Disney to Expand Hong Kong Disneyland

Posted by: Frederik Balfour on June 26, 2009

It looks like the Walt Disney Company (DIS) and the Hong Kong government have finally reached an agreement to expand their undersized and underperforming Hong Kong version of the Magic Kingdom. Though its joint venture, Hong Kong Disneyland declined to comment about ongoing discussions, Reuters reports an announcement is expected by early next week. On the face of things it looks like an important breakthrough for Disney, which in March announced it was sacking 30 Hong Kong-based “Imagineers” because discussions with the Hong Kong government, which currently owns 57% of the park, were going nowhere.

However it appears as though Disney ended up making all the concessions. According to press reports, Disney will pay for the entire expansion costing as much as $800 million. The government will convert its debt to equity to prevent its share from being diluted below the 50% mark. The Hong Kong government, quite rightly, was reluctant to pony up any more cash into the money-losing park considered too small to attract enough first time visitors, let alone getting them to come back. Although Hong Kong covered more than 80% of the initial $2.9 billion cost of the project, the government has just a 57% share in the joint venture, with Disney holding the other 43%.

But it looks to me like the 30% expansion plan comes too little, too late. The clock is ticking as Disney plans to open a monstrous park in Shanghai in 2014 that would dwarf the puny Hong Kong version of the Magic Kingdom, the smallest of all Disney theme parks worldwide. But as Allan Zeman, who is chairman of the profitable government-owned Ocean Park in Hong Kong said to me on the phone today, “Disney has no option” but to put in the additional cash, because the park will never turn a profit at its current size. Hong Kong Disneyland officials declined to comment.

Perhaps execs back in Burbank are still living in Never Never Land. Or maybe they just can’t afford to admit the Hong Kong project was poorly conceived from the get-go. From this end, it feels like Disney is throwing good money after bad. Mainland visitors account for more than one third of the tickets sold to Hong Kong Disneyland, and Shanghai Disneyland is bound to cannibalize most of that business once the Magic Kingdom comes to the Middle Kingdom. Shanghai is expected to sprawl across more than 800 hectares, while an expanded Hong Kong park will only cover about 150 hectares. And don’t forget the Universal Studios will be opening its own theme park in Singapore as part of the casino complex by early next year.

Reader Comments

Andy

June 28, 2009 11:32 AM

Chinese government should never allow Disney to open in Shanghai if it can't turn a profit for Hong Kong. Hong Kong government should take over HK Disney and give it to Ocean Park.

Mack

July 1, 2009 4:43 AM

Thanks for sharing about Hong Kong Disneyland. Ocean Park is the 170 miles long sparkling jewel of Hong Kong. Kids enjoy in The Dolphin Breeding Centre. Bird lovers can enjoy seeing the Amazing Birds Show. Don't fail to visit the Butterfly House, Goldfish Pagoda. You can engage in some diving, sliding and spiralling water sports. For more detail refer http://www.journeyidea.com/ocean-park-paradise-in-hong-kong/

Stuart

July 1, 2009 11:24 PM

The writer is spot on; I've believed the same for years. To Andy and Mack, I've lived in Hong Kong. Comparing Disneyland with Ocean Park is Apples to Oranges.

The reason Disneyland fails here is pricing and, as the writer indicated, a failed concept at the beginning. No Pirates of the Carribbean attraction? No Haunted House? What else did they leave out?

Disneyland can't turn a profit because of the huge, overly-inflated development costs. Shanghai should be a big success if Disney doesn't blow it this time.

Vivien

July 2, 2009 5:18 AM

To Andy:
Why Chinese government should never allow Disney to open in Shanghai if it can't turn a profit for Hong Kong? Both HK and SH are imporat to China. We are talking about fair competition in nowadays, not only gaining benefit from governmetn policy.
HK should expect more competitions from mainland citeis. Others are/will be getting developed as time goes by. HK should polish its paws to hunt for survival , not waiting for feeding.

LED

July 20, 2009 2:45 PM

HK has to give way to Shanghai which is rising to the top. Go China Go!

Cavy

September 25, 2009 5:09 AM

vivien, your english sucks. polish your english before u post here.

If Disney does build a disneyland in Shanghai, i will buy its shares.

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