• Thu
  • Aug 28, 2014
  • Updated: 1:45am
CommentInsight & Opinion
LEADER

Hong Kong must back Disneyland's expansion plans

PUBLISHED : Friday, 21 February, 2014, 3:57am
UPDATED : Friday, 21 February, 2014, 3:57am

There was a time when Hong Kong Disneyland was clouded with uncertainty. Mishaps, poor management, financial losses, negative publicity - the list went on to such an extent that there were growing doubts whether the deal clinched by the previous government with the US entertainment giant was the right one. Thankfully, the Magic Kingdom has come alive after eight years of struggling.

For the second year since opening in 2005, the theme park on Lantau Island has made a profit. Buoyed by a record attendance of 7.4 million, revenues rose 15 per cent year on year to HK$4.9 billion in the last financial year. Net profit more than doubled to HK$242 million. For a business that has suffered losses for years, these are encouraging figures.

That Disney has finally become a success story in Hong Kong is not just down to the brand and the right business strategy. It also benefits from a growing Chinese economy. Visitors from the mainland jumped 15 per cent and accounted for nearly half of the park's attendance. Occupancy rates for the two hotels reached 94 per cent. Business has been so good that one in five guests have been turned away.

No profit-minded company can afford to let go of business on its doorstep. The theme park therefore is rightly seeking to build a third hotel. Under the plan, the theme park will finance HK$600 million of the cost. Disney will contribute HK$1.7 billion in cash and lend another HK$1.15 billion, while the government is to provide a loan of HK$809 million, subject to approval by the Legislative Council.

The financial arrangements will no doubt be carefully scrutinised when the funding is tabled to Legco for approval. Some lawmakers have already queried whether the estimated cost of HK$4.26 billion is too high. Given taxpayer money is involved, the question is a valid one.

Understandably, some people have been sceptical about the Disney magic from the very beginning. It is true that the theme park is the smallest of the five in existence and that the upcoming opening of Shanghai Disneyland will pose further challenges. But in the competitive world of tourism, standing still is hardly a sustainable strategy. More needs to be done if Disney is to stay ahead in the theme park business. It is good that the Magic Kingdom continues to achieve. But its full potential can only be realised with further investment and expansion. It is in the city's interest to back that expansion.

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leormac
More visitors to Disneyland? have you stood in a queue there for a ride.... the park itself is maxed out that my kid of 3 does not want to go there anymore. This is not supply and demand but overcapacity for the experience of what..... standing in lines. Sure raise the price and then only have the better off going there another brilliant idea.
artdig18
The $4.2 billion seems to be a very high price tag for a hotel. I agree that there is no standing still in tourism and as a pillar of HK economy it must be developed. I understand most hotels in HK are averaging occupancies over 90% but they don't get a cheque from taxpayers to fund a hotel development/expansion.
Would the government's $800M contribution/loan be better on something that is a tourist attraction itself (which a hotel is not necessarily an attraction)?
Disney seems to be increasing its equity by contributing $1.7 billion in cash at a time when it is profitable. HK Govt needs to be wary of dilution of its equity.
Given John Tsang's "mountain of cash" and HK Govt's lack of ideas on tourism needs, the investment in a hotel at Disney is at least better than not doing any thing.
pjp
Land rates for hotel development ARE subsidised by the government. Webb-site did a recent article on this.
HK-Explorer
I agree that they need to keep on expanding Disneyland. The only worry is they are not expanding fast enough. I think they should have 3-4 new areas under construction to cope with ever expanding visitors. They say it is the smallest of the 5. HK should try and make it #4 is size.
Probably more indoor attractions are needed (like Lion King / Micky). Shows are something that differentiates the experience from Ocean park.
Having 2 great parks in HK is great but they need to keep on improving. If they keep ahead of the curve they will stay profitable and be a great place for people to relax.
XYZ
Knock it down and build housing there instead.
 
 
 
 
 

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