A tale of three Dis­ney cities in Asia

China Daily (Canada) - - LIFE -

Asia is be­gin­ning to pull ahead of North Amer­ica in the global theme park busi­ness. In East Asia, the fo­cus is on Dis­ney parks in Tokyo, Hong Kong and Shang­hai. In 2014, the world­wide at­ten­dance growth in the top 10 theme park groups ex­ceeded 5 per­cent. These con­glom­er­ates— in­clud­ing Dis­ney, Mer­lin, and Uni­ver­sal— re­ceived more than 392 mil­lion vis­i­tors.

In the post­war era, the theme park in­dus­try was mainly Amer­i­can. Since the 1980s, it has ex­panded in the ad­vanced economies. Last year, Dis­ney’s over­all rev­enue grewby $4.4 bil­lion, top­ping $50 bil­lion for the first time.

InHong Kong Dis­ney­land, vis­i­tors from the Chi­nese main­land andHong Kong each still ac­count for about 40 per­cent of the to­tal vis­i­tors. WhileHong Kong Dis­ney­land is only a decade old, its daily ca­pac­ity is barely 34,000 vis­i­tors; the low­est among the Dis­ney parks.

With the dwin­dling num­ber of vis­i­tors from the main­land, Hong Kong Dis­ney­land suf­fered a loss of $20 mil­lion in 2015, af­ter barely three years in the black. Fewer peo­ple from the main­land are vis­it­ing, rev­enue is de­creas­ing, prof­its are off and ho­tel rooms are emp­tier. The next two years will be chal­leng­ing, pos­si­bly crit­i­cal.

AsHong Kong Dis­ney­land is likely to con­tinue to lose vis­i­tors from the main­land, it is look­ing harder at South­east Asian mar­kets, in­clud­ing In­done­sia, the Philip­pines and Thai­land. Sur­veys sug­gest that two-thirds of mid­dle­class fam­i­lies on the main­land want to visit Shang­hai Dis­ney Re­sort and 17 per­cent plan to go this year.

With a ma­jor­ity stake in the park, Hong Kong’s gov­ern­ment is boost­ing its ex­pan­sion. It is in a dou­ble bind. If it does not in­vest in ex­pan­sion, Dis­ney­land could suf­fer even more. Con­versely, if the ex­pan­sion fails, it risks los­ing more money over time.

Launched near Tokyo in 1983, Dis­ney Park was the first to be built out­side the United States. Last year, the num­ber of vis­i­tors dropped by more than 1.1 mil­lion to 30.2 mil­lion. Though the drop was at­trib­uted to the ex­treme heat last sum­mer and re­cent an­niver­sary cel­e­bra­tions, the stream of vis­i­tors is ex­pected to con­tinue. Ticket prices have been raised for the third con­sec­u­tive year to secure money for in­vest­ing in the park and Tokyo Dis­neySea.

With debt tak­ing and low rates, Abe­nomics has been good to Tokyo Dis­ney­land. Vis­i­tors have been sus­tained by ef­forts to prop up con­sump­tion do­mes­ti­cally and the yen’s de­pre­ci­a­tion in­ter­na­tion­ally. But as cur­rency wars are re­duc­ing de­pre­ci­a­tion ben­e­fits, Ja­panese PrimeMin­is­ter Shinzo Abe is push­ing for a con­sump­tion tax hike next year.

At the Shang­hai Dis­ney Re­sort, all eyes are on main­land vis­i­tors. In the early 2010s, two Chi­nese theme park chains, OCT Group andHaichang Group, en­tered the top 10 list of op­er­a­tors. That’s when Dis­ney and Shang­hai Shendi, a State-owned com­pany with a 57 per­cent stake in the re­sort, be­gan to build the Dis­ney Re­sort in Pudong.

To Dis­ney, Shang­hai will be its first ma­jor park in a large emerg­ing econ­omy. To­day, theme parks and re­sorts are its most crit­i­cal seg­ment, ac­count­ing for some 30 per­cent of its val­u­a­tion, of which in­ter­na­tional parks and re­sorts ac­count for only about 5 per­cent.

With­the open­ing of the Shang­hai Dis­ney Re­sort in­June, Dis­ney’s in­ter­na­tion­althe­mepark rev­enues could dou­ble from$2bil­lion in2016 to­some$4bil­lion by the early 2020s. How­ever, in­Shang­hai, Dis­ney­land’s value will be de­ter­mined by jobs, cap­i­ta­land­spillover ef­fects. The suc­cess can be­mea­suredin fis­cal2017, when­the first full-year re­sults will­be­comeavail­able. Yet ini­tial re­sponses are en­cour­ag­ing.

Ini­tially, some 10 to 20 mil­lion peo­ple are ex­pected to visit the Shang­hai Dis­ney Re­sort an­nu­ally. In sheer size, it will be twice as big as its coun­ter­part in Tokyo and three times big­ger thanHong Kong Dis­ney­land; it will re­quire newin­fras­truc­ture and lo­gis­tics. It will be vi­tal for lo­cal travel agen­cies that thrive on short tours. It may boost the num­ber of for­eign vis­i­tors in Shang­hai. In the prop­erty mar­kets, it is gen­er­at­ing a lot of in­ter­est among other de­vel­op­ers and in­vestors.

To­day, the Shang­hai Dis­ney Re­sort is the most im­por­tant in­flu­ence in Asian theme park devel­op­ment, even glob­ally. It is ex­pected to have a ma­jor im­pact on rais­ing the bar for qual­ity, guest ex­pe­ri­ence and set­ting a price pre­mium in the mar­ket.

The au­thor is re­search di­rec­tor of in­ter­na­tional busi­ness at the In­dia China and Amer­ica In­sti­tute (US) and a vis­it­ing fel­low at the Shang­hai In­sti­tutes for In­ter­na­tional Stud­ies (China) and the EU Cen­tre (Sin­ga­pore).

LI FENG/ CHINA DAILY

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