Gulf states must get leisure, entertainment mix right
Proceed carefully investing in more theme parks, and get private sector to play its part
Dubai: Bring the private sector along for the ride - this could be the best option for Gulf governments when committing investments on theme parks and other big-ticket entertainment options.
“While there is a growing demand for theme parks, GCC governments need to assess any opportunity carefully,” says a new report issued by Strategy&, the consultancy. “Theme parks require large and complex investments, and there is typically a lengthy period before they breakeven, in part because of high operating costs.”
In July, DXB Entertainments, owner of Dubai Parks and Resorts, confirmed it will not go ahead with a Dh2 billion plus Six Flags’ theme park in Jebel Ali. Funding was cited as the main reason for the pullback. There is also active talk in the market that some of the upcoming retail and entertainment destinations will be downsized or built over multiple phases as and when conditions are deemed right.
Caution is right
According to Karim Sarkis, Senior Executive Advisor with Strategy& Middle East, “There is a limit to the number of theme parks a country and region can absorb. In the UAE, where the wave of investment in theme parks started earlier, there is [now] more focus towards a diverse range of entertainment options. However, the two investment areas are not mutually exclusive.
“Mall operators will naturally look to build more differentiated entertainment options to maintain their visitor levels. Given that GCC citizens have clearly expressed a need for more accessible entertainment centres and parks, we believe investments will continue to flow in that direction.”
An eye on bigger prize
Whatever be their level of caution about new investments, Gulf governments will not be pulling back from their entertainment exposures altogether. Forecasts suggest these governments can generate “an incremental of $3.4 billion annually by aligning investments in the leisure and entertainment sector with consumers’ needs”.
This is where the private sector can pull its weight. If not in theme parks, private players can come up with the multiplexes and more.
“The regional penetration of cinema screens is still below international markets,” said Alice Klat, Director of the Ideation Center, which is the think-tank for Strategy& in the Middle East. “In the US and UK, there are 124 and 65 screens per million population, while the number in Saudi Arabia is as low as 1 per million today.
“Yet the number of screens are expected to increase by ~ 91 per cent CAGR (compunded annual growth rate) between 2018-23, increasing the screens from 29 in 2018 to 750 in 2023 and bringing the number to 22 screens per million.
“Assuming that demand in the region will reach the same levels as in the US or UK, there is a significant gap to fill in terms of supply of screens before it becomes the highest in density of screens and risks a decrease in return on investments.”
Saudi Arabia will play catch up
It is not just cinemas/multiplexes that are blooming in Saudi Arabia… even theme parks are getting into the act. The government, STrategy& notes, has created new entities such as the Ministry of Culture, the General Entertainment Authority, and General Sport Authority. There will soon be “11 more culture subsector bodies that will focus on developing areas such as visual arts, performing arts, film, and music”, it adds.
“Regional developers, spurred on by government strategies, have an opportunity to design and build integrated entertainment experiences at a scale that is rare across the globe,” said Sarkis. “The most innovative examples of such projects is being built in Saudi Arabia - by Qiddiya and NEOM. Qiddiya is planning a mix of retail, cultural dining and entertainment experiences, and building the best and largest amenities.
“These include a major outdoor entertainment venue that can host events for up to 40,000 visitors, the Six Flags theme park, the largest motor sports city in the world, and many other activities.
“NEOM will also include futuristic theme parks, the world’s largest garden, museums and galleries, and archeological sites, and international scale sports arenas to host global competitions.”
Even art makes for a leisure pursuit
According to Strategy&, governments in the Gulf should push art and culture much more forcefully into the public consciousness. “GCC consumers are not sufficiently engaged in arts and culture - GCC governments should start by making arts and culture offerings more available and accessible, publicizing them in dedicated public spaces,” the consultancy says. “They should then encourage peoples’ participation through the creation of immersive and engaging experiences.”
Focus on the neighborhood
Gulf governments should “incentivize investments to build comprehensive neighborhood entertainment offerings. Family entertainment centers should be prioritized for their high profitability (return on investments of 20 percent or more). Outdoor urban parks should be made more available and accessible, especially closer to prime city locations”.