Ocean Park chief executive Tom Mehrmann discusses the challenges and achievements of the Hong Kong park’s six-year HK$5.5 billion (US$710m/€565m) Master Redevelopment Plan, completed this summer.
Founded in 1977 by the Hong Kong Jockey Club, Ocean Park enjoys a unique setting overlooking the South China Sea on the southern side of Hong Kong Island. Operating on a not-for-profit basis, wholly owned by the Hong Kong Government and a public trust, its mission is to provide an affordable day out centred around entertainment, education and conservation.
As it celebrates its 35th anniversary in 2012, Ocean Park has become one of Asia’s top five amusement parks, entertaining over 7 million annual guests. Work on the Master Redevelopment Plan (MRP) began in 2006, and the results have transformed the park into a world-class venue fit for the challenges of the 21st century – including new competition from Hong Kong Disneyland and other attractions in the wider Pearl River Delta.
When I arrived at Ocean Park in January 2004, we were facing a number of challenges. SARS had been a very prominent threat in the market, and although people in Hong Kong felt that it was behind them, it had provided a massive shock to tourism throughout South East Asia.
SARS really just highlighted what had been a difficult time for the park. Attendance was low – we finished the year at around 3 million people. After four consecutive years of loosing money, cash reserves were being eroded and very low capital investment was made as a result. And with Hong Kong Disneyland close to opening [in September 2005], there was a sentiment that our park had grown tired, a new thing was coming and people were just waiting for it to arrive.
But there were some silver linings. During SARS, the Mainland Government had, in partnership with the Hong Kong Government, come to an agreement to relax visa restrictions on a controlled basis across different Chinese cities and provinces. To this day, I think Hong Kong has some really aspirational qualities to the Mainland market. As the Frequent Independent Traveller scheme (FIT) was rolled out across China, visitor numbers really grew. To break up a shopping or a gastronomic trip to Hong Kong, people realised they could throw a fun day at Ocean Park into the mix. It was a wonderful deal.
The FIT scheme has slowed down quite a bit lately, but there are still 450 million people that have access to it, which is a significant number when you think about it – more than the population of Europe, certainly more than the United States, and about one third of the Chinese population. Each time the Government releases a different province, it just opens up a new market for us.
We see that the first time a traveller has the ability to come out of their own province they like to come as part of a group, with others that speak the same language, but they are usually on a very packed itinerary. The second or third time they come, they stay for the whole day, bringing family and friends and enjoying the park on every level.
Big and bold
When signing the deal with Disney, the Hong Kong Government made the decision to put in a tourism foundation as a pillar of economic development to shift Hong Kong away from what was once a manufacturing and financial-based city. As part of this, they put the proper infrastructure in place and placed emphasis on hotel development. As a result, the city of Hong Kong become one of the pre-eminent tourist destinations in the world.
It was therefore incumbent on us to make sure that Ocean Park was standing tall and offered value when people came, but I think I can honestly say that if Disney wasn’t in the picture, there probably wouldn’t have been the same motivation to do something so big and bold as we have with the Master Redevelopment Plan.
There was, before I arrived, some serious discussion about moving the park off the headland [Summit] and bringing it down to the lowland area [Waterfront].
Allan Zeman, who had just been brought on board as chairman, heard about this and said, “Look, what you have created with what nature has given you is beyond compare and if you bring everything down to the lowland you are just going to be another theme park on a level piece of land, meaning you could be anywhere; it’s no longer uniquely Hong Kong.”
Allan was very quick to say we were not giving up the headland, and I agreed. We needed to find a way to work with the framework we had. Part of that meant moving a million cubic metres of dirt and creating a new level platform up there. It was a very ambitious and bold move on our part but I think the new Summit area has made the park easier to traverse and to experience. Obviously, the Ocean Express improves access to the two touch points as well. Our guests are now staying longer and exploring more.
Making a masterplan
Preliminary work on the Master Redevelopment Plan had begun before I arrived at Ocean Park. After working on some ideas with another company from the United States, we brought in Robin Hall and Philip Vaughan of Vertex Productions in 2005. Next we brought on board a storyteller, a creative individual named Adam Bezark. The three of them sat down with our team and came up with a story, a common thread to guide the design process and maintain continuity of experience.
As we were no longer the only game in town and were operating in a much more competitive environment, we set about identifying our differential values – our location, topography and animals, plus the conservation, education and entertainment components that the park was founded upon. Ultimately, I wanted to focus on the multi-generational value of the park; meaning people that came here as children would now be bringing their own children. I felt there was something very powerful in that, especially as Disney was coming into the market and didn’t have that generational linkage yet.
When it came to designing the various areas of the park, we did it from the perspective of offering different climatic or geographic zones as you travel the world, such as Polar Adventure and the Rainforest, along with a little more fanciful theming in Aqua City. In assessing our past, we reviewed our name, Ocean Park, and yet you never saw the ocean until you got on the cable car, so we wanted to bring more water into the picture. We opened the story with Aqua City and the Lagoon, and then you get fantastic offerings like the giant pandas and other Asian animals.
I think we used to have somewhere in the neighbourhood of 3,000 fish in Atoll reef, we now have 5,000 in our Grand Aquarium. We have two pandas, four red pandas, Chinese salamanders, and hundreds of birds in Amazing Asian Animals. Moreover, we’ve just brought in over 100 animals for Polar Adventure. Within the mix of attractions and offerings, we wanted to have two-thirds animals, education and conservation, and then the other third would be more visceral – which meant rides. That’s where Thrill Mountain comes in, it’s purely kinetic.
We said very early on that, with the arrival of Disney, there was no sense in us getting into 3D and 4D experiences. There isn’t enough media content in the libraries of the world to even come close to what Disney puts on; they do a fantastic job with their intellectual property and their 3D/4D experiences. Why dabble in that market when they do it so well? Let’s focus on what we do well, which is animals and “real world” experiences.
Amazing Asian Animals
Hong Kong history
The redevelopment was very much like performing open-heart surgery on a marathon runner while they are still running. About the only part of the park we didn’t touch was the Cable Car Plaza. Although it wasn’t part of the MRP, we thought there was a great opportunity to transform this transition area that all guests pass through going to or coming from the cable car that links the Waterfront to the Summit. We came up with the concept of Old Hong Kong, and we’ve had a lot of compliments on it. Because Hong Kong is such a dynamic city, it moves very quickly and it’s hard to find historical reference points around town. The greatest thing about Old Hong Kong is seeing grandparents point out things they remember from when they were young to their grandchildren, whether it’s a rickshaw, the Kowloon Motor Bus or the Dai Tat Dei Market.
In 2005 we brought all the park’s food and beverage back in-house, hired our own executive chefs, changed the menus, and took over the kitchens and the warehouse, as well as the procurement process. I am proud to say we are perhaps one of the only parks in the world that is ISO 22000 certified for food hygiene and safety. Our team is completely committed, and recently we have watched our per capita spending on food and retail nearly triple. We have what I think are some of the greatest sit-down dining restaurants in the industry, including the new Tuxedos restaurant in Polar Adventure. We have changed guest behaviour because of this; they are now eating at the park, staying later and we have been able to extend the park hours as a result.
Beyond the MRP
Polar Adventure opened this June and was the final part of the Master Redevelopment Plan to be completed. We are now about to enter a second phase of development with the addition of a waterpark and two hotels, set for completion around 2016. This will allow us to put a second gate in place and position Ocean Park as a destination resort. I want to develop the world’s best waterpark, on every level – an indoor, outdoor, year-round operation that combines the very best waterpark experiences in the world, complemented by hotel-like cabana facilities that will allow us serve a whole new market consisting of both local and destination travellers.
We already say that the park has more things than you can do in one day, and so most people run out of time before they run out of things to do. There should be a seamless link from the park to the hotels, which will also have an entertainment, education and conservation component to them. We are really leaving the door open to developers to bring in their very best ideas related to the Ocean Park theme.
With 42 million people coming to Hong Kong last year and an expectation of, I think, 44 to 45 million this year, the city is currently short of accommodation, especially on the South side of the island. Once we get the MTR South Island Line [subway] connection in 2015, we are going to be a very simple transfer from downtown in just a few minutes.
With the exception of myself and a few other expats, this is a park that is run by locals, and supported and funded by the local people. That is why we are happy to call ourselves “Hong Kong people’s park”.
When we set about devising the MRP, we did not take the normal approach to feasibility, which is sometimes driven by a desire to build the park you want rather than the park you can afford. We wanted to build a park that never becomes a burden to the taxpayers of Hong Kong. Even though we are ultimately owned by Government, every cent that has been lent to this park will be paid back. Nothing has been given for free; even our interest rates on the government loan are higher than current market rates.
Ocean Park has always been a frugal and prudent company. I have to give a nod to my entire management team – they are extremely good at what they do. I am really proud of the fact that we generate a nearly 35% EBITDA, which for a 365-day a year animal-based park, is a rather unusual figure. As I will often say, not-for-profit is not a business plan, it’s a tax status.
We never had any loans prior to the MRP and I admire the fact that, even through the very tough years, the park was able to survive on its own cash reserves. By the time I arrived in 2004, we were down to about HK$100 million (about US$12 million) in reserves. That was maybe enough to fund three months of business. We then set about generating cash reserves that would cover about two years of operating expenses if no revenue was coming in. That was a very conservative place to be but we felt that we had no other option as a government-owned facility with an obligation to the employees and the people of Hong Kong. In the last seven years we have taken our reserves to over HK$2 billion and exceeded both revenue and attendance expectations, which will allow us to pay back the MRP loan over a roughly seven-year period.
We have achieved some results that I think are really outstanding in the industry. In terms of attendance we are three years ahead of our plan, with over 7 million guests in the last 12 months. We are only a few weeks into the next fiscal year but we are already tracking higher than last year. I think one of the greater challenges now will be to see if we can spread demand out over the year rather than having attendance peaks that go beyond our theoretical capacity in the park.
Before the MRP we were not even offering one entertainment unit per guest per hour during peak periods; we were offering maybe 0.7. That meant guests were waiting between an hour and maybe two hours for attractions during peak conditions. We wanted to take that metric to a different level and increase our instantaneous capacity in the park to 36,000 people who, even under the most extreme conditions, could enjoy two entertainment units per hour. This became a critical driver for us as we chose new attractions and examined capacities and throughput. I can say very confidently we are now looking at about 80,000 entertainment units per hour.
The challenge now is to operate efficiently and ensure guests get a real value for their money when they choose to spend a day at Ocean Park. We are charging a lower price than some local attractions, but the comparative experiences in the Mainland tend to be cheaper and we still have a very price-sensitive customer.
In this southern part of Asia, there are many destinations, along with new attractions appearing all the time. But I believe, kind of like Central Florida or Southern California, more parks create critical mass and more opportunity. We really are a complement to Disney, and a complement to the OCT parks, Chimelong, and to Macau. As long as we remain culturally relevant to the markets we serve, Ocean Park should always be on the itineraries of visitors coming to Hong Kong.
Tom Mehrmann was talking to Owen Ralph
The Ocean Express now links the Waterfront to the Summit in just three minutes
What do you get for HK$5.5 billion?
Ocean Park’s HK$5.5 billion (US$710m/€565m) Master Redevelopment Plan (MRP) was completed in eight phases and called for the doubling of attractions from 35 to 70. Yet one of the biggest challenges was retheming and improving access between the two distinct areas that make up the park.
The former Lowland, where all visitors now enter the park, has been redeveloped into the Waterfront, while the old Headland, high up above Aberdeen Harbour, is now known as the Summit. Linking them is the Ocean Express, a fully themed funicular transport system opened late in 2009 as a result of extensive tunnelling between the two areas. Alternatively, guests can still enjoy the scenic 1.5km cable car ride that traditionally linked the Lowland and the Headland.
Awaiting visitors inside the Waterfront is Aqua City, showcasing a three-tier Grand Aquarium, various Amazing Asian Animals exhibits including Giant Panda Adventure and a redeveloped children’s area called Whiskers Harbour. Each night after dark, a spectacular water and laser show called Symbio brings Aqua City’s Lagoon to life. Additional attractions in this area include the tethered SkyStar Balloon and a custom-made Sea Life Carousel courtesy of Wood Design.
Although it was not officially part of the MRP, Ocean Park management also took the opportunity to transform the former Cable Car Plaza into a themed area called Old Hong Kong. Leading off the Waterfront, it features street scenes, shop fronts, food outlets and games influenced by the city of yesteryear.
Once they have reached the Summit, guests can enjoy new themed areas such as Polar Adventure, integrating both North and South Pole environments as well as a Mack rollercoaster called Arctic Blast. In a total contrast of theme, the Rainforest featuring Expedition Trail and an Intamin Rapids ride. Close by, at the very summit of the Summit, the high energy Thrill Mountain features the Hair Raiser floorless B&M coaster and carnival-style rides such as The Flash (Mondial Ultra Max), Whirly Bird (Chance Aviator), Rev Booster (SBF Musik Express) and Bumper Blaster (IE Park bumper cars).
Areas that have been retained include Marine World and Adventure Land, featuring Ocean Theatre and various thrill rides in addition to new animal exhibits like Sea Jelly Spectacular and Chinese Sturgeon Aquarium.
Linked to the Summit by a hillside escalator, Adventure Land used to give way to a further area of the park at Tai Shue Wan, but this has now been cleared to make way for a second-gate waterpark, scheduled to open in 2016. Together with the Ocean Hotel and Fisherman’s Wharf Hotel, these new additions will mark the next stage in Ocean Park’s development as it becomes a multi-day destination resort.