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  1. #1

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    Could Hong Kong Disneyland be the first Disney park to close?

    BusinessWeek is reporting that the future is looking very grim for Disney's Hong Kong Disneyland. The park has been on a steady decline financially since it opened in 2005 and now the park is starting to feel the pinch. Recently several employees of the park were laid off and now expansion plans been put on indefinite hold due to a breakdown in talks with the Hong Kong government. Could Hong Kong Disneyland be the first Disney Park to shut its gates forever?

    Hong Kong Disneyland's Future Is in Danger

    The Magic Kingdom theme park has steadily lost money since opening in 2005. Now it's laying off workers and has put expansion plans on hold

    By Frederik Balfour and Bruce Einhorn


    Pixie dust is in mighty short supply at Hong Kong Disneyland. The park, a joint venture between Walt Disney (DIS) and the Hong Kong government, was supposed to be Disney's foothold in the potentially lucrative China market but has steadily lost money since opening in September 2005. The Hong Kong version of the Magic Kingdom is the smallest of Disney's theme parks, and some visitors gripe that it's too small to entice them back for a second visit.

    Now the project has hit a new snag: Disney has indicated that it is putting on hold long-awaited plans to expand on the park. In a statement from Disney's Burbank (Calif.) office released on Mar. 16, the company said it was laying off employees in Hong Kong after failing to reach an agreement with the Hong Kong government to fund a much-needed expansion. According to Disney, "the uncertainty of the outcome requires us to immediately suspend all creative and design work on the project."

    Thirty Hong Kong-based Disney "Imagineers" will be losing their jobs, leaving a skeleton team of 10 behind.

    The government has received plenty of heat over the financing of the project since the first balloons were released on the site. 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%. "Ever since Day One, Hong Kong Disneyland has been controversial," says Paul Tse, the representative of the tourism industry on Hong Kong's Legislative Council. "The government paid a lot of money for very little control, and the park hasn't been doing well in the past two years. That's not a big selling point to the Hong Kong public."
    Small World After All

    Scrapping expansion plans could threaten the park's viability. The park occupies just 126 hectares and has only four "lands"—Fantasyland, Tomorrowland, Adventureland, and Main Street USA—and two hotels.

    Hong Kong Disneyland Managing Director Andrew Kam has said expansion is vital to the park's success. Speaking to reporters in September, shortly after he joined Disney from Coca-Cola (KO), Kam said the park had plenty of room to grow, since it was only using half of the land available.

    "Expansion is part of the strategy to make this park work for Hong Kong," he said. Both Disney and the government were "very much interested in growing the business," said Kam, adding that new rides and features "will drive our future growth."

    Local reports have put a $500 million price tag on the proposed expansion, which would increase the size of the park by about one-third. A Disney spokesman declined to confirm the figures. Although they are currently at an impasse about how to fund expansion, the two sides have agreed in the past to make some additions, albeit within the park's original boundaries. For instance, the addition of the attraction "It's a Small World" helped boost visitors for all of 2008 by 8% over 2007, and Kam said to reporters last September: "We have plans to open new attractions within the existing site."

    One reason Disney might be willing to walk away from negotiations with the government: The company has another China option, since it is talking with Shanghai officials to open a theme park there that would be much larger and easier for many Chinese families to visit. "Now that the government has decided not to support Disneyland in Hong Kong, Walt Disney is going to shift its focus towards its new and arguably more exciting China project—Disneyland Shanghai," Parita Chitakasem, a research manager with research firm Euromonitor, said in an e-mail. The Shanghai park, which has not yet received final government approval, could open in 2014 and be as large as 800 hectares. "Hong Kong Disneyland would have a lot of trouble competing," she says.

    Even without competition from a larger Disney park in Shanghai, Hong Kong Disneyland's numbers have been disappointing. The 4.27 million tickets sold in 2007 were well below the 5 million who visited in 2006, the first full year of operation and well below government projections before Hong Kong Disneyland opened. In 2007 Disney agreed to waive management and royalties for two years after the joint venture failed to meet performance targets. Although Disney does not release financial figures, Euromonitor estimates the park made an operating loss of $46 million in the year ended June 2006, and lost $162 million the following year. Estimates for 2008 were not available.
    Meeting the Shanghai Challenge

    One area of opportunity has been China. A company spokesman said the park draws one-third of its visitors from Hong Kong, one-third from mainland China, and one-third from international tourists. "We are merely scratching the surface of business in China," Kam said in September.

    However, the possible shift of mainland Chinese away from Hong Kong to Shanghai could mean a drop of as much as 60% in visitor numbers to the Hong Kong park, estimates Euromonitor's Chitakasem.

    That's why the threat of Disney walking away and focusing on the Shanghai project may force the hand of Hong Kong government officials.

    "The bottom line is that the government needs Hong Kong Disneyland to keep expanding in order to stay as competitive as possible as a tourism destination," says Chitakasem. "With this in mind, it would definitely be in the Hong Kong government's interest to come up with the cash, despite its disappointment in Disneyland Hong Kong so far."

    Balfour is Asia Correspondent for BusinessWeek based in Hong Kong. Einhorn is Asia regional editor in BusinessWeek's Hong Kong bureau.
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  2. #2

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    I've been afraid of this . I think it was foolish of Disney to open 2 Disney resorts so close to each other (3, counting Tokyo, although TDL seems to be more Japan-inclusive) as they will probably cannibalize each other. SDL could eliminate at least the 30% of visitors that come to HKDL from mainland China. I do, however, think the laying-off of Imagineers was merely a stunt to threaten the HK government if they don't provide financial support, so Disney may not have completely given up interest in the expansion. Still, HKDL's closure does seem ominously possible as a worst-case scenario, although I certainly hope they won't let it happen.

  3. #3

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    If they close it, it could be rethemed to Nara Dreamland...

  4. #4

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    I never really understood why they opened the park in the first place, it wasn't built on scale that rivals any of the other Magic Kingdoms and there wasn't anything truly unique that would make people want to go. Especially just after California Adventure and Disney Studios Paris opened with less than stellar success, the money could have been used to spruce up the parks that were already opened. I wonder what would happen to the park if it did close.

  5. #5

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    If this is true?...I will be the first one who will feel sad...
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  6. #6

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    I don't know what will happen, but if it does close, I wonder if maybe the parks in the US will get some of there stuff, like their electric Autopia or that Pirate-themed area that was rumored to be for Hong Kong Disneyland. Then again, they might just rip everything out and reuse some stuff in Shanghai.

  7. #7

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    Re: Could Hong Kong Disneyland be the first Disney park to close?



    Failure to launch I suppose.. hopefully it all works out.

  8. #8

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    Most of it will get ripped up and sent to Shanghai. Disney never should have built a park in Hong Kong in the first place. They should have waited for their Shanghai prize and not had been in such a rush to the China market. Oh well, it's really the Hong Kong government and its taxpayers that will be burned most.

  9. #9

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    If they closed hong kong disneyland...
    It will be ASHAMED to disney and hong kong government.
    Disney is famous worldwide becaused of their hi-tech technology in building the parks. While hong kong governemnt will be shamed forever like disney because they must be thankful to have a disney park.
    I think if hkdl closed down this will be a sad history to disney company and of course to Walter E. Disney.

  10. #10

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    I really doubt the park would close. Too much has been invested for either Disney or the hong kong government to allow that. They both have too much too loose.
    Even Bob Iger recently in the shareholders meeting said that the park is not a failure and is doing ok.

    right now they are just playing a game to see who give sin first. Meanwhile the park is supposedly doing some decent numbers. If i remember correctly the park was built for no more than a 6million guest attendance before it needed significant expansion. The opening year projection had the park reaching numbers which were close to capacity. Obviously that did not happen.

    All we have to do is look back at past Disney expansions. Euro Disney has a much higher initial investment with several expensive hotels. Many media outlets claimed it it was in huge problems and rumors even flew around of its possible closure. It never did.

    DCA opened with numbers which were much lower than forecast, rumors flew around about the park maybe closing and loosing its gates and becoming a pay per ride area as part of DTD. The park has seen its numbers increase yearly and is now getting a huge addition.

  11. #11

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    Quote Originally Posted by Baloo View Post
    I really doubt the park would close. Too much has been invested for either Disney or the hong kong government to allow that. They both have too much too loose.
    Even Bob Iger recently in the shareholders meeting said that the park is not a failure and is doing ok.

    right now they are just playing a game to see who give sin first. Meanwhile the park is supposedly doing some decent numbers. If i remember correctly the park was built for no more than a 6million guest attendance before it needed significant expansion. The opening year projection had the park reaching numbers which were close to capacity. Obviously that did not happen.

    All we have to do is look back at past Disney expansions. Euro Disney has a much higher initial investment with several expensive hotels. Many media outlets claimed it it was in huge problems and rumors even flew around of its possible closure. It never did.

    DCA opened with numbers which were much lower than forecast, rumors flew around about the park maybe closing and loosing its gates and becoming a pay per ride area as part of DTD. The park has seen its numbers increase yearly and is now getting a huge addition.
    If the economy improves here in the states and abroad, I have no doubt that Disney and Hong Kong would immediately pursue the expansion plans again. If not, attendance and the image of the park could sink beyond recovery ..unless a couple billion is spent on the park for a makeover equivalent to both Phase 1 and 2 of DCA ..with unique attractions unlike any other park. It's hard to say what's going to happen in the face of a precarious poor economy ..and the added theat of future inflation.
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  12. #12

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    Quote Originally Posted by imagineerthat View Post
    . . . it wasn't built on scale that rivals any of the other Magic Kingdoms and there wasn't anything truly unique that would make people want to go. . .
    A "Soarin' Over China" would tempt me to travel to Hong Kong, which I've heard is more beautiful than the extremely polluted city of Shanghai.

    I'm not going to blow $350 a night on any Disney hotel and I'm not into collecting kitchy, low-brow Disney art, but I think Disney's Magic Kingdom parks are beautiful and (in some cases) worth the international plane tickets when coupled with other amazing destinations. I hope the Disney Company makes Hong Kong unique and extraordinary enough to merit my making up excuses to visit. I have rationalized, "Hey, Tokyo and Paris are amazing cities. And while I'm there I'll stop by their Disneylands."

    And while I'm on the subject I REALLY want to go on a "Soarin' Over Europe!" Or a "Soarin' Over France," with it's California-like beauty! I heard an Imagineer agree (he said) with Jay R., that people just like Soarin' because they like to fly, but flying over Japan, China, or Europe could be extraordinary!
    They've got the technology, just film the damn things and decide on the scents! I will not fly from California to Hong Kong to go Soarin' Over California.

  13. #13

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    Hong Kong Disneyland was the stupid idea from the first place. Tokyo Disneyland was the only park that made any sense. For decades Japanese tourists had traveled to Disneyland to enjoy Walt's creation. But Chinese love for Disneyland was never shown. I think that Hong Kong Disneyland was the wrong size park, the wrong type park in the wrong place. It was a series of bad decisions.

    What Disney management has to learn from this:

    1) Foreign parks are much risker and less profitable than American parks.
    2) Drive people to your parks, don't bring the parks to the nations.
    3) Building on the cheap is a bad business plan.
    4) Multiplying the same park design all around the world makes your other parks less unique and special.
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  14. #14

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    Quote Originally Posted by JiminyCricketFan View Post
    Hong Kong Disneyland was the stupid idea from the first place. Tokyo Disneyland was the only park that made any sense. For decades Japanese tourists had traveled to Disneyland to enjoy Walt's creation. But Chinese love for Disneyland was never shown. I think that Hong Kong Disneyland was the wrong size park, the wrong type park in the wrong place. It was a series of bad decisions.

    What Disney management has to learn from this:

    1) Foreign parks are much risker and less profitable than American parks.
    2) Drive people to your parks, don't bring the parks to the nations.
    3) Building on the cheap is a bad business plan.
    4) Multiplying the same park design all around the world makes your other parks less unique and special.
    Excellent and unique perspective that I have never heard expressed before. Disney did try to force feed Hong Kong Disneyland to China. Tokyo took the initiative. They might even help finance the new Star Tours e-ticket coming in 2011.
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  15. #15

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    Re: Could Hong Kong Disneyland be the first Disney park to close?

    Letting Hong Kong Disneyland close is not an option. Disney wouldn't let it happen. It would damage their brand too much in that region, and I'm sure Disney has no interest in letting anything like that happen.

    Disney is already working hard to make their two other disappointments work - DCA and Walt Disney Studios Paris -- both of which have also not been as profitable and successful as Disney had wanted, on varying levels.

    I think all this amounts to Disney playing hard to get with the HK Government. Both sides want the other side to act, but neither side is willing to do it themselves. One of them will break eventually -- it's just a matter of who?

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