Hong Kong Disneyland's 2016 losses confirm that Disney's international theme park operations are a complete flop

Disneyland Hong Kong managing director Samuel Lau Wing-Kee announced
disappointing results from the theme park resort in a briefing on February 20
 Only two weeks after the Walt Disney Company committing nearly $2 billion in cash to bail out Euro Disney from imminent financial collapse, news of more financial woes of yet another struggling international Disney theme park and resort surfaced this past week.

Disneyland Hong Kong is the smallest Disney theme park in the world
Disneyland Hong Kong posted its second consecutive fiscal year in the red, dropping 11% in attendance on a 7% decline in revenue, and reporting a $22 million loss (HK$171 million) for the fiscal year, ending on October 1.

The net loss widens and builds on a $19 million loss (HK$148 million) Disney HK had from the previous year in fiscal 2015.

Much like Disney's other international theme parks (e.g., Paris and Shanghai)—with the only possible exception of Disneyland Tokyo, of which Disney does not have any ownership stake in—Disney's International theme park operations have all consistently struggled to stay profitable and have posted massive losses during the vast majority of their cumulative years in operation overseas.


Disney officials are, likewise, expecting a steep drop in attendance at its newest international theme park, the $5.5 billion Disneyland Shanghai, in its second year of operations, after reports surfaced in the news media that park attendance has plummeted in recent months due to bad word-of-mouth from park visitors on social media in the mainland.

The entrance of the Disneyland Hong Kong resort in Penny's Bay, Hong Kong
This kind of bad news was not totally unexpected and is in line with previous patterns seen at both Disneyland Paris and Disneyland Hong Kong during their sophomore years of operation, when those parks, likewise, both began garnering bad word-of-mouth from the public over guest service problems and a clash of cultures between park visitors or employees and the Walt Disney Company inside the theme parks.

If there are any serious problems inside a new Disney theme park, the honeymoon between visitors or employees and Disney is typically over well before the end of the first year of operation.

Disneyland Hong Kong has only been in the black in three of its twelve years of existence, between 2012 and 2014, when there was a brief tourism bubble in Hong Kong. Park attendance was 6.1 million in 2016, which was down steeply by 10% from the year before.

Park officials of Disneyland Hong Kong, which is jointly owned by Disney and the Hong Kong government, announced a long overdue $1.4 billion plans for an expansion in November 2016.


However, given the recent announcement by Disney to financially bailout Euro Disney with a $1.6 billion cash infusion—the second such bailout in three years—it now appears that the $1.4 billion expansion plans at Disneyland Hong Kong may also be a form of financial "bailout" by the Walt Disney Company to help the struggling Hong Kong theme park.

After some major layoffs in 2016, workers protested in front of Disney HK
The main reason for the sharp decline in park attendance numbers was largely due to a steep drop in tourism from mainland China.

Tourism from the mainland was down, accounting only for 36% of Disney's park attendance figures, the lowest level since 2009. Visitors from mainland China accounted for 41% of Disney Hong Kong's attendance in fiscal 2015 and 48% in fiscal 2014, so the downward trend is not encouraging.

The volatility of the financial markets in China, the resulting plunge in tourism from mainland Chinese visitors due to unfavorable currency exchange rates, and the grand opening of the much larger Disneyland Shanghai in June 2016, as well as increased competition from a slew of other new theme parks built on the mainland, were largely blamed for Disneyland HK's disappointing numbers.


However, Disneyland Hong Kong managing director, Samuel Lau Wing-Kee, dismissed specific claims that the opening of the new $5.5 billion Disneyland Shanghai was cannibalizing mainland business away from Disneyland Hong Kong, making sure not to criticize Disney executives for their questionable decision to build a new Disney theme park so close to Disneyland HK.

Disney's competitors in mainland China, such as the Dailan Wanda Group, are
taking aim at both Disneyland Shanghai and especially Disneyland Hong Kong.
Chairman of Dailan Wanda, Wang Jianlin (center), seen above touring Disneyland
Shanghai
"China is a big enough market to be able to accommodate both parks," Lau insisted. To drive his point home, Lau further argued that the U.S. is the home to two Disney theme parks, which do not adversely affect one another's ability to stay profitable.

However, Lau failed to demonstrate whether a country like China was affluent enough that it could sustain two competing Disney theme parks so close together without cannibalizing each other's business.

Much like Euro Disney, the Hong Kong Disney theme park first opened to a great deal of mixed praise and criticism back in September 12, 2015. Many critics slammed the Hong Kong Disney theme park for being too small and not having enough high-end "E-ticket" rides to sustain the kind of buzz and high park attendance numbers worthy of a Disney theme park.


The Hong Kong Disney theme park is currently the smallest Disney theme park in the world, taking that dubious title away from Disney California Adventure in Anaheim, California, after that Disney theme park completed its latest massive expansion project and re-dedication in June of 2012.

Disney almost always has some issues with clashing with international cultures
whenever they open a theme park overseas, but the one lesson they never seem
to learn is: The customer is always right
Disneyland HK is about a third the size of its much bigger sister theme park in Shanghai and has been long overdue for expansion plans.

Disney's recently announced $1.4 billion plans to expand Hong Kong Disney last November, slated to open in 2020, and will incorporate a new Frozen themed area, a new Marvel Super Heroes zone, a much larger transformed castle and hub area, and other new attractions, rides, restaurants, shopping, hotels and entertainment offerings.

But given the recent bad financial news from Disneyland Hong Kong's sister theme park, Disneyland Paris, it now appears that massive cash infusion into Hong Kong is just a bailout by another name for yet another struggling Disney international theme park.

So why is it that, for virtually every international Disney theme park, with the possible exception of Disneyland Tokyo, that they have all failed? The answer lies in the fact that in the case of Disneyland Tokyo (the only successful international Disney theme park thus far), it is not owned or managed by the Walt Disney Company.


Disney's brand of Hollywood elitist culture and corporate liberal politics which seems to seep into just about every aspect of their branding and story-telling—even inside the theme parks—ultimately seems to clash with virtually every indigenous culture overseas, whether it's the French, the Chinese, or the people of Hong Kong.

There is nothing more arrogant than a foreign entity telling the indigenous
population how to act or behave in their own country
When tourists go to a theme park, they want to escape from the realities of the world and not be talked down to or lectured to by a bunch of arrogant liberal elitists from America who look down upon other cultures and people with a "America's ideals and way of life are best/superior" mentality.

Unfortunately, that's what Disney's management often does inside their international theme parks as Disney is not very receptive in accepting other cultures or values, and almost never works in assimilating any outside values into their own corporate culture. They look down on other cultures and beliefs as being inferior.

This is why only the Disneyland Tokyo resort is a success overseas where other Disney international resorts have fallen on their faces. They give the public what they want without lecturing to them or insulting their culture.


The management at Disneyland Tokyo, the Oriental Land Company, is not affiliated with the Walt Disney Company and reflects the culture and values of Japanese society rather than that of liberal Hollywood or even America.

Disney's clash with the French over the company's rigid and offensive rules at
Euro Disney when it first opened likely doomed that Disney theme park
Thus, the specter of overbearing American cultural imperialism—especially the really annoying Hollywood liberal variety—is not there amongst the park's management in Disneyland Tokyo. Thus, that Disneyland is far more in tune with the local culture and values.

However, in every other Disneyland overseas, everyone knows that Disney's rigid corporate culture inevitably clashed with the local indigenous cultures, especially with the French and mainland Chinese, of which neither wants to be told what to do or how to act in their own countries.

This is the single, most important reason why all of Disney's international theme parks have failed to and have quickly garnered bad word-of-mouth from locals soon after their grand openings.


Thus, it looks like Hong Kong Disney is another bottomless money pit for the Walt Disney Company that investors should be very concerned about from Disney's theme parks and resorts segment.


Sources:

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