Theme parks, FECs bleeding half a billion in 2 months

The industry will expect more retrenchment, bigger salary cuts and ultimately, more parks to close permanently, says expert

by RAHIMI YUNUS / pic by MUHD AMIN NAHARUL

THEME parks and family entertainment centres (FECs) have lost an estimated RM520 million in just two months between October and November as the country largely returns to the Conditional Movement Control Order (CMCO).

Malaysian Association of Amusement Theme Parks and Family Attractions (MAATFA) president Tan Sri Richard CK Koh said one water park is incurring a minimum of RM2 million per month from topline revenue and another RM2 million cash outflow to pay rent and salaries, among others.

Koh says Budget 2021 does not benefit theme parks, FECs and attraction biz – Source: MAATFA

For other operators, he said a minimum of RM1 million is lost monthly, if not higher.

“It will definitely increase the risk of closure and winding up, especially for FECs. Among our members, 10 to 20 small FECs and 10 to 15 FECs with over 3,000 sq ft (278.7 sq m) have been closed.

“This is very depressing as they were also providing jobs and contributing to the government’s coffers with the annual entertainment tax,” Koh told The Malaysian Reserve (TMR).

With the latest movement restrictions, he said theme parks are very much affected and set to suffer another period of zero revenue.

He said many of the industry players have spent excessively on safety and preventive measures, but that would not be compensated without any inflow of revenue.

As it is, Koh said theme park operators still need to incur payroll, utilities and basic maintenance costs.

“The industry will expect more retrenchment, bigger salary cuts and ultimately, more parks to close permanently as all assistance given during the first MCO are no longer available or valid,” he said.

Koh added that Budget 2021 does not benefit theme parks, FECs and attraction businesses except for the Social Security Organisation wage subsidy programme.

He added that the first six months of payment of the initiative are still pending.

MAATFA has a total membership of 90 big theme parks, attractions and FECs.

Sunway Theme Parks ED Calvin Ho said both the company’s theme parks — Sunway Lagoon in Petaling Jaya, Selangor, and Lost World of Tambun in Ipoh, Perak — had to close temporarily due to the CMCO.

“The impact is very direct and immediate where theme parks are not operating, while the cost is escalating,” Ho told TMR.

Ho said the theme parks would need three to five years to fully recover from the impact of the Covid-19 pandemic which had also hit the travel businesses where theme parks are linked to.

Before the pandemic, he said over 50% of the visitors were from overseas, mainly the Middle East, China, India and South-East Asia.

Ho said Sunway Theme Parks recorded between 10,000 and 15,000 visitors during weekends, and 2,000 on weekdays.

He said there was a massive recovery for the theme parks during the third quarter of the year when the last round of CMCO was lifted, with 4,000 to 5,000 visitors on weekends.

At the time, the capacity was also limited to between 500 and 600 per day in view of the pandemic, but the numbers had been “quite encouraging”.

“We need to keep theme parks alive because they are vehicles for tourism,” Ho said.

He said industry players are hoping that the government would give more incentives and consider abolishing the 25% entertainment tax which is largely viewed as outdated.

The 25% entertainment tax is paid on top of corporate tax.

Without the entertainment tax, Ho said theme park operators could offer more affordable and competitive entry ticket prices.

“Theme parks are more for families compared to other entertainment outlets that are subject to the entertainment tax. We also need to keep on putting in money and invest to bring in tourists,” he said.

Koh said the government needs to seriously consider removing theme parks from the Entertainment Act 1953 as theme parks are totally family-oriented entertainment venues specially created for families in the form of affordable entertainment for all Malaysians.

“Presently, in addition to collecting entertainment tax, the government is already collecting income tax and licensing fee from theme parks,” Ho added.

He said the abolishment of entertainment tax for theme parks and FECs is necessary and will be a boost for the tourism industry, as the entertainment tax paid ranging from 20% to 30% amounts to a great portion of the operating cost.

“Theme park operators have the option to pass the entertainment tax on consumers which results in higher ticket prices and this negatively affects the number of visitors. FECs, however, cannot pass on this tax to their customers, therefore resulting in even greater difficulty to recoup the investment,” he said.