Disney’s foreign curse could end with China resort project

Disney has taken steps to win over Chinese consumers. Chinese zodiac symbols combine with Disney characters at a central garden in the 963-acre resort

Los Angeles, June 13: The acrobats are practicing their flips. Chefs are learning to cook dumplings by the thousands. And invited guests are test-driving the Tron Light cyle Power Run, a rollercoaster that races through a fluorescent space landscape at 60 miles per hour.

All systems are go for the June 16 opening of the $5.5 billion Disney Shanghai Resort, the largest foreign investment ever from the world’s biggest theme-park operator and a career milestone for Walt Disney chief executive officer Bob Iger.

If history is a guide, however, the opening could be as turbulent as the twists and turns on Big Thunder Mountain. Disney’s past international park efforts have been marked by cultural missteps and years of losses. Shanghai represents a chance for the Burbank, California-based company to avoid those mistakes and earn a profit commensurate with the money it’s investing.

“The billion-dollar question is, will it be more like Hong Kong or more like Tokyo?” asked Barton Crockett, an analyst at FBR Capital Markets & Co. “It’s much bigger than Hong Kong. In Paris, the execution has been problematic.”

In an interview with Bloomberg TV in Shanghai on June 9, Iger said the new park’s size, commitment to technology and focus on local culture distinguish it from prior efforts.

“It combines all the things we have learned over the years from all the other parks we have operated,” he said. “In a way, it’s the smartest park we’ve ever built, based on our own learning.”

Disney has taken steps to win over Chinese consumers. Chinese zodiac symbols combine with Disney characters at a central garden in the 963-acre resort. A giant tea house sits at the foot of the castle, the tall est of any Disney park. An app will let guests buy tickets and check wait times on rides.

Disney’s resorts division began taking steps overseas with Tokyo Disneyland in 1983. Construction of the first park there ran about 80% over its 100 billion-yen budget.

But the company was insulated. Card Walker, CEO at the time, had endured kamikaze attacks on his aircraft carrier in World War II and was reluctant to invest directly in Japan, according to “Dream it! Do It !,” a 2013 autobiography by Disney parks designer Marty Sklar.

So, he signed a licencing deal with Oriental Land, which funded and owns what is now two parks in Japan.

Oriental Land earned $692 million last year on sales of $4.4 billion. Disney collects a royalty that amounted to $366 million in fiscal 2015, much of that profit.

Things haven’t gone so well at the company’s other international resorts. Euro Disney SCA, the publicly traded owner of the two parks at Disneyland Paris, has been bailed out three times in three decades—with the US company lending a hand each time — and hasn’t made a profit since 2001. Disney has a 77% stake in that company.

Among the problems: Europeans didn’t stay overnight or spend on merchandise like their American counterparts, meaning too many of the 5,800 rooms at seven hotels were empty.

Disney also took a beating in the local press for perceived cultural imperialism, such as serving too much American food, said Lee Cockerell, who supervised restaurants at Disneyland Paris on opening day and is now retired from the company.