry Brand Names Universal Studios Florida Universal’s Islands of Adventure Universal Studios Hollywood


Major Companies

Player Performance SeaWorld Entertainment Inc. (formerly Busch Entertainment and SeaWorld Parks & Entertainment) is an operator of 11 theme parks located throughout the United States. The company’s attractions include SeaWorld San Diego, SeaWorld San Antonio, Busch Gardens Tampa, Adventure Island, Discovery Cove and SeaWorld Orlando, Water Country USA and Aquatica. The Blackstone Group purchased Busch Entertainment from Anheuser-Busch InBev for $2.3 billion and then took the company public in April 2013. According to the company, SeaWorld’s parks hosted 22.5 million guests in 2015.

SeaWorld’s amusement parks are geographically dispersed, which helps the company protect itself from localized events and seasonal weather conditions. Furthermore, five of the company’s 11 theme parks are open year-round. The company’s parks are primarily aimed at families, with each park having a mix of thrill-orientated, family-friendly and zoological attractions. SeaWorld has one of the world’s largest zoological collections, with about 89,000 animals kept across its parks. About 62.0% of SeaWorld’s revenue is earned through admissions, with the rest coming from food, merchandise and other retail products.


themed land with retail shops, restaurants and a high-tech 3D train ride all based on the popular novels. The company also opened a companion Wizarding World of Harry Potter attraction at its Hollywood location in April 2016.

Financial performanceOver the five years to 2016, Universal’s industry-specific revenue is expected to increase an annualized 13.5% to $3.5 billion. Universal has been the industry’s

best-performing company in terms of revenue growth over the past five years. Universal’s operating income has continuously surged over the period and is expected to reach $1.7 billion in 2016, despite the company’s increased costs, particularly the higher levels of capital investment Universal made in new rides and attractions. Recent park renovations and additions drove an increase in attendance and per capita spending for Universal’s theme parks, which is expected to continue over the next five years.

SeaWorld Parks and Entertainment (US segment) - fi nancial performance

YearRevenue



2011 1,330.8 11.3 140.3 142.4

2012 1,423.8 7.0 222.7 59.1

2013 1,460.3 2.6 197.9 -11.2

2014 1,377.8 -5.6 160.6 -18.8

2015 1,371.0 -0.5 159.4 -0.7

2016* 1,328.9 -3.1 143.1 -10.2

*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD

SeaWorld Parks & Entertainment Market share: 8.3% Industry Brand Names SeaWorld Busch Gardens Adventure Island Discovery Cove Water Country USA Sesame Place Aquatica


Major Companies

Player Performance Cedar Fair is a publicly listed partnership formed in 1983 that owns and operates 11 amusement parks, three outdoor water parks, one indoor water park and five hotels. Its head office is located in Sandusky, OH, and the company employs about 2,000 full-time employees and 42,100 seasonal and part-time employees. Due to climate, most of the company’s parks operate on a seasonal basis and are closed between October and April. According to the company, more than 23.0 million people attended its parks in 2015, bringing in $1.2 billion in revenue.

The company’s parks include Cedar Point, which is located in Ohio; Knott’s Berry Farm in Buena Park, CA; Dorney Park and Wildwater Kingdom, which are located near Allentown, PA; Valleyfair in Shakopee, MN; Worlds of Fun in Kansas City, MO; and Michigan’s Adventure, which is near Muskegon, MI. The water parks are located near San Diego and Palm Springs in California, while the others are adjacent to the Cedar Point, Knott’s Berry Farm and Worlds of Fun amusement parks. Cedar Fair’s main theme park, Cedar Point, is the largest


Financial performanceOver the five years to 2016, SeaWorld’s revenue is expected to remain stagnant at $1.3 billion. Compared with the broader industry, SeaWorld’s performance has been slow, primarily due to continual struggles since 2014. Attendance at SeaWorld’s parks fell sharply in 2014 and is expected to fall further in 2016 as a number of factors negatively impact visitor numbers. According to the company, adverse weather, particularly above average rainfall in Florida and below average temperatures in Texas has kept some visitors away. The company instituted a $50.0 million cost savings

program in 2014 as a means of restructuring the company’s provision of services; the restructuring will result in an estimated elimination of 300 positions. The company experienced negative media attention in 2013 following the release of the documentary Blackfish, which was critical of the way killer whales are kept in captivity at SeaWorld locations. The company has since announced that it will phase out its whale shows following mounting criticism of the company’s trademarked show. Additionally, Falcon’s Fury, a new thrill ride at SeaWorld’s Busch Gardens Tampa amusement park, missed its initial opening date of summer 2014.

Cedar Fair LP - fi nancial performance

YearRevenue



2011 1,028.5 5.2 227.9 50.3

2012 1,068.5 3.9 233.7 2.5

2013 1,134.6 6.2 301.8 29.1

2014 1,159.6 2.2 278.3 -7.8

2015 1,235.8 6.6 295.3 6.1

2016* 1,299.8 5.2 314.7 6.6


Cedar Fair LP Market share: 8.1% Industry Brand Names Knott’s Berry Farm Cedar Point Dorney Park and Wildwater Kingdom Valleyfair


Major Companies

Player Performance Six Flags commenced operations in the early 1980s when, under the name of The Tierco Group, it purchased its first theme park, Frontier City, in Oklahoma City. The company has since grown largely through acquisitions. Six Flags has 18 parks across the United States, Mexico and Canada. The company derives over half of total revenue from ticket sales and admission fees, with the sale of food, beverages, merchandise and games accounting for the remainder.

The company’s theme parks cover about 4,500 acres of land and offer a broad selection of thrill rides, water attractions, themed areas, concerts, shows, restaurants and retail outlets. Six Flags’ parks range in

size between 100 acres and 500 acres; however, its biggest is a 2,200-acre gated safari and waterpark in Jackson, NJ. The company has an aggregate of about 800 rides, including more than 130 roller coasters. Six Flags holds exclusive licenses for theme park usage of certain Warner Bros. characters, including Bugs Bunny, Daffy Duck, Tweety Bird and Superman, which it uses to market its parks and sell merchandise featuring the characters.

Financial performanceOver the five years to 2016, the company’s US-specific industry-relevant revenue is expected to grow at roughly


seasonal park in the United States. Virtually all revenue from the company’s seasonal amusement and water parks is generated in a 130- to 140-day operating period from early May each year to the fall; the majority of revenue is generated in July and August.

Financial performanceOver the five years to 2016, Cedar Fair revenue is expected to grow at an average annual rate of 4.8% to $1.3 billion. Revenue increased each year over the five-year period, reflecting a rise in

attendance and an increase in average in-park guest spending for the year. The improved attendance is largely due to increases in season passes sold and season pass visits from the company’s increased marketing focus on season passes. The increase also reflected a rise in revenue from spending on hotel rooms, food, merchandise and other complementary activities located outside the park gates. The company’s revenue is anticipated to rise an additional 5.2% in 2016 and operating income is expected to reach a strong $314.7 million in 2016.

Six Flags Inc. - fi nancial performance*

YearRevenue



2011 904.3 3.8 312.4 18.6

2012 955.5 5.6 188.9 -39.5

2013 990.8 3.7 182.0 -3.6

2014 1,049.6 5.9 142.8 -21.5

2015 1,128.3 7.5 235.0 64.5

2016* 1,189.9 5.5 245.7 4.6


Six Flags Inc. Market share: 7.5% Industry Brand Names Six Flags


Major Companies

Other Companies The industry’s remaining amusement parks consist of comparatively smaller establishments that serve a regional customer base. While these parks still cater to a range of demographic groups, many of the attractions provided may be smaller, available park space may be less expansive and there may be comparatively fewer rides that use the intellectual property of popular entertainment franchises. The Hershey Entertainment and Resorts Company, for

example, operates one of the largest regional amusement parks in the country. Hersheypark, founded in 1906, covers a comparatively small 121 acres of land and integrates only the intellectual property of its brands into the park’s rides and concessions. Other small amusements parks may only serve a base of customers spanning a local area, and these parks generally do not earn revenue from international customers.


the same rate as the broader industry at an average rate of 5.6% per year to $1.2 billion. Six Flags’ revenue has experienced a steady upward trajectory over the past five years, despite its lack of intellectual property that has helped major players Disney and Universal dominate the industry since 2011. Admissions revenue per capita increased over the past five years, driven primarily

by improved yields on single-day tickets and season pass pricing. Increased revenue from rentals, food and beverage, retail, paid attractions and catering also resulted in an increase in per capita guest spending. The increase in per capita guest spending over the past five years has also benefited operating income, which is estimated to rise to $245.7 million in 2016.


Capital Intensity For every dollar the average park spends on wages in 2016, it will spend an estimated $0.33 on the use and replacement of capital and equipment. As a result, this industry has a moderate level of capital intensity. Amusement parks have significant capital requirements due to the continual need to provide new rides and attractions with each new season. Depending on visitor interest, many rides may not last longer than a season or may only be constructed as part of a larger commercial film or television branding campaign. The major amusement parks invest heavily and regularly in upgrading facilities to attract new customers. The practice of building special rides or park areas related to movie releases or other popular themes has become more

common as competition within the industry has intensified. The past five-year period has been an especially costly

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

r Int

ensi

veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Concert & Event PromotionConfectionery WholesalingArcade, Food & Entertainment Complexes

Beer WholesalingNon-Hotel Casinos

Amusement Parks

Level The level of capital intensity is Medium

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Amusement Parks

Arts, Entertain-ment and Recreation

Economy


Operating Conditions

Technology & Systems The Amusement Parks industry has experienced a moderate level of technological change in recent years, both in response to consumer demands and to maintain profitability. Technological advancements are particularly important in relation to providing new interactive material, displays and thrill rides to attract new and repeat visitors. Currently, visitors are calling for higher, faster and different thrill rides, roller coasters and other attractions for theme, amusement and water parks. The capital costs associated with these rides can be significant, and the ride may only have a limited lifetime before it is replaced due to reduced visitor interest. Similar conditions apply to most other areas of operation of theme parks, like investing in new interactive displays and theater shows.

Seasonal parksMany outdoor parks operate seasonally, with the majority of customers visiting in hot summer months until the parks close for general maintenance during the winter. When outdoor parks reopen in the spring, potential visitors anticipate new attractions; accordingly, parks that offer the most advanced attraction types will be more appealing. Families with

young children make up a significant portion of the amusement park customer base; as such, amusement parks must ensure the safety and family-friendliness of their new offerings, implementing such solutions as surveillance systems, structural monitoring technology and the usage of child-friendly materials for the construction of amusement playground equipment. Older children, who represent another significant amusement park market, will expect more thrilling rides. A park operator must adopt the latest technology while maintaining the highest possible safety standards.

Cost cuttingAmusement parks also focus on technological development to increase their profitability by cutting costs. Park operators spend a significant amount on electricity; reducing these costs can considerably affect the park’s profitability, with the added benefit of increasing the park’s environmental friendliness. In recent years, amusement parks have adopted new water filtration and pumping systems that increase water use efficiency and save on energy costs, simultaneously cutting operation costs and minimizing environmental impact. Updating the

Capital Intensitycontinued

period for the industry as major operators have spent lavishly on new attractions in an attempt to win back guests. Disney and Universal in particular have invested billions in new rides and attractions that have proven extremely popular with guests. Small, local operators that run on a seasonal basis do not typically spend due to their limited access to capital and the relatively low number of customers they can attract to make major investments worthwhile.

The industry also requires a high level of labor as significant staff input is required in all areas, including

administration, ticket selling, food and beverage and merchandise sales, operation and maintenance of rides, displays and equipment and theater performances. Some attractions, particularly historic ones, may have some volunteer input, but in most cases, paid part-time and seasonal labor is used where possible. Average industry wages have been gradually increasing over the long term, although some traditional labor roles have been automated. Still, the average industry operator spends about 23.2% of their annual revenue on wages and associated labor costs.

Level The level of Technology Change is Medium



Revenue Volatility Over the long term, industry revenue volatility is moderate. There is a high level of visitation to a variety of attractions in geographically diverse locations, which helps stabilize revenue fluctuations from year to year. However, many operators have extremely high revenue volatility within the calendar year, due simply to parks along the northern border closing during the colder months of the year. Amusement parks in locations in the northeast traditionally earn over two-thirds of their revenue within the summer period. It is for this reason that the industry’s

major amusement parks are located in areas where weather is favorable year-round, such as Florida and California.

Over the long term, lower attendance can be offset by higher average admission fees or by increasing expenditures on year-round entertainment such as indoor shows or additional dining areas. Any factor that affects travel patterns and demand can affect attendance and industry revenue; however, changes in demographics, including the age distribution of the population, may mean a permanently lower level of attendance

Technology & Systemscontinued

technology of accommodation fixtures across the park can also have a positive impact on operators’ profit margins: replacing traditional restroom plumbing fixtures with low-flow units and swapping out new higher-efficiency ice machines and freezers for old ones in concession stands can similarly cut costs and increase the company’s brand value by appealing to the increasingly environmentally conscious consumer.

Visitor experienceThe overall experience a visitor has planning and carrying out their visit to an

amusement park can have a significant impact on the park’s brand value. As such, the industry is constantly innovating technological advancements to improve secondary aspects of the park experience, such as ticketing, waiting in line and food and beverage purchases. Most major parks allow visitors to purchase tickets online, reducing wait times at the entrance to the park. Similarly, many parks have developed ticketing technologies that enable visitors to purchase enhanced tickets; with these tickets, guests may pay more to skip long lines for popular attractions.


Volatility vs Growth

Reve

nue

vola

tility

* (%

)

1000

100

10

1

0.1

Five year annualized revenue growth (%)–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Amusement Parks

Level The level of Volatility is Medium



Regulation & Policy Regulation of the Amusement Parks industry is mainly related to public safety, including regular maintenance and inspection of rides. Federal and state government regulations tend to distinguish between two types of rides: fixed-site rides, which are generally found in theme parks, and mobile rides, which are generally associated with carnivals or shopping centers. The federal Consumer Product Safety Commission only has authority over mobile amusement rides. Some states, such as Missouri, Utah and the District of Columbia do not require any regular inspections.

State health departments may further impose regulations on industry operators to ensure the safety of the parks and of individual attractions. Amusement parks’ safety and health standards are of particular public concern because children and teenagers are the industry’s primary target audience.

Parks must comply with the Fair Labor Standards Act in the employment of individuals at their parks, and Occupational Health and Safety Administration regulations will also apply to employees who operate or work in the vicinity of rides. Federal access regulations, such as the Americans with Disabilities Act will also apply to the park’s treatment of visitors and employees. Concession services within water parks will also be subject to federal

and state health regulations. Moreover, any parks that serve alcohol on their grounds (such as Cedar Fair’s Soak City) will face additional regulation.

Water parks garner special attention from regulators due to the potential risks open bodies of water pose. For example, the federal government passed the Virginia Graeme Baker Pool and Spa Safety Act, designed to ensure the safety of public and private pools and spas. This act was spurred by Consumer Product Safety Commission findings that 5- to 9-year-old children had the highest frequency of suction entrapment incidents in swimming pools and spas. Accordingly, the act mandates a standard that all pool and spa drain covers must meet in order to reduce the risk of such incidents. All parks and features that have been built over the past five years have been held to this standard, and features that were built prior to the act’s passage must be retrofitted with protective covers.

Regulation is on the rise due to growing concern about the safety and maintenance standards of rides, especially since children and teenagers are the target audience for parks. Increasing regulation raises costs for amusement parks, although these costs are not burdensome enough to deter a significant number of potential new players from entering the industry.

Revenue Volatilitycontinued

by children than in the past. This industry has experienced average revenue volatility, defined as the average absolute change in revenue per year, of

6.6% over the five years to 2016. Much of this, however, is the result of massive revenue growth in 2011 following several years of subdued consumer spending.

Level & Trend The level of Regulation is Medium and the trend is Increasing



Industry Assistance Amusement parks do not receive direct or special assistance from the federal government. The industry does, however, benefit from general tourism-related promotional expenditure. The International Association of Amusement Parks and Attractions (IAAPA) is the major industry association. It was founded in 1918 and represents more

than 4,500 facility, supplier, and individual members from more than 90 countries. The IAAPA aims to assist its members improve their efficiency, marketing, safety, and profitability. It has a particular emphasis on assisting its members in maintaining the highest possible professional and operating standards and safety.

Level & Trend The level of Industry Assistance is None and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises Employment Exports ImportsWages ($m)

Domestic Demand

Consumer spending

($b)2007 13,556.8 7,761.9 634 550 101,247 -- -- 2,726.5 N/A 10,041.62008 12,971.7 7,531.6 524 438 110,297 -- -- 2,739.5 N/A 10,007.22009 11,353.6 6,736.3 536 451 106,831 -- -- 2,519.2 N/A 9,847.02010 11,187.2 5,596.7 551 461 115,943 -- -- 2,661.4 N/A 10,036.32011 13,317.1 6,891.1 564 477 114,022 -- -- 2,775.5 N/A 10,263.52012 13,284.3 6,955.3 556 470 119,926 -- -- 3,112.3 N/A 10,413.22013 14,035.1 7,368.4 578 489 122,492 -- -- 3,256.4 N/A 10,590.42014 15,106.0 7,981.3 591 497 127,550 -- -- 3,487.7 N/A 10,875.72015 15,634.6 8,704.2 613 514 131,552 -- -- 3,612.0 N/A 11,210.52016 15,951.5 8,827.7 622 519 134,623 -- -- 3,701.3 N/A 11,542.92017 16,347.0 9,034.2 641 536 137,403 -- -- 3,790.0 N/A 12,009.72018 16,732.7 9,327.1 653 543 140,843 -- -- 3,892.7 N/A 12,370.42019 17,117.6 9,489.8 672 560 143,385 -- -- 3,975.8 N/A 12,653.52020 17,540.6 9,721.4 686 569 147,640 -- -- 4,099.7 N/A 12,945.32021 17,932.1 9,918.3 703 584 150,560 -- -- 4,192.0 N/A 13,270.9Sector Rank 8/19 6/19 17/19 17/19 6/19 N/A N/A 8/19 N/A N/AEconomy Rank 526/1370 301/1370 942/1370 945/1370 280/1370 N/A N/A 433/1370 N/A N/A

IVA/Revenue (%)

Imports/ Demand

(%)

Exports/ Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2007 57.25 N/A N/A 133.90 20.11 159.70 26,929.19 0.052008 58.06 N/A N/A 117.61 21.12 210.49 24,837.48 0.052009 59.33 N/A N/A 106.28 22.19 199.31 23,581.17 0.052010 50.03 N/A N/A 96.49 23.79 210.42 22,954.38 0.042011 51.75 N/A N/A 116.79 20.84 202.17 24,341.79 0.052012 52.36 N/A N/A 110.77 23.43 215.69 25,951.84 0.052013 52.50 N/A N/A 114.58 23.20 211.92 26,584.59 0.052014 52.84 N/A N/A 118.43 23.09 215.82 27,343.79 0.052015 55.67 N/A N/A 118.85 23.10 214.60 27,456.82 0.052016 55.34 N/A N/A 118.49 23.20 216.44 27,493.82 0.052017 55.27 N/A N/A 118.97 23.18 214.36 27,583.09 0.052018 55.74 N/A N/A 118.80 23.26 215.69 27,638.58 0.052019 55.44 N/A N/A 119.38 23.23 213.37 27,728.14 0.052020 55.42 N/A N/A 118.81 23.37 215.22 27,768.22 0.052021 55.31 N/A N/A 119.10 23.38 214.17 27,842.72 0.05Sector Rank 2/19 N/A N/A 10/19 12/19 2/19 11/19 6/19Economy Rank 75/1370 N/A N/A 1128/1370 517/1370 25/1370 1155/1370 301/1370

Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Consumer spending

(%)2008 -4.3 -3.0 -17.4 -20.4 8.9 N/A N/A 0.5 N/A -0.32009 -12.5 -10.6 2.3 3.0 -3.1 N/A N/A -8.0 N/A -1.62010 -1.5 -16.9 2.8 2.2 8.5 N/A N/A 5.6 N/A 1.92011 19.0 23.1 2.4 3.5 -1.7 N/A N/A 4.3 N/A 2.32012 -0.2 0.9 -1.4 -1.5 5.2 N/A N/A 12.1 N/A 1.52013 5.7 5.9 4.0 4.0 2.1 N/A N/A 4.6 N/A 1.72014 7.6 8.3 2.2 1.6 4.1 N/A N/A 7.1 N/A 2.72015 3.5 9.1 3.7 3.4 3.1 N/A N/A 3.6 N/A 3.12016 2.0 1.4 1.5 1.0 2.3 N/A N/A 2.5 N/A 3.02017 2.5 2.3 3.1 3.3 2.1 N/A N/A 2.4 N/A 4.02018 2.4 3.2 1.9 1.3 2.5 N/A N/A 2.7 N/A 3.02019 2.3 1.7 2.9 3.1 1.8 N/A N/A 2.1 N/A 2.32020 2.5 2.4 2.1 1.6 3.0 N/A N/A 3.1 N/A 2.32021 2.2 2.0 2.5 2.6 2.0 N/A N/A 2.3 N/A 2.5Sector Rank 9/19 2/19 12/19 12/19 3/19 N/A N/A 4/19 N/A N/AEconomy Rank 688/1370 533/1370 688/1370 765/1370 440/1370 N/A N/A 506/1370 N/A N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

COMBINATION PARK A water park that has both indoor and outdoor attractions

DESTINATION PARK A water park that attracts visitors from outside the regional area who visit the location for the specific purpose of going to the water park.

IN-PARK EXPENDITURE Average amount of money spent per visitor on tickets, food, beverages, souvenirs and other in-park purchases.

OUT-OF-PARK REVENUE The amount of money generated outside of amusement parks, including hotel rooms, food, merchandise and other complementary activities located outside of the park gates.

SEASON PASS A ticket that allows visitors multiple entries over a defined period or season for one price.


Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossary continued

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IBISWorld Industry Report 71311 Amusement Parks in the US

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Transcript of IBISWorld Industry Report 71311 Amusement Parks in the US