While annual revenues from the media giant's parks in Florida and California have surged 46% over the past five fiscal years to $13.6 billion, those in France, Hong Kong and Japan have been nearly flat at around $2.5 billion.
Analysts expect the Shanghai Disneyland theme park and its two hotels to lose money in their first few years but ultimately to boost the international theme-park business's bottom line. They also point to a larger potential.
The question is not just "whether Shanghai Disneyland can resurrect international parks," said Nomura Securities analyst Anthony DiClemente. "It's whether it can grow the Disney brand in a new and important region."
Although the Tokyo park's performance has been relatively strong, the other two have struggled with problems of their own, as well as broader economic and political factors, including November's Paris terrorist attacks.
Overall, Disney's parks and resorts business reported operating income of $3.03 billion last fiscal year. But, according to research firm MoffettNathanson, the overseas parks, which the company doesn't break out in its results, had an operating loss of $45 million last year, in part because of spending on the Shanghai project. The firm estimates that their operating profit peaked at $179 million in 2011.
Disney owns a majority stake in Disneyland Paris and a minority stake in Hong Kong Disneyland. It has no equity in Tokyo Disneyland, from which it gets licensing fees.
Disney Chief Executive Robert Iger has said for years that he sees the Shanghai park as more than a compelling economic opportunity in the largest city of the world's most populous country.
"As Walt did with Disneyland in the '50s, enabling Disneyland to really grow the Disney brand in the United States, we believe we will have some really interesting opportunities to do the same in China," Mr. Iger told an investor conference in 2009, soon after gaining a key approval from the Beijing government.
Mr. Iger has been more modest about the Hong Kong and Paris parks. "Well, I think you can be optimistic in a sense that they should be profitable," he said at an investor conference in March. "In terms of how profitable, we don't give guidance."
Disneyland Paris has been plagued by problems since its 1992 opening, struggling to strike a balance between Disney values and European tastes. Its corporate parent, Euro Disney SCA, hasn't reported a profit since fiscal 2008. Attendance at the park hit a high of 16 million in fiscal 2012, then fell to 14.2 million in 2014 and 14.8 million in the past fiscal year. A new ride based on the film "Ratatouille," from Pixar Animation Studios, failed to overcome the damping effect of Europe's economic slowdown.
In an attempt to bolster the park's finances, Disney last year injected €420 million ($477 million) of new capital into Euro Disney and converted €600 million of Euro Disney debt into shares. In the process, it increased its stake in the French park to nearly 77% from 40%.
In Hong Kong, where Disney's park opened in 2005, attendance was initially lower than expected because of the park's relatively small size and scarcity of appealing rides. But Hong Kong Disneyland has expanded over time, and reported its first net profit in 2012. That profit grew to HK$332 million (US$42.7 million) in 2014.
Last year, however, the park slipped back into a loss, which the company attributed to overall softness in Hong Kong tourism. Attendance dropped 9% to 6.8 million.
Hong Kong Disneyland could get a lift later this year when it opens an "Iron Man" ride, the first at any Disney park based on a Marvel superhero. A new hotel also is under construction, a sign the company believes attendance will grow again.
But the opening of the new Shanghai park could siphon off visitors from mainland China, who accounted for 41% of the Hong Kong park's attendance in 2015.
That is one of many unknowns that make it difficult to predict what effect the Shanghai park will have on Disney's performance, said Barclays analyst Kannan Venkateshwar.
Disney has said there are about 330 million "income qualified" people living within three hours of Shanghai Disneyland, leaving more than enough potential visitors for both parks, which are separated by 760 miles.
It also isn't clear how much Chinese consumers would be willing to spend on food, toys and other concessions during visits to the Shanghai park, where ticket prices range from $56 to $76. That compares with $105 to $124 at the Magic Kingdom at Walt Disney World in Orlando, Fla. Average spending per visitor at other international Disney parks, said Mr. Venkateshwar, is lower than in the U.S.
Barclays projects that Shanghai Disneyland will draw 12 million visitors in its first year, while Nomura puts the figure at 15 million. State-backed Shanghai Shendhi Group, which owns 57% of the Chinese theme park, has said it expects 10 million. Disney, which owns the other 43%, hasn't offered an estimate.
The Magic Kingdom drew 20.5 million people last year, according to a report from the Themed Entertainment Association and consulting firm Aecom.
Mr. DiClemente of Nomura said that once Shanghai Disneyland is up and running, it could generate as much as $500 million in operating income a year. MoffettNathanson expects the park to reach that milestone by 2021.
Source: Wall Street Journal by Ben Fritz
from China Travel & Tourism News http://ift.tt/1iB6EFm
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