Feature

Riding high on mega bucks

A new breed of amusement parks is coming, of a size and a scale of investment that we've never seen before in India, says Shijith P K.

Who needs Disneyland when you have us?" questions Rakesh Babbar, the managing director of IRPPL (International Recreation Parks), the company behind the upcoming Entertainment City in the heart of Noida. The Entertainment City, spread over 150 acres and being set up at an investment of Rs 1100 crore, represents a new class of parks that are under construction or are being planned around the country. Larger, better and with the costliest 'rides' around, they reflect a change in not only how park operators and real estate developers think about amusement parks, but also how state governments perceive them.

Other upcoming projects include two planned by ISKCON, one at Vrindavan in Dwaraka, at an investment of Rs 1000 crore over 600 acres of land and one at Bangalore at an investment of Rs 350 crore. The themes for the two parks would revolve around the stories of Krishna. The religious theme is held in common with a Rs 100 crore park being promoted by the Saagar family at Haridwar. Revolving around the epic Ramayana, the park to be called 'Ganga Dham' will be situated on the banks of the Ganga.

But it isn't only spiritual theme parks that are making the running. IRPPL have also built a 62-acre park in Rohini, Delhi at an investment of Rs 200 crore. Called 'Adventure Island', the park is set to officially open later this year. Chandigarh too will be getting its own mega park in the next three years. To be developed and operated by Gurgaon-based Unitech, the park would be spread over 73 acres and have an initial investment of Rs 250 crore. The south too hasn't been immune to the action with the WonderLa park on the outskirts of Bangalore. Built over 83 acres and promoted by the V-Guard group, the park has already been in operation for a year.

The amusement park industry, around Rs 3000 crore now, has been growing at 25 per cent per annum over the last 5 years, according to industry estimates. There are around 150 parks in India, with 10-15 coming up over the next few years. These include the mega parks with investments of more than Rs 100 crore. At present, industry experts say around 10 per cent of the parks represent investments of around Rs 30-60 crore. Another 10 per cent are spread over 10-20 acres representing investments of Rs 10-25 crore. The rest are spread over 3-5 acres and represent investments of under Rs five crore.

Amusement parks in India usually have long break-even periods of 7-10 years but Babbar is bullish about his own park. "The rise in middle class incomes and the fact that we are in the heart of the city, means we won't have that long a gestation period," says Babbar. The fact that the park will be centrally located makes it unique among amusement parks, most of which are located on the city outskirts. That's because governments usually allot land outside city limits, and most developers choose to construct parks on government land, as it is cheaper than buying their own at market rates.

The 150 acres on which the Noida entertainment park is based was provided by the Noida authority and is one of the few cases where a government has recognised an amusement park's need for a prime location to succeed. Local governments encourage the establishment of amusement parks, hoping they will drive domestic tourism, and let the local economy benefit from the money flowing in.

Those looking to get into the amusement park business come from a varied range of businesses. For example, one of the bidders for the Chandigarh theme park project was a consortium which included the retail giant Pantaloon. But they are usually alliances between an amusement park operator from India or abroad, and a real estate developer. IRPPL, for example, is 50:50 joint venture between International Amusement, who operate Appu Ghar in Delhi, and Unitech. Allying with international park operators like Disneyland and Sentosa of Singapore gives a branding advantage, according to K Srinivas Gupta, the chairman of the southern region of the IAAPI (Indian Association of Amusement Parks and Industry).

Big regional groups looking for a higher profile also feature in the amusement park business. The V-Guard group in Kerala, for example, built its success on the back of voltage stabilisers, and now has amusement parks in Kerala and Karnataka. Says Gupta, "For such groups, the amusement parks aren't their primary source of business. It's more a diversion for them, than a way of diversifying their business. But they also tend to be more passionate about it."

Of the initial investment in a park, typically 60 per cent goes into buying the land and the development of the site while the rest goes into the equipment and the various rides. Industry experts say that if the park is to be set around a theme, site development could even go up to 80 per cent of the costs. In the case of the Noida Entertainment City, according to the IRPPL general manager of corporate finance, Rajan Narula, the main components of their initial investment were Rs 110 crore for the land while Rs 180 crore was spent in developing the site.

The adoption of a theme by a park is important as most parks would tend to have the same rides, and the theme would help differentiate them. According to Gupta, 'theming' provides that little extra people are looking for. "People want an escape from reality and their normal day-to-day lives for 8-10 hours, and for that you have to provide an overall experience. You can't do that by just focusing on rides," says Gupta.

When constructing a park, promoters can choose to source the rides from within India at a cost of Rs 10-15 crore, or they could choose to import it from countries in Europe like Switzerland and Italy for 10 times the cost. A typical amusement park's expenditure would be dominated by energy costs that can go up to 50 per cent. Other significant heads are the salaries and maintenance of rides.

When it comes to the revenues, there are usually four sources - the collections at the gate, food & beverage sales, advertising, and merchandising sales. The gate receipts that a park generates are determined to a large extent by the location of the park and the kind of footfall it has.

While parks in Tier II and III towns would have footfalls of around 50,000 to a lakh in a year, parks in bigger cities would have footfalls in the range of 5-6 lakh with the mega-parks expecting around 10 lakh. According to industry experts, parks in big cities can typically expect about one per cent of the local population and 10-15 per cent of tourists to visit in a year.

While prices for entry tickets for smaller parks would be around Rs 100, for the bigger parks, tickets would range from Rs 300 to Rs 500. The amusement park industry is one that does most of its business on weekends and holidays- in a year around 80 per cent of the business is done in 200 days.

According to an industry expert, Indians usually don't spend much at a park so the entry ticket price usually represents the maximum a park would get out of a visitor. In smaller parks, on an entry ticket of Rs 100, only a further Rs 10 would be spent in the park whereas in the US, for a US$ 50 entry ticket, US$ 50 more can be expected to be spent by a visitor.

As for the future of the industry, Rajen Shah, the president of the IAAPI, feels that would be dependent on the classification of the industry as 'social infrastructure' with its resulting tax benefits. He argues that even if profit may be the motive for the industry, there are various social benefits for a community from having an amusement park around. Gupta on the other hand, suggests a lesson could be learnt by the industry from Orlando in the US. There, Disneyland and dozens of other parks co-exist and develop synergies with the hospitality industry. He recommends Goa and the Andaman & Nicobar Islands as sites that could be developed by the government as entertainment destinations.