x Abu Dhabi, UAESunday 21 January 2018

Work starts on China's House of Mouse

The Walt Disney Company's second third venture in Asia, after Tokyo and Hong Kong, is set to open in about five years.

Mickey and Minnie dance during a celebration held for the start of construction work on Shanghai Disneyland on Friday. Xinhua / AP Photo
Mickey and Minnie dance during a celebration held for the start of construction work on Shanghai Disneyland on Friday. Xinhua / AP Photo

SHANGHAI // The Walt Disney Company and the state-owned Shanghai Shendi Group yesterday broke ground on the Shanghai Disneyland Resort, the US entertainment company's first theme park on mainland China.

Disney officials have said they regard China as the company's biggest opportunity since the founder developed the first theme park almost 50 years ago.

The Shanghai resort, which will include two hotels and a dining and retail area, is expected to cost US$4.4 billion (Dh16.16bn).

The park, covering almost 390 hectares, is scheduled to open in about five years.

The Shanghai government estimates the park will attract 7.3 million visitors in its first year. Disney may collect more than $200 million in annual management fees in a decade, plus licensing revenue, the advisory and investment firm Evercore Partners estimated.

"This is our most significant investment in a market that is experiencing dynamic growth," the Disney chief executive Robert Iger said yesterday.

Shanghai Shendi, a group of three local companies, will own 57 per cent of the project. Disney will own the rest, putting its commitment at $1.89bn. The entertainment company also will hold a 70 per cent stake in the management company that collects operating fees.

The project will be financed 30 per cent with debt and 70 per cent equity, with the companies making investments proportionate to ownership, a statement said.

Disney has already increased film production in China and plans to open stores there by the middle of next year, the statement said. Mr Iger would not say whether a separate cable channel or other media outlet is planned.

Shanghai Disneyland is projected to generate management fees of between $65m and $70m for the company in the first year and more than $200m annually within a decade, said Alan Gould, an analyst with Evercore.

Disney also will collect a licence fee of about 6 per cent on ticket sales, revenue for the use of its name on hotels and a separate fee on merchandise, Mr Gould said.

"Disney has the strongest China strategy of all the media companies," he said.

A longer-term goal is to negotiate wider distribution of films in China and the creation of a 24-hour channel, Mr Gould said.

"Taken as a whole, we believe China is the most exciting opportunity we've had since Walt first bought land in Florida in 1964," said Tom Staggs, the chairman of Walt Disney Parks and Resorts, at an investor presentation on February 17.

Mr Staggs estimated 30 million Chinese enter the middle class each year and spending on domestic leisure travel there may double to more than $200bn by 2015.

Disney said 330 million people lived within three hours of the park by car or train.

Shanghai Disneyland may be the first of three theme parks on the resort's 700ha site, a local government website says. The park will blend classic Disney characters and rides with new attractions and experiences tailored to China, the company said.

Mr Iger said the park would "be the first one built in the digital era", and that would enhance some of the rides and make it easier and quicker for visitors.

Shanghai also plans to spend 4bn yuan (Dh2.24bn) on a 9.2km subway line to the theme park in the city's Pudong area.

Construction will begin in September, and the line is scheduled to open by July 2015.