'The biggest decision is not which market, but which partner': KidZania Founder Xavier Lopez Ancona

(L To R} Paras Chandaria - Founder and Promoter, KidZania India and Xavier Lopez Ancona - President and CEO, KidZania at KidZania ,Ghatkopar. Image -Swapnil Sakhare for Forbes India

It has been a decade since KidZania opened its first India centre in Mumbai in 2013, and then in Delhi in 2016. The edutainment company, founded by Mexican entrepreneur Xavier Lopez Ancona, is present in 23 countries and is now eyeing five more cities in India, and perhaps even second centres in Mumbai and Delhi.

Paras Chandaria, executive chairman of California-headquartered UST Global, who is the largest investor in KidZania India with Rs107 crore—actor Shah Rukh Khan is the other investor—says that in the next eight to 10 years, India will become the largest market for KidZania across the world, with at least seven to eight centres, surpassing Mexico with four; similarly, Tier-II markets and upcoming towns in India with a high density of children will be tapped into.

With the Covid-19 pandemic severely affecting all players in the indoor entertainment and hospitality sectors, KidZania was no exception. Current annual revenue stands at Rs80 crore, with a 17 percent cash profit as of March 2023. The company is now looking to bolster revenues by using the same physical assets in multiple ways for different demographics.

In India to celebrate the company’s 10th anniversary, Ancona and Chandaria spoke to Forbes India about the impact of the pandemic, the road to recovery and growth in the Indian market. Edited excerpts:

Q. In the last 10 years, the global economy has gone through a lot of turmoil for various reasons. How has KidZania fared in these conditions?
Ancona: KidZania started 24 years ago, and before Covid-19, we had 29 facilities in 25 countries. So, it was a truly global cooperation. Covid-19 hit us very hard, because we are in the hospitality sector and in the business of indoor entertainment for children. We lost two facilities in the Philippines and Thailand. But, during Covid-19, we also opened two more facilities, in Phuket [Thailand] and in Surabaya [Indonesia]. Now we have eight facilities in different stages of development. The first one opens in two months in Hanoi, Vietnam; next year we open one in South Africa and one in Hong Kong.

In the first year of Covid, footfalls dropped by almost 80 percent. We are recovering: Last year we were 30 percent below pre-pandemic numbers; this year we're going to be close to 20 percent. Families in all countries have already come back to KidZania, but what's being a little bit more challenging for us is to bring back schools. Because children in some countries, like Mexico, were out of school for almost two years. And so, getting them back to school and then bringing them out immediately to KidZania has been more challenging. One third of our footfalls are from school visits.

Where brand partners are concerned, we lost some of them because of Covid; some of them were also hit by Covid, so they had to cut costs. But we're getting them back now, and we're attracting new ones.
I see a future where families and schools are going to go for physical learning, with socialising experiences. Parents want their kids off smartphones and want them to have experiences with other types of activities.
 
Q. Are you also planning any new programmes and projects?
Ancona: We're offering new professions. Jobs of the future are changing rapidly because of technology, and we don't know really what are going to be the future jobs. But there's a lot of jobs that are going to support those new jobs, using technology, STEM, engineering. Kids can now try to be an astronaut, use AR and VR, work with drones, robotics or artificial intelligence, coding.

These are very popular with kids. The parents are very happy because the kids are now trying out jobs that are going to be meaningful in their future. And brands are happy because now we're targeting brands that are becoming more influential. So, it's a win-win-win situation.

The older professions are all still there. When you're a kid, there are these professions that are very strong in your life, like being a pilot, a doctor or a fireman, and they're going to be so forever. Every year or two, we ask kids all over the world what they want to be when they grow up. And that's where we get all the ideas from. I'm very proud that now more girls are saying they want to be engineers than boys, and I think that's a good trend and that hopefully it's going to stay like that.

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Q. How do you tackle cultural differences among children in different countries?
Ancona: Children all over the world are very similar. The only difference is perhaps in things like them being very organised, standing in queues in Japan, while being a little bit rowdier in Mexico. But one big difference between Japan and the rest of the world is that children all over the world veer towards activities where they can earn KidZos and can spend KidZos; there is a balance. But in Japan, all the children wanted only to earn KidZos; nobody was going to spend them. It is perhaps cultural. So we had to tweak some of the activities so that they could earn instead of spend, and therefore have more interest in the activities.

Q. You had started a programme on entrepreneurship. How is that going?
Ancona: Yes, it is very popular, and every year we are getting more people for it. Our typical activities are for 20 to 30 minutes. Teaching a kid to be an entrepreneur is very difficult so we decided to do the entrepreneurship programme like a summer camp over two, three or four weeks, during which we have the children for five days a week, five hours a day, and we’re able to teach them from getting an idea, put up a company, registering the brand, production, sales, marketing, financials, and growing your company. Although our dream is to teach kids about professions they can aspire to follow when they grow up, we also want kids to be entrepreneurs. In countries like India, there are a lot of entrepreneurs, which is very good. But in countries like Mexico, we don't have a lot of entrepreneurs. Promoting entrepreneurship from a young age is what we love to do even as a family, since we're a family of entrepreneurs. We'd love to give some of that back and create a culture of entrepreneurship.

Q. You are executive chairman of UST, which is in the business of digital transformation, digital solutions and platforms; a sector that is very different from the space in KidZania operates. What inspired you to invest in this company, and how has this investment fared?
Chandaria: Individually, and as a family, we've always looked at ways in which we can make a difference and make an impact. We've been doing this for 100 years, so when I got involved in UST the vision was to transform three billion lives using technology. When we came across KidZania, we loved the concept of transforming children's lives through edutainment.

We have a long-term time frame [for the investment] so we don't need things to be profitable immediately; they have to be profitable, but we can take a little longer to get there. So, I'm confident that just like UST is now the largest privately held digital transformation business, KidZania will become the largest children's edutainment platform. It is a profitable business for us, but not as profitable as we'd like it to be unfortunately; our landlords keep jacking up rents at incredible rates.

Q. Do rents in India follow global trends?
Ancona: No, that's what was the biggest surprise here! All over the world, retail is hurting. If you go to shopping centres where KidZania is located, there are a lot of empty spaces, so we get calls from all over the world to go and open KidZania in malls. A lot of large department stores are leaving these malls, so they're giving us those spaces for very low rents and they see us as an anchor; they want more footfall to their malls and one way to bring footfalls is through KidZania. We can bring anything between 400,000 and 800,000 additional visitors and so we get very good rates.

But surprisingly, in India, it is the other way around. Here rates are going up, there's difficulty to find new malls to expand in. So it's really a big surprise. Honestly, India is on a different trend from the rest of the world, and I think that has to do with it being one of the fastest growing economies now; every other country is, kind of, struggling, but India is an upcoming and booming market.

Q. One of the reasons rents for you are so high is because KidZania is located only in the biggest cities. Are you looking to expand to smaller cities, where rents might be lower?
Chandaria: Yes, we're looking at rolling out in other cities. So far we have a 70,000 square feet KidZania space in Mumbai, and 95,000 square feet in Delhi. The next one we hope will be in the range of 40,000 to 60,000 square feet. But the ceiling height also matters for us—it has to be at least 5 metres high, ideally 9 metre—and that's a big limitation. So, finding malls that have this kind of spaces has not been easy. Our goal is to be in Bengaluru next, where we are looking for locations. Then we'd like to do Pune, Ahmedabad, Chennai and Hyderabad. We are confident that we'll be able to do another five behind those five. It takes us 18 to 24 months to build a property, so it does not happen overnight. In Mumbai and Delhi if we find other opportunities we'll perhaps look at a second KidZania.

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Q. What are the biggest challenges of being an entrepreneur across so many countries?
Ancona: The number one advice that you can give anybody once they become international is to find someone locally who can help you, someone who knows the laws and regulations, the culture and how to do business locally. It makes it easy for us to grow. The biggest challenge is not to find the markets—you can go online and in half an hour we can get all kinds of information—but the most important decision is about who we partner with. This has helped us succeed in 25 countries; in one-third of them we are the only Mexican brand there. That is also a challenge, because it is not like brands from the US, or China, or Japan.

Chandaria: For me the biggest challenge is the pace of change, especially on the tech side. You might be the first mover, but if you don’t capitalise on it in the first couple of years, it’s gone. You have to keep reinventing and staying ahead of the curve. We do this by building a strong eco system of partners; we don’t try to be everything ourselves.
 
Q. What does KidZania aspire to be?
Ancona: There are two things we are working on: One is the new kind of professions, and the other is sustainability. We are also building a second platform for growth called Kinezis, which is about wellness. We are testing it in Mexico, and we would like to grow it internationally. Next year we are testing a smaller format KidZania for smaller cities, and for the after-school market, which is growing dramatically all over the world.

From February we will be starting something called ‘Inclusion Nights’ in Mexico, where adults will be engaging in activities with one physical limitation, either they will not be able to see or hear or walk. This is to build empathy for those who have physical disabilities. So, the idea is to use the same assets for different demographics.

Chandaria: Pre-Covid we were testing with combining online and offline elements of KidZania. We feel it has a lot of potential and will continue to explore it.