Why should Wonderla be built in every state ?
How did the state Government of Karnataka, Kerala and Telangana on an average earn INR 17 Crore, INR 14 Crore and INR 11 Crore respectively in the form SGST during the FY 2023-24 by allowing Wonderla to operate in their respective states ?
Also, let us discuss how a State Government located in the east is trying to capitalise on this opportunity by inviting Wonderla with incentives to built and operate an amusement park in their state and thereby earn revenue in the form of SGST also in addition to it promote tourism and increase employment opportunities.
Meaning of the word Amusement Park
An amusement park is the generic term for a collection of rides and other entertainment attractions, assembled for the purpose of entertaining a large group of people. An amusement park stands out from a simple city park as it is more elaborate and provides attractions meant to cater to adults, teenagers, and kids. Visiting amusement parks is a part of discretionary spending and is perceived to be a leisure activity.
Key factors that influence the success of an amusement park
- large area of land and significant fixed capital improvements such as, the introduction of innovative new rides and attractions.
- location of the amusement park
- adequate and cost-effective supply of electrical power and water
- statutory and regulatory permits, licenses and approvals
Revenue stream for amusement parks
The number of visitors visiting the amusement parks is called as “Footfalls”. Footfalls determine the revenue that an amusement park can earn. The footfalls at amusement parks experience moderate seasonal fluctuations. Typically, the Footfalls are higher in the third quarter of the financial year (October to December) due to festive seasons such as Deepawali and Christmas. Increase in footfalls is also witnessed during first quarter of the financial year (January to March) owing to school’s summer vacations. Weather conditions such as heavy monsoon season leads to decrease in footfalls.Food & Beverages - As most of the amusement park visits are day long, food and beverages consumption is considerable, contributing 15% to 18% of the total revenue. Amusement parks offer various kinds of eateries in the form of restaurant, cafe, bars, pizza chains etc. As food courts had always been crowd-pullers in India, some of the amusement parks are tying up with food retail chains via franchise model to enhance the revenue.
Others - Gifts, Souvenirs and other retail items, Sponsorships and advertisement, Resort, Banquets, Lawns etc and Miscellaneous Rentals contribute around 3%
What intrigued us to research more about amusement park in general and Wonderla Holidays Limited in particular (herein referred to as "Wonderla") was the details discussed in Earnings Conference Call for Q2 FY 2020, held on October 31, 2019.
What intrigued us to research more about amusement park in general and Wonderla Holidays Limited in particular (herein referred to as "Wonderla") was the details discussed in Earnings Conference Call for Q2 FY 2020, held on October 31, 2019.
Mr George Joseph, Joint Managing Director of Wonderla informed that the company has received an offer from the Government of Odisha to setup a new amusement park in that State. The Government of Odisha will provide the land on a long-term lease basis thus enabling to develop an asset-light model and balance sheet friendly amusement park.
- The location zeroed in was around 19 to 20 km from Bhubaneswar and about 2.5 km from the National Highway. The land is being offered on a long term lease of 90 years at a very competitive rate INR 6 Lakhs per acre.
- 20% Investment subsidy capped at INR 15 Crore will be provided by the Government of Odisha
- Access of National Highway to the park and development of 60 feet road with a double line. The development cost of the road will be borne by the Government of Odisha.
- Potable water connection from Mahanadi River directly to the amusement park and the water charge agreed is one-tenth of what is being currently paid by the Company at their Hyderabad park.
However, in the Earnings Conference Call for Q1 FY2023, held on August 12, 2022, Mr Arun Chittilappilly, Managing Director of Wonderla informed that the company has signed a Memorandum of Understanding with Government of Odisha for the development of an amusement park in the state capital city of Bhubaneswar and for this development, the company has received 50.6 Acres of land for ninety years in the Kumarbasta village within Khorda district of Bhubaneswar.
The Bhubaneshwar park is set to commence operations from May 24, 2024.
We were curious to know how the Government of Odisha is going to be benefited by inviting a company to build amusement park in its state. The usual benefits are development, urbanisation, tourism and employment. However, there emerged a revenue stream that will increase the coffers.
Let us discuss it in detail
The footfalls recorded for the FY 2023-24, at the three Wonderla locations are as below –
Park entry ticket price from Monday to Friday for various categories are –
Coming back to the amusement park being opened at Bhubaneshwar which is being highly supported by the Government of Odisha, if 4,79,754 visitors pay an average price of INR 1,158 per head then the Government of Odisha receives a cash inflow of INR 10 Crore. [ (4,79,754 * 1,158) * 9% = 10,00,00,000 ].
Wonderla has signed MOU recently with the Government of Gujarat to establish Wonderla as a tourist destination in Gujarat. The Governments of Madhya Pradesh, Punjab and Uttar Pradesh are very keen to have Wonderla as Tourism destination in their respective states.
Wonderla has outperformed its competitors in the industry by just operating three parks and has contributed nearly INR 44 Crores as SGST and another INR 44 Crore as CGST during the FY 2023-24. The state governments are now realizing the benefits of having an amusement park and are inviting Wonderla with incentives to set up an amusement park in their state.
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A large portion of the revenue is dependent on the sale of entry tickets as opposed to the sale of merchandise, food and beverages. Hence, we can arrive at the revenue from sale of entry tickets of each park by multiplying the average ticket price with the number of visitors.
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Why did we calculate revenue from sale of tickets at each park ?
The above revenue does not include GST, the fare increases by an additional 18% because sale of entry tickets of an amusement park is taxable supply of services and GST is leviable at the rate of 18% ( SGST @ 9% and CGST @ 9%). Hence, each of the State Government receive their respective share of GST being 9% of each ticket sold.Let us compute the SGST revenue that each state would earn due to sale of tickets.
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By allowing Wonderla to operate an amusement park in its respective state the Government of Karnataka, Kerala and Telangana on an average have earned INR 17 Crore, INR 14 Crore and INR 11 Crore respectively in the form SGST during the FY 2023-24.
It is to be noted that the above discussed SGST revenue of the respective state government is only from the sale of entry tickets to the park.
GST is levied on sale of food and beverages which is generally around 5% of the invoice value. Wonderla does not allow you to carry food inside the premises and backpacks carried by visitors are checked thoroughly to prevent food from outside entering the premises. The visitors have no option but to buy food and beverages inside the park.
We wish to clarify that the price of tickets are higher during weekends and holidays. You would have understood why is it so. Answer - The number of visitors during weekends and holidays are higher.
GST is levied on sale of food and beverages which is generally around 5% of the invoice value. Wonderla does not allow you to carry food inside the premises and backpacks carried by visitors are checked thoroughly to prevent food from outside entering the premises. The visitors have no option but to buy food and beverages inside the park.
We wish to clarify that the price of tickets are higher during weekends and holidays. You would have understood why is it so. Answer - The number of visitors during weekends and holidays are higher.
While the number of visitors remain constant and the ticket price increases, the revenue increases. Similarly, if the ticket price remains constant and the number of visitors increase, the revenue increases. When both the number of visitors and ticket price increase at the same time, there is a substantial increase in revenue. This is again beneficial to the State Governments because 9% is applied on the increased ticket price.
Coming back to the amusement park being opened at Bhubaneshwar which is being highly supported by the Government of Odisha, if 4,79,754 visitors pay an average price of INR 1,158 per head then the Government of Odisha receives a cash inflow of INR 10 Crore. [ (4,79,754 * 1,158) * 9% = 10,00,00,000 ].
We believe that an annual visitor count of around 5 Lakhs is easily achievable because when we checked the location of the park it was surrounded by residential schools, colleges and universities. The target audience are waiting for the park to commence operations.
Why would a state government not support a plan which is having the potential to generate a recurring cash inflow of INR 10 Crore along with other benefits such as development, urbanisation and employment opportunities.
Direct and indirect employment opportunities arise in the form of hiring to operate and maintain the amusement park, bus facilities provided by travel agents to reach the amusement park, restaurants and shops that crop up outside the amusement parks and many more.
The Government of Odisha is not the only one who is extending support to Wonderla. The Government of Tamilnadu has granted exemption from payment of local body tax for a period of 10 years in relation to the new Chennai park which is set to commence operations in the near future.
Wonderla has signed MOU recently with the Government of Gujarat to establish Wonderla as a tourist destination in Gujarat. The Governments of Madhya Pradesh, Punjab and Uttar Pradesh are very keen to have Wonderla as Tourism destination in their respective states.
Wonderla has outperformed its competitors in the industry by just operating three parks and has contributed nearly INR 44 Crores as SGST and another INR 44 Crore as CGST during the FY 2023-24. The state governments are now realizing the benefits of having an amusement park and are inviting Wonderla with incentives to set up an amusement park in their state.
Conclusion –
Every state government should take appropriate initiatives which promote businesses. Along with development, employment is generated when businesses expand and thrive. Freebies are temporary in nature and cause significant cash outflow whereas initiatives such as above provide long term development and even a source of cash inflow.
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