Disney still to find its magic in Shanghai, as early visitor numbers fall short of expectations

Early visitor numbers to mainland China’s first Disneyland in Shanghai have been disappointing, according to experts, proving even the “happiest place on earth” isn’t immune to the whims of the tourism industry.

While not providing specific numbers, the company’s chairman and CEO Bob Iger insisted in August the US$5.5 billion park has been “well received by the Chinese consumer”, bringing in over a million visitors since its gates swung open with great fanfare in mid-June.

He Jianmin, director of the tourism management department at Shanghai University of Finance and Economics, estimates around 20,000 people are visiting daily.

But commentators say those healthy-sounding numbers – the equivalent of over 7.3 million annually – fall well short of expectations, and are blaming the less-than sparkling start on high prices and rumours of long queuing times.

Previous estimates had suggested around double that through the turnstiles.

Barclays Bank projected the “authentically Disney and distinctly Chinese” park would attract 12 million visitors in its first year, while Nomura said it would reach 15 million.

State-owned Shanghai Shendi Group, the park’s majority stakeholder, had predicted 10 to 12 million visitors in the first 12 months.

Fewer visitors will certainly leave its annual revenues well short of the targeted US$3.7 billion expected by Liu Zhaohui, co-founder of Beijing-based travel company TripVivid.

An earlier report from Ctrip, the country’s largest online travel agency, had suggested annual spending at the site could reach 33 billion yuan ($4.95bn) based on its June to September bookings, and boldly trumpeted that Shanghai Disneyland “opened a new era of high-end holiday tourism in China”.

Last year that industry was worth US$610 billion at home and abroad, which the government is hoping to double by 2020 on rising spending by the middle classes.

Disney claims 330 million “income qualified” people live within three hours of the park, but Ken Wong, Asia equity portfolio specialist at Eastspring Investments, points to Shanghai Disneyland’s high ticket prices – 499 yuan for peak season or 370 yuan during the off-season – as the primary reason for many staying away.

“[These prices] are making it difficult to attract more visitors,” he told the South China Morning Post. “Disneyland might need to readjust them.”

Although prices are not high compared to other its parks – they are US$95 adult in Los Angeles and US$64 in Hong Kong – monthly per capita disposable income in China is less than 2,000 yuan a month, while Ctrip estimates per capita spending for a Shanghai Disneyland trip is 2,219 yuan including travel and hotel stay.

Despite making the experience as Chinese as possible – including Mickey Mouse-shaped braised pig knuckle, Peking Duck pizza, and a Chinese zodiac-inspired garden of Disney characters – Shaun Rein, managing director of China Market Research Group said Disney made a “big mistake” in not better handling long queues, which generated negative word of mouth and have forced consumers to adopt a “wait-and-see attitude”.

“There’s still pretty good demand, but people [appear to] want to wait six months, 12 months, and even longer until the issues are ironed out,” he said.

A BNP Paribas report agrees that the negative press on long waits may be why foreigners, too, are have been hesitant to visit “for the time being”.

But this early performance of arguably China’s most high-profile tourist opening to-date could also prove an ominous reflection of just how hard the industry has reacted to a slowdown in income growth and weakened consumer confidence.

“Consumers are really double-checking, and triple-checking where they visit. They really want to get the best value,” said Rein.

He says outbound travel and tourism is 16 times the value compared with a decade ago, but Chinese buyers are now trending away from expensive places such as Europe, and towards “exotic and cheap” places in Southeast Asia, and domestic wilderness locations such as Yunan, Guilin, Qinghai, and Gansu.

Wong underlines that to successfully attract more money to be spent at home, “services must be affordable and consumers must feel that there is value for their money”.

Caught in the Disney crossfire, meanwhile, are local retail industries which had anticipated wider consumption of at least 20 billion yuan, according to analysts from CITIC Securities.

Retail and hotel spending had been expected to be the biggest gainers from the opening, but Wong does not expect a huge knock-on effect in the country’s overall service industry in China.

“The slowdown ... is more of an isolated case,” he said. “That doesn't translate into any expected slowdown in China’s services sector.”

Shanghai-native Zhao Xiaotian was one of the early visitors to the new Disneyland. She said the park’s facilities were good, but huge crowds limited the number of rides she was able to go on.

“It took several hours to queue up for some rides, which affected the overall experience,” she told the Post. “So it doesn’t feel as if I got my money’s worth from the 500 yuan entrance fee.”

Rein said Chinese tourism will continue to grow, but people are changing where they want to go, so companies “need to be very agile in what they offer.”

“But Disney will bounce [back], Disney is fine,” he said.