LEISURE: Disney Countdown Begins with Park Opening Date

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Bottom line: Shanghai Disneyland will meet its target of opening in the half of this year, but the event will be marked by numerous small problems that are common with such big projects but generate negative publicity.

Disneyland set for June 16 opening
Disneyland set for June 16 opening

The countdown to launch for what’s likely to become one of Disney’s (NYSE; DIS) biggest growth drivers for the next decade has officially begun, with announcement of a June 16 opening date for the $5.5 billion Shanghai Disneyland resort. The most noteworthy thing about this particular announcement is the date itself, which falls within Disney’s target for an opening in the first half of the year. The newest Disneyland was originally set to open by the end of last year, and another delay would have sent a negative signal that the park was running into more problems.

But the June 16 opening date comes just within Disney’s latest target, hinting at the huge complexity of a project that will draw not only huge crowds but also intense media attention at the start. From a purely seasonal perspective, a more ideal opening date would have been in April, when Shanghai’s weather starts to warm and a full day outside becomes a comfortable proposition for tourists after the long winter.

All this brings me to my bottom-line assessment that Disney is rushing to meet its second deadline with this new announcement, which means the new opening is almost certain to be pocked with snags and other hiccups. Such snags are inevitable for such a large project even when everything goes according to schedule, and I remember numerous small problems that got disproportionate attention when Hong Kong Disneyland opened about a decade ago.

The situation in this case could become even worse due to the huge scrutiny that will come from global and local media, and throngs of eager Chinese who will spend big money to be among the first to sample the new park. But at the end of the day, I have little doubt the new park will be among Disney’s most successful, drawing on legions of Chinese children and adults who have grown up with Mickey Mouse, Donald Duck and other Disney characters.

One Chinese media report captures the mood from this latest announcement, which is really just a date, by noting that the new park opening is just 154 days away. (English article; Chinese article) Such count-downs are quite common in China, and are used to generate hype before big events like this. Everything else in the latest reports is mostly recap of previous details of the park, which has been under construction for the last 5 years.

After the headline price tag of $5.5 billion, other noteworthy facts include the park’s size of 963 acres, which will make it 3 times the size of the nearby Hong Kong Disneyland park. It will also feature the company’s largest castle, and represents Disney’s biggest foreign investment of all time. Disney only actually owns 43 percent of the park, with various Chinese entities holding the remainder.

Cash Cow

Beyond my predictions of a tourist frenzy and numerous snafus at the beginning, my main observation is that this park should easily become a cash cow for Disney almost immediately and could even become its most profitable theme park. That’s because the park is located in one of China’s most populous areas in the Yangtze River Delta, which counts at least 5 major cities all within a 2 hour train ride in addition to Shanghai.

At the same time, Chinese are a bit like the Japanese when it comes to Disney, with many adults being huge fans of the company’s characters. That’s a major contrast to the west, where Disney is mostly children’s fare and it’s rare to see adults visiting Disneyland by themselves.

By comparison, I do expect we’ll see plenty of young adults coming to Disney by themselves, along with the throngs of young families and grandparents spending lavishly on their only sons and daughters who are the result of China’s one-child policy. Shanghai should also benefit from a big jump in overall tourism, and on the whole this park opening should provide a nice lift to a much wider range of local companies that make their money from the tourist trade.

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