U.S. Amusement Park Industry: Economy, Jobs & Competition

Introduction

According to the International Association of Amusement Parks and Attractions (IAAPA), 319 million people attended America's 450 amusement parks in 2001, generating over $9 billion in revenues ("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 cannot imagine the world without Mickey Mouse or the Tasmanian Devil — America's amusement parks have brought these characters to life and created a lucrative industry in the process.

The purpose of this essay is to provide an in-depth analysis of the amusement industry. It begins by clearly defining the amusement industry, then examines the industry's impact on Gross Domestic Product. Employment factors and the major players that make up the market are also discussed. A major focal point is the competition that companies within the industry face and the types of investors that have interests in this particular sector. A SWOT analysis is provided along with an examination of the supply and demand dynamics of the amusement industry.

Defining the Industry

The amusement and recreation industry includes more than 102,000 establishments covering 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: sports, performing arts, and amusement ("Amusement and Recreation Services," 2000).

The sports segment of the industry includes professional sports as well as establishments that offer sports amenities and services to amateur athletes. Commercial sports clubs manage professional and amateur athletic clubs and promote athletic events. Sports featured in these establishments include boxing, baseball, basketball, ice hockey, football, soccer, wrestling, and auto racing. Both professional and amateur companies involved in sports promotion are part of this segment. Sports establishments in which gambling is allowed — such as dog, auto, and horse racetracks — are also part of this segment ("Amusement and Recreation Services," 2000).

The sports segment also includes physical fitness amenities characterized by exercise and weight-loss programs, health clubs, gyms, and day spas. Many of these establishments offer aerobic dance, exercise classes, and yoga. Other businesses within the sports segment include bowling centers that rent lanes and equipment for duckpin, tenpin, or candlepin bowling. Sports and recreation clubs that are available only to members and their guests — such as some golf, yacht, tennis, racquetball, hunt, and gun clubs — also fall within this segment ("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 represent performers and assist them in obtaining new work, while booking agencies create performance engagements for theatrical groups and singers. Costume design companies create costumes for productions, and lighting and stage crews manage the technical aspects of productions ("Amusement and Recreation Services," 2000).

Musical performers within the performing arts segment include dance bands, popular music artists, jazz musicians, orchestras, and rock and roll bands. The segment also includes dance schools, studios, and halls, as well as parks that provide entertainment through shows, mechanical rides, and refreshment stands. Other amusement and recreation services may include day camps, go-cart rentals, fireworks display services, rodeos, riding stables, ski lifts, waterslides, skating rinks, and establishments offering rental sporting goods ("Amusement and Recreation Services," 2000).

For the purposes of this discussion, the focus is on the amusement segment of the industry. According to the Bureau of Labor Statistics, the amusement segment is composed of an assortment of establishments that provide amusement for large numbers of customers. Some businesses within this segment supply video games, pinball machines, and gaming machines to amusement parks, arcades, and casinos. This segment also consists of casinos and gaming establishments that provide off-track betting — a quickly emerging part of the industry. In addition, the segment includes amusement and theme parks ranging in size from local carnivals to multi-acre parks, which may feature 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." 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 — 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, which holds the largest market share in the industry. The industry qualifies as an oligopoly because there are significant barriers to entry, the first of which is capital. Parks spend millions of dollars to build and maintain theme parks, and in some cases these parks do not attract sufficient patrons, meaning there is no return on investment and investors lose money. This environment discourages entry and results in only a small number of companies willing to take the associated risks.

GDP Contribution and Economic Impact

The Gross Domestic Product is defined as the monetary value of all goods and services produced by an economy over a specified period of time. According to the Oxford Dictionary of Business, GDP is measured in three ways: on the basis of expenditure (the value of all goods and services bought, including capital expenditure, consumption, increases in the value of stocks, government expenditure, and exports less imports); on the basis of income (income created by employment, self-employment, rent, company profits, and stock appreciation); and on the basis of value added by industry (the value of sales minus the costs of raw materials) ("Dictionary of Business," 1996).

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

Statistics from the Bureau of Economic Analysis show that in 1990, amusement and recreation services contributed $36.5 billion to GDP, compared with $80.8 billion in 2000. As a percentage of GDP, the amusement and recreational segment represented approximately 0.08% from 1997 through 2000 ("Gross Domestic Product by Industry," 2000). The Bureau of Labor Statistics projected that U.S. real GDP would exceed $8.5 trillion by 2006 — an increase of more than $1.6 trillion over the decade between 1996 and 2006 (Su, 2001). According to the Bureau of Economic Analysis, real GDP increased at an annual rate of 1.3% in the second quarter of 2002, following a 5.0% increase in the first quarter.