LEISURE: Disney Looks Prudent In Shanghai Park Delay
Bottom line: Disney’s decision to delay the opening of its Shanghai theme park looks wise, and should help it to avoid some of the negative publicity that usually occurs with the launch of such major projects.
In what should come as a big surprise to no one, media are reporting that Disney (NYSE: DIS) is delaying the planned opening for its massive Shanghai theme park by up to half a year due to a number of issues. On the surface at least, this particular news isn’t completely unexpected but certainly doesn’t sound encouraging. But I would take a different view and say the decision actually looks encouraging, as it shows that Disney is willing to suffer from some negative short-term publicity now to make sure that the opening is a good one when it finally comes.
From a purely seasonal perspective, I could never really understand the decision for a planned launch of Shanghai Disneyland in late 2015, following 4 years of construction on what’s likely to become one of the world’s most profitable theme parks. As a Shanghai resident, I can confidently say that the winter months from December to March are some of Shanghai’s least pleasant, both due to our cold temperatures that are usually below 10 degrees and the tendency for bad air quality during that time.
Those 2 factors are hardly ideal for people visiting a park like Disneyland, which requires visitors to stand outside for long periods of time, often in long lines for a limited number of rides and other attractions. The fact that most of the park’s visitors will be families with young children makes the problem even worse, since such doting parents often worry about the effects of things like poor air quality on their children’s health. And yet a late-2015 opening would have put the inhospitable winter months squarely in the center of Shanghai Disneyland’s opening schedule.
According to the latest reports, Disney has now conceded that its massive $5.5 billion Shanghai park won’t be able to meet its previous plans for an opening by the end of this year, and is now targeting a debut in spring of 2016. (English article) Disney CEO Robert Iger disclosed the delay on a call to discuss the company’s latest quarterly results, and added construction on the park will be finished by year end.
Other media also cited the seasonality factor as perhaps one reason behind the delay, and an $800 million expansion of the original plan could also be partly responsible. The massive park will include 2 hotels and a dedicated shopping area, as well as the world’s largest Disneyland castle, the signature feature of the 5 other Disneylands around the world.
Having personally lived through the somewhat nightmarish opening of Hong Kong Disneyland in 2005 and read numerous reports about similar problems with Disney’s Paris theme park, I have to applaud the company for this cautious approach. The launch of any project of this size is always incredibly difficult, and negative publicity at the outset is almost inevitable as various glitches occur.
The attention will be especially intense in this particular case, since Chinese media love to focus on foreign companies operating in their home market. Foreign media are also intensely interested in big moves in China by big multinationals like Disney, and love to report extensively when those companies run into problems.
For all those reasons, Disney looks wise for delaying the opening of the park until early 2016 to ensure it’s really ready for the event and ensure the best possible result. Early problems and negative publicity are almost inevitable, regardless of when this massive theme park finally opens. But barring any major publicity nightmares, I fully expect the new park to be one of the most successful for Disney, whose name and expertise will draw in millions of newly affluent Chinese who love this kind of big-name, high quality tourist attraction.
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