Disney looks to China for international growth
Filed under: Company News, People
With profits down 19 percent in its theme parks, the Walt Disney Company (DIS) needs to expand internationally in order to grow in these tough economic times. So where is it looking? Shanghai, China will be the next location for a Disney-style theme park. If built to full capacity, the new park could rival Disney World in Florida, which attracts 45 million annual visitors.
The park will cost $3.6 billion to build and Disney will own about 40 percent of the Shanghai resort. The rest will be owned by a holding company formed by a consortium of Chinese companies selected by the government. This park will set Disney on the right path to meet its goals of generating about 50 percent of its annual profits from overseas sales. Right now, international sales represent about a quarter of revenue and operating income.
The Disney plans for Shanghai are huge, in line with the potential market of 1.3 billion Chinese. The park will include a mix of shopping areas, hotels and a Magic Kingdom-style theme park on 1,000 acres in the Pudong district. The theme park is planned for 100 of those acres. It will be a bit larger than Disneyland in Anaheim, but about the same size as Disney's successful parks in Paris and Tokyo. Ultimately, Disney hopes to expand the park to more than 1,700 acres, and increase capacity to rival Disney World in Florida.
Disney has been in negotiations with China for 20 years, but the prospect of creating tens of thousands of jobs in the current economic climate was what finally made this deal possible. Of course, operating a park is not Disney's only plan. The company hopes to use the park to market all of Disney's products, including DVDs and video games.
Some raised concerns that a Shanghai park would take customers away from Disney's Hong Kong resort, but that resort is tiny and can't handle its current crowds. In addition, mainland Chinese must get a visa to go to Hong Kong, which limits the park's appeal. Rita Lau, Hong Kong's secretary for commerce and development, told Bloomberg that China's population provides enough market potential for both Disney theme parks.
Traffic at U.S. Disney Parks Holds Steady
New international Disney parks probably won't make much of a dent in traffic to the company's U.S. parks. For example, Tokyo Disneyland, which got 27.2 million visitors in the fiscal year that ended March 2009, found 95.8 percent of its visitors were Japanese, and most were people who could not afford a trip to the U.S.
Disneyland Paris has been around since the 1990s and it certainly hasn't hurt traffic at Disney properties in the U.S. The French park had 14.5 million visitors in 2008 and new hotels are planned for the surrounding area. Disneyland Paris is now Europe's most popular attraction with more visitors than the Eiffel Tower and the Louvre combined.
As long as Disney carefully selects locations that don't compete with each other, there's probably room for growth. While attendance at U.S. Disney parks has held steady -- despite big traffic declines at other U.S. theme parks -- they may have maxed out their potential here. Can Disney grow significantly without building its park's brand internationally? Probably not.
Lita Epstein, who lives in the Orlando area and has to deal regularly with all the traffic Disney generates, has written more than 25 books, including Trading for Dummies and the Complete Idiot's Guide to Value Investing.
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Reader Comments (Page 1 of 1)
11-04-2009 @ 12:57PM
mary said...
Why not all their lousy toys are made there.
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11-04-2009 @ 2:24PM
joseph said...
If finished I won't mind going but I will not buy any tainted merchandise or eat the food. And I'll wear a face mask to protect me from the foul air & any diseases I might get.....you know what forget it. I'm not going.
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11-04-2009 @ 2:07PM
roy said...
What about the tainted meat from U.S. meat companies and Swine Flu in the U.S. right now?
When are you leaving ?
11-04-2009 @ 3:16PM
Trecie said...
Will any Americans be getting jobs from this? Feels kinda like ok we have milked America for so long let us move on now...why not build on to parks here to draw in more tourists to America and help out us Americans who need jobs! We have been buying merchandise and tickets since the opening of the parks and now in economic down times they give China jobs? COME ON!!
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11-05-2009 @ 1:48AM
CN said...
and.... your probably the same person who argues against US built but foreign owned Auto manufactures. While the companies are abroad, the jobs are here....
But reverse the agruement and you still can't be satisfied with the jobs there and the money returning here.
Problem is neither is that simple... it's a world market, and you and I and people around the world all own these companies in our 401k's. pensions, and other investment products. So no matter where the Job is located, or the company is based, you can profit from right their on your couch.... well that is if you actually got off of it long enough to make a buck to invest.
11-04-2009 @ 3:17PM
joseph said...
Roy - there was a research done & swine flu actually started in China not Mexico. And they have one of the worst air quality in the world. I'd rather get sick here than over there. Tainted meat? At least I know it's beef that's tainted not cat meat, dog meat, rat meat, etc............BTW, Trecie is right
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11-04-2009 @ 3:46PM
Walt Disney 3rd said...
Didn't grandpa used to ban Communists from his parks?
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11-04-2009 @ 5:55PM
MADDAT52 said...
Obama's economic policies are the biggest threat to our national security that we have ever faced as a nation. The division of the people combined with the falling dollar creates the probable outcome of collapse and anarchy. This is a crime that needs to be addressed. It is obvious that this is the agenda and between Obama himself and his associates there is enough taped statements wherein they state that there intent is to destroy the constitution and remake America in there own way. If that's not a crime then what the hell is?
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11-04-2009 @ 6:32PM
jjddixie1 said...
"When you wish upon a Czar"..
Think.. (D)Disneyland dumbocrats in DC, including the interchangeable.. Snoopy, Dopey and "Sleazy" Etc, who are running the show with their dumb as dog-doo, 'mickey mouse' policies... which in reality, are (D) destructive & disastrous.
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11-04-2009 @ 7:27PM
MyKisa said...
....7th largest holder of gold
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11-04-2009 @ 6:59PM
john said...
SURE BE NICE OF DISNEY TO LOWER THEIR FOOD COURT PRICES AT THE THEME PARKS SO FAMILIES CAN EAT WITHOUT GOING BROKE OR RUNNING UP THEIR CREDIT CARD JUST FOR CHOW! PLUS IT WOULD BE NICE FOR FAMILIES TO HAVE A LITTLE EXTRA SO THEY CAN PURCHASE SOME OF THE MERCHANDISE THERE.....BUT THANKS TO THAT GREEDY PRICK EISNER AND NOW THE NEW REGIME THE ONLY THING THAT MOUSE CARES FOR IS YOUR GREENBACKS!!! THIS IS NOT WHAT WALT WOULD EVER HAVE WANTED IT TO COME TO.
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11-04-2009 @ 8:53PM
Meli2012 said...
Americans need their jobs first..Who can think about going to Disney when they have to work? Prices increasing there are just a sign that DISNEY is hurting as well..sounds kind of desperate to open another theme park in another nation when you have $$$$ here in the states. I know it takes money to make money..but it is a recession..globally..not just locally.
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11-04-2009 @ 10:13PM
pet said...
disney should be making more jobs here insted of the quick buck in china
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11-04-2009 @ 11:17PM
Dang1067 said...
Might as well ship Disney to China and have them take Congress along with them!!! Observe Mickey's eyes, they are slantlier and getting smaller and smaller.... And his tail is beginning to appears like a chops-stick.... And having two humongous buck-teeth.... And that's not all, Mickeys' voice is also beginning to sound with high pitch... And last time I saw, Mickey dropped his cheese and religiously started eating flied-rice.... What the FVCK!!!!
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11-05-2009 @ 1:31AM
Dontcha Worryboutit said...
Thank God!! Does that mean they'll stop coming in droves 2 the one in so cal?!
Americans mght actually make it 2 the front of the line in less than 5 hrs ; )
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11-05-2009 @ 1:53AM
joe said...
Cedar point in sandusky ohio is the best amuzement park in the world other than "wONKAS Chocolate factory"
ive been to disney world, in florida it was cool but it was aimed way more for childeren 10 and under...
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11-05-2009 @ 2:52AM
Chris Moshinskie said...
So big deal. Why bother???
No one is going to be tall enough to ride the really good rides.
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11-05-2009 @ 6:50AM
Bob Sherwood said...
Wonder if they'll serve Mickey Suey at the foodstalls?
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