With the US and Europe fast reaching saturation point, all eyes are turning east, as Simon Fowles discovers…
For a continent where so much is happening so fast, it’s hard to know where to begin a market report on Asia. We could, perhaps, fill a year’s worth of issues on that very subject alone and probably still only scratch the surface. And for that reason this article must only be considered as a general guide to trends.
Similarly, again for reasons of space, the Indian subcontinent – another market with huge potential – has largely been left out, simply to focus on the countries thought of as the ‘Far East.’
It is fair to say that the growth currently being experienced across much of Asia, China in particular, is not only unprecedented but highly exciting. And that’s true of all industries, not just the leisure and amusement ones. Economic analyst PriceWaterhouse Coopers predicts the Asian amusement industry will grow at the fastest average annual rate of anywhere in the world, with close to seven per cent of a total US$7.6bn revenues by 2008, with China leading the way. Attendance at Asian parks is projected to surpass 278 million in 2009, generating average annual revenue increases of 5.9 per cent.
Euromonitor forecasts attendance at Asian parks to increase by as much as 25 per cent by 2010, compared to, say, the US, with a projected 10 per cent increase.
The recently published TEA/ERA 2006 Global Attendance Report highlighted just how important Asia is already in global terms. Nine of the top 25 attended parks worldwide are in the continent, and of these, four are in the top 10: Tokyo Disneyland, Tokyo DisneySea, Universal Studios Japan and Everland in Korea.
The top 10 most attended parks in Asia are rounded out with Lotte World (Korea), Yokohama Hakkeijima Sea Paradise (Japan), Hong Kong Disneyland, Ocean Park (Hong Kong), Nagashima Spa Land (Japan) and Happy Valley (China). These parks recorded 68.3 million visitors in 2006, up 4.4 per cent on the previous year, driven by a surging Hong Kong – with Disney’s new facility and a record year for Ocean Park. The Hong Kong SAR government is actively promoting the area as a family destination and will benefit now that Chinese borders have opened up, particularly in the day trip sector.
Of course, amusements are just one industry fuelling continent-wide growth. Gambling, is another, which expects to generate a tourism boom. The beautiful – and tiny – island of Sentosa, just off Singapore in the South China Sea, will be a major tourist destination resort by 2010, attracting the likes of Universal Studios along the way. Singapore hopes to triple its tourism revenues to US$19bn and double the number of visitors to 15 million by 2015.
Macau has fast supplanted Las Vegas as the gaming capital of the world in the past five years or so it has been allowed to expand, and new territories are expected to open up in the next few years, perhaps paving the way for new larger-scale entertainment facilities with amusement parks and waterparks to follow.
At last year’s IAAPA Asian Expo in Shanghai, IAAPA president Charlie Bray said the “explosive” development of China’s theme parks had seen the country emerge as ‘a driver for the Asia-Pacific region,’ which is set to enjoy the fastest growth of the industry in the next five to 10 years. “The Asia-Pacific is clearly an emerging market for the amusement park and attractions industry. I think the future growth of the region will largely depend on China and India,” he said.
The World Travel and Tourism Council predicts that China will become the second largest travel and tourism economy within 10 years, a staggering statistic by any account. With 1.3 billion locals with bulging wallets they will, of course, need places to go for entertainment.
In terms of parks already developed, Japan, Korea, Hong Kong and China lead the way. It is estimated that there are at least 2,000 amusement parks in China alone, although the industry only started there about 20 years ago. Many of these were built up in economically developed regions such as Beijing, Tianjin, the Yangtze River Delta and the Pearl River Delta. Not all of them, of course, would match ‘internationally accepted standards,’ and reinvestment has been lacking in many properties, but the fact remains that the infrastructure is at least there. Areas such as Shanghai and Shenzen are poised for major investment in the next decade and are among the attractive propositions for the likes of Disney, Universal or Paramount in the pan-Asia region.
Other countries too are seeing significant possibilities in the attractions industry. Malaysia, for instance, has a number of good parks (think Genting or the Sunway Lagoon), while countries such as the Philippines have Enchanted Kingdom as a good benchmark. Waterparks are also taking off, with places like Vietnam getting in on the activity here.
Just 10 years ago, much of Asia was in the depths of economic collapse. Today people’s incomes are well beyond where they were in 1997 in places such as China, Vietnam, Cambodia and Laos. Over 100 million people across east Asia have left the ranks of the extreme poor since 2000 and poverty continues to fall. In fact, many countries are now classed as ‘middle income’ rather than ‘low income’ and at current rates, fewer than 25 million out of around two billion people across east Asia will be living below the poverty line by 2010.
China’s locomotive rise to become the fourth largest economy in the world (it passed Japan in 2004), as well as the third largest trading nation, has brought enormous benefits for global economy, bringing down inflation across the world. The recent $3bn purchase of a 10 per cent stake in US private equity company Blackstone (itself with subsidiary interests in the theme park business) by the Chinese government is evidence of the power the region can wield.
As with any large growth though, this is not without its own perils. Its stock market, for instance, shows classic signs of a balloon, delicately balanced between under-inflation and ready to burst. With cheap currency, a vast trade surplus and low interest rates, growth at the levels seen recently will not be sustainable. But over the next decade the markets will undoubtedly turn much more Chinese.
A recent report by the United Nations Economic and Social Commission confirms that the Asian economies are surging ahead, growing 7.4 per cent this year (down from 7.9 per cent last year), but with that sounded a note of caution.
Discrimination against women costs the region as much as $80bn in economic growth, it suggests, while also noting that factors such as a sudden oil price shock or an avian flu pandemic must be closely monitored.
Of course, the weakening US dollar does not help, and some countries may deliberately try to keep their currencies from strengthening to counter this. If China’s economy were to overheat, and there are small indications that it might, the effects would ripple across Asia and beyond.
It is perhaps unfair to focus largely on China, but the sheer impact it is having on the world’s industries, finances and output is truly outstanding. It is, after all, the world’s largest consumer of and producer of steel and a huge consumer of cement, while iron ore has risen five years in a row. The unexpected and dramatic rate of industrialisation in China caught the global industry by surprise, with insufficient capacity to meet demand forcing costs to rise…a fact not lost on the ride manufacturers trying to rein in the spiralling outlay of producing their rides, with increased prices in steel and oil.
Land prices too have shot up exponentially right across much of Asia. In Seoul, for instance, land prices have risen 15-20 per cent a year for the past three years, while in Shanghai’s suburban Chuansha district commercial property prices have risen tenfold. Many of the prime locations for parks already have them, so any developer has to factor in costs for extra transport and access.
According to the International Energy Agency’s World Energy Outlook, Asia’s importance to world energy markets – and its share in carbon dioxide emissions – will continue to grow. Most demand will notably come from China and India, with slower energy demand growth in Japan and Korea. But China in particular, with 20 of the 30 most polluted cities in the world – a result of its high use of coal for energy – has new environmental issues to consider. And these come at a cost.
A copier’s charter?
Unfortunately, investment in some Asian countries has not been without its problems and copying remains a blot on an otherwise promising landscape. While coin-operated machine manufacturers, like software developers before them, have seen inferior copies of some of their products in Asian locations for years, the practice is not exclusive to them.
A number of amusement ride manufacturers have in recent years complained of low-quality and – more importantly – potentially unsafe copies of their rides turning up at Asian parks. As well as the potential threat to life, there is a threat to professional reputation and less of a willingness from ride makers to invest heavily in R&D.
And it’s not just rides. China’s Shijingshan amusement park recently came under fire from the Walt Disney Company for wholesale infringements of its copyrights. Despite its claims of innocence – “the characters in our park just look a little bit like theirs” – the park has hastily removed some of the more outrageous alleged copies in the light of negative publicity. Even a banner over the entrance invites visitors in as “Disney is too far.” It is one thing to copy Disney’s initiative and unqualified success in the theme parks business but another entirely to do so using slightly amended versions of its portfolio of stars.
The issue of copying remains a sore point for a number of industry organisations and its members but it is one that will surely lessen over the next decade.
Countries like China are keen to prove they are now the acceptable face of investment and will only seek to expand on this as its leisure industry continues to blossom.
And, in a decade’s time, what a beautiful blossom that may prove to be.