International Association of Amusement Parks and Attractions

¶ … International Association of Amusement Parks and Attractions (IAAPA) 319 million people attended Americas 450 amusement parks, which grossed over $9 billion in revenues in the year 2001.1 ("The U.S. Amusement Industry," 2002) Amusement Parks are an essential part of American Life and have been for decades. Theme Parks blanket the country and add an interesting dynamic to the American economy. Many of us can't imagine the world without Mickey Mouse and the Tasmanian devil. America's amusement parks have brought these characters to life and created a lucrative industry in the process.

The following discussion will aid us in understanding the United States Amusement Industry.

The purpose of this essay is to provide an in-depth analysis of the Amusement Industry. We will begin by clearly defining the Amusement Industry. Then we will discuss the industry's impact on Gross Domestic Product. Employment factors relating to the industry and the Major Players that make up the market will also be discussed. A major focal point of the essay will be the competition that companies within the industry face and the types of investors that have interests in this particular industry.

SWOT analysis of the industry will also be provided along with an analysis of the supply and demand of the Amusement Industry. Let's begin our discussion with a definitive view of the industry.

Defining the Industry

The amusement and recreation industry includes more than 102,000 establishments; these establishments cover a large range of attractions from theme parks to fitness centers. The industry is composed of any activity that occupies a person's free time, but excludes the viewing of motion pictures and rentals. The multifaceted range of activities presented by the amusement and recreation industry can be classified into three large groups including sports, performing arts, and amusement.("Amusement and Recreation Services," 2000)

The sports segment of the industry includes professional sports, as well as establishments, which offer sports amenities and services to amateur athletes. In addition, commercial sports clubs manage professional and amateur athletic clubs and promote athletic events. There are various types of sports that can be found in these establishments, including boxing, baseball, basketball, ice hockey, football, soccer, wrestling, and auto racing. Both professional and amateur companies involved with sports promotion are a part of this segment industry. In addition, sports establishments' in which gambling is allowed, such as dog, auto, and horse racetracks are a part of this segment of the industry.

Amusement and Recreation Services," 2000)

Moreover, the sports segment of the industry also includes physical fitness amenities that are characterized by exercise and weight loss programs, health clubs, gyms, and day spas. Many of these establishments also offer aerobic dance, exercise classes and yoga. Other amusement and recreation businesses within the sports segment include bowling centers that rent lanes and equipment for, duckpin, tenpin or candlepin bowling. These services can be public or private. Sports and recreation clubs that are only available to members and their guests include some golf, yacht, tennis, racquetball, hunt, and gun clubs. ("Amusement and Recreation Services," 2000)

The Performing Arts segment facilitates a wide variety of businesses and groups involved in live theatrical and musical performances. Theatrical production companies, manage all aspects of producing a play or theater event, including employing actors and actresses. Agents also represent actors and assist them in getting new jobs. These booking agencies create performance engagements for theatrical groups and singers. In addition Costume design management companies create costumes for productions. ("Amusement and Recreation Services," 2000)

Also included in the performing arts segment are lighting and stage crews that manage the technical aspects of productions.

The performers of musical entertainment include dance bands, popular music artists, jazz musicians, orchestras, and rock and roll bands. ("Amusement and Recreation Services," 2000)

The performing arts segment can also include dance schools, studios, and halls, which provide parks for the purpose of entertaining. Some of these establishments have shows, mechanical rides, and refreshment stands. The other amusement and recreation services may include day camps, go-cart rentals, fireworks display services, rodeos, riding stables, ski lifts, waterslides, skating rinks, and also establishments offering rental sporting goods. ("Amusement and Recreation Services," 2000)

For the purposes of this discussion we will focus on the Amusement Segment of the industry. According to the bureau of labor and statistics the amusement segment of the industry is composed of an assortment of establishments, which provide amusement for a large number of customers. Some of these businesses within the industry supply video games, pinballs, and gaming machines to amusement parks, arcades, and casinos. This segment consists of casinos and gaming establishments that provide off-track betting and represent a quickly emerging part of this industry segment. ("Amusement and Recreation Services," 2000)

In addition this segment also includes amusement and theme parks, which range in size including local carnivals to multi-acre parks. These parks or carnivals may have shows, mechanical rides, and refreshment stands. ("Amusement and Recreation Services," 2000)

According to the International Association of Amusement Park Attractions " the amusement industry is a responsible, regulated one. Besides a thorough set of internal checks, each facility is subject to one or more layers of independent examination. According to the CPSC, 42 of the 50 states regulate parks. Of the eight states that don't, the legislature in one is studying the issue (AL), five have a few facilities each at most (AZ, KS, MS, SD, UT), and two have none (ND, MT). In addition, the American Society for Testing and Materials (ASTM), an independent standards-writing body, has developed ride safety standards in conjunction with the industry and other interested parties for over two decades." ("Media and News" 2002)

The Amusement Park Industry would be defined as an oligopoly. An oligopoly is a market in which a limited number of sellers follow the lead of a single major firm. (Scott 1997.)

In this case the major firm is Walt Disney. Disney has the largest market share in the industry. The industry is an oligopoly because there are significant barriers related to entering this industry; the first of which is money. Parks spend millions of dollars to build theme parks and maintain them. In some cases these parks do not attract patrons, which means that there is no return on investment and investors loose money. This creates an environment in which only a small portion of companies are willing to take the risk associated with investing in an amusement park and so an oligopoly is created.

Comparing GDP

The Gross Domestic Product is defined as the fiscal value of all the goods and services shaped by an economy over a specified period of time. According to the Oxford Dictionary of Business, the GDP is measured in three ways:

On the basis of expenditure, meaning the value of all goods and services bought, including capital expenditure, consumption, increase in the value of stocks, government expenditure, and exports less imports.

On the basis of income, meaning income created by employment, self-employment, rent, company profits (public and private), and stock appreciation.

On the basis of the value added by industry, meaning the value of sales minus the costs of raw materials. ("Dictionary of Business" 1996)

The Bureau of economic analysis writes that, the gross domestic product by industry accounts present estimates of quantity and price change for GDP by, value added by industry, and estimates for gross output by industry and for intermediate inputs by industry. These estimates in combination with the current-dollar estimates can be used to decompose an industry's real out-put and price growth. (Gross Domestic Product by Industry, 2000)

Statistics provided by the Bureau of Economic Analysis concerning GDP by industry shows that in 1990 the Amusement and Recreations services made up $36.5 billion of the GDP compared to $80.8 billion in 2000. Percentage wise the Amusement and recreational segment made up.08% of the GDP from 1997 until the year 2000.2 (Gross Domestic Product by Industry, 2000)

The Bureau of Labor Statistics projected that U.S. real gross domestic product would exceed $8.5 trillion by 2006, which is an increase of more than $1.6 trillion during the ten years between 1996 and 2006. (Su, 2001) According to the Bureau of economic analysis Gross Domestic Product increased at an annual rate of 1.3% in the second quarter of 2002, according to revised estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 5.0%. (Gross Domestic Product by Industry, 2000)

Employment

The amusement and recreation services industry provided more than 1.7 million jobs in the year 2000. Miscellaneous amusement and recreation services including amusement parks, coin operated amusement devices, public golf courses, membership sports and recreation clubs, and physical fitness facilities, accounted for 3 out of 4 jobs. Even thought the majority of establishments within the amusement and recreation industry are small, over half of all jobs were in establishments that employ over 50 workers. ("Amusement and Recreation Services," 2000)

In the amusement and recreation services industry jobs are held by a huge number of seasonal and part-time workers and by employees who are younger than the average for other industries. The majority of workers are under the age of 35. The majority of the firms in the industry boost hiring in the summer months, and often opt to employ high school- and college-age employees. ("Amusement and Recreation Services," 2000)

It is estimated that about 56% of workers in the industry are employed in the service occupations. Amusement and recreation attendants are the main occupation in amusement and recreation services. These attendants perform a mixture of duties depending on where they work. They can perform such duties as handing out sports equipment, collecting money, providing caddy services and operating amusement park rides..("Amusement and Recreation Services," 2000) Recreation workers organize and endorse activities such as arts and crafts, music, sports, plays, games, social recreation, camping, and hobbies. Schools, theme parks and other tourist attractions or health, sports, and other recreational clubs generally employ these workers. Recreation workers plan organized events to structure leisure time.. ("Amusement and Recreation Services," 2000)

Gaming services workers support the operation of games such as keno, bingo, and gaming table games. They may perform duties such as calculating and paying off the amount of winnings, or collect players' money or chips. The various other service workers can include waiters and waitresses, counter attendants, serving workers, and bartenders, all of these employees work at amusement establishments. ("Amusement and Recreation Services," 2000)

Building, grounds cleaning, and maintenance jobs may include building cleaning workers, who clean up when shows or sporting events are over. They are also accountable for the daily upkeep of various facilities at the parks. Landscaping and grounds workers maintain athletic fields and golf courses. These employees preserve artificial and natural turf fields, mark boundaries, and even paint team logos. They are also responsible for mowing, watering, and fertilizing natural athletic fields and vacuuming and disinfecting the artificial fields. Protective service occupations include security guards and surveillance officers, who patrol the property and guard against vandalism, theft, and illegal entry. ("Amusement and Recreation Services," 2000)

The bureau of labor and statistics estimated that about 9% of all jobs in this industry are in sales and related occupations. The largest of these occupations is made up cashiers. The bureau also reports that, "another 9% of jobs in this industry are in office and administrative support occupations. Receptionists and information clerks, one of the larger occupations in this category, answer questions and provides general information to patrons." In addition large occupations in this group may include general office clerks, secretaries and administrative assistants.

Management, business, and financial operations occupations make up 6% of employment in this industry. Managerial duties in the performing arts include marketing, business management, event booking, fundraising, and public outreach. Recreation supervisors and park superintendents oversee personnel, budgets, grounds and facility maintenance, and land and wildlife resources." ("Amusement and Recreation Services," 2000)

Jobs in amusement and recreation services are more likely to be part time than are those in other industries. In fact, the average non-supervisory worker in the amusement and recreation industry worked 25.9 hours a week in 2000. Many types of amusement and recreation establishments dramatically increase employment during the summer and either scale back employment during the winter or close down completely. Workers may be required to work nights and holidays because most establishments are busiest during major holidays..("Amusement and Recreation Services," 2000)

Earnings in amusement and recreation services are below the averages of other industries, this is because of the large number of part-time and seasonal jobs the industry provides. In fact, "Non-supervisory workers in amusement and recreation services averaged $262 a week in 2000, compared with $474 throughout private industry. Wage and salary jobs in amusement and recreation services are projected to increase about 35% over the 2000-10 period, more than double the rate of growth projected for the entire economy." ("Amusement and Recreation Services," 2000)

It is believed that the shifting demographics of the Nation also will have a major impact on industry employment in the future. For instance, amusement and recreation services are expected to progressively target the growing elderly population. As a result, employment opportunities may be better in such establishments, such as cruise ships and golf courses that serve people between the ages of 50 and 75. Additionally experts declare that the "Continued growth in hospital and hotel fitness centers and instructional exercise programs, especially those designed and marketed for retirees, also should lead to more job openings." Moreover, the bureau of labor and statistics asserts that, "growth also is expected in those amusement and recreation services, such as health spas and fitness centers, that cater to younger adults in their 20s and 30s with steadily rising incomes..("Amusement and Recreation Services," 2000)

Working Conditions

Many in this industry work outdoors, whereas others may work in hot, crowded, or noisy conditions. Some jobs, such as those at fitness facilities or in amusement parks, involve some manual labor and, thus, require physical strength and stamina. Also, athletes, dancers, and many other performers must be in particularly good physical condition. Many jobs include customer-service responsibilities, so employees must be able to work well with the public..("Amusement and Recreation Services," 2000)

In 1999, cases of work-related illness and injury averaged 6.7 for every 100 full-time workers, higher than the average of 6.3 for the entire private sector. Risks of injury are high in some jobs, especially those of athletes. Although most injuries are minor, including sprains and muscle pulls, they may prevent an employee from working for a period.. ("Amusement and Recreation Services," 2000)

Major Companies

Walt Disney dominates the amusement park industry. Some other major players in the industry are Paramount, Anheuser Busch, Six Flags Parks, Universal Theme Parks and Legoland. In few of these companies including Paramount, Disney and Universal also have interest in the television and film industries.

Disney has locations in Florida and California including Disney world and Disney Land. The Busch theme parks are part of a conglomerate, which includes Busch Gardens, Sea World, Water Country, Discovery Cove, Adventure Island and Sesame Place. The Busch theme parks are located in Virginia, Florida, California and Pennsylvania. Six Flags owns 36 parks throughout the country including parks in Georgia, Texas and New Jersey. In addition Paramount and Legoland have parks in Virginia and California respectively.

Import/Export Component

The whole concept of amusement parks was imported to America from medieval Europe. In 1983 Disney exported the idea of Disney Land to Tokyo, Japan. Disney also has a theme park in Paris, which is one of Europe's premiere attractions. Disney also plans to open a Disneyland in Hong Kong.

Many of the parks have also imported employees from various countries. Busch Gardens' employs hundred of people from places like Ireland, Italy and Germany. These employees provide the park with entertainment and arts and crafts from their respective countries. This gives the park an authentic feel and really allows visitors to experience the "old country" without actually having to visit. Theme parks also import crafts and architectural designs from other countries.

Competition within the Industry

Most of the competition within the industry exists in California and Florida. In California, Disney and Legoland compete. In Florida the major players are Busch, Disney and Universal.

These companies compete by building new rides such as roller coasters or other attractions. They also compete by engaging in price wars and by allowing patrons to print out etickets from their personal computers this eliminates the need for guest to stand in lines to enter the park.

In April of 2001 Legoland launched a 20 million advertising campaign in an effort to attract visitors. "This new campaign demonstrates that Legoland Parks are a perfect place for families for hands-on and minds-on experiences," said Christian Korbes, vice president of Global Family Attractions at Lego. (Dolbow, 2001)

Though most of the competition in the amusement industry exists in these two states, the amusement parks of the Midwest are also very competitive. There are four parks in the region that compete including; Paramount's Kings Island in Mason, Cedar Point in Sandusky, Six Flags Kentucky Kingdom in Louisville and Six Flags Ohio.

It has been reported that the owners of the four parks are willing to risk millions in marketing and production because the seasonal theme park business is a competitive industry in the Midwest market. (Aldridge 2001)

This fact is especially true in Ohio, where more than 10 million people visited amusement parks last year. These visitors were a chief factor in producing Ohio's $27 billion tourism market in 2000.

Scott Dring, who is a spokesman for the Ohio Division of Travel and Tourism, estimates that of the 145 million day trips visitors came Ohio last year, more than 24 million of them visited the regions' amusement parks. Amusement parks in the region also comprised 1.3 million of the 34 million overnight trips taken by Ohio tourists. Ohio government research illustrates that "on average, a family of four in Ohio spends about $152 when they visit a regional amusement park. That compares with the $228 families spend at Orlando parks and the $205 they spend at Anaheim parks." (Aldridge 2001)

Additionally, Six Flags, with 36 parks has been purchasing parks and remodeling older non-Six Flags properties and renaming them. There efforts have created remarkable results. The four new Six Flags properties achieved a 42% increase in attendance and 14% growth in per capita spending in the year 2000. However the companies stocks have been diluted. The shares were cut in half in 1999 as the firm fights to turn a profit while having $2.2 billion in long-term debt and accounting from past business dealings. (Munarriz 2000)

Competition from other Industries

Most of the competition that the amusement industry experiences come from within. However there are external factors that exist that the player in the industry must contend with.

Among these externalities is the competition from other industries. Some of this competition comes from the retail industry because many tourists would rather go shopping than pay $50 dollars to go to an amusement park.

The Type of environment that companies compete in As we've already stated the prime competition in the Amusement Industry is in California and Florida. These environments are very dependent upon the tourism industry. For the purposes of this discussion we will only focus on the Amusement Industry as it relates to the American environment even though Disney competes on an international level.

In Orlando there are several amusement parks that are extremely close to one another including Disney, Sea world and Universal studios. All of these parks are competing for the business of tourists that visit the area. The same situation is true in California but to a lesser degree because the parks cover a wider geographic area but the competition is still fierce.

In other regions of the country such as Williamsburg Virginia there are only two major parks and Anheuser Busch owns them both and one park is a theme park (Busch Gardens) while the other is a water park (Water Country). This type of environment allows Busch to offer season tickets to both parks at a discounted price. Paramount's King's Dominion is also located in Virginia but again the competition is not as fierce as in California and Florida.

Finally the Midwest parks are also extremely competitive but not as reliant upon the tourism industry as parks in other regions of the country.

In the Midwest parks rely more on the regional support of residents as opposed to tourists. People aren't as apt to visit Ohio, as they are to visit Florida or California.

Demand and Supply

As we stated earlier there are hundreds of amusement parks in the U.S. And they incorporate different themes into their parks to entertain guest. The supply is abundant but many of the nations top amusement park attractions are concentrated into a few geographic areas that are only accessible if patrons want to travel. Unless individuals live in these areas the supply of the major amusement parks is limited. However there is a rather abundant supply of smaller amusement parks that are easy to access.

The demand for amusement parks has grown significantly over the past decade even though there has been a slowdown in recent months due to world events and inclement weather. American's definitely want to participate in the fun that an amusement park provides. It is safe to conclude that amusement parks will continue to be the main attraction for tourist and residents of these regions alike.

SWOT Analysis of Industry

Strengths: A major strength of the Industry and its players is location. Many of the major parks in the industry have locations in Orlando, Florida, which is the no. 1 tourist destination in the world. Another strength of the industry is the popularity of theme parks especially among families. Brand recognition is also strength because people want to see the characters in the movies and cartoons that they watch. Finally another major strength of the industry is the diversification of the main players. This diversification provides the companies with an opportunity to spread out their profits so that if one industry that they are involved in is suffering financially they still have industries within the company that are doing well and can substitute for the one that are not.