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|27 March, 2018

Thrill ride: Dubai theme parks proving a real rollercoaster for investors

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Rides and attractions at MOTIONGATE Dubai.

Rides and attractions at MOTIONGATE Dubai.

MOTIONGATE™ Dubai/Supplied

Management at DXB Entertainments, the Dubai theme park operator which yesterday reported a 1.12 billion dirham ($305 million) loss for 2017, is still confident about the project’s long-term future, despite lower than expected ticket sales and new competition set to enter the market in the coming months.

The company also announced it had reached a deal with banks to restructure 4.2 billion dirhams in debt and had received fresh funding from its majority shareholder, Meraas Holding, a Dubai government-linked developer, Reuters reported. (Read the full report here).

Dubai Parks and Resorts comprises four theme parks built under phase one – Bollywood Parks Dubai, Legoland, Legoland Water Park and Motiongate. (Read the full financial results here).

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Its biggest challenge has been meeting lofty sales and revenue projections issued when it launched. In initial financial projections released in December 2016, DXB Entertainments was forecasting full-year revenue of almost 2.447 billion UAE dirhams for 2017, based on 6.7 million park visitors.

However, according to the full-year results published on Monday, revenue for the year stood at 552 million dirhams, based on 2,275,545 visitors.

The company has sought to combat the sluggish visitor numbers, firstly by reining in costs. Staff headcount decreased to 2,538 by the end of September 2017 - down from 3,184 at the end of 2016.

The firm’s management team has been overhauled and there has been an acute focus on driving footfall by targeting Gulf residents, offering big discounts for both one-day and annual passes. (Read the full report here).

However, management is upbeat about the future: "I am optimistic, personally, about the performance for the beginning of the year," Mohamed Almulla, chief executive and managing director, said in an interview with Reuters on Monday. "It's a long-term investment. The park is not something we can turn around easily."

He said visitor numbers were positive, without elaborating. Figures for the last quarter show that visitor numbers were up 66 percent quarter-on-quarter and average hotel occupancy during the final quarter of the year stood at 48 percent, compared to 22 percent in the first three months of the year.

DXB Entertainments isn’t the only theme park in the emirate to face teething problems. Ilyas & Mustafa Galadari Group (IMG), the Dubai-based operator of IMG Worlds of Adventure, the world’s largest indoor theme park, is in talks with banks to restructure a 1.2 billion-dirham syndicated loan, Reuters reported last month.

Plans for a 20th Century Fox World theme park in Dubai, which was initially announced by Al Ahli Holding Group in December 2015, was shelved in November 2016. The park, which was supposed to be the first of four potential Fox-themed parks that Al Ahli Holding was planning to develop, had been slated to open this year and was meant to contain rides based on Fox-themed brands like The Simpsons and Planet of the Apes.

Zawya also reported in late 2016 that plans for a Universal Studios theme park in Dubailand had been permanently scrapped. (Read the report here).

Despite these setbacks, operators in the United Arab Emirates are still pushing ahead with their ambitious theme park launches. Warner Bros. World Abu Dhabi, a 1.65 million-square-foot indoor theme park, is set to open this summer and DXB Entertainments confirmed in its financial report on Monday that construction of Six Flags Dubai, Dubai Parks and Resorts’ fifth theme park, and the region’s first Legoland Hotel are progressing according to plan and are due to open in 2019.

Further reading:
UAE's DXB Entertainments expects brighter 2018
Dubai theme parks a real rollercoaster for investors
Warner Bros offers first look at Abu Dhabi Indoor Theme Park
Dubai Holding, Universal Studios confirm Dubailand theme park no longer going ahead
Ferrari World Abu Dhabi recognised as region's leading theme park for 2017
UAE's DXB Entertainments to restructure $114bln with creditors

(Writing by Shane McGinley; Editing by Mily Chakrabarty)
(shane.mcginley@thomsonreuters.com)

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