The Element of Water
Aqua parks are the only real estate format in Russia to begin its development in the country’s regions. However, in the wake of the collapsed roof over the infamous Transvaal water park several years ago, most similar projects throughout Russia were either scuttled or were quickly reformatted as pools with some water park features. This format is once again trying to get back on track.
The first aqua parks appeared in the 1950s, and the U.S. is the world leader, led by Dells, Wisconsin, with 18 indoor water parks, in this form of family entertainment. The U.S.’ largest outdoor (Noah’s Ark) and indoor (Kalahari Resort) aqua parks are located here.
Surf’s Up
The aqua park segment in Russia could loosely be termed as developing, which is visible by the number of projects and their upkeep as well as by the amount invested. The country’s water parks today can be counted on two hands, with one operating in Mytischy, two in St. Petersburg, and one each in Yekaterinburg, Samara, Kazan an Omsk, plus the ones being built along the Black Sea coast; however, they have only just started to be built.
If one were to believe advertisements, however, there are many more aqua parks. However, specialists prefer to be accurate. “Two water slides built alongside a typical swimming poll in a fitness center cannot be called a water park,” says Kva-Kva Aqua Park in regard to Kimberly Land and other similar projects.
The effective operation of a water park is based on people’s desire to enjoy the water. However, despite foul weather, this desire does not diminish, which is proved by Finland, where indoor aqua parks are very popular just as they are in Russia, although there are relatively not many warm and sunny days.
A Guilty Pleasure
Following the collapse of the roof at Transvaal, many developers decided to err on the side of caution and cancelled the construction of a number of planned water-park projects. Mainly this was because of the difficulty in delivering them to the market. “The authorities were very wary, which is understandable, that there could be a repeat, so they did everything possible to slow development,” says one market expert. The developer o one of the water parks which had already been completed was forced to redesign the roofing. Wooden beams were installed here, in water with high chlorine content. In Podolsk, a pool was built instead of a water park, to avoid problems with delivering the facility to the market.
The underdeveloped nature of this format in Russia is not the only reason for the Transvaal tragedy, as, indeed, water parks in general require huge investment, and this is rather risky in financial terms. Therefore, developers are in no hurry and are completing these projects gradually, while more complicated concepts have begun to appear just recently, where good experience has risen and competition has forced investors to look ahead.
Large expenditures influence the finances of any aqua park. There are well-known instances when many very good indoor water parks built in Europe are not commercially viable, so the local governments finance them. “Indeed, water parks are not the most profitable business,” says Alexei Mogila, director of the retail and regional real estate department at Penny Lane Realty. “Difficult infrastructure designs and expenditures must be considered.”
The lion’s share of expenses for construction goes to the interior engineering. This is for the water equipment, tools for cleaning the pools, etc. It also costs quite a bit of money to protect and secure the infrastructure.
According Mikhail Uznikov, senior creative specialist for projects at Forrec, a turn-key outdoor aqua park costs an investor around $10,000/sqm, including soft costs to designers, which could run the budget up by 10%-15%. “In terms of an indoor park, the cost doubles. For example, the 5,000-sqm Centrepark in France was built for $23-$25 million, including design.”
However, one should consider that a rather large part of expenses go toward design and construction of complicated infrastructure, such as with facilities practically full encased in a glass structure.
A Mix
Nevertheless, in practice, investment in the construction of a water park has a definite financial attraction. How can an aqua park be rendered profitable? In addition to the water attractions, an aqua park could include additional services, such as a spa zone, a sauna area, bowling, a sport hall, fitness club and restaurants and cafes. A shopping mall selling accessory items would also do well in a water park.
According to Uznikov, specifically the water attractions are the most popular with the visitors. “The higher in quality and variety the water facilities, the longer people will spend in the entertainment complex, and this is the most important aspect in the financial success of any retail area. This mixed model is the most effective and successful in the West.”
At the same time, there are well-known examples when even stand-alone water parks have done well financially on their own, without any attending functions. Indeed, in particular, in Germany there is an aqua park in operation which was built far from other entertainment facilities on a former airbase. As a result of the populated area nearby, the water park enjoys a good level of visitation.
Aqua Parks plus Shopping Centers
Russian has its own specifics, as the majority of first-opened indoor water parks were built by shopping center developers. Indeed, the Kva-Kva aqua park in Mytischy is part of the XL shopping center developed by Ramzen. The developer of Yekaterinburg’s largest aqua park, Limpopo, is the Urals-based holding company, Lider, which has already built several shopping centers.
However, is the connection between a shopping center and an aqua park, as popular in Russia, ideal, and this question is debatable. Maria Voronova, director of the marketing department at RosEuroDevelopment, doubts that an aqua park is a good anchor tenant for a shopping center. “The operation of a water park is a separate business, and is still quite weak in Russia.” Let’s note that RosEuroDevelopment has a modern water park project in Ufa as part of the 150,000-sqm Planeta shopping and entertainment center.
Despite all the complications, investors view aqua parks as prospective businesses, and, despite only being in operation for a short time, Transvaal did turn a profit. “Demand clearly exceeds supply,” says Sergei Popov, deputy director of the commercial department at Eurocomplekt, a designer of water parks. “These projects will very likely be profitable in a number of the country’s regions; however, in terms of indoor water parks, they should be built in a complex with other facilities, such as with a shopping center, to minimize the risks to the investor.”
Specialists recommend minimizing risks by paying very close attention to the size of a water park. Indeed, some believe that the aqua park in Samara is too large for the city, thus the investors will likely not be able to count on high yields. Nevertheless, good management will always turn a profit.
Visions of Grandeur
The construction boom of water parks in the U.S. occurred in the 1980s. However, the parks of yesterday are no longer very popular, and they are being replaced by aqua parks of the next generation.
The most profitable means is to integrate a water park as part of an overall theme park or system of parks located in a large resort zone. For example, in Orlando, Florida, there are parks and hotels of Universal Studios, Disney Land, Sea World, Blizzard Beach, Typhoon Lagoon and others, which are part of a whole theme package. Visitors do not come to the respective parks for an hour or two, but, rather, for extended periods of time on weekends, during vacations and other holidays. If a structure also houses a family entertainment center alongside a large shopping and entertainment center, this is only a positive aspect for the entire recreational area assisting the aqua park for the long term.
Moreover, the combination of indoor and outdoor water parks has performed well financially. For example, the Costa Caribe - Universals Studios project was designed by Forrec, and has been performing well financially year-round since it opened in 2002. The park comprises an indoor and an outdoor zone, and is popular all year round, as it forms a single area, with glass walls separating the areas.
In short, the combination of themes is popular, with a water park theme permeating virtually all attractions. Indeed, there are log-flume rides, combining the thrill of a roller coaster with the splash-down of a water slide. Such parks offer the chance to get a bit damp or really to take the plunge. At the same time, a visitor could avoid the water altogether, given that there are also regular “dry” rides.
Aligning with the West
As previously noted, the aqua parks operating in Russia today could unlikely be termed fully modern concepts; however, market experts forecast that there soon will be water parks here to rival those in Florida. Indeed Jones Lang LaSalle is certain that the Russian market will follow in the footsteps of Western countries, where most entertainment and sport facilities are multi-functional.
However, it is not so simple to predict which projects will appear soon on the market, as most are in the design stage currently and they have not been officially announced for construction, let along delivery to the market. According to Mogila, two large projects will soon appear in Moscow, as aqua parks will be included in the lineup of the Festival Park entertainment centers located on Kaluzhskoe and Kievskoe shosses, respectively. Additionally, the Red Park project was just recently announced for completion in Yekaterinburg on around 60 ha, and will include a water park.
In conclusion, it will be worth waiting to see how the Black Sea coast will be developed and which interesting outdoor water parks will be built. Indeed, even prior to Sochi being awarded the 2014 Winter Olympic Games, large investors had been showing interest in this region, so the Games should generate even more interest in this area of Russia.