Tuesday, March 28, 2023

Waterpark trends

the opportunities and challenges for waterparks in China

by Dan Martin


“Compared to Western facilities, Chinese waterparks are developed quickly and cheaply with government assistance, operate with an inexpensive workforce at twice the actual capacity of Western waterparks, and serve a population in which up to six adults are saving up to send the family’s one child to a waterpark. The parks can’t charge the equivalent of US $30 to $40 per person – but they don’t need to.”

China has accepted whole new categories of Western leisure facilities at a breakneck speed. High value attractions went in first: golf courses, theme parks and in Macau, casinos. Three leading industry figures – Don McCrary of Dreamparks International, David Bogdonov of WhiteWater West, and Jeff Mayer of Bassenian Lagoni – all believe waterparks will lead the next wave.

There are several systemic distinctions between China and the West that will make a difference for developing waterparks in China. China has been what might be called a “command economy.” Although it is changing over time, everyone would agree that the Chinese government is responsible for directly creating economic activity, including housing and jobs. Five-year plans, backed by government money, guide how the government expects to do this.

In the US, while Americans tend to blame the government if there is a falloff in adequate housing and jobs, they expect the private sector to provide them and generally resist the concept of anything like the Chinese five-year-plans.
The level of government involvement directly impacts waterpark development in China. If you want to develop a waterpark, you may find it necessary to build housing as part of the project.

As the housing is developed, you are able to build your waterpark. (There are curious, but not direct, parallels with US waterpark hotels that sold condos to fund development, and in golf communities, where the inducement to buy a residence is the coming golf course.) When you build a Chinese waterpark, there are, by any Western standards, an astonishing number of workers on site. Instead of a five man western crew with equipment, there are 50 Chinese workers with tools. In other words, the developer provides jobs. To make sure that this all goes to plan, the government is involved in every project every step of the way. There is no external regulatory entity as in the US.

In fact, even after development, the government owns the land and, by extension, the improvements. This creates a hurry-up atmosphere that contributes to projects being built as quickly as possible, so the developer can start operating and generating a cash flow to start paying taxes to the government as soon as possible. The haste helps the government create jobs by further expanding the workforce needed on-site to accelerate construction.

China’s five-year-plans have been targeted toward creating manufacturing capacity (jobs) for many cycles, but the recent stabilization of the population at 1.3 billion has allowed an easing of pressure. Most important to our industry, the current five-year plan includes government support for leisure facilities. David Bogdonov of WhiteWater West points out that now “local governments are asking for recreation facilities to be built by real estate developers in exchange for land in real estate developments.”

The differences don’t stop there. The famous one-child rule has created a remarkable set of demographics. That one child is at the bottom of a family tree that includes two parents and four grandparents – an extended household of up to seven people (assuming that grandparents live close by or watch the child) with only one child. Western households typically have twice the number of children as that same Chinese family tree, and Western grandparents are often less involved (partly because they are likely to have multiple grandchildren).

In the West, there is widespread concern that the middle class is evaporating. It’s simpler in China – there isn’t much of a middle class. In 2006, Chinese sociologist Zhou Xiaozheng said, “China’s current success is built on 300 million people taking advantage of 1 billion cheap laborers.” Even today that’s not far off the mark. Approximately 320 million Chinese, about 25% of the population, live in households with incomes at or above that found in most Western countries. This is close to the number of people (330 million) living in the US, but as pointed out, with fewer children. At the same time, hundreds of millions of Chinese have household incomes far less than would in the West be considered candidates for attending a waterpark. The average poor family in China earns less than $5,000 US per year.

The result could be that we have a market in China where waterparks get built for the 320 million, and the billion go unserved. But that won’t happen – not in China. Construction and operating labor is cheap in China and the government, in its five-year plan, is backing more leisure facilities. (There is to some extent a parallel in the West as there are many hundreds of municipal or government owned and operated aquatic centers.) Project economics, in China, are structured to make it work for many.

“Cultural norms also make a big difference in the design and operation of leisure destinations,” says Jeff Mayer, Director of International Planning for Bassenian Lagoni, who has been working on tourism projects in China for the last ten years. Mayer observes, “With a history of living in densely populated mega-cities, the Chinese seem to be less concerned about personal space than do more self-conscious Westerners.” A Western waterpark that holds 3,000 will, in China, comfortably hold 7,000.

On the surface, this presents revenue benefits, but it also strains infrastructure and increases the importance of maintenance and safety. Unfortunately, many of the early water filtration systems installed in China were designed to Western standards, while receiving twice or more the user load. Parks that are willing to invest in highest quality mechanical/filtration systems – and get the ratio right – will be the most successful. Like many emerging economies, China has public maintenance issues. There are also frequent water quality issues in China. Mayer advises, “If you are going to develop a project in China that has water in it, you better have a very good aquatic engineer on your team.”

While it’s hard to miss water quality issues, Don McCrary of Dreamparks International notes that the Chinese government and the CSCI (the Chinese equivalent of the US’s ASTM) are adamant about safety. Following some ride accidents they began to send inspection teams to foreign factories operated by vendors for assurance that materials and fabrication practices were safe. This rigorous approach is continuing.

Compared to Western facilities, Chinese waterparks are developed quickly and cheaply with government assistance, operate with an inexpensive workforce at twice the actual capacity of Western waterparks, and serve a population in which up to six adults are saving up to send the family’s one child to a waterpark. The parks can’t charge the equivalent of US $30 to $40 per person – but they don’t need to.

The leveling off of the population and the country’s economic ascent have made all this possible. Projections by the UN and US show that the Chinese population has leveled off at 1.3 billion, will stay at that level through 2050 before starting a gradual decline, and possibly drop below a billion in 2080. However, in that time, the population will age considerably. The number of children 0-15, the broad target market for water experiences, has been on a steady decline – from approximately 346 million in 1990 to 253 million in 2010, a level that is projected to remain for several decades. This is still more than four times the size of the same age group in the US. In time, the Chinese population is expected to become more evenly distributed by age group.

The leveling out of the age groups and the ratio of children to adults impact the mix of attractions in a Chinese waterpark. Mayer has worked with leading cultural anthropologists on multiple tourism projects in China and has learned that “Culturally, water is very important in China. It is seen as a luxury to have access to clean water, and running water, in particular, elicits a vivid association with the continuity of life.”

David Bogdonov, of WhiteWater West, agrees. He points out that there is a strong tradition of spa and hot springs participation in China. This meshes well with the waterpark industry and has been integrated into WhiteWater’s waterpark designs across China.

Don McCrary notes that South Korea has already been down this path. There, early waterparks were very Western, but now they mix traditional spa and modern thrilling water experiences. McCrary, who is currently working on three projects in China, notes that waterparks that incorporate the tradition of spa and hot springs provide an opportunity for the multigeneration Chinese family to get wet and have fun. However, he notes that Western groups are typically retained for their excellence in “Western style” facilities – which is what their clients really want.

According to Bogdonov, China’s waterpark wave really began with “the success of Chimelong waterpark. It opened its doors in 2007 and immediately rose to the third most highly attended waterpark in the world after the two Disney parks in Orlando.” Chimelong has traditional Chinese aspects but leads with a very strong Western waterpark ride package.

The current market response is to go big. Bogdonov says that the emphasis has been on the larger parks in the largest cities. “Given the size of the urban areas in China, developers are usually focused on providing high capacity parks. The Chimelong Park in Guangzhou and Beijing Longmenzhen each have peak-day attendance in excess of 35,000.”

In addition to providing deeper markets, the largest cities have many income-qualified households that own cars, better enabling them to get to the parks. However, while China has become the largest car market in the world, ownership is still well below that of Western countries. All this is not good news for China’s vast rural population. For them, waterparks are likely to be a thing of dreams for at least a generation.

With its enormous population of children – even if 75% are in low-income households – China will be a good candidate for a trend we have experienced in the US – water, water everywhere – from flow riders and slides on cruise ships and water play areas in zoos, to play fountains in public parks. While the public recreation movement in China is nascent, it may emphasize water play as a way to encourage the healthy active lifestyle that many local level Chinese government units seem to encourage and demand in exchange for development rights.

As in the US, existing theme parks in China can be expected to add waterparks. The shake-out in the Chinese theme park industry increases the likelihood that some less-than-successful theme parks will add waterparks as a way towards recovery. Adding a second park allows operators to increase capacity at a lower incremental cost.

Mayer, McCrary, and Bogdonov all believe that this adds up to extraordinary opportunities for every facet of the visitor attractions industry. Westerners just need to be smart and thoughtful about crafting experiences that resonate with Chinese culture, respond to governmental concerns, and address the rapid evolution of its infrastructure. • • •

Dan is a Managing Principal at Market & Feasibility Advisors. His rich portfolio includes retail and hospitality feasibility, museums, zoos, theme parks, water parks, resorts, aquariums, and more in 30 states and provinces across North America and in Asia and the Middle East.

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