“Kind of fun to do the impossible” ‘ breaking ground at Shanghai Disneyland

After 10 years of negotiations with the Chinese Government, ground has finally been broken on the $3.7 billion first phase of Disneyland Shanghai.

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"Our Shanghai resort will be a world-class family vacation destination that combines classic Disney characters and storytelling with the uniqueness and beauty of China, ” said Iger (see below).  "Working with our Chinese partners, the Shanghai Disney Resort will be both authentically Disney and distinctly Chinese." The park will include an interactive castle, unique to Shanghai Disneyland, which is planned to be the tallest of the iconic fairytale castles yet built. 

Due to open in 2016 the initial phase will cover 1.5 sq miles (1/26th the size of Walt Disney World in Orlando) and comprise a theme park and two hotels.  Visitor numbers are expected to be 7.3 million in the first year to the park which is 57% owned by the Shanghai Shendi Group and 43% by Disney.  (Financing will be proportional to ownership.)  In addition, Disney will have a 70% stake in a joint venture management company that will be responsible for creating, developing and operating the resort.  Alan Gould, an analyst with New York-based Evercore Partners* estimates that Disneyland Shanghai will generate management fees of $65-70 million in its first fiscal year of operations, 2016, and grow to more than $200 million in 10 years "assuming the park reaches 15 million in attendance".

International expansion is one of the three elements of Disney’s strategy (the other two being focus on content and franchises and leveraging new technology).  Thomas Staggs, Chairman, Walt Disney Parks and Resorts, told Disney’s 2011 Investor Conference Feb 2011 that, “we expect expansion outside of the United States to be our most important growth opportunity.”

Staggs set out the huge potential for China.  “Roughly 30 million Chinese enter the middle class each year, which will lead to significant growth in leisure travel.  In fact, spending on domestic leisure travel in China is expected to more than double to over $200 billion by 2015.”

“Bear in mind that more than 40% of visitors to Hong Kong Disneyland come from Mainland China. Given that our penetration rate in Southern China is currently just 1% per year, we certainly have room to grow.”walt disney with mickey mouse toys

“We’re well into our blue sky development, and once Shanghai opens, in about five years, we know we’ll have a park that is distinctly Disney, yet, authentically Chinese. Taken as a whole, we believe China is the most exciting opportunity we’ve had since Walt first bought land in Florida in 1964.”

Success is not likely to be straightforward in the mainland Chinese market; Hong Kong Disneyland has had mixed fortunes, but then as Walt Disney himself said, “It’s kind of fun to do the impossible”.  Regulation of media space has meant that there is no Chinese Disney Channel to act as a launch pad for franchises.  Disney have had some innovative ideas to build market presence, for instance setting up Disney English language schools aimed at children between 2 and 12 years of age using learning materials including Disney characters.  In addition, Disney plan to invest in Disney-branded movies that will be produced in China for the local market.  Chinese protection of Disney brands may also be a problem with piracy being a particular concern in China, however the downside in losing revenue can have a silver lining: increased brand recognition.

At the Credit Suisse 2011 Global Media and Communications Convergence Conference, CFO Jay Rasulo was keen to stress that Disney have learnt lessons from their experiences in Paris and Hong Kong: working within the existing travel industry structure; recruitment and retention of cast members -“we are a sought after employer, we get the pick of the labor market”; and the universal appreciation of Disney service levels.  Key to success will be to create a culturally relevant version of Disney in China.  For all the planning and research in the end responsiveness is key: “you have to be ready to spin on a dime”. 

 

* Source: As reported in The Hollywood Reporter

Image: copyright Disney