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Amusement Parks: Serious business - Views on News from Equitymaster
 
 
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  • Sep 15, 2000

    Amusement Parks: Serious business

    Infotech, Communication and Entertainment form the golden triangle of investments in the market currently. In the USA, which has the most developed entertainment market, entertainment spend ranks ahead of even clothing and healthcare and in many parts of the world, entertainment is the fastest growing sector. A small part of the entertainment industry is the amusement parks. They can generate a lot of economic activity in their location, create a traffic flow and tourist centre and can even put a remote location on the map as the Walt Disney World Resort did for Florida.

    In India however, the amusement park industry India has been bogged by the same problems that had earlier bogged industries such as steel (in the mid eighties) fertiliser (in the late eighties) and cement aquaculture and finance companies in the mid nineties). The absence of a long term strategy, the gold plating of capacities (over invoicing of assets and inflation of project cost) and the presence of capricious promoters looking out for a fast buck.

    In India almost 75% of the amusement parks that have been set up are water parks with hardly any exclusive rides. Contrast this to the Walt Disney World Resort which includes Magic Kingdom, Disney–MGM Studios and Disney’s Animal Kingdom apart from 13 resort hotels and a complex of villas and suites, a retail, dining and entertainment complex, a sports complex, conference centres, camp grounds, golf courses and water parks.

    The revenue model of the Indian amusement parks is too dependent on gate receipts unlike in the West where merchandising is the major source of revenues as well as profits. Again the Disney model is an illustration where the creation of brands such as Mickey Mouse and Donald Duck have become household names and freed the company from its geographical constraints. The profit margins are also obviously the highest in this activity.

    What is required is a long term perception from the promoters and the reduction of entertainment taxes by the state governments (the various state government’s charge taxes almost equivalent to what they charge movie theatres). Only then will the domestic tourist (who comprises almost 90% of the tourist traffic in India) be compelled to look at amusement parks as a serious source of entertainment.

     

     

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