Sector insight: UK theme parks

Revenue growth has outstripped rising admissions as operators make the most of the trend to visit attractions in the UK.

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A recent ad campaign to promote the delights of Blackpool made full use of the similarity between its famous Tower and the somewhat bigger one in Paris to which it was built in homage. But there has always been more to the Lancashire seaside resort than Victorian engineering, and now its attractions are to be regenerated. Merlin Entertainments, the UK's leading theme park operator, is being brought in to help with the process.

The company, which counts Legoland, Alton Towers and the London Dungeon among its portfolio of attractions, posted strong results for 2009 - like-for-like sales up more than 6% year on year - despite delaying plans for stock market flotation.

Indeed, the theme park industry has come through the recession relatively unscathed: between 2004 and 2009 revenues grew by 27%, according to Mintel, with admissions up 12% over the same period.

Revenue growth has outstripped admissions as operators have added extras to increase revenue potential from visitors. As a result, people have increased their spending on premium tickets or virtual queuing options to avoid long waits for the rides.

Last year, theme park revenues reached £315m, with admissions at 13.8m. The average revenue per visitor has increased from £20 in 2004 to £23 last year. However, people are being more cautious with secondary spending once inside the parks: it dipped slightly as visitors have been bringing in their own food rather than using the restaurants on site, as well as cutting back on souvenirs.

The sector has benefited from sustained investment from the operators and has been well-placed to make the most of the trend for cash-strapped consumers to stay in the UK for their holidays in the form of more day trips and shorter breaks. Holidays in the UK, by UK residents, increased 17% in the year to October 2009, according to VisitEngland, while outbound travel by UK residents declined by 15%.

With families providing the backbone of visitors to theme parks, peak activity centres on two key trading periods -the Easter and summer school holidays. Advertising spend and promotion are, accordingly, focused on these periods, as the winter weather in the UK means that most outside attractions have to close down during those months.

The market benefits from high numbers of repeat visitors: 23% of those who visited a park in 2009 were returning visitors.

Higher overheads, such as electricity prices and staffing costs, have had an impact on the attractions' operating margins. Staffing levels are high in theme parks and wage bills and staffing costs account for 20%-33% of turnover.

Although a high number of attractions compete with theme parks, there are fewer than 20 major parks in the UK. However, those in the South East in particular face added competition from European parks; Disneyland Paris attracts more UK visitors than most domestic parks except Alton Towers.

Merlin Entertainments dominates the UK scene, with its parks accounting for almost 60% of admissions and 70% of revenues. It has invested in its attractions with new rides, and its strategy of providing accommodation has also proved popular - all its parks now have a hotel or are seeking planning permission to add one.

Its Alton Towers park is the most popular in the UK - more than half of all adults have visited - followed by Thorpe Park, Chessington World of Adventures and Legoland.

Flamingo Land, the combined theme park and zoo in North Yorkshire, is the biggest independent operator. Meanwhile, Drayton Manor in Staffordshire added Thomas Land, based on the Tank Engine character, to its park in 2008 to appeal to younger children and extend its season; as a result, admissions and revenue jumped by a third in 2008.

Looking at future growth of the market, by 2014 Mintel predicts visitor numbers will reach 15m - up 9% on 2009 - and revenue will reach £374m. Although this equates to a 19% rise in revenue over the five-year period, when inflation is taken into account it means the market remains static.

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