The economics of gated visitor attractions are broadly similar around the world with the majority of revenue being derived from admissions.
We have based this assessment on an attraction charging a full adult admission fee of US$60 including tax.
Per Capita Revenues
All attractions offer some form of discounts for children, families, group tours and other parties as well as special promotional activities. Allowing for these discounts and tax (which varies by country) generally results in per capita admission revenues between $34 and $44.
Adding on spending on food, beverage, merchandise, games, parking and upcharge activities would typically bring the total per capita revenue back to a value equivalent the full adult admission charge of $60.
Operating costs at attractions vary by the type of attraction with theme parks, water parks and entertainment attractions achieving the highest profit margins. Commercially run wildlife and aquatic attractions can be profitable although the largest ones often need subsidies. Most museums can only operate with significant amounts of grants and subsidies.
At well-run theme parks and entertainment attractions, an operating profit margin of around 33% would represent a strong performance. On this basis the attraction would generate an operating profit equivalent to $20 per visitor.
It is critical for attractions to reinvest in the product. This is especially true of theme parks that target a local and regional resident market where generating repeat visits from this source is vital to success.
A general guideline is that a reinvestment equivalent to 10% of revenue is an appropriate allocation to ensure ongoing stable attendance levels. This would require an amount equivalent to $6 per visitor to be set aside each year for reinvestment.
Allowing for the reinvestment funding the attraction would provide a profit margin of $14 per visitor to cover debt and interest repayment along with any taxes.
The level of investment to create attractions can vary enormously depending on the availability of funds and the client vision. However, a useful guide for attractions targeted at a local and regional market is to allow for a budget equivalent to $150 - $200 per visitor.
This would indicate a development budget of $150 - $200 million for a theme park targeting 1 million annual visitors. However, many projects in the Middle East and China have development budgets significantly above these levels.
The economic challenge comes when assessing the funding for this level of investment. With a likely profit of $14 per visitor each year and a capital cost of between $150 - $200 per visitor, the profit equates to less than 10% of the required investment level.
Unless a developer can secure funds at low interest rates or can self-fund with a low target financial return, it is not possible to create a park within these economic parameters without some form of external support. This support could include free land, support with infrastructure investment, grant funding and sponsorship.
If external support is not available then the development costs will need to be revisited. In many locations where there is limited competition it is possible to develop parks and attractions in stages with a relatively modest initial investment that can be supported by operating revenues. Profits can then be used to enhance the attraction over time to build up attendance and revenues to reach the full market potential.
These figures illustrate the challenges in developing, funding and operating visitor attractions. However, they are merely indicative guidelines and it is critical at an early stage of the development process to secure independent market and economic planning assistance to complement the design process.