The opening of Shanghai Disney Resort heralds a new era in the development of the Chinese theme park industry. Phase one alone, Shanghai Disneyland theme park, represents a $4.8bn investment, making it the most expensive theme park ever built. The figure is more than $5.5bn when hotels and retail/dining and entertainment (RDE) are included.

Shanghai is positioned in the Yangtze River Delta (YRD), one of the most populous and affluent regions of China. Shanghai has a population of 24 million people, but there are more than 125 million in the wider YRD region and an even greater number when considering the extensive high-speed rail (HSR) network. It’s a very large market and a great location for Shanghai Disney and other upcoming projects there.

Furthermore, approximately 70 to 80 per cent of the urban population can afford to pay a high ticket price for a world-class theme park. And as China continues to grow at a significant rate by international standards (6 to 7 per cent), the middle-income group is still expanding rapidly. That’s very positive for the cultural tourism, leisure and theme park industries.

TRANSFORMATIVE IMPACT
Taking that into account, Shanghai Shendi Group originally expected 7 to 8 million visitors in the first year, an estimate that has since increased to 10 to 12 million range. The market scale is on par with Tokyo Disney, where two parks attract more than 30 million visitors annually – (a number that has been built over 30 years). Disney is expecting to achieve that over time with up to three parks in Shanghai.

Shanghai Disney, along with Universal Studios Beijing in 2020, marks the next generation of branded theme parks. These investments have a combined value of more than $8bn in theme parks alone and will have a transformative impact.

The industry will move from smaller, mid-size and regional parks into the destination park category. Right now, Shanghai, Beijing and Guangzhou are the top tier markets for these major theme park destination hubs.

DOUBLE-DIGIT GROWTH
As Universal Studios Beijing reinforces the impact of Shanghai Disney in terms of the next stage of development, double-digit attendance growth is expected in the overall industry.

With the rapid development of the economy and the continued urbanisation of the country (approaching 60 per cent of the population now live in cities and urban areas), there’s further potential for the tourism industry outside the top tier cities.

In terms of other impacts, Shanghai Disney Resort will lead to industry expansion in China. It’s educating the market, and that will have a complementary effect on the industry. It’s providing a high price point and product leadership, which is positive for other parks as well as existing leading domestic operators – though these operators must raise their game if they’re to compete. For international operators such as Merlin (with Legoland Shanghai planned) and others, we’ll see the “tent pole effect” as Disney sets a high price point that other parks price up against. Further impacts will be a rise in standards in service and operations, more new projects and increased interest in the tourism industry.

CREATING A DESTINATION
Overall, we think Shanghai Disney will help create an important theme park destination hub in Shanghai and the greater YRD region. Multiple parks enhance the drawing power of all of them, as we’ve seen in Florida and California where there are also multiple parks and operators.

As this happens, parks will do more to become self-contained destination parks. Wanda Group has a big project outside Shanghai in Wuxi, one of the upcoming Wanda Culture Tourism City projects, which will be driven by Chinese storylines, content and culture. It’s a significant investment in a self-contained destination with a major theme park, indoor waterpark, big show, large-scale retail mall and flagship hotels. That’s one of the key trends we’re seeing across the industry – creating a destination. For example, Legoland Parks are adding waterparks and hotels to be more self-contained. Driving overnight visitation is very important and encourages year-round operation.

Helping the trend, domestic tourism is growing rapidly. The Chinese are making more weekend trips to nearby cities by high-speed train. More people have cars and are driving to scenic areas and national parks. The success of Chimelong Ocean Kingdom in Zhuhai, near Macau, has shown the Chinese are interested in multi-day stays.

INVESTMENT AND OUTLOOK
In terms of return on investment, it’s about the long-term economic impact the destination will have on the tourism and service industry and the creation of a major attractions hub for Shanghai and the YRD.

Shanghai Shendi Group and Shanghai’s government will derive value and monetise their investment through this larger cultural tourism and mixed-use leisure and commercial destination. The International Tourism and Resorts Zone will be positioned as a world-class tourism destination, which includes themed entertainment attractions; hotels/resorts, sightseeing, shopping (including premium factory outlets) and restaurants; meeting, incentive, conference and exhibition (MICE) industry; mixed-use commercial, educational, creative and industry innovation business parks and other supporting industries.

Shanghai Disney has the highest ticket price in China and will achieve the strongest visitor per capita expenditure. In a few years, Universal Studios Beijing will reinforce “Chapter 2” of the industry’s development towards large-scale destination parks. Leading up to 2020, Shanghai Disney will help generate significant double-digit attendance growth and boost the cultural tourism industry in China.