Hong Kong Disneyland the beleaguered park that has drawn underwhelming reviews for its thin lineup of attractions needed a lifeline. On Tuesday it got one, when the Hong Kong government and Walt Disney executives reached a deal to expand Disney's second Asian theme park over the next five years in an attempt to boost sales and stand up to competitors.
The government hopes the expansion plan which will add another 30 attractions and three new themed areas will answer critics' complaints of overcrowding and boring rides. "Expanding Disneyland, or doing any other operational activity to increase what it currently offers, will be very important in keeping potential visitors attracted to the park and not losing appeal to competing attractions elsewhere," says Parita Chitakasem, a research manager with research group Euromonitor International.
Under the new arrangement, Disney will foot the bill, pumping $451 million (HKD 3.5 billion) into the project and converting another $348 million (HKD 2.7 billion) of existing loans into equity. The government, meanwhile, says it won't inject any new capital into the expansion but will convert a substantial portion of its loans into equity. The Hong Kong government has already been the major financial driver, spending some $418 million on the park and another $1.8 billion on roads, sewers and a rail line to access it. Now, the government's majority stake will remain, but it will drop to 52%, from 57%. "Hong Kong Disneyland needs time to clean up its teething problems. Then profit will come," says Jeffrey Lam, a member of Hong Kong's Legislative Council.
Disneyland Hong Kong opened to great fanfare in September 2005, bringing in some 5 million visitors within its first year, according to Euromonitor International. The original theme park was seen as a bold step by Disney to make inroads into China, while Hong Kong hoped it would secure its place as a major tourist destination in Asia. Since then, however, visitors have dropped and losses have grown for the company. Disneyland has struggled even against local theme parks like Ocean Park, which attracts a larger number of visitors with its cheaper entrance fees and larger size. "Disneyland is a good product, but its smaller scale in Hong Kong presents some issues, the foremost being overcrowding, which was a major complaint when the park first opened. People don't feel the entirety of the Disneyland experience," says Howard Ho, senior consultant at Horwath Hotel, Tourism and Leisure consulting.
In an attempt to draw more international visitors, the new attractions will include two themed areas "Grizzly Trail" and "Mystic Point" which will be exclusive to Hong Kong's Magic Kingdom for their first five years. A third area, "Toy Story Land" based on the Disney/Pixar Toy Story film will be exclusive within the Asian region. The expansion will boost the total number of attractions to more than 100 and enlarge its current space by nearly a third.
The timing is certainly right. Analysts say Hong Kong Disneyland needs to expand to stand up to plans for a much larger Shanghai Disneyland in the next few years. Construction has not begun, but the Shanghai municipal government and Disney Co. signed off on a project proposal earlier this year. The new plan could also lift spirits at a time when Hong Kong's tourism has taken a hit on swine flu concerns. According to the Hong Kong Tourism Board, the number of new visitors to the city in May dropped a steep 13.4% year on year. For the first five months of the year, however, new arrivals were down a more moderate 1.4%. Mickey to the rescue?