Disneyland Hong Kong has reported its first annual loss in three years — HK$148 million (US$19.04 million) before taxes.
The theme park operator blamed it on a sharp decline in mainland Chinese tourists, leading to a 9.3 percent drop in the number of visitors compared with the previous year.
At the same time, it warned of the potential threat from Shanghai Disneyland, which is scheduled to open in June. It is much bigger than Disneyland Hong Kong and has more competitive ticket prices.
Already, the Hong Kong theme park is conceding visitors to its Shanghai rival and expects 2016 to be another bumpy year.
But there’s one thing Disneyland Hong Kong is not saying.
And that is Hong Kong still managed 50 million tourists last year — a figure other major cities can only dream of — despite declining numbers across the board.
Visitor spending in Hong Kong Disney was up last year, resulting in a pre-tax annual income of HK$5.11 billion, the second highest since the park opened in 2005.
So what’s the deal with the HK$148 million loss?
The fundamental reasons for the company’s poor financial performance are mismanagement, complacency and lack of innovation.
I used to be a big fan of the idea of building a Disneyland in Hong Kong from day one.
But the park we got is a far cry from what I expected and advocated.
Unlike Disneyland in Los Angeles and Disney World in Colorado, which have their own unique characteristics and can provide visitors with a kind of experience unparalleled anywhere else, our Disneyland is not only the smallest but also perhaps the most boring. It lacks character and come-ons.
In other words, it is a mediocre Disneyland compared with those in the US, Paris or Tokyo.
Obviously, it is something the management has also noticed, which is why it put forward an expansion plan in 2007 and got the endorsement of the government, which owns 57 percent of the company.
Unfortunately, rather than enriching the features and attractions of the park, Disneyland Hong Kong has spent most of the money building luxury hotels in pursuit of quick profit.
In fact, Hong Kong Disney would probably have reported an even greater loss much earlier if it had not been for Chinese visitors to Hong Kong.
Arrivals from the mainland slowed only in recent years due to the stalling Chinese economy.
And there is one thing I need to point out here: Walt Disney broke its promise to Hong Kong.
When Disney was working aggressively to talk the Hong Kong government into offering favorable terms to build the theme park in the late 1990s, it promised that it would not open another Disneyland in a nearby region.
It was only five years after the opening of Hong Kong Disneyland that Walt Disney concluded a deal with the Shanghai authorities to build another Disneyland.
Whether or not Disney has its own unique interpretation of the term “nearby”, what it did is a complete breach of its promise to Hong Kong.
Like it or not, Disneyland Hong Kong and the tourism industry are now in the same boat.
If they continue to count on Beijing to open up more cities for the Individual Visit Scheme to support their income, rather than undergoing reform, thinking outside the box and completely revitalizing themselves with innovation, their days are numbered.
This article appeared in the Hong Kong Economic Journal on Feb. 26.
Translation by Alan Lee
[Chinese version 中文版]
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