Family entertainment centres, which do well in small towns too, can be the low-cost alternative to amusement parks. By Pankaj Joshi
Where can a family of four -- where the father wants to sit and relax, the mother wants to go shopping and the children prefer a movie or a park -- spend time together? At the FEC!
The Family Entertainment Centre is perhaps the most important innovation of the amusement park industry. Entertainers have to innovate. The FEC concept is a product of that compulsion.
The sheer variety of options it offers, makes it a very alluring entertainment destination.
In India, after the first one in Bangalore was closed on orders of the government in 1998, the business has come a long way. Today there are eight such centres in India. The investment has also increased, as per estimates by TEAM Projects. From Rs 5 crore in the first FEC, it is now Rs 50 crore in the eight centres.
Today five cities -- Mumbai, Delhi, Baroda, Bangalore, and Hyderabad -- boast of FECs. Sizes vary from a modest Rs 3 crore to an impressive Rs 20 crore, already on par with the $ 1-5 million average cost overseas.
Attractions
The typical centre would have a video game arcade alongside the mechanised rides. Snooker, go-karting, bowling and food outlets are the other usual features. The higher end ones would go for many more rides with a higher level of sophistication and might add a shopping complex and a mini-theatre. Investment-wise, the main outgo is on land.
From a corporate viewpoint, FECs offer many advantages. Firstly, compared to something as top-heavy as an amusement park, an FEC requires less investment and the structure is a lot more flexible. The fact that the FEC targets the entire family makes for a lot of traffic and faster recoveries.
Secondly, FECs overseas have done well in small towns also. These are any day more profitable propositions since the real estate costs are only a fraction of that in metros. Overseas, where FEC chains like Timezone are common, industry observers opine that the returns on investment are much higher in the small towns.
Another benefit of an FEC that emphasises brand-building is that it boosts the image of the area where it is located. This also affects the value of the real estate there.
All fun and games?
No doubt, being involved in the amusement industry is fun. Therefore, it's no surprise that the FEC concept is so popular overseas. In India too so many entrepreneurs are drawn to the industry, a prime example being the Arvind Mills group.
But too many operators simply build upon their own assumptions of what an FEC ought to be. It is not all about some soft play systems (snooker), a party room, and some redemption games (pinball machines). A basic feasibility study is necessary, for this is an under-researched industry that attempts to cater to widely varying market tastes.
According to a study on the homepage of the International Association of Amusement Parks and Attractions (IAAPA), "A proper feasibility study tells you who the target market (niche) should include; what the FEC should contain (the concept and mix) and its size; design and operational factors critical to turning the target market into loyal repeat guests; how much the FEC will really cost; and the income, expenses, and return on invested capital."
Studies have revealed two critical drivers of profitability:
Location and market area.
Target populationLocation and market area
Typically, the residents in an FEC's primary and secondary market areas will account for about 80 to 85 percent of its business. The rest will be residents living beyond the secondary market area or visitors to the area. The market area's size is a function of multiple factors. It cannot be taken for granted that each centre has the same geographic area as has been marked by a circle of a defined radius on a map.
Common sense says that the target market's distance from the FEC is the time of travel. A bad road or a congested stretch makes even short travel unattractive. Location close to a well-maintained highway increases the geographic market on that side. A good location necessarily possesses accessibility -- how easily visitors can get to the FEC and exit it.
Area forces must be taken into account. Any physical features --hills, valleys, military outposts, hospitals, shopping malls or industrial areas -- must be taken into account for their effect on traffic creation. Weather patterns also cannot be ignored. Extreme weather conditions are great news for FECs with good indoor facilities. If the FEC location is either in a rundown area, or is such that travellers need to pass through some rundown areas to reach it, then it will be a great downturn to potential traffic.
Factoring in competition is important. This includes both direct competition, such as other entertainment centers, as well as indirect competition, like public parks and recreational areas.
Target population
An FEC cannot be justified on the basis of population. They are not correlated. What matters is the size of the socio-economic class and age group, which the FEC wants to target, with a margin allotted for competition.
Local tastes need to be studied. There is a whole wide world out there, as industry experts point out. An analysis of a market can focus on criteria which turn out to be too broad, including age, sex, race, educational attainment and income. "Psychographics," which focuses on people's attitudes, motivations, and lifestyles is a better predictor of demand. These factors drive people's expectations from the FEC.
Based on these, a number of things are decided:
the precise location
the choice of attractions
the general appearance of the FEC.It is this combination which can literally make or break a project.
FEC’s future in India
Worldwide, FECs are proving to be highly popular and their potential in India is immense.
Dr Rajesh Khajuriya, President TEAM Consultants, estimates that the number of FECs will go up to 40 by 2003 if current trends are maintained.
He states that, with further development of small towns, and with resorts increasingly looking at the amusement park model to diversify and increase incomes, investment in FECs will overtake investment in parks within three years. The overall investment will go up from the Rs 50 crore at present to Rs 2000 crore.