Business Strategies: turning FILTH to FIHTS

There are persistent rumours that the Hong Kong Government is more than a little unhappy about the performance of Disneyland Hong Kong. Numbers are poor, visitor spend is low and then there was the major gaff about sharks' fin soup at McSoup prices which resulted in a very public spat followed by a very big apology.

In 1999, the government said "Hong Kong Disneyland will attract millions of tourists a year." It eventually opened on 12 September 2005. But its capacity is less than 35,000 visitors daily. True, it has had "millions" of visitors - but not many millions - it's averaging less than 5 million per year, well below target - and far less than the 12.775 million capacity. (35,000 * 365 days). Also, there have been serious overcrowding problems on public holidays when 30,000 capacity has resulted in long queues for both attractions and refreshments.

Additional zones are being opened to try to improve its popularity, after the HK government's LegCo approved the expansion in July this year.

Even so, its numbers have been boosted by Hong Kong residents who have been given special privileged entry. Notwithstanding that, in May this year, Disney announced a round of redundancies - including 75% of its "imagineers." That, it said, was due to the lack of progress in negotiations over expansion plans.

And the people of HK are not happy : they covered just under 90% of the cost of the park, but own less than 60%. After the expansion that has now been agreed, that share will be reduced still further - to just 52%.

But in the background, Disney is looking at wider expansion, not all of it through "miniparks" - if that is what Hong Kong has so far been.

Disney has today announced that it has had permission from China's national government to build a new theme park in Shanghai. It will be bigger than Hong Kong, even after the latter's expansion.

The tourism benefit to Hong Kong has not been demonstrated: a third of Disneyland's visitors are local. Another third are mainland Chinese. Only the remaining third are "international." So it's not proving attractive to the vast majority of HK visitors, and it's not drawing in many new ones to spend money elsewhere in the territory.

There have been persistent rumours that Disney has been / is negotiating with the Malaysian government to build a Disneyland right next to the Singapore border. The rumours started in earnest in 2005. It has often been termed a "mini Disneyland," implying that the same issues that face HK will face Malaysia.

The position of the proposed development is open to serious question: it's 300km drive from the capital: in fact, it seems designed to capitalise on Singapore's tourism trade than to secure domestic business from across Malaysia.There are reported plans for the first Legoland in Asia (personal note: hooray - educational as well as fun), and a cultural theme park (probably not based too closely on the Asterix park which is just down the road from Disneyland Paris and a much more relaxed and - again - educational day out) plus " a third park." But despite all the announcements, so far there are a few houses and not much else in the huge area designated for development. However, a number of confirmed deals have been announced for what is turning out to be something of an education hub.

The big question is whether the talks were a sideshow in Disney's face-down with Hong Kong but failed to impress the HK government, resulting in the plan to move into Shanghai.

Meanwhile, Cathay Pacific, part HK Gov owned, is advertising via google ads: HK Disneyland X'mas deal, the ad shouts to Malaysian readers. Buy two, get one free: airfares, hotel and park ticket. All from a little over MYR2430 per person. That's more than a month's salary for more than two-thirds of the population of Malaysia, on some figures.

Has HK been outflanked?

Only time will tell. But as it's clear that mainland Chinese are not flocking to HK's version, perhaps due in part to travel restrictions, there is little doubt that sheer weight of numbers in Shanghai will mean a more successful venture than that in HK.