Theme Park Industry Is Part

¶ … theme park industry is part of a larger industry that needs to be at least briefly mentioned and investigated: the leisure industry. Because of Korea's economic boom, the overall aggregate demand has been on the rise. Average income for the population has grown and, as such, besides investing and saving, the South Koreans have been discovering a new activity: spending. This include leisure activities and, among them, spending time (and money) in a leisure theme park.

If we refer strictly to theme parks as part of the family entertainment industry, the first part of our analysis should be directed at an overall briefing on costs and revenues. One of the characteristics of amusement parks (theme parks included) is the fact that large economies of scale are permitted, however, in order to achieve this, an investor is expected to continuously reinvest, at least for the first couple of years, in the park.

If we only think about the initial costs related to starting the business, we will have an overall picture of the costs involved. Indeed, land and technological equipment come first and we should expect a significant cost here. For example, in terms of technological equipment, the machines must compel with the most recent security norms in the area, so as to avoid unfortunate problems.

Afterwards, one must hire personnel. According to the case study, approximately 75% of all operating expenses were personnel related. We only need to think about the diversity of jobs that we may have in a theme park to get an idea about the costs involved: besides the managerial staff, we would have machine operators, perhaps actors, singers, dancers, etc. guides and so on.

In terms of revenues, 60% came from ticket sales, while beverages, food, souvenirs and merchandise accounted for the rest. As overall demand for theme park was on the rise in South Korea, we would be expecting revenues to slowly rise in the next couple of years, thus reducing the break-even period required.

We have had a brief look at the economic environment and its impact on the theme park industry. Let's have a look at the legal and technological environments, both with repercussions on the industry's profitability.

The legal environment contained a large amount of rules and laws, directed both at regulating the use of land (extensive in this case) and the use of machinery, due to the increased risk for accidents. Especially in this last situation, the industry needed to abide by a series of imposed rules and any misfortune would have serious consequences, including on the park's reputation. A general comment on the legal environment included insurance premiums (although the case study specifically mentions that this was not Asia's case).

These were generally very high, because of the risk they insured, and 100% coverage was mandatory in the industry (one of its particularities).

The technological environment had perhaps just as much an impact on the industry as the economic or legal ones. The most important issue was related to the hardware and software providers for amusement machinery and know-how.

The provider of hardware market, in terms of large machines, was almost an oligopoly, with very few companies providing high quality machines. As a personal opinion, in these cases it is quite likely that the price was fixed between the players at a mutually advantageous level. However, smaller machines were manufactured by a much higher number of competitors and could be manufactured domestically.

The most difficult component for the industry was related to management and know-how. Walt Disney were considered the gurus in this area, but they had extremely large licensing fees, going up to 10% of total revenues. Additionally, they were very selective about picking their partners and forming joint ventures and South Korea seemed to be nowhere on their list.

Finally, the impact of the social environment needs to be discussed. Five different market segments had been identified, but the industry seemed to cover almost any area of the demographical spectrum, ranging from senior citizens to children and to executives.

The fact that there was such a broad area of interest meant that the park's message had to reach everyone, so that customer satisfaction would be maximized. In this sense, the theme parks needed to extend their range of products and services offered as far as possible. Advertising was also a serious issue, with more than 10% of total revenues spent.