Disney will add new attractions in expansion of Hong Kong park

Walt Disney will invest $452 million to expand its Hong Kong theme park. Sunnymok

With flagging attendance at China's first Disneyland park, the Hong Kong special administrative government is eager to expand, especially with competition from a new Disneyland expected to be completed in Shanghai in 2014.

"If there is no expansion, the attraction of the (Hong Kong) theme park will fall over time," government economist Helen Chan said at a briefing to announce details of the long-awaited additions.

Hong Kong is the smallest of Disney's five resorts.

"We're only increasing it (the size) by some 20 percent, but the Shanghai Disneyland is going to be 10 times the size of Hong Kong Disneyland. How are we going to compete with them?" asked lawmaker Emily Lau during a briefing on the plan.

That probably means more woes for Hong Kong's four-year-old park, where visitor numbers hover below projections and the government is spending another HK$3.63 billion to add three areas.

Other Hong Kong government officials, who must still lobby lawmakers to green-light the deal, stressed the Hong Kong park's unique attractions.

They said new attractions that are part of the expansion will help increase the park's current reported attendance of about 4.5 million annually to 5.2 million to 8.4 million visitors by 2015, when the expansion is completed.

"We often talk about uniqueness and exclusiveness, and therefore it's not just about the size," Lau said.

The total net economic benefit of the expanded theme park over 40 years would range from HK$64.7 billion to HK$117.3 billion, the government reported, adding that the theme park already has added 0.2 percent to the city's annual GDP since opening.

Walt Disney Co announced during the summer that it will invest $452 million to expand its Hong Kong theme park.

Loan-to-equity

Hong Kong Chief Executive Donald Tsang said Hong Kong would not invest more capital in the joint venture, but would convert a substantial part of its loan for the project into equity. He said Disney's capital investment would be about HK$3.5 billion.

The Hong Kong government invested HK$3.25 billion for a 57 percent stake and spent HK$13.6 billion on landfill, roads, sewers and a rail line. Disney, the largest theme-park operator, invested about HK$2.5 billion for the remaining stake.

Disney spokeswoman Leslie Goodman said the company was pleased to have completed an agreement "that will benefit both parties" following two years of negotiations.

"The expansion will contribute to Hong Kong's appeal as an international, family-friendly tourist destination and the resort's long-term success," Goodman said in a statement, adding that the company is eager to start work.

The Hong Kong government said China, with 1.3 billion people generating the world's third-largest economy, can support two Disney parks. The city will develop new tourist attractions, including the Hong Kong National Geopark, and promote itself as a "shopper's paradise" and hub for wine and gourmet foods, said Rita Lau, secretary for commerce and economic development.

Hong Kong Disneyland's expansion will begin by Dec 31, she said. Disney will spend HK$3.5 billion to add rides such as "Toy Story Land" and "Grizzly Trail". The government will turn part of a loan to the park into equity.

"We at Hong Kong Disneyland are focused on getting our exciting project under way as soon as possible," Andrew Kam, the park's managing director, said in a statement last week.

The first area will take three years to complete, and work will begin on the next two areas during the following two years. The expansion project is scheduled for completion in 2014, the source said.

As part of the deal, Disney promised to increase transparency by disclosing its annual visitor figures and financial performance for the Hong Kong park. The first report is expected at the end of the park's 2009 fiscal year.

Falling gov't stake

"In total, this means that Walt Disney Co will invest about HK$6.2 billion of new capital to demonstrate the company's confidence in Hong Kong Disneyland," said Rita Lau, Hong Kong's secretary for commerce and economic development.

After Disney's new investment and the government's debt-to-equity swap, Hong Kong will see its stake in the park fall to 52 percent from 57 percent.

This is the theme park's first major expansion since the park opened to great fanfare in 2005.

Since then, however, the park's performance has been sluggish, with attendance falling short of initial targets.

The government's outstanding loan to the theme park is about HK$6.89 billion. After the conversion, this balance will not drop below HK$1 billion, the government said in a statement.

According to the statement, the expansion, with its mix of new thrill rides, will "broaden the park's appeal" and act as a "catalyst" to improve the park's operating and financial performance.

Changes at HQ

From its US headquarters in Burbank, California, Walt Disney Co said Ed Grier resigned last month as president of the Disneyland Resort in Anaheim, California, after 28 years with the company. The resignation took many in the company by surprise.

Grier wasn't much of a public leader, rarely being seen in the parks. But under his watch, Disneyland has prospered the past three years, with Disneyland Park winning the Theme Park Insider Award as the world's best theme park in 2009 and 2008.

Disneyland hasn't named a replacement.

The departure of 54-year-old Grier comes eight months after Disney reorganized the division that generates 30 percent of its revenue by cutting jobs to cope with the US recession.

The company owns resorts in the United States, holds stakes in venues in France and Hong Kong and licenses its operations in Japan.

"My decision to retire from the Walt Disney Co was not an easy decision," Grier said in a separate memo that also was e-mailed to Bloomberg. "I have had a long and rewarding career with the Walt Disney Co, and am excited to explore what's next."

He said he would work on a business venture with his sons.

Grier started with Disney theme parks 28 years ago, beginning his career as an auditor at the Walt Disney World Resort before taking roles at operations in Tokyo and Paris.

The Disneyland resort was the company's first theme park, opening in July 1955 on 85 acres in Anaheim. It has since grown to 510 acres and includes Disney's California Adventure Park.

The company posted a 19 percent drop in theme park operating income in the third quarter. Profit for the fourth quarter will be announced Nov 12.

Agencies

(China Daily 11/09/2009 page6)