Risk in the Theme Park Industry - Essay Example

According to Lukas, accidents and deaths are the most closely monitored risk despite the statistical fact that economic concerns and poor weather affect business more frequently. (2005) However, when accidents or deaths do occur, there are several direct consequences. First, the park is often closed during the process of an investigation. In addition to the lost ticket sales during that timeframe, the public perception of danger is increased. "The mere perception of an unsafe ride can affect park attendance, while accidents and deaths can result in park closure and decline in ticket sales.

" (Lukas, 2005) Statistically, the risk is minimal. In 2003, there were only 78 ride-related injuries which resulted in an overnight hospital stay. (Banay, 2005) Nevertheless, the costs are high when accidents do occur. Insurance underwriters are very concerned with safety, and the cost of insurance is dictated by safety records. While patrons of amusement parks are seeking danger and thrills, park management must balance these desires with the risk of increasing insurance rates. Still, the cost of bad publicity is the highest cost resulting from this statistically insignificant risk to the industry.

Terrorism, despite occurring far less frequently than accidents, is considered to be a greater risk to the industry. While the publicity surrounding accidents generally affects one park, or perhaps one family of parks, the effect of terrorist activity is industry-wide. "After an incident of civil unrest, natural disaster, or terrorism, there is an immediate 30% downward spike in the perception of safety at such public locations." (Banay, 2005) She reports that the resultant decline in theme park attendance continues as much as three years after a major terrorist episode.

According to sources cited by Debora Vrana in her article for the LA Times, visits to theme parks worldwide were down by 1.5% in 2003. (2004) This decline was attributed to terrorism in addition to poor weather and a poor economy. Under current terrorism threat conditions, the cost to the industry is potentially high, and the US government currently classifies the risk of another strike as moderate to high. Unfortunately, due to the large crowds that gather at these establishments, they are considered to be a potential target.

The specific consequence of that risk appears to be a long-standing decline in park attendance stemming from a decrease in the public perception of safety. A panel of industry insiders gathered in 2002 to discuss the impact of 9/11 on theme park attendance and revenues. Of note, their conclusions did not identify terrorism as the greatest risk. Rather, they concluded, "at this point, it is the soft economy that is really putting a crimp on vacation plans." (Levine, 2002) Like other businesses within the travel and tourism industry, theme parks rely on patrons to spend their discretionary income.

When the economy is poor, fewer people are spending, and those who are spending frequently spend less. "Road blocks in the form of war in Iraq, SARS, a stagnant economy, and currency rates have impacted the amusement industry." (Banay, 2005) Currency rates are known to affect the rates of international travel, and those parks which attract an international audience are subject to those effects as well. The risk comes in