Theme Parks - UK - January 2008

Table of Contents

Issues in the Market

• Main issues
• Definition
• Abbreviations

Market in Brief

• A period of fluctuating fortunes
• Utility companies and legislators add to woes
• Merlin makes its mark
• Two thirds have been to a UK theme park
• Priorities for parks: improve food and queues
• Family and friends
• Further rationalisation on the way?

Internal Market Environment

• Key points:
• A growing burden of red tape
• Minimum wage increases cause problems with differentials
• Gambling Act revisions impact on certain types of park
• Greater onus on fire safety
• Growth in CRB checking brings additional costs
• Insurance costs on the up
• Rising energy costs add to overheads
  • Figure 1: Trends in the price of electricity for the non-domestic sector, 2002-07
• Marketing effectiveness
  • Figure 2: Theme parks ever visited, by region, October 2007

Broader Market Environment

• Key points:
• Credit crunch to see consumer spending slow down?
  • Figure 3: Trends in personal disposable income and consumer expenditure, 2002-12
• Few opportunities to target an ageing population…
  • Figure 4: Trends in the age structure of the UK population, 2002-12
• …while lifestage trends look equally bleak
  • Figure 5: Trends in UK adult population, by lifestage, 2002-12
• More ABs to help boost attendance and spending?
  • Figure 6: Forecast adult population trends, by socio-economic group, 2002-12
• Households getting smaller
  • Figure 7: Trends in UK household composition, 2002-12
• The weather remains unpredictable
  • Figure 8: UK weather trends, 2002-07

Competitive Context

• Key points:
• Competition for the leisure pound
  • Figure 9: Consumer expenditure on selected leisure activities, 2002-07
• Theme parks unique in being so reliant on weather
• Growing affluence leads to higher expectations
• Families have least weekend leisure time - time for a rethink on tickets?
• Theme parks vs other days out
  • Figure 10: Places/attractions visited in the last 12 months, 2007
• Theme parks trumped by more cultural attractions
• Shopping and free venues/attractions provide competition
• Plenty of options for financially challenged
• Getting real works its magic?

Strengths and Weaknesses in the Market

• Strengths
• High barriers to market entry
• Opportunities to develop secondary spend
• Relatively little competition
• New rides and attractions can generate repeat business
• Clearly communicated, unique proposition
• Weaknesses
• Vulnerable to poor weather/climate change
• Growing affluence may mean fewer domestic holidays
• Constant requirement for bigger, better rides
• Difficulties in expanding

Market Size and Forecast

• Key points:
• Weathering the storm?
  • Figure 11: UK theme parks market, by volume and value, 2002-12
• Past market performance
• Present market performance
• Future market performance
• Requirements for success
• Factors used in the forecast

Segment Performance

• Key points:
• Admission and merchandise revenues up, as catering stalls
  • Figure 12: UK theme parks market, by value, by segment, 2002-07
• Overhead pressures force operators to pass on the costs
  • Figure 13: UK theme park admissions revenue trends, 2002-07
• Catering suffers from poor weather
  • Figure 14: UK theme park catering revenue trends, 2002-07
• Healthy eating: dead-end or dead good?
• Visitors like a small memento
  • Figure 15: UK theme park merchandise revenue trends, 2002-07
• Accommodation dominates other revenue
  • Figure 16: UK theme park other revenue trends, 2002-07
• Ride photography still area of growth
• Gaming machines flat

Market Share

• Key points:
• Merlin achieves top sales…
  • Figure 17: Leading UK theme park operators ranked by turnover (latest year)
• …and profits
  • Figure 18: Leading theme park companies ranked by operating profit (latest year)

Companies and Products

• Key points:
• Major players
• Merlin Entertainments Group Ltd
• Tussauds Theme Parks
  • Figure 19: Recent financial performance of Tussauds Theme Parks Ltd, 2003-06
• Tussauds Hotels
  • Figure 20: Recent financial performance of Tussauds Hotels Ltd, 2003-06
• Legoland Windsor
  • Figure 21: Recent financial performance of Legoland Windsor Park Ltd, 2003-06
• Flamingo Land Ltd
  • Figure 22: Recent financial performance of Flamingo Land Ltd, 2003-06
• Drayton Manor Park Ltd
  • Figure 23: Recent financial performance of Drayton Manor Park Ltd, 2004-07
• Paultons Park Ltd
• Gulliver' s
• Gulliver' s World
  • Figure 24: Recent financial performance of Gulliver' s World Ltd, 2003-06
  • Figure 25: Gulliver' s World Ltd turnover, by segment, 2005 and 2006
• Gulliver' s Land
  • Figure 26: Recent financial performance of Gulliver' s Land Ltd, 2003-06
  • Figure 27: Gulliver' s Land Ltd turnover, by segment, 2005 and 2006
• Gulliver' s Kingdom
• Oakwood Leisure Ltd
  • Figure 28: Recent financial performance of Oakwood Leisure Ltd, 2003-06
• Lightwater Valley Attractions Ltd
  • Figure 29: Recent financial performance of Lightwater Valley Attractions Ltd, 2004-07
  • Figure 30: Lightwater Valley Attractions Ltd turnover, by segment, 2004-07
• Prime Resorts Ltd
  • Figure 31: Recent financial performance of Prime Resorts Ltd, 2004-07
• Pleasurewood Hills Ltd
  • Figure 32: Recent financial performance of Pleasurewood Hills Ltd, 2005 and 2006
• Other operators

Brand Communication and Promotion

• Key points:
• Advertising spend by park
  • Figure 33: UK theme parks expenditure on main media advertising, by theme park, 2007*
• Merlin parks' spend towers over rivals
• Smaller parks caught in ' Catch 22' situation
• TV and radio tops for targeting individuals…
• …while direct approach is favoured for groups
• Websites playing important role

Who Visits Theme Parks?

• Key points:
• Theme parks visited
  • Figure 34: Theme parks visited in the UK, 2002-07
• Merlin works its magic…
• …while other parks struggle
• Who has visited a theme park?
  • Figure 35: Theme park visiting in the UK, by demographic sub-group, October 2007
• Broad appeal of parks presents challenges for operators
• The Internet - an essential tool for keeping in touch with visitors
• ' Softer' park or attractions could appeal to older people
• Small number of foreign theme park visitors could be converted?
• Who has been where?
  • Figure 36: Most popular theme parks visited in the UK, by demographic sub-group, 2007
  • Figure 37: Next most popular theme parks visited in the UK, by demographic sub-group, 2007
• Young adults go for parks with excitement…
• …while families go for fun and education
• Legoland hits the AB jackpot
• Theme park visiting combinations
  • Figure 38: Theme parks visited in the UK, by most popular other theme parks visited, October 2007
  • Figure 39: Theme parks visited in the UK, by next most popular other theme parks visited, October 2007
• Merlin' s virtuous circle
• Northern parks compete with each other but also Alton Towers

Increasing the Attraction

• Key points:
• What would make visits more enjoyable?
  • Figure 40: Factors that would make theme park visits more enjoyable, October 2007
• Room for improvement
• Catering hits a raw nerve
• Queues: a fact of life but can anything be done?
• Pay-as-you-go alternative finds favour
• What would make visits more enjoyable? - demographic analysis
  • Figure 41: Most popular factors that would make theme park visits more enjoyable, by demographic sub-group, October 2007
  • Figure 42: Next most popular factors that would make theme park visits more enjoyable, by demographic sub-group, October 2007
• Food and drink value high up the menu for families and lower-income consumers
• Pay more to jump the queues?
• Pay-as-you-go could help families
• Better quality toilet facilities particularly important to women
• What would make visits more enjoyable? - visitors and non-visitors
  • Figure 43: Factors that would make theme park visits more enjoyable, by UK theme park visiting, October 2007
• Theme park visitors want more reasonable catering prices
• What would make visits more enjoyable? - by individual theme park
  • Figure 44: Factors that would make theme park visits more enjoyable, by most popular theme parks visited in the UK, October 2007
  • Figure 45: Factors that would make theme park visits more enjoyable, by next most popular theme parks visited in the UK, October 2007
• Merlin needs to wave its magic wand over catering?
• Northern parks rated poorly
• Southern park visitors attracted by queue jumping
• Pay-as-you-go tonic for Legoland?
• Combinations of incentives
  • Figure 46: Most popular combinations of factors that would make theme park visits more enjoyable, October 2007
  • Figure 47: Next most popular combinations of factors that would make theme park visits more enjoyable, October 2007
• Catering value part of overall visitor experience