Hong Kong Dl might need to be refinanced - LA Times, 2/8/07

[Darkbeer]

http://www.latimes.com/business/la-f...ninav-business

The upbeat earnings report was tempered by a warning of declining attendance at Hong Kong Disneyland, which opened in 2005. Disney has pointed to that park as a leading example of its top-priority effort of international expansion, and the company hopes to use it as a springboard to win Chinese government approval for a park in Shanghai.

But Disney said the Hong Kong park drew fewer visitors in the quarter just ended than in the same three months a year earlier and that attendance and sales had missed projections.

"If these trends do not significantly improve," the company warned, it would be in violation of pledges it made to lenders on the project. Disney could then be forced to refinance $294 million in debt.

Wednesday's admission is the starkest to date about the Hong Kong property, where Disney has a large minority stake. Even so, and despite flat attendance at Disney's U.S. parks, higher average spending by U.S. visitors pushed the division's profit to $405 million from $375 million.

Profit at the network division including ABC and ESPN rose to $750 million from $606 million, while profit from consumer products dropped to $235 million from $270 million.

On the same day the Hong Kong theme park warning was included deep in a Securities and Exchange Commission filing, Disney was hosting Wall Street analysts for an annual series of closed-door presentations in Florida. The company made audio of the day's events available over the Internet.

[PragmaticIdealist]

Michael Eisner... The gift that keeps on giving.

[merlinjones]

This is the third time Disney's Eisnerist theory of underbuilding a skimpy theme park for opening has proven to be disastrous (DCA, Disney Studios Paris, Hong Kong DL).

[HauntedPirate]

Common sense says, "Three strikes and you're out!", aka "Time to try something different". Why don't I get the feeling this will happen?

Something else that caught my eye - theme park attendance was flat at US parks. Does this mean the 50th celebration was a really big deal, and now they're going to invest some capital in the parks to get people to come back, or will we see the typical knee-jerk Disney reaction and cut costs and corners?

[NickCharles]

Who keeps pushing the idiotic notion of a park in Shanghai?

[mainstreetcm]

Who keeps pushing the idiotic notion of a park in Shanghai?

While I am just taking a guess here, I would assume its some MBA spreadsheet profit pushing mogul that is just looking to make a quick dollar.

[DisneyMickey]

They have created another mess in Hong Kong. Why would they try and focus into another one in Shaghai just a few miles away? It's a combination of the underbuilding they emphasize now-a-days and the reliance on marketing they try and save themselves with. There are so many idiots and ego centered guys in control, they will just continually chase their tails in a circle. When Disney sticks to what they know, they are tremendously successful. Why don't they realize that when they build things like an Indiana Jones, Pirates of the Carribean, or Expediton Everest, people flock to see what they have done? Why do they reduce themselves to things like "Year of Million Dreams" crap and half-assed "Laugh Floor Comedy" unoriginality?

[nish221]

Common sense says, "Three strikes and you're out!", aka "Time to try something different". Why don't I get the feeling this will happen?

Something else that caught my eye - theme park attendance was flat at US parks. Does this mean the 50th celebration was a really big deal, and now they're going to invest some capital in the parks to get people to come back, or will we see the typical knee-jerk Disney reaction and cut costs and corners?

No. Even to the so-called MBA types, it was plainly obvious that the 50th was
a definite success not only at DL, but the tie-ins to WDW (as tenuous as it sounded
to me) actually worked (on a lesser scale). (at least from the blogs & annual
report & scuttlebutt). And if you look at WDC theme parks, attendance was actually up.

And even WDW is looking at realizing that spiffing up an older ride is
very cost effective and can get almost the same attendance boost as
a new ride *if* done well enough. Case in point, Tiki Room/PotC/HM.

At least for now, the pure "on the cheap (DCA)" or "on the small(HKDL)"
(or "on the cheap and small" (DSP)) look like they won't happen.

Ex: Look at the money being spent on Nemo Subs. And the new efforts
at HKDL (Autopia, iasw, HM) & DSP (Cars, Crush Coaster, ToT) .

[Baloo]

The attendance drop is being compared to the highly suuccesful attendance record 50th celebration. It is not a surprise that the parks would see a decline. They are still higher than expected though.

Disney has a large amount of cash flow that needs to be invested and the company will see a growth spurt in additions both domestically and internationally.


Many keep pointing at Hong Kong as a go on the cheap investment but do not realize that the investment done inhong kong does not only include the Disneyland park. It included several acres of a foundation for a rsort that will eventally have two or maybe even three gates as well as hotels a recreation lake nearby as well as transportaion.

Reclamation for the second gate is already in progress and the resort will most likely see its second gate open in 2012. Hong Kong Disneyland aslo has an ambitious second and third phase addition that will burst thru the parks berm.

All this is also being done mostly by money invested by the hong kong government so its not like Disney is dictating every single dollar invested in the project.

Hong Kong Disneyland resort is a challenge but i have no doubt that it will be a big succes in the near future.



Disney is in the verge of a rebirth and with large capital investments in its resorts especially anaheim will begin to have faith in the company again.