THE push into theme park development, despite the massive initial capital outlay, is intended to create a “virtuous cycle” whereby the park receives a regular stream of visitors that establishes it as a famous attraction, which, in turn, attracts more visitors. The theme park’s popularity would then indirectly raise land and property values in the surrounding area. As part of the cycle, the new jobs created by the leisure and hospitality industry would also ensure that the properties are well-occupied by workers as well as visitors.

“Themed attractions focus on the long-term economic development of Malaysia’s leisure and tourism industry to deliver a multiplier effect across several sectors, such as retail, food and beverage, and hotels. They also complement the surrounding commercial and residential developments,” Themed Attractions and Resorts Sdn Bhd managing director Tunku Ahmad Burhanuddin tells The Edge.

Sunway Bhd CEO of shopping malls and theme parks H C Chan says that each visitor could easily spend as much, if not more, on food and beverage and merchandise as they do on an entry ticket. Last year, Sunway Lagoon recorded 1.5 million visitors (60% foreign), while the visitor count at the Lost World of Tambun was 700,000 (5% foreign).

Another industry player tells The Edge that established theme parks, in places such as Orlando in the US, do not rely on ticket sales to make money, but on merchandise and food and beverage sales. “The idea is to make customers spend the full day at the theme park and experience it,” he points out.

It is worth noting that several theme parks outside of Kuala Lumpur have been highly profitable over the past few years, such as Bukit Gambang Resort City in Pahang and the Lost World of Tambun in Perak.

Some say that the parks’ dominant market share in those states is simply because competition is limited. Thus, they continue to attract a steady stream of visitors, comprising families with young children, teenagers and tourists.

While intense competition among theme parks is anticipated because of newcomers to the market, existing players may have an advantage in being established brands, which goes a long way towards customer loyalty.

“The first-mover advantage certainly helps establish the park’s status as a key attraction, which helps us in the long run. The state government has been supportive of our endeavours, and the park is proving to be a top destination for locals as well as tourists,” says the general manager of a theme park in a state neighbouring Selangor.

Realising the appeal of the spillover benefits, state-linked developers have begun making inroads into building new theme parks. For example, Perak Corp Bhd’s joint venture with Sanderson Project Development Sdn Bhd for the construction of a 52-acre animation theme park, is set to be the jewel in the crown of PCB’s Bandar Meru Raya township development.

“Incorporating theme parks as a major component of the integrated township model would mean that the residents of surrounding areas form its core customer base, and this does not include the influx of foreign visitors. The main risk here is the execution of the theme park itself and potential cost overruns,” he adds.

Another strategy would be to combine the theme park with a retail component, such as an adjoining shopping mall. This provides the mall with steady visitor traffic, for which retail tenants would be more than willing to pay higher rentals.

This gives developers the advantage of enjoying revenues from both sources — visitors to the park, and the recurring income generated by the rental of retail space. This model was pioneered by the Sunway Group’s long-standing Sunway Pyramid and Sunway Lagoon developments, and other companies have since followed suit.

One example is i-Bhd’s i-City development, which is set to have a mall with one million sq ft of leasable area. The mall will complement its Leisure Park@i-City theme park that boasts four attractions — City of Digital Lights, Snowalk, WaterWorld and FunWorld.

In a similar move, the IOI Group’s IOI City Mall, which will be launched this month, will boast a mall with 1.4 million sq ft of net leasable area, and District 121, a 70,000 sq ft adventure park.

A check on the finances of a sample of profitable theme park operators shows their similar characteristics. Bukit Gambang Resort City (BGRC), the Lost World of Tambun and Sunway Lagoon are all involved in water park operations, and have first-mover advantage in their respective locations.

Others, such as i-City and Melaka Wonderland, have managed to attract a growing number of visitors in spite of existing theme parks nearby, and are indicative of the stiff competition in the leisure segment. Not surprisingly, many of these theme parks have posted increasing profits over the past three years.

Sentoria Group Bhd, which owns and operates BGRC, states in its annual report that in 2013, the theme park saw a 7% year-on-year increase in the number of visitors to 651,000. Total spending per visitor also increased by 11% y-o-y to RM37.80, underlining the theme park’s success.

Meanwhile, i-Bhd says that its Leisure Park@ i-City has been generating profits since its first year of launch and has achieved double-digit revenue growth annually since 2009. In its annual report, the group mentions that the theme park played a major part in driving and growing traffic to i-City itself, which now averages 90,000 visitors a week.

With the spillover effect of its theme park seeming to boost the quality of i-City’s surrounding properties, the group is a prime example of a developer reaping the benefits of a combined retail and theme park development and its potential to generate returns.

Noteworthy, last month, soon-to-be-listed leisure-based Only World Group Holdings Bhd (OWG) CEO Datuk Richard Koh Cheng Keong said that it plans to raise RM50 million through its initial public offering in December 2014. The group owns three water parks under the Wet World brand. It also operates the two family attractions in Genting Highlands — Haunted Adventure and Ripley’s Believe It or Not.

 Recently, Koh, who owns the Wet World Wild Adventure Park in Batu Feringghi, Penang, in his personal capacity, said that the park had closed last month, 10 months after it commenced operations, due to unfavourable weather conditions. It is unclear how long the water theme park will remain closed.

This article first appeared in The Edge Malaysia Weekly, on November 10 - 16, 2014.

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