Amusement Demographics 101

Feasibility studies consist of:

  • Determination of the geographic market area
  • Competitive analysis
  • Analysis of market area's population
  • Determination of the mix and other project design, programming and operation characteristics
  • Attendance projections
  • Per capita spending (spending per visit) projections by type of revenue
  • Pro forma financial projections of revenues and expenses
  • Design day capacity and size requirements
  • Cost estimate
  • Return-on-investment projections
  • Break-even and sensitivity analysis

This article is not able to discuss all of the above in detail. However, lets look at the next step in a full analysis of the market area's population.

A population of 100,000 in a retirement area of Florida is going to have a much lower count of targeted aged children than a population of 100,000 in a suburban location in Los Angeles. Even in Los Angeles, a market population of 100,000 will be different in one part of the metropolitan area than in another.

To accurately move from the 'rule-of-thumb' formula above to a completed feasibility study, you need to consider a number of other important factors. Income and education have a dramatic impact on frequency of visits and per capita spending. Using the same illustration, two different populations of 20,000 families with 16,000 children ages 2 to 12 will not be the same and their spending habits and potentials will be very different.

Information from the U.S. Bureau of Labor Statistics Consumer Expenditure Survey (CES), based on data from 10,000 households reveals a difference in annual entertainment spending based on income. The survey includes a category for 'entertainment fees and admissions' that includes theme parks, FECs, zoos, etc.

The 2007 CES showed that households with annual incomes of $50,000 - $69,999 spent 76% more on out-of-home entertainment than households with annual incomes of $30,000 - $39,999. Families with incomes exceeding $70,000 spent almost four times as much as those with $30,000 - $39,999 incomes and more than twice as much as those with $50,000 - $69,999 incomes.

Income is not the only factor that influences consumer spending for out-of-home entertainment. Education also has a dramatic impact. The 2007 CES showed that high school graduates with some college households spent 2.3 times as much as high school graduates without any college households and that college graduate households spent 365% as much on out-of-home entertainment as high school graduates without any college households.

Accordingly, determining potential revenues for a project requires a complex analysis. Any two populations with the same population, or even with the identical number of target households, will have very different out-of-home spending potentials. Not all populations are created equal when it comes to out-of-home entertainment spending. Understanding these differences and targeting a niche market population with a focused activity mix is a critical factor for success with community-based entertainment facilities.

 

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