How Shanghai Disney park turned profitable so quickly

June 02, 2017 11:18
The success of Shanghai Disney park gives an idea about the spending power of the  Chinese middle class. Photo: Shanghai Disney Resort

Costing 34 billion yuan to build, the Shanghai Disney park was once predicted to be a money loser for years given its small size and high ticket prices.

Even Chinese property tycoon Wang Jianlin said the park would not be profitable for 20 years.

Surprisingly, the resort, which opened less than a year ago, started to make money in the latest quarter, three years ahead of market expectations.

Walt Disney announced that Shanghai Disney Resort booked a profit in the quarter ended April 30 and the park is expected to at least break even for the full year.

The company did not disclose detailed figures but chief executive Bob Iger said the operation in the Shanghai Disney park “exceeded our most optimistic expectations”.

Visitor numbers to the Shanghai theme park has hit the 10-million mark after an 11-month operation. The full-year attendance is likely to hit 11 million.

Meanwhile, the slightly bigger Hong Kong counterpart saw a 10 percent visitor drop to 6.1 million last year.

Based on previous experiences of Disney parks in Hong Kong, Tokyo and Paris, it takes at least three years to reach the breakeven point.

In fact, the first-phase project of Shanghai Disney Resort only has an area of 116 hectares compared with 126 hectares for the Hong Kong theme park. That makes it the world’s smallest Disney park.

Still, Shanghai Disney park is almost running at full capacity during holidays such as Lunar New Year or Labor Day.

A daily ticket to the Shanghai Disney park costs 499 yuan during peak times such as holidays and weekends and 370 yuan on other days.

By contrast, the adult ticket to Hong Kong Disney park costs HK$589. So Shanghai Disney charges about the same as Hong Kong during peak seasons. Bear in mind that in Shanghai, the average salary is just around 4,500 yuan.

Notwithstanding its size constraint and expensive tickets, Shanghai Disney proved naysayers wrong and quickly turned profitable. How is that possible?

The theme park's success shows mainland parents are quite willing to splash out on holidays. For those who cannot afford an overseas trip, they don't mind spending 1,000-2,000 yuan on a Disney trip.

There are about 400 million people near Shanghai that can travel there within half an hour by bullet train. This huge captive market is also one reason behind the success of the theme park.

This article appeared in the Hong Kong Economic Journal on June 1

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist