Dubai Parks Operator Eyes A Breakthrough Run This Year

Dubai

A revised ticket pricing strategy and peak seasonal demand during December ensured DXB Entertainments, the theme park operator, close 2017 on a relative high. The fourth-quarter visits to Dubai Parks totalled 795,746, up 66 per cent on Q3-17 (third quarter), while revenues were Dh157 million.

This brought the total visitor count for 2017 to 2.3 million and revenues of Dh552 million. Net loss for the year was Dh1.116 billion, in part due to a Dh478 million “non-cash depreciation expense”. According to the operator, such a depreciation charge is “normal for a large-scale project of this nature”.

Mohammad Al Mulla

“What we did with the ticket changes was simplify it for consumers and bring in consistency on the pricing to avoid confusion,” said Mohammad Al Mulla, CEO and Managing Director, DXB Entertainments. “We’ve got the annual pass programme going to build up awareness. And when you create more engagements with the product, the number of visits will increase.

“In many ways, 2018 will be the first full year of operations because for the better part of 2017, not all parts of the park were fully operational. Now that it is, we can start focusing on (marketing more aggressively) to the international markets.”

Last year, of the overall visitor count, 70 per cent were from within the UAE. In the theme park industry, destinations tend to make money when overseas visitor numbers are on par or even higher than the domestic.

Ahead of Dubai Parks’ opening in late 2016, projections were for 2017 to pull in more than 6 million visitors.

The ticketing changes — signed off in September last — impact was most directly felt in the December figures. That month had the “highest daily visitation to date, with an average of over 20,000 visits in the last 10 days (of the year) and peak daily visits approaching 27,000”, the operator said in a statement.

In the second and third quarters, visitor numbers were 414,000 and 479,000, respectively.

Another boost was provided by the completion of all rides within Phase 1 during Q4-17. “In 2017 we focused on revising our pricing and marketing strategy to ensure we continue to drive footfall and are well positioned to generate long-term returns,” said Al Mulla in a statement. “Simultaneously, we optimised our cost structure and delivered operational synergies.”

But the change to ticket prices also brought on “marginally” lower theme park revenues on a per capita basis — Dh138 in Q4-17 compared to Q3-17’s Dh142.

On the expenses side, the operator is incurring costs related to the Dh4.2 billion debt it has on the books. These funds were taken for constructing and delivering Phase I.

“To accurately measure the operational performance of the business, we continue to focus on improving our operational EBITDA (earnings before interest, taxes, depreciation and amortisation),” the company said in a statement. The EBITDA loss during 2017 was Dh422 million, and there was some improvement from a 33 per cent gain in the fourth quarter compared to the third.

“Our operating costs have been steadily decreasing each quarter from Dh284 million in Q1-17 to Dh211 million in Q4-17,” said Al Mulla.

One area where the operator could be looking for further gains would be from its hotel property. Occupancy levels at the 500-room Lapita did increase in Q4-17, averaging 48 per cent. But for the full-year, average occupancy was at 35 per cent. The hospitality part of the business delivered Dh61 million in revenues during 2017.

“But if you look at the numbers, from October 2017 we started making good progress in hospitality,” said Marwa Gouda, Head of Investor Relations, DXB Entertainments. “If you look at December, we had 90 per cent occupancy and that’s quite an encouraging sign.

“What the hotel element does with its 500 rooms is push about 15,000 people into the rest of the destination. It’s a strategy that will work even better going forward.”

DXB Entertainments looks to tap new funds from Meraas, plans Dh1.2b convertible instrument

The board of directors at DXB Entertainments has recommended additional funds from its main shareholder Meraas — the Dubai Government owned master-developer — in the form of a convertible issue. These funds would be tapped to meet working capital requirements as well as general expenditure and debt servicing until it reaches cashflow break even.

As per the proposal, an existing Dh700 million subordinated shareholder loan it took from Meraas will be rolled into the convertible issue. This requires regulatory approval and will be presented to shareholders on April 25.

John Ireland

DXB Entertainments had earlier reached a deal with financing partners to reset the terms of its Dh4.2 billion Phase 1 debt, which includes a three-year moratorium on principal payments. These payments will now kick in only by 2021.

“The debt realignment and convertible instrument provide adequate room to meet working capital requirements, routine capital expenditure and debt servicing,” said John Ireland, Chief Financial Officer, DXB Entertainments. “With the business fully funded, we can focus on the operational success of the business.”

As for the deal on the Dh4.2 billion debt, the term of the facility has not been extended and there will also be no impact on the interest rate.

_M.N.