Hong Kong Disneyland must prove that public funding for expansion is worthwhile

To win support for more than HK$5 billion in taxpayer investment, theme park will have to show it has a viable business strategy for a highly competitive business

PUBLISHED : Wednesday, 23 November, 2016, 11:18pm
UPDATED : Wednesday, 23 November, 2016, 11:18pm

Even before the world’s smallest Disneyland officially opened in Hong Kong on September 12, 2005, there were plans for the theme park to eventually expand. After 11 years of operation, a major new facelift has been announced. While the need for further development is beyond doubt, the question is how to go about it. With a price tag of HK$10.9 billion – more than half of which is to come from the public coffers – taxpayers have to be fully convinced that the investment will be worthwhile.

The figures provided by Disney and the government appear to be reassuring. The number of attractions will increase from 110 to 130 between 2018 and 2023. Visitor numbers are expected to grow from 6.8 million last year to 9.5 million by 2025. Up to 8,000 jobs will be created across the tourism industry following the upgrade. The total economic benefit could reach HK$41.6 billion over a 40-year period.

Can Hong Kong Disneyland’s HK$10.9 billion upgrade boost visitors to 9.5 million by 2025?

Only time will tell whether the numbers are correct. If history is any guide, officials tend to be overly optimistic. During the early years, the theme park was struggling to meet some its business targets. It fell into the red again earlier this year, and some staff had to be laid off. The future is further clouded by competition from its Shanghai counterpart, which has just announced an ambitious expansion plan of its own just months after its opening in June. Its impact and that of other theme parks in the region on Hong Kong Disneyland cannot be ignored.

As the major shareholder in the venture, the government has a role to play in the expansion. But the public is also entitled to ask whether there are alternative financial arrangements. In the previous expansion, the government contributed its part through converting an old loan into equity in Hong Kong Disneyland, effectively sparing taxpayers from committing new capital. This time, the government is to ask the Legislative Council to approve an injection of HK$5.8 billion.

The funding request will no doubt be carefully scrutinised by Legco. This is, after all, the constitutional duty of lawmakers. While officials can expect a tough sell, it should not become ammunition for filibustering in the legislature.

Taxpayers to pay more than half of HK$11 billion cost for Frozen and Marvel superhero attractions to boost Hong Kong Disneyland

The success of theme parks lies in their ability to attract new customers and repeat visitors. Whether superhero Iron Man and Elsa the Snow Queen can work their magic remains to be seen. But being bigger does not necessary mean being better. The real challenge is to stay profitable in the increasingly competitive world of entertainment. A clear direction and sound business strategy will go a long way towards garnering public support.