In the competitive world of leisure and entertainment, selecting the right business model is essential in driving long-term success. Leisure Development Partners (LDP) global experience confirms there is no one-size-fits-all solution.
Unlike other forms of real estate, attractions sometimes struggle to pay commercial rent levels given the high capital expenditure requirements and modest margins. Fit-out contributions or joint venture agreements are therefore sometimes necessary. Attraction developers receive support to improve a project’s viability, whilst landlords can benefit from increased footfall, spend, and dwell time at a destination. This makes partnerships and deal-making especially important, helping to align the interests of landlords and tenants and get projects off the ground.
Whether launching a cutting-edge immersive experience or expanding a well-established family entertainment concept, the business model must align with the local market, commercial goals, risk appetite, and operational capabilities. Finding the balance between all the elements is key.
Internal and external factors to consider
Developing a successful attraction requires both operational expertise and strategic planning. Developers must assess a range of internal and external factors that directly influence project performance. This should be considered early in the planning process to optimise the development in the context of the local market.
External factors – those beyond the developer’s control – include the size and characteristics of the resident and tourist markets, existing competition, climate, and the broader economic and political environment.
Internal factors are determined by the developer and include the chosen concept, pricing strategy, capital investment, site selection, and marketing approach.
Twelve key considerations in development
LDP has identified 12 foundational questions every developer should address:
- Why and where?
What is the project’s core objective? Is your goal to drive footfall to a wider destination, draw off existing footfall or be a successful stand-alone operation? - Is there a market?
Are the local resident and tourist markets sufficient to generate enough demand for the project? - Who is your target market?
Based on the chosen concept, who is the core target market? What age profile are you looking to attract? What can they afford to spend? What experiences are they looking for? - Who is your competition?
What is the level of competition for similar experiences? What prices do they charge, how do they perform, and how will you differentiate? - Which trends can you tap into?
Does the concept align with consumer trends and emerging leisure behaviours? How will you communicate this to potential visitors? - What attendance and revenues can you expect?
Considering the internal and external factors mentioned, what level of footfall and revenue is achievable? What are the key benchmarks to review to forecast performance? - What about operating costs and CapEx?
What are the ongoing operational expenses? Is the required capital investment commercially viable? - How will it be financed?
What sources of funding are available – private investors, loans, or grants? - How will the investment be recouped?
Will the project deliver a return on investment? What strategies are in place to mitigate risk and drive long term performance? - Who will operate it?
Will operations be handled in-house or by an external operator? - Are there partnership opportunities?
Could collaboration through joint ventures, management agreements, or franchises enhance delivery? - What is the long-term plan?
Is there a roadmap for sustained operation, growth, and reinvestment?
Emerging vs. proven concepts
The first step is identifying a concept to develop. Attraction developers must decide between adopting a proven concept or an emerging, less-tested idea.
Proven concepts, such as FECs, bowling, or adventure parks offer greater predictability. Their performance across different markets is often well documented, making it easier to forecast potential attendance and revenues. Developers benefit from a clear understanding of operational requirements, customer expectations and long-term viability. These concepts may also carry existing brand recognition and are typically easier to finance due to their track record.
In contrast, emerging concepts, such as digital art or immersive theatre experiences, come with more uncertainty. There is often limited data on performance over time and across multiple markets, and long-term potential may be untested. However, being a first mover can offer an advantage helping to differentiate a new venue within a crowded market. While this can carry more unknowns, a thorough market and feasibility study can help to mitigate risk.
Many now-global successes such as KidZania, iFLY, and LEGOLAND Discovery Centre began as innovative ideas in limited markets. With the right strategy, emerging concepts can evolve into regional or even global brands.
Partnership models
Selecting the right business model is critical to long term success. It is fundamental to how risk, investment and returns are managed, and affects operational control and long-term brand strategy. Below is a high-level overview of the four most common models:
Own & operate
The concept owner fully funds and manages the attraction. This allows maximum control and return but involves the greatest financial risk.
Joint venture
The concept owner partners with a local investor or operator. Typically, the local partner invests the initial capital, the concept owner takes on the operations and repays capital through a revenue share agreement. This removes the initial capital investment requirement for the concept owner but does not eliminate risk entirely.
Franchise agreement
The concept is licensed to a local partner who funds and runs the attraction. The concept owner offers operational and marketing support and earns fees. This lowers financial exposure but limits operational control.
Franchise & operate
The local partner invests, and the concept owner operates the attraction under a dual agreement. This structure retains brand and operational control while minimising financial risk.
Each model presents a trade-off between risk, control and return. Own & operate offers the highest control and return but requires capital and bears the greatest risk. Joint ventures spread investment and risk but require strong alignment and trust between parties. Franchising enables rapid expansion with minimal capital but sacrifices some degree of control. Franchise & operate strikes a balance – providing operational control with reduced financial exposure. Developers and concept owners must carefully assess their objectives and capabilities to select the most suitable structure for their project and market.
Final takeaway
There is no silver bullet in leisure development but the most successful projects share a few common traits: a business model tailored to their market; a clear operational plan; honest partnerships and a realistic understanding of the concept’s potential.
LDP partners with clients to align concept, market and strategy – transforming creative ideas into viable and impactful destinations. Get in touch with their team to take the conversation further – www.leisuredevelopment.co.uk or email info@leisuredevelopment.co.uk
