Mojo eludes Disney in Hong Kong

While Tokyo's Magic Kingdom prospers, its younger sibling bleeds red ink


HONG KONG — In sharp contrast with the long-running success story that is Tokyo’s Disneyland and DisneySea, the Hong Kong version is struggling.

After facing harsh criticism over its opaque business operations, Hong Kong Disneyland, the second of the storied theme parks in Asia after Tokyo Disney Resort, finally released its financial results Jan. 19, the first time it has done so since the park opened in September 2005.

The results were grim. The Magic Kingdom is still losing huge amounts of money after four years, posting a net loss of 1.32 billion Hong Kong dollars (¥15.3 billion) in fiscal 2009 and HK$1.57 billion (¥18.3 billion) in fiscal 2008.

The theme park may not break even until after 2014, the company said. The initial target was for sometime between 2009 and 2011.

“Disney has not stopped the bleeding,” read the Jan. 20 front page of the Oriental Daily, one of the largest Chinese-language newspapers in Hong Kong.

Bad financial figures aside, the negative view Hong Kong residents have of the local Disneyland may surprise outsiders. But even from the start the local media have been critical, noting that the Hong Kong government owns a 57 percent stake in the operator.

Where has the Disney magic gone?

During a recent interview with The Japan Times, Andrew Kam, managing director of Hong Kong Disneyland Resort, stressed it is too early to cast judgment because developing and running a theme park is a long-term investment.

“We are in the development stage. This is still a stage where we have to invest intensively to build the park up,” Kam said during the interview at the park’s “City Hall.”

Hong Kong Disneyland drew 4.6 million visitors in 2009, up 2 percent from the previous year. Given the global financial crisis and the swine flu outbreak that hit Hong Kong last year, the figure is an “acceptable result,” he said.

Still, Kam said the park has learned three key lessons in the last four years: It should focus more on young adults, keep introducing new attractions to lure the capricious people of Hong Kong and not depend too much on the legacy of Disney stories, which many Chinese are not necessarily familiar with.

“Knowledge about Disney and affinity toward the Disney brand are actually a lot less” in Hong Kong than in the U.S., he said. “We actually are coming into a market where in general people are not familiar with Disney stories.”

The information released last month included the first-ever official breakdown of visitors by country, and they support Kam’s observations. In 2009, locals accounted for 41 percent of all visitors, mainland Chinese for 36 percent and visitors from other countries, mainly in Southeast Asia, for the remaining 23 percent.

Meanwhile, the business structure of Tokyo Disney Resort, which includes the two most popular and successful theme parks in Japan, is very different from that of Hong Kong Disneyland.

Foreign visitors to Tokyo Disney Resort accounted for only 3.2 percent of the 27.2 million people who went through the turnstiles in 2008. Rather, it is the enthusiastic local visitors who keep the park in the black, coming back again and again as it seamlessly adds new attractions on almost a yearly basis.

According to a survey conducted by Disneyland in 2000, about 18.7 percent of customers had been to the park more than 30 times and 40.7 percent said they had visited between 10 and 29 times.

Only 2.5 percent said they were first-time visitors. The operating company, Oriental Land Co., stopped releasing this breakdown of repeat visitors after 2001.

In November, Hong Kong residents’ concerns about the negative effects of the Disney project on the economy have deepened as the Chinese government gave the final greenlight to build a Disneyland in Shanghai, Hong Kong’s primary rival on the mainland.

But Disney officials in Tokyo aren’t concerned.

“We won’t be affected much by (competition with Hong Kong and Shanghai) because foreign visitors do not account for much of a percentage of our guests,” said Keiko Namikoshi, a spokeswoman for Oriental Land in Tokyo.

The basic concept of Tokyo Disneyland at its launch in 1983 was similar to what its younger sibling would later use in Hong Kong: directly introducing major attractions popular in the U.S., retaining with stunning accuracy the original American cultural flavor.

That business strategy proved very successful in Tokyo from the start. Oriental Land has posted an operating profit every year since the park’s opening in 1983.

Disney’s success in Tokyo owes more than a little to the Japanese people’s strong and long affinity for American culture, including Disney characters, Namikoshi said.

“The Disney culture has been deeply rooted in Japan all since the end of the war. (Japanese people) are very familiar with Disney characters such as Mickey Mouse,” she said.

Meanwhile in Hong Kong, the Magic Kingdom is now significantly changing its strategic focus. The park is opening three new attractions in 2014 with less emphasis on Disney stories. Two of them will not feature any Disney characters or stories at all while retaining a Western feel.

“When we opened the park in 2005, I think we offered very basic Disney products,” Kam of Hong Kong Disneyland said.

While Disney stories are still the core value of the theme park, now it should “build additional elements that will appeal to larger segments of the market,” he said.

Hong Kong Disneyland, however, will need to work harder to win over the hearts of money-conscious residents, who are never afraid of criticizing their government and its Disney-related projects.

John Ap, an associate professor of tourism management at Hong Kong Polytechnic University, said Hong Kong people — who had expected much from the Disney project — have been frustrated with the opaqueness and “arrogance” of the government-backed operator.

“They need great transparency and accountability to Hong Hong taxpayers, to the public, so that people know what exactly is happening,” he said.

Hong Kong Disneyland should try harder to “reach out to the local community” by disclosing more of the financial details of its operations, he said.

At the same time, Ap said, Hong Kong people should not seek quick returns because it takes a long time to build up a profitable theme park.

“I think the company also needs to educate the public about the nature of the theme park industry. Involvement in this industry has to be long-term,” he said.