Disney Reaches Deal on Hong Kong Expansion

[Melanie]

Expansion deal reached on Hong Kong Disneyland

HONG KONG, June 25 (Reuters) - Hong Kong has reached a deal with the Walt Disney Co (DIS.N) to expand the local Disney theme park, seen as necessary to bolster the park's long-term prospects against a Shanghai rival, a government source said on Thursday.

The agreement is expected to be announced by June 30, with details of the deal to be laid out to local legislators in a special meeting next Tuesday.

The government source, who asked not to be named, said the meeting's agenda would include the Disneyland deal and that a media report on the imminent announcement "was largely accurate".

The Hong Kong Economic Times on Thursday reported that the deal was expected to be worth HK$7 billion ($903.3 million) of which HK$4 billion would be used for expansion.

But a Disney spokeswoman in the United States told Reuters that discussions were ongoing and that there was "no" deal yet.

The size of Hong Kong Disneyland, the smallest of Disney's magic kingdoms, is expected to almost double, with construction to begin within a year, pending approval from the city's legislative council in July, the newspaper reported.

The Hong Kong government, which owns 57 percent of the underperforming resort, desperately needs the expansion to boost flagging attendance, with a much larger rival Disneyland expected to be built in Shanghai in 2014 that could draw much visitor traffic from the burgeoning mainland China market.

"At this stage, we have to support the expansion, otherwise it will be very difficult to compete with Shanghai in five to six years time," said legislator Fred Li of the Democratic Party, who said his party backed the expansion as long as Disney boosted its financial transparency in future on attendance figures.

Hong Kong's Financial Secretary John Tsang travelled to Los Angeles in May, where he met senior Disney executives. The trip is seen to have paved the way for the breakthrough after Disney earlier said it would stall any expansion amid the credit crunch.

The Walt Disney Co (DIS.N) earlier indicated it would likely invest more capital in Hong Kong Disneyland and allow the Hong Kong government to convert its loans to equity to maintain its majority share of the theme park, a source involved in their talks told Reuters earlier.

[Scar]

... seen as necessary to bolster the park's long-term prospects against a Shanghai rival, ...

... with a much larger rival Disneyland expected to be built in Shanghai in 2014 that could draw much visitor traffic from the burgeoning mainland China market.

... it will be very difficult to compete with Shanghai ...

The Walt Disney Co (DIS.N) earlier indicated it would likely invest more capital in Hong Kong Disneyland

So I wonder how much more Disney is going to invest in Hong Kong, and how much it is planning to invest in Shanghai to compete against itself?

[Scar]

... his party backed the expansion as long as Disney boosted its financial transparency in future on attendance figures.

Can anyone explain what this means?

[DizneyFreak2002]

Well Bob Iger got shown up by the Chinese government and businessmen... They are laying out ALL the money and still are only minorty owners of the park... Unreal this management team in place...

[DisneyFanaticDargon]

Depending on what they decide to expand, it might actually make Hong Kong Disneyland worthwhile to visit in the near future.

[DisneyCrazy]

Disney Agrees to Pay $452 Million for Hong Kong Park Expansion

June 30 -- Walt Disney Co. will pay HK$3.5 billion ($452 million) to add rides like “Toy Story Land” and “Grizzly Trail” at its Hong Kong theme park and raise its stake in the project, said its partner, the city’s government.

Three new themed areas will be built over five years, said Hong Kong Chief Executive Donald Tsang, at a press conference. The government said it won’t invest money in the expansion and that Disney’s investment will cut Hong Kong’s stake in the project to 52 percent from 57 percent. Disney, the second- biggest U.S. media company, runs five parks worldwide.

“The existing park is so small, we hope the expansion starts as early as possible,” said Joseph Tung, executive director of the Travel Industry Council. “Adding exclusive rides will enhance the park’s attractiveness.”

The agreement ends two years of talks between the two shareholders that were marked by tension over attendance, job creation and investment. The Hong Kong park, which opened in September 2005, was the company’s first foray in China aimed at positioning itself for the mainland market.

The expansion will “benefit both parties,” said Leslie Goodman, a Disney Parks executive vice president, in an e-mailed statement. “Disney is making a substantial investment in this important project.”

Missed Targets

Park attendance has fallen short of target from the outset. To date, 14 million people have visited the park, averaging between 4.5 million and 4.6 million a year, said Helen Chan, a government economist. That compares with the city’s initial target of between 4.2 million and 5.6 million a year, she said.

The park’s performance has drawn the ire of Hong Kong lawmakers like Emily Lau, who called for a stop to more government spending on the project after a 23 percent drop in attendance during the park’s second year of operation. In an interview yesterday, Lau said Hong Kong is “throwing away good money investing” in the park.

“These new attractions might be what the park needs to draw more visitors,” said James Lu, executive director of the Hong Kong Hotels Association. “It’s about time they expanded.”

This development plan will boost the size of the Hong Kong park by 23 percent, the government said.

A few months ago, Disney signed a framework agreement to build a park in Shanghai which is pending approval by China’s central government, said Robert Iger, Disney’s President and Chief Executive Officer, on a May 5 earnings conference call. No schedule was mentioned for Shanghai.

World’s Largest

“Mainland Chinese equate big with better, the world’s largest this, and that,” said Shaun Rein, Shanghai-based managing director of China Market Research Group. “All the rides are scrunched together in a really small area, so what Disney had to do is to expand it to generate continuous interest from Hong Kong and people in mainland China.”

The expansion will boost the economy as unemployment in the city reaches 5.3 percent, the highest in four years, creating 3,700 construction jobs and an additional 600 long-term positions when the park opens, Tsang said today. Over the past three years, Hong Kong Disneyland has contributed a 0.2-percent- a-year gain to the city’s gross domestic product, said Chan.

‘Good Agreement’

“The executive council believes this is a good agreement,” said Hong Kong’s Secretary for Commerce and Economic Development Rita Lau, at the press conference.

The Hong Kong government said it will convert “a substantial part of its loans” into equity, though maintain at least HK$1 billion of loans in the theme park and remain its majority shareholder. No details were given. The city has HK$6.1 billion in loans on the project.

Hong Kong had invested $418 million in the park for its 57 percent stake and spent another $1.8 billion on landfill, roads, sewers and a rail line. Disney invested $320 million for the remaining stake.

[DizneyFreak2002]

Wow... Imagine that... And what is WDW getting???? nothing......

Sad to say but the crown jewel, WDW's Magic Kingdom, will now be the worst...

Step up to the plate TDO and get some major projects going... Opps, that may cost some money... Nevermind...

[JPL]

Sadly the best WDW can hope for out of this expansion is clones and watered down versions of the new attractions being developed for HKDL.

[Imagineer1981]

2 things

1) Hong Kong is paying for a big chunck of the expansion, Florida won't be paying for WDW

2) Travel and luxuries aren't cheap in China. Shanghi is not direct competition to most in Mainland China because most can't afford to go. Shanghi is much farther north then Hongkong and with 2 Billion people, they will have problem filling the parks with bodies, its just making it affordable to go.

[DisneyFanaticDargon]

Sad to say but the crown jewel, WDW's Magic Kingdom, will now be the worst...

They MIGHT still have more attractions than Disneyland Paris...I think...

2 things

1) Hong Kong is paying for a big chunck of the expansion, Florida won't be paying for WDW

Agreed. It's a lot easier to fund this kind of stuff and for Disney to get behind it when THEY'RE not the ones footing the bill. Most of Disney's budget for the next 10 years probably went to the DCA expansion, sad to say.

[lockedoutlogic]

They MIGHT still have more attractions than Disneyland Paris...I think...

Disneyland Paris is a fantastic park....

really....and i don't know about sheer "numbers" of attractions....but theirs are better (save no splash mountain)....and it is a better overall experience than Magic Kingdom


the studios stink...but that is irrelevant in this discussion

[lockedoutlogic]

Can anyone explain what this means?

yeah....the park has been a terrible investment for the chinese so far (remember they had to build an island) and disney has glossed over the figures to try and spin is as a success or at least gaining ground.

people just haven't gone there....perhaps because the chinese generally have bigger issues than themeparking....and perhaps because what they opened at hong kong was even more pathetic than disney studios paris....a truly remarkable feat

[lockedoutlogic]

Well Bob Iger got shown up by the Chinese government and businessmen... They are laying out ALL the money and still are only minorty owners of the park... Unreal this management team in place...

right down the middle.....

It's because that "development" has nothing to do with vacationing or park attendance....it has everything to do with kissing chinese fanny to keep sweatshop labor merchandise flowing back to the western world.....

WHERE THE REAL MONEY IS MADE

moichendising! moichendising! moichendising