Wang's Theme-Park Bet More of a China Real Estate Gamble: Gadfly

Wang's Theme-Park Bet More of a China Real Estate Gamble: Gadfly

(Bloomberg Gadfly)Earlier this year, Wang Jianlin threatened to see off Walt Disney Co.'s theme park in Shanghai with his own slew of attractions. Dalian Wanda Group Co.'s pack of wolves—a roll-out of 15 to 20 theme parks in Chinawould defeat the lone tiger that is Shanghai Disneyland, Wang said.

China theme park sales, 2016  $6.35 billion

The reality, as Wang on Wednesday announced his second $15 billion development project in a week, is that neither Disney nor the Chinese billionaire inhabit the same jungle.

Disney is in Shanghai, one of the country's most popular cities for overseas, and domestic, tourists. It's a draw for China's aspirational and emerging middle classes, as Disney's attraction in Hong Kong well knows. With four million attendees in its first four months of operation, the $5.5 billion theme park should be close to breaking even in its first full year of operation in 2017.

Those kind of glowing numbers are important for Disney, which is battling a decline in operating income from some of its other theme parks and spent years preparing for its Shanghai adventure.

For Wanda, they're less important. It still makes most of its money from real estate. Theme parks are headline-grabbing and cost a lot to build, but shopping malls, hotels and apartments are the company's bread and butter.

Also, by choosing second-tier cities, Wang gets something China's other property tycoons crave: cheap land and tax benefits. There's also the added advantage of infrastructure support from local governments keen to create jobs and attract holidaymakers.

Rural perks are just as well, because running a theme park anywhere in China isn't easy. Although Euromonitor expects China to overtake the U.S. as the world's biggest theme park market by 2019, there's plenty of competition, with almost 60 large-scale attractions set to open in coming years, adding to the some 300many of which lose moneyalready in operation.

There's also increasing rivalry for land from property companies, which themselves have begun using the ideology of theme-park development to get subsidies from local authorities in order to secure cheap countryside, according to China Securities International analyst Jennifer So.

Wang's experience with theme parks hasn't all been smooth sailing. He temporarily closed his movie theme park in Wuhan in August less than two years after it opened and copped some bad press after sightings of copycat Disney characters at his attraction in Nanchang. And while ticket prices at some of Wanda's theme parks are less than half of Disney's, people living in second-tier cities also earn less.

It all adds up to make Wang's amusement-park bet something of a bigger gamble on the nation's heady real-estate market. Home-price gains in China's smaller cities have been more subdued than in larger ones like Beijing and Shanghai, but they're still impressive.

So long as Wang ensures his star attraction is everything but theme parks, any income from ticket sales is icing on the cake. Fulfilling consumers' desire to ride a loop-the-loop rollercoaster is one thing, but you can bet Wang's focus will remain firmly on terra firma.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story: Nisha Gopalan in Hong Kong at [email protected]
To contact the editor responsible for this story: Katrina Nicholas at [email protected]

© 2016 Bloomberg L.P

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