Recreational Activities Industry Snapshot

The US recreational activities industry consists of a variety of diverse sectors, such as theme parks (valued at $10 billion in 2004) and fitness centers (valued at $35 billion). Also included are sports entertainment and activities, travel & tourism and video rental. While the sectors within the industry are diverse, all have been affected by a series of generic factors over the last few years. These include the impact of 9/11 and the war on terrorism, rising energy costs and the growing popularity of consumer credit in the US.

The US possesses one of the most highly developed infrastructures of leisure facilities in the world. Private centers dominate the US fitness center market, accounting for 60% of the markets value.

The US theme park market is primarily focused in Florida and California. Theme parks have been heavily affected by the aftermath of the 9/11 attacks, due to their perceived vulnerability to terrorist activity, with revenues declining since 2001. In addition, rising energy and labor costs have placed additional pressure on the margins of operators in this market.

US consumers reduced their travel and tourism activity post-9/11, with both domestic and international leisure trips affected. However, these reductions had been recovered by 2004. The weakening of the dollar during the last few years, which has affectively made the country a cheaper place to visit, has boosted international tourist spending in the US. The falling cost of air travel has also helped to boost revenues from international tourism.

The leading players in the US recreational activities industry include theme park giant Walt Disney, fitness center leader Bally Total Fitness, cruise operators Carnival and Royal Caribbean Cruises, American Express (travel agency) and Blockbuster (video rental).

Key Issues

Rising Energy Costs - Natural gas prices have doubled during the last few years, due to supply shortages, and electricity prices have risen as a result. This has led to significant cost increases for theme park, fitness center and sports stadium operators, leading to falling margins at a time when outdoor leisure activities have experienced a decline in participation.
Weakened Dollar - In order to stimulate economic activity, the US government has allowed the dollar to steadily weaken in comparison to most other major currencies. For example, the dollar lost 24% of its value against the Euro between 2002-2004. This has attracted growing numbers of international tourists to the US, countering the negative impact of the 9/11 terrorist activity

Technology Threat - The rapid growth in the use of the Internet and electronic gaming options as alternatives to outdoor recreational activities, poses a long-term revenue threat to the recreation industry. Both government policy and industry players will need to find ways to integrate new technologies into outdoor leisure activities, in order to maintain participation levels amongst younger Americans.

Significant Trends

Growing Demand for Cruises - Cruises have become increasingly popular with US consumers during the last two decades. In 2004, there were approximately eight million US passengers on cruises, an increase of 39% since 2000 alone. This shows that the cruise market in the US has been relatively sheltered from the economic and political turmoil of the last few years. Through to 2008, the market is expected to achieve passenger growth of 8% per annum.

Online Sales Boom - The Internet has revolutionized the way that consumers spend their money, particularly on leisure products and activities. The majority of low cost flights are now purchased via the Internet, as are significant numbers of hotel reservations and tickets to sports and entertainment events. This has weakened the position of the traditional travel agent. The video rental market has also been drastically affected by the growth of the Internet, with online sites cannibalizing revenues from traditional outlets.

Declining Participation - Prior to 2001, participation in outdoor recreational activities had steadily increased in the US since 1990. However, since that time, most activities have witnessed a decline in both participation numbers and frequency. This is largely due to concerns linked to travel following the 9/11 attacks, although the growth of in-home Internet and pay-TV entertainment has also had an impact, especially on Americans between the ages of 18-29.