Disneyland to open in Shanghai

The Magic Kingdom is heading for China. Plans for Disneyland to open in Shanghai seem like a match made in heaven: the world’s biggest theme park operator setting up in mainland China’s brightest, flashiest city.
Certainly the amount being invested in the project, about HK$25 billion (Dh11.84bn), indicates confidence that mainlanders are ready for an unashamedly Hollywood entertainment experience when it opens in 2014.
But the lessons from Hong Kong, where Disney opened a theme park in 2005, indicate that attracting visitors will not be a walk in the park.
Before Hong Kong Disneyland launched, the aim was for the venue to break even by last year. In fact, it lost HK$1.32bn last year. Visitor numbers were expected to have reached 6.49 million by last year, when only 4.6 million people went through the gates.
Yet given its vast population, economic growth and the increase in the size of the middle class, China seems to be an untapped market for global-scale theme parks.
Up to now, it has seen what the industry describes as amusement and regional theme parks. In the past, some lacked investment and were in remote locations, says Christian Aaen, the regional director of entertainment and leisure in Asia for Aecom Economics, which carries out feasibility studies for theme parks.
Perhaps it is no surprise that one media report said 70 per cent of China’s 2,500 amusement and theme parks were making losses, although this figure is thought to relate to nearly a decade ago.
But more regional theme parks are being built, typically involving investments of several hundred million dollars and attracting up to about 3 million visitors a year.
In mainland China, domestic tourism has always been about going to “iconic spots” and having your picture taken, says Dr Honggen Xiao, an assistant professor of tourism management at the Hong Kong Polytechnic University.
But Dr Xiao says the “huge population” is looking for other forms of entertainment away from temples or pagodas.
“Domestic tourism has been booming for many, many years,” he says. “There are new constructions going on and more theme parks being built.”
The operator Overseas Chinese Town (OCT) has become a market leader, setting up a series of its Happy Valley parks in China’s first-tier cities before expanding into the other areas, says Mr Aaen.
Often these regional amusement parks are part of wider property developments. OCT is now the eighth-largest theme park group, with 15.8 million visitors last year.
But the largest parks in the world’s most populous country are small by global standards.
None of the world’s top 25 theme parks is in mainland China, according to Aecom Economics’ 2009 Theme Index report. Among Asia-Pacific nations, the mainland only scrapes into the top 10, with Happy Valley in Shenzhen attracting 2.8 million visitors last year. That compares with the 17.2 million visiting Disney’s Magic Kingdom in Florida last year.
A look at neighbouring countries suggests Asia certainly has an appetite for western-style theme parks.
Three of the biggest 10 theme parks in the world, in terms of visitor numbers, are in Japan, while South Korea’s Everland rounds out the top 10.
According to Owen Ralph, the editor of the industry journal Park World, many believe the move of a major international brand such as Disney into the Chinese market is not before time.
“The presence of brands like Disney is important because until now they’ve not really had any outside [operators],” Mr Ralph says. “A lot of these [locally run parks] have not penetrated the market to the same degree as in other countries.”
International operators such as Disney, Universal, Paramount and Warner Bros had been taking an interest in China for the past decade, says Mr Aaen, but until Shanghai Disneyland, there had only been proposed schemes.
“This will open [the market] for more international brand parks,” he says of the new “destination park”, as such suppresses venues are known. “Incomes are now at a fairly good level and people can afford the higher prices. That will help turn the bottom line into black.”
While Hong Kong Disneyland has performed below expectations, hundreds of millions of dollars are being invested in extending the venue. The theme park can also look at Disneyland Paris to show what can be achieved.
After a shaky start, this is now Europe’s most visited attraction, thanks in part to further investment, with 12.7 million visitors last year. A third theme park is now planned there and will hopefully improve the scheme’s financial performance.
Mr Aaen believes Shanghai Disneyland will help to enlarge the industry as a whole in China and drive improvements at other parks as consumer expectations grow. Such trends have been seen, he says, in the US and Japan when major parks have opened.
“The Shanghai region has sufficient market strength combining regional population and tourism to potentially become a multi-theme park destination hub,” he says.
Such destinations can be found in southern California, central Florida and Tokyo.
“Shanghai Disneyland will act as a catalyst for other attraction, leisure and tourism development in Shanghai and China, which will expand the market and grow the tourism pie,” Mr Aaen says.
There is still space on the Chinese mainland, however, for major theme parks playing on the country’s cultural heritage, says Dr Xiao.
While Disney is “a well-known and very good brand”, it primarily caters to what westerners are interested in, he says. In the mainland, there has not been the same level of exposure to western entertainment as in some other parts of Asia, so Disney might not have the same public appeal.
Indeed, only 36 per cent of the visitors at Hong Kong Disneyland are mainlanders, with 41 per cent coming from Hong Kong and 23 per cent from overseas.
“I think it might take more years for other international brands to enter China,” says Dr Xiao.
“Culture will have a very important role to play. That … will be more likely to cater to broadly Chinese tastes as well as [to] people from Taiwan, Korea, Japan and South East Asia.”
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