Walt Disney Co.’s (DIS) Hong Kong Disneyland is getting a $1.4 billion upgrade and expansion, and now Disney is offering to pay more of the costs in exchange for a larger stake in the theme park.
Citing documents submitted to the Hong Kong legislature, Variety reported Disney has offered to pay for half of the expansion through the 47% of the theme park it owns. That would lower the amount the Hong Kong government is paying by $45.2 million. Disney is also offering to waive management fees for two years, but in return it wants its stake in Hong Kong Disneyland to go to 48% from 47% while the Hong Kong government’s stake would decline to 52% from 53%. The offer is expected to be discussed by the legislature on Saturday, reported Variety. (See also: Walt Disney: How Entertainment Became An Empire.)
Rumblings in Hong Kong
The move on the part of Disney to offer to share in the costs of the expansion comes at a time when lawmakers are complaining about the amount the Hong Kong government pays Disney for Hong Kong Disneyland amid losses at the park. Disney has balked at readjusting the formula in which its fixed management fees are calculated, reported Variety, noting that for the October-to-September financial year, Hong Kong Disneyland lost $22.1 million.
Earlier this month, the South China Morning Post reported it was revealed for the first time ever that the government in China pays 5% to 19% of the revenue from Hong Kong Disneyland to Disney each year in the form of royalties. The Post said that amounts to between $216 million (USD) and $434 million since 2009, when financial figures started being released. This despite the fact that Hong Kong Disneyland has lost money in eight of the 11 years it’s been open. Lawmakers wanted the government to renegotiate the deal, which Disney opted not to do.
Hong Kong’s push to expand Disneyland comes as a competing Disney theme park, Shanghai Disney Resort, on the Chinese mainland, opened its doors in June. The sixth Disney theme park outside the U.S. is triple the size of Hong Kong Disneyland, which is likely why the government is looking to expand. The Shanghai park features the use of Chinese zodiac signs, and three fourths of the park's restaurants serve Chinese cuisine. A significant portion of the park was designed by local Chinese designers. With the new park, Disney is banking on the large middle class of China will visit and is also betting on the expected rise in Chinese domestic tourism to generate huge park revenues.