Owners to Invest $800 Million More in Shanghai Disneyland

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Owners to Invest $800 Million More in Shanghai Disneyland

Postby HostDave » Wed Apr 30, 2014 5:37 pm

Shrugging off economists’ concerns about a cooling Chinese economy, the Walt Disney Company on Monday announced a deal to increase spending on its coming Shanghai megaresort by $800 million.

Disney and Shanghai Shendi Group, a consortium of state-owned companies, had already committed to spend $4.7 billion on the theme park resort, which is scheduled to open at the end of next year, an ambitious time table. The additional $800 million – with Disney contributing about 43 percent and Shanghai Shendi shouldering the balance – will be used to increase the number of rides operating on opening day.

Disney did not specify what rides and entertainment offerings the additional funds would allow it to add. A spokeswoman said the $800 million would flow entirely toward new offerings and that the deal in no way reflected budget overruns.

Shanghai Disneyland represents a huge bet on China’s shifting approach to westernized entertainment and leisure travel. Disney has said it sees the property as transformative for the company as the establishment of Walt Disney World in Florida was in the 1970s. Disney is also building its first full-size store in China – a 53,000-square-foot giant in Shanghai that will be the company’s largest retail outpost anywhere.

Increased spending at the resort, Disney said, reflects the company’s belief that the opportunity in Shanghai has only increased. Disney on Monday cited a study by a research firm called PhoCusWright indicating that the Chinese travel market was projected to grow 34 percent between 2012 and 2015. About 330 million people live within a three-hour trip of the resort, which is in Shanghai’s Pudong district.

“We’ve been impressed with the growth of China’s economy, especially the rapid expansion of the middle class and the significant increase in travel and tourism,” Robert A. Iger, Disney’s chief executive, said in a statement.

Even so, China’s overall economy has slowed over the past year as authorities in Beijing try to transition toward a more efficient and sustainable economic expansion. In December, for instance, retail sales growth in China was almost unchanged from a month earlier, at 13.6 percent.

Disney has also been pouring money into its Hong Kong Disneyland, which opened to underwhelming results in 2005 in part because of limited offerings. To some degree, the additional spending on Shanghai Disneyland may be intended to avoid similar opening-day complaints there.

After a $500 million expansion was completed, attendance at Hong Kong Disneyland totaled 7.4 million people last year, an increase of 10 percent from the year before. The theme park, still the smallest in Disney’s worldwide fleet, has now delivered double-digit increases in attendance since 2009 and has started turning a modest profit.

Disney owns roughly 43 percent of Shanghai Disneyland, with the balance held by Shanghai Shendi. The initial $4.7 billion investment was split along ownership percentages. But Disney will have operational control, holding a 70 percent stake in a management company created with Shendi to run the resort.

The resort, one of the largest foreign investments in China ever, includes a 225-acre Magic Kingdom-style park with a castle surrounded by themed areas, although guests will enter through a lush 11-acre garden instead of down an American-style Main Street shopping esplanade.

Disney won approval for the park from the Chinese government after two decades of talks in part by promising that the resort would be sharply different from the original Disneyland, which has become a symbol of American culture.

Disney has kept most details of the park under wraps, in part because it fears that other theme park operators in China will try to churn out knockoffs. So far, the only major attraction Disney has announced, aside from the castle, is Pirates of the Caribbean: Battle of the Sunken Treasure, a boat experience themed around the company’s “Pirates of the Caribbean” movies.

Shanghai Disneyland will also include two hotels, a lake and a shopping district, bringing the initial size to about 963 acres.

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