Business for Sale Industry Economics
2002 - 2021
2021 - 2027
Attractions parks business revenue is projected to climb significantly in the next five years, due in major part to increased numbers of foreign and domestic visitors, as well as more consumer spending. Mechanical rides, water rides, games, performances, themed displays, refreshment booths, and other attractions that support the production of enjoyment for consumers are offered by amusement and theme park enterprises.
A vast majority of the sector is dominated by five big players: the Walt Disney Company, Universal Parks & Resorts, SeaWorld Entertainment Inc., Six Flags Entertainment Corporation, and Cedar Fair LP. Though the amusement park business is very competitive, the big operators have gained a competitive advantage by using copyrightable intellectual property rights to the films and other forms of entertainment to boost their base of consumers. According to research, industry revenue is projected to shrink on an annualized basis by 10.3% for the next five years, for a total of $10.8 billion.
The market income will be reduced by an extraordinary 62.1% between now and 2020, due to the extraordinary effect of the COVID-19 (coronavirus) pandemic. While many parks have reopened in later months, and a variety of health and safety regulations remains in place, the impact on the local economy remains minimal. As of the duration of the epidemic, certain restrictions such as capacity limitations, social distance, mask regulations, and contact tracking have caused less people to visit the parks.
Also, adoption of these processes has also raised operational expenses related to employees and equipment, which has now cut into industry profit, which was already decreased severely due to revenue loss. Additionally, travel limitations have led to reduced tourist activity, which has put more reliance on parks to bring in people from the local community. In 2021, it is expected that the total economic recovery would be 38.1 percent. However, this number is susceptible to change depending on the pace and effectiveness of mass vaccination efforts in the United States.
Because of the rise in the domestic economy, the sector will see demand growth in the next years, which will result in an increase in the amount of tourist and consumer expenditure. Opening the travel limitations that apply to domestic and international air travel would allow competing businesses to access a greater customer base.
Destination parks in which huge firms like Disney and Six Flags control the sector and advertise them to other nations, like China and the Middle East, are particularly crucial for these firms. In this manner, research predicts industry sales to expand at an annualized rate of 11.2% over the next five years, increasing to $18.4 billion in 2026.
The amusement parks business has seen steady and consistent growth over the last five years, and this is projected to continue for the next five years as well. The amusement and theme park industries provide mechanical rides, water rides, games, shows, themed exhibitions, refreshment booths, and other attractions with the purpose of providing amusement for customers.
As the total amount of money spent on consumer goods and time spent on leisure activities both expand, the amusement park sector benefits from a growing percentage of customers putting their money towards amusement park experiences. Furthermore, a rise in domestic and international travel resulted in higher tourism-related revenue for the business, as the biggest operators prefer to locate in popular tourist destinations, while also supporting the upkeep of hotels and resorts that accompany these parks.
While industry revenue generally maintained constant increase for the bulk of the five-year period, the dramatic effects of the COVID-19 (coronavirus) pandemic all but eliminated revenue growth in this time period. as a consequence, total revenue is projected to fall at an annualized rate of 10.3% during the next five years, resulting in $10.8 billion in total revenue by 2021. A shrinkage of $12.8 billion over the course of the year (with a projected 62.1% reduction) would mean a $62.1 billion dollar value loss in 2020 alone.
Though a great number of companies have returned in July of 2020, the disruption to industry income and output due to capacity constraints, health and safety rules, and many consecutive months of shutdown has been extensive Because the amusement parks sector depends on attendance to generate income, the shutdown of several parks around the country had a significant impact on the national economy in 2020.
One notable, on average, firms that comprise the biggest three in the industry saw a 73.9% decrease in revenues in 2020. Cedar Fair LP, one of the main rivals in the business, has reported a 90.1% fall in attendance at its parks in the company’s latest financial filing for the 2020 fiscal year. In addition, fixed expenses constitute a large proportion of the sector’s expenditures, and as a consequence, industry profit levels are especially subject to ticket sales and income earned per admission.
Thus, significant revenue drops in 2020 are likely to lead to comparable falls in industry profit levels. It will take five years, ending in 2021, for industry profit, which is calculated as profits before interest and taxes, to amount to 2.6% of the total revenue earned by the industry.
This indicates a massive drop, with the rate in 2016 being 22.2 percent. In 2021, it is expected that the industry would see a 38.1% revenue recovery, although this number is susceptible to change because of the pace and effectiveness of mass vaccination initiatives.
Furthermore, the Amusement Parks business is exposed to the pandemic in two ways: It is affected by social distancing norms, which mandate the closing of venues owing to an increased risk of public exposure, but also by macroeconomic trends that impact the demand for amusement parks. Since theme park attendance reflects discretionary expenditures for domestic consumers, the number of people who visit the parks and the industry’s earnings are affected by national unemployment and how it influences consumer spending.
Overall, the increase in unemployment during the year 2020 added 126.4 percentage points to the rise in overall unemployment since the recession. This translated into a 3.8 percent loss in expenditure, which caused a drop in overall economic growth.
The above statement furthermore asserts that the total demand for holiday destinations (regardless of whether a recessionary era seems to be conceivable) is governed by the amount of consumer confidence which may or may not be in the market. In the face of declining consumer confidence, industrial shrinkage is expected to be even worse in 2020, when the confidence index is predicted to drop by 21.2 percent.
Not only do consumer spending habits impact industry demand, but so do national patterns on travel. Due to this, tourist destinations are places where industrial establishments are many. Due to this, travel income varies depending on the shift in air travel between US citizens and overseas visitors.
Furthermore, the worldwide H1N1 pandemic has put a serious dent on airline revenues, with the recent implementation of quarantine standards necessitating reductions in aircraft capacity and preventing international travel to and from certain places US citizens and international visitors are forecast to travel less inbound to the United States than they did in prior years, with the United States seeing a 59.5% and 75.7% reduction in outbound domestic travels and incoming international tourist journeys respectively in 2020 to address these challenges, the business will have to do more than only fight with lower park capacity resulting from social distancing measures, but will also face diminished demand from prospective customers.
In the last decade, larger organizations have found innovative uses for intellectual assets like as film franchises and TV programs to construct bigger and more popular attractions, and these firms have become the leading industry participants in terms of both attendance and profitability.
While many business use several intellectual property (IP) licenses to develop emotional connections with distinct demographic groups, a business gains a larger client base by targeting a more specific audience with an improved customer experience.
For example, Disney just debuted a new attraction themed to the “Star Wars” movies called “Star Wars: Galaxy’s Edge,” which is expected to appeal to an even broader demographic than the initial “Star Wars” fanbase: adult males. The differentiating characteristic of IPs has the effect of encouraging brand loyalty and increasing a company’s competitive advantage.
the industry is highly concentrated, with more than 80% of revenues coming from just a few large competitors, such as Disney, Universal Parks & Resorts, SeaWorld Entertainment Inc., Six Flags Entertainment Corporation, and Cedar Fair LP, which collectively account for over 80% of the total revenue of the industry in 2021.
At the same time, the overall number of industry organizations is expected to fall due to the epidemic, as micro-enterprises (smaller firms) have to depart the sector because of their reduced financial circumstances. According to research, the number of individual firms is projected to fall annually an average by 6.1% between 2016 and 2021, resulting in a total of 367 firms. A further market consolidation will occur as a result of the pandemic, exacerbating existing market concentration.
With the annual variations of seasonal elements like as holidays and weather, many amusement parks are very sensitive to their revenue patterns throughout the year. While Memorial Day brings in a large amount of cash for amusement parks, Labor Day corresponds with a substantial increase in their income as well.
Some parks in the Northeastern United States, where significant snowfall and cold temperatures are prevalent, prefer to have all of their facilities shut down during the winter. In order to generate income in spite of the industry’s cyclical shifts, a number of water parks in the Northeast and Midwest have migrated to include indoor and outdoor parks, which allows for year-round use.
During the five-year period, employment in the amusement park business has declined in tandem with the sector’s collapse. As a result, amusement parks have resorted to a wide range of cost-cutting measures, including compensation reductions, layoffs, and furloughs. While there are full-time workers and a significant number of part-time workers, because of the seasonal nature of the sector, there are more part-time workers than full-time workers.
Between the years 2005 and 2010, a 4.9% yearly decline is expected to occur in the overall number of industry employees, resulting in a net drop of 122,576 people. The total fall, accounting for a 41.4% reduction in 2020, includes the 41.4% reduction recorded in 2020 alone.
In the five years leading up to the onset of the COVID-19 (coronavirus) pandemic, the amusement parks business is predicted to dramatically rebound, with positive growth in revenue, jobs, and visitors. In the long term, the number of domestic trips made by US citizens is forecast to climb at an annualized rate of 9.4 percent each year, while the number of foreign travels into the US is forecast to climb an annualized 22.7 percent per year. This influx of visitor spending is projected to have a big impact on the regional and destination amusement parks’ financial health.
The growing economy will make people feel better and, as a result, lead to greater spending on things that don’t need to be done. These may include hobbies, vacations, and entertainment like going to an amusement park. Indeed, the total demand for industrial services is predicted to grow at an annualized pace of 2.5% over the next five years, and that will lead to considerable revenue growth for service providers.
Research predicts that industry sales will grow at an annualized pace of 11.2% to $18.4 billion during the next five years. Though this huge growth won’t get the industry back to pre-pandemic levels by 2026, this growth nonetheless brings us closer to that objective.
There are significant investment commitments made by the nation’s leading amusement parks to add new rides and attractions. As a result, industry-wide profits are predicted to rise significantly over the next five years as tourists flock to the new features. Hagrid’s Magical Creatures Motorbike Adventure, which is themed to the Harry Potter films, is found within Universal Studios Orlando, which is the home of several rides based on the books and films of the same name.
For the company’s initial Harry Potter attraction, helping improve attendance at Universal Orlando Resort by 50.0% during the attraction’s first three years, it can be expected that the current new attraction will have a similar positive impact on attendance. Industry operators have used new content and sophisticated technology in order to craft more dynamic and memorable experiences for consumers, and this trend is projected to lead to further growth in attendance and expenditure in parks.
The top five operators in the industry’s market share are expected to maintain and perhaps even expand their position in the coming years. In addition, as more consumers in the domestic market flock to large-scale theme parks, the total number of tourists visiting the country will inevitably increase. Although these huge corporations are likely to maintain their worldwide expansion, they are also anticipated to create new parks in areas that are seen as potentially strong growth markets and use their intellectual property to appeal to a broader consumer base abroad.
The majority of smaller firms in the sector will, in all likelihood, keep on being swallowed up by bigger regional competitors who must become bigger and more streamlined in order to compete with firms of like size. Competition in the amusement park market is going to be fiercer as smaller parks find it more impossible to compete without facility renovations, new attractions, or distinct concepts, which normally involve considerable expenditure.
Despite the tendency of consolidation, industry involvement is likely to increase due to increased income. The number of industrial firms is predicted to grow at an annualized rate of 4.1 percent to 448 organizations during the next five years. Employment is expected to grow at a comparable yearly pace of 8.2 percent, bringing the total number of employees to 181,917.
During peak seasons, the business will almost certainly continue to employ a significant number of part-time and seasonal employees. Nonetheless, increased profit levels will be driven by an increase in industry demand. Overall, industry profit is expected to reach 15.5 percent of average sales in 2026, as measured by profits before interest and taxes.
In the domestic market, the business has already reached a very high population penetration rate and a steady customer base, making major increases in attendance and income over the next five years likely to be challenging. Furthermore, as customers grow more picky with an expanded number of alternative alternatives, the sector will likely compete more for customers’ leisure time and discretionary dollars.
For amusement park owners, a high number of returning customers is desired, thus they will likely invest in new rides and attractions to continually improving the customer experience in the hopes of attracting repeat visits. Major tour operators will also likely focus more extensively on the international tourist industry by advertising internationally, particularly in countries with substantial population and wealth growth, such as Asia.
In order to maintain attendance, industry operators are expected to offer more appealing packages and discounts in the future. For the industry’s major theme parks, all-inclusive holiday packages that include resort accommodations as well as park entrance are especially beneficial in retaining clients. As people’s disposable money rises, the simplicity of these packages will undoubtedly become a more attractive and convenient alternative for families looking for vacation ideas.
Mechanical rides, water rides, games, performances, themed exhibitions, refreshment booths, and other attractions are all operated by businesses in this sector. Operators in the industry might also lease space on a contract basis. The amusement park business has reached the end of its life cycle, as shown by a domestic market that is extremely saturated.
Industry value added (IVA), which quantifies an industry’s contribution to overall economic activity, is expected to decline at an annualized rate of 0.6 percent during the ten years through 2026. In comparison, the US economy is expected to grow at an annualized pace of 1.9 percent over the next ten years, well exceeding the contribution of amusement parks to the economy.
While IVA shrinkage is normally associated with an industry in the decline phase of its life cycle, the bulk of this drop was caused by the COVID-19 (coronavirus) pandemic. In reality, IVA dropped 75.5 percent in 2020, while the sector as a whole lost 7.1 percent on average.
Nonetheless, this is an external shock to the industry’s operations rather than a fundamental shift in the industry’s development potential. Furthermore, when mass vaccination efforts spread throughout the United States, park closures and capacity restrictions will be eased, accelerating predicted recovery.
Other components of the business, apart from IVA developments, indicate the mature character of the sector. For example, as the top competitive firms have devised innovative techniques to grow market share, industry concentration has expanded significantly in recent years.
For instance, the utilization of intellectual property, especially from blockbuster film series, has resulted in massive park attractions that generate money through merchandise, food, and general admissions. Despite the heavy consolidation activity, increased industry income and profits in the post-pandemic recovery phase will stimulate new operators to join the market in the five years leading up to 2026.