Shanghai Disneyland - The Mouse Hits the Mainland

Shanghai Disneyland just announced a June 2016 opening.  Do you believe the park will fare better than Hong Kong Disneyland when it opened, and just how important do you think Shanghai is to Disney?

Kenneth

Dear Kenneth:

The opening of the Disney Shanghai park announced for June 2016 will be a monumental milestone for the Disney company.  With over $5.5 billion USD expended, it will be Disney’s largest ever investment.  CEO Bob Iger has said, “It will be a one-of-a-kind, world-class destination that is authentically Disney and distinctively Chinese.  It will be a merge of Disney’s legendary storytelling involving and featuring China’s rich culture.”  

The park will open with two hotels, an expansive recreation area, a unique retail and entertainment district, and the main feature – a 6-area theme park.  The park will showcase never-before-seen attractions created specifically for the people of China.  The park will feature the largest castle among all Disney parks and a new area called Treasure Cove (Disney’s pirate themed land). There will be a newly created Tomorrowland with rides and attractions such as Jet Packs, Star Wars Launch Bay, Buzz Lightyear Planet Rescue, Marvel Universe, and many, many more attractions.

Kenneth, the Hong Kong Disney park has never achieved the projections that Disney expected.  It is the smallest Disney theme park and, in my opinion, never achieved the level of quality expected by locals and tourists.  The park has always experienced intense competition from the pre-existing Ocean Park Theme Park.  Ocean Park is a world-class theme park which actually was better received by the locals and visiting mainland Chinese.

Ocean Park draws over 7.79 million in attendance per year compared to Hong Kong Disneyland’s 7.5 million in attendance per year.  The Hong Kong Disney Park has attempted to build attendance to the 7.5 million per annum as projected, and has finally hit projections after 9 years.  I project that Hong Kong Disney will see a decline, particularly from the mainlanders who will hold off visiting Hong Kong Disney to go to Shanghai Disney Resort.

The Shanghai market is enormous with over 330 million in population within a 3 hour drive or train ride to the park.  I believe that the Shanghai Disney Resort will attract over 10 million guests its first year of operation.  The park has the potential to be a “superstar” park in Disney’s line up of their parks.  Kenneth, the park is a staggering 963 acres – three times the size of Hong Kong Disney.  It is bigger, better, and has never before seen attractions.  They have room to produce two additional theme parks, which are being planned.  I have heard the master plans are currently underway.

Shanghai Disney Resort is a joint venture of the Disney organization, a 43% owner, and the Shanghai Shendi Group, a 57% owner and itself a joint venture of the Chinese government.

Disney sets the bar for our industry, there is no question about that.  They have made mistakes along the way, however.  For instance, Euro Disney saw colossal errors when it opened.  ITPS was retained by Banc Paribas, the local French Bank to study what went wrong. In those days, Disney very seldom reached beyond its own envelope.

In a nutshell, what we found was that they over estimated the guest spend.  They did not realize at that time that Europeans spend less than the Americans and Japanese do in the other parks.  They did not realize that a European could jump on a plane, go to Orlando, be guaranteed good weather and more attractions, and visit cheaper than traveling within Europe to Euro Disney.

The Disney park in Paris is also on the wrong side of the weather line in Marne-la-Vallee, a town located about 20 miles east of the center of Paris. Cooler weather is experienced there than in Paris.  They also opened with too many hotels and not enough demand.  Occupancy was 38% in the initial year, less than required to support their operations.  The local farmers were also “mad as hell” because Disney received special dispensation from the government and was highly resented for receiving these government awards.

Parisians did not like the American park coming to their city.  When asking a Parisian if he had visited Disneyland, you would receive a cold stare and an indignant “no, no, no!”  The greatest faux pas was that it was built in Paris, France.  It should have been developed – in our opinion – in Spain on the Costa del Sol.  Warmer year-round weather and it would have been welcomed with open arms.

So, as great as Disney is, they do get it wrong from time to time.  I believe they have learned from both Paris and the smaller Hong Kong Disney what needs to be presented in Shanghai.  I believe they will have a grand slam home run when it opens.  My long time friend, Nick Winslow, who opened the Shanghai World’s Fair, told me many stories about the enormous crowds that flooded that event.  Many days, they had well over 100,000 to 200,000 people and, in the end, achieved an attendance of over 73 million by closing!

So, Disney will be a lot smarter in 5 months!

And I predict a lot richer.