Hong Kong government has announced a HK$10.6 billon injection to bail out the debt-laden Ocean Park, the popular marine themed local tourist attraction.
Facing intense competition from Hong Kong Disneyland, Ocean Park has never really been able to make much money, even during the best years. In the fiscal year 2018/19, the situation became worse, with the company booking a HK$560 million loss.
Given the troubles, perhaps it’s time for Ocean Park to rethink its strategy and try to avoid direct competition with Disney.
Ocean Park was Hong Kong’s first theme park that was up to global standards. Opened in 1977, it is considered a symbol of the takeoff of the city’s economy.
The Ocean Park venture was the joint effort of the government and the Hong Kong Jockey Club, with the former supplying the land plot free of charge and the latter providing the funding. In 1987, Ocean Park became a financially independent, non-profit organization.
The theme park posted revenue growth in recent years. Revenue rose 2.9 percent to HK$1.73 billion in the 2018/19 financial year.
Ticket sales dropped 3.8 percent to HK$1.15 billon, but the park achieved 18 percent growth in other revenue, like in-park catering and retailing, proving that Ocean Park at least had some success in boosting non-ticket income.
The main reason for the loss is increased costs. In 2018/19, labor costs increased by 10 percent to HK$770 million, almost representing almost half of the total revenue. Meanwhile, interest expense surged 32 percent to HK$250 million, and legal and other costs spiked to HK$170 million.
Ocean Park needs a big crew given that the park has an area of nearly 100 hectares and receives over 5 million visitors every year.
While barely making any money, the park has constantly renovated its facilities and built new ones over the years.
In 2005, the park launched a HK$5.55 billion plan to increase the number of attractions to 80 from 35. In 2012, it unveiled another plan to build a new water park and add other attractions. Ocean Park had to finance these initiatives by borrowing money.
As of June 2019, the park had loans totaling HK$5.3 billion, leading to rising interest expenses.
The HK$10.6 billion injection will cover a new round of expansion as proposed by Ocean Park. The latest expansion plan will create seven zones and 20 attractions over the next seven years.
The question is, does Hong Kong need to have two theme parks with similar positioning? Rather than expanding further at considerable financial costs to compete with Disney, Ocean Park should perhaps think about how to take advantage of its animal exhibits and shoreline to offer visitors unique experiences.
This article appeared in the Hong Kong Economic Journal on Jan 16
Translation by Julie Zhu
[Chinese version 中文版]
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