Amusement park profitability can go up and down like a roller coaster. It's an industry in which constant change may be the only key to a long ride, writes Angus Kidman.

Published in The Bulletin, December 12, 2001

Some $80m in investment came to an ignominious end in November 2000 when Sega World closed its doors. The theme park, based at Sydney's Darling Harbour and backed by the ailing Japanese electronic gaming company which lent the park its name, was forced to shut down after the Olympic influx of visitors to Sydney failed to improve its consistently poor bottom line. An attraction which had been launched with great fanfare in April 1997 as "Australia's interactive Disneyland" is now used for nothing more than the occasional discount warehouse sale.

In its death throes, Sega World remained a financial disappointment. Most of the 300-odd attendees at the auction of its contents, held on a rainy Sunday last March, were more interested in bidding low sums for a second-hand video game machine than coughing up serious cash for rides such as Rail Chase or Ghost Hunter, which combined traditional roller-coaster mechanics with virtual-reality technologies. The key rides ended up selling to an overseas bidder, who paid just $140,000 for one attraction auctioneers had hoped to sell for at least $200,000.

The fact that no one in Australia wanted to buy the rides to use in another venue, even at bargain-basement rates, underlines the challenges faced by the theme park industry. With high investment costs and a limited domestic market, producing a profit can be tricky.

Even the backing of a major media conglomerate is no guarantee of success. Just six months after the Sega World auction, Fox pulled the plug on its Fox Studios Backlot theme park in Sydney's eastern suburbs. Management became so desperate to attract visitors to the Backlot that admission fees were even dumped in the last months of the Backlot's life, but that couldn't compensate for fierce local opposition to the operation and a perception that the location was too inconvenient for families to visit. (The site is now being used to extend Fox's existing movie production facilities.)

The situation is only slightly healthier on Queensland's Gold Coast, the unofficial theme park capital of Australia. In the first six months of 2001, Dreamworld clocked the highest visitor numbers, with 1,031,551 visitors to the park, down just 0.5% on the previous half year. Sea World attracted 668,000 visitors, but recorded stronger growth of 13% which park management attributes largely to increased domestic patronage.

Warner Bros Movie World drew 566,000 visitors in the same period, with a more severe drop in visitor numbers of 5.6%. Total spend per visitor also dropped for Movie World, leaving the park in the red. (Those attendance figures indicate the challenge faced by Sega World, which needed an estimated 800,000 visitors a year to be profitable.)

The story doesn't get much better in overseas markets, despite a healthier ratio of overseas-to-domestic visitors than most Australian parks. Disney, which virtually invented the concept of the theme park when it opened Disneyland in 1955, laid off more than 1000 workers in its theme parks amid a 78% drop in company profits. A newly launched theme park, California Adventure, also failed to attract anticipated visitor numbers, forcing a program of ticketing discounts.

In the past, a typical response to such a quandary would have been to introduce bigger, more extravagant rides. Certainly, such rides continue to be developed. People with neck problems would probably do well to avoid the Double Shot, developed by US company S&S Power. Described by the company as "a big donut sliding up and down on a big stick", the ride flings its passengers up and down in the air four times in the space of 40 seconds, accelerating to 56kmh and imposing forces equivalent to 3.5 times that of regular gravity – or about the same as that experienced by a Formula One driver under braking – on the way through.

However, park operators aren't generally going down that route. Cost can be a huge disincentive; installing even a modest ride involves tens of millions of dollars in expenditure. For that reason, second-hand rides are growing in popularity. Earlier this year, Dreamworld purchased the controversial Big Dipper roller coaster which was removed from Sydney's Luna Park after complaints about noise from local residents.

Even at lower prices, though, expensive failures such as Sega World, which heavily promoted its high-tech "virtual reality" systems, continue to suggest that the "gee-whiz" factor may not be enough to attract the public.

As well, extravagant rides can raise safety concerns, even though the record of theme parks in this area is generally exemplary. (Of the eight recorded deaths on rides at the original Disneyland, for instance, only one was due to faulty maintenance.)

As an alternative strategy, many park managements are opting for a rather less thrilling but also less risky route: hanging off the coat-tails of an existing movie or television series. This ensures guest awareness and enthusiasm even before visitors enter the park, and reduces the cost of creative development. Given that many theme parks are now owned by large media outfits, this allows for effective cross-promotion.

The most conspicuous local beneficiary of such a policy to date has been Dreamworld. The park got a big boost to its visitor numbers in 2000 when it played host to the first series of the reality television hit Big Brother. Each week, the evictions attracted a paying audience of up to 1300 devotees. Even after the show stopped broadcasting, visitors continued to queue up to tour the house used for filming of the shows. A second series of Big Brother, scheduled for midway through 2001, should keep the crowds coming, although a recent decline in ratings for similar reality series overseas suggests the concept is not necessarily a guaranteed hit.

In latching onto a phenomenon hatched by the media, Dreamworld is following a path embraced increasingly by theme parks the world over. Some, such as Movie World, make this linkage their entire modus operandi. Others simply draw on current attractions to boost their existing operations; Wonderland in Sydney, for instance, has run a promotion tied to the animated movie hit Shrek.

Some theme parks are even built around individual personalities, a trend started by Disney and continued with US operations such as Dollywood, which focuses on the hillbilly heritage of country singer Dolly Parton. Not all celebrity branding of this type is successful. In 1990, television personalities Mike and Mal Leyland invested $4m in Leyland Brothers World, a theme park on the NSW Central Coast, which included a scale replica of Uluru. The park was a resounding failure and went into receivership before being sold for $800,000 and converted into a roadhouse.

As that example shows, choosing the right tie-in can be critical for park profitability. "Having attractions or shows that are direct tie-ins to popular movies or television shows can both help and hurt theme parks," says Rick West, publisher of Theme Park Adventure, a magazine that tracks the theme-park industry. "If an attraction is based on a very popular film such as the Indiana Jones attractions that Disney has or perhaps Star Wars, then it's possible to have incredible guest reaction and experiences."

On the other hand, in the fickle world of entertainment, last year's thrill can become this year's disaster. West points to the example of Disney's recently developing a series of attractions based around the television quiz show, Who Wants To Be A Millionaire?, which has seen its US ratings decline heavily in the past year.

"They've spent a lot of cash on something that is now in the twilight of its popularity with the American public," said West. "What Disney should have done was open these attractions in Florida and California in conjunction with the debut of the show on network television."

Despite such snags, in the risk-averse world of theme-park management, betting on Hollywood seems a good deal safer than trying to come up with an original concept. On December 26, Warner Bros Movie World will open an attraction based on the mega-successful movie adaptation of Harry Potter and the Philosopher's Stone. The new offering – which will include a recreation of the movie's Diagon Alley set, live owls and a live cast of witches and wizards – is opening a mere month after the movie that it mimics, in contrast to earlier Movie World attractions which appeared years after the films on which they were based. However, success seems virtually assured; the film has already set an Australian box-office record, taking $9.2m in its opening weekend.

It may be the most visible strategy, but cross-media promotion isn't the only path to success. Sea World attributed its growth in 2001 visitor numbers to the installation of its Polar Bear Shores attraction, where visitors could check out two adult polar bears, Ping-Ping and Kanook.

Sticking to its knitting, and recognising the importance of regular changes to attract return visits, Sea World will introduce two new Russian polar bear cubs, Lia and Lutik, on Boxing Day.

Not all the problems suffered by theme parks can be attributed to the difficulties in picking public reaction. Like most tourism-driven businesses, the theme-park industry is suffering from a lack of tourist traffic in the wake of September's terrorist attacks in the US. Ticket sales at some Disney theme parks in the US (which were identified early on as potential targets for future attacks) dropped by 25% in the weeks following the attacks. "Recent events make this a particularly challenging and somewhat anomalous time for our company," Disney CEO Michael Eisner said.

However, the problem doesn't seem to be a global one. Paris-based Euro Disney, for instance, denied specifically that user numbers had dropped in the weeks following the attacks. (Euro Disney itself was unprofitable for several years and faced an initially hostile reaction from many Europeans.)

Some local parks could even benefit from a reduced desire by Australian tourists to travel overseas.

Nonetheless, it seems clear that without continuous reinvention (or at least a steady stream of movie concepts to lift), the future will be challenging, if not heart-stopping, for most theme-park operators. "Designers must pool from a wide variety of things when coming up with new attractions, from established icons to new and fresh ideas that no one has ever been introduced to before," said West