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View Full Version : Reuters is reporting that EuroDisney may be forced to close


gallaj0
11-14-2003, 09:39 AM
Reuters is reporting today that analysts are expecting a reported $70 million dollar loss this year, with attendance down by almost 5 million people from projections.
To those who may know more about Disney operations than I )a very long list indeed;) ), what do you make of that?
What may be the result of this kind of loss, and has the EuroDisney every put up these kind of number before and lived to tell about it?
And if they are on the way out, what does that mean for the other parks?

What do you think?

DisneyKidds
11-14-2003, 09:53 AM
Not that I am an expert on such things either, but I can't see them boarding up the place. The investment in property and infrastruction, the number of jobs for the local economy...............it just seems too big to up and pull the plug.

I really hope that doesn't happen as we are planning to visit DLP next summer. We'll be in France visiting friends and we'd like to drop in on DLP for a couple of days to see how they do Disney in another part of the world. I'm sure the kids would like it and it would give me some added Disney perspective. Maybe the mounting loss will make them offer some great incentives for people to visit.

wdwguide
11-14-2003, 10:10 AM
A closure of DLP will be a sad thing indeed. It is by far the best-themed Magic Kingdom-type park in existence.

crusader
11-14-2003, 11:15 AM
I'm not sure where Reuters is getting this but it does appear to have merit.

This pretty much sums it up.http://www.guardian.co.uk/business/story/0,3604,1067440,00.html

Luv2Roam
11-14-2003, 12:26 PM
There must be severe problems. I scan read an article last week that reported DLP had negotiated with creditors to hold off until the end of March 2004 on loans due or coming due.

magicMLV
11-14-2003, 12:28 PM
Euro Disney is renegotiating its debt with the banks.
Closing the resort is only a theoretical option after a press release from Disney stating that they could not reimburse their debt as of June 2004. The situation was much worse back in 1994 and closing the park was already being discussed as part of the negotiation strategy with the banks. Euro Disney will remain open for a long time...

raidermatt
11-14-2003, 12:41 PM
I agree that closing the resort is probably still an unlikely scenario, though the fact that its even a possibility is disturbing. Certainly there are a lot of other possibilities, short of outright closing the place.

Since you're in Europe, magicMLV, it sounds like you've got more info on the subject.

Maybe the situation isn't as bad as it was in '94, but its not good, and it seems to be getting worse, not better. Have you heard anything about what EuroDisney expects to happen that will turn things around? Are they proactively doing anything, or are they just trying to "ride the storm out" and hope for a better economic environment?

Thanks...

magicMLV
11-14-2003, 01:11 PM
Raidermatt : As you know, Euro Disney relies heavily on summer crowds and Europe experienced an exceptional heat wave during the summer 2003 with 10 000 deaths only in France. Things should improve with a better economic environment and reasonable weather.

They are reviewing the marketing strategy (new 1-day 2-park ticket, new ads) and focus a lot of energy on the entertainment (new Lion King show next summer) and special events such as the Halloween season or the Christmas season.
But no new attraction in the near future.

grinningghost
11-14-2003, 05:33 PM
I've never been to DLP, but I would think weather would be a big factor in attendance. Can anyone comment on what a Magic Kingdom is like when it's REALLY cold? I don't think I'd go there.

pheneix
11-14-2003, 06:30 PM
I was talking to one of my friends at Uni the other day about this. As just about everyone here knows, Universal Orlando has a LOT more in common with Disney's other theme park resorts than it will ever have with WDW, so a lot of people at Uni take a glance at these operations to see how they are doing, if for no other reason that just pure curiousity.

Anyways, the rumors that are passed around over there (and granted this is from a direct competitor so there is an obvious slant against Dis Co.) are that DLP is still a LONG WAY away from having to shut it's doors, but it is a hell of a lot less longer away than it was a year ago. The possibility is also growing a little greater every day with the continued lack of growth being shown at the resort.

If I were putting money on this, I would expect a major change in operations (such as dark days) at DLP by the end of the Christmas season, and if things are not improving by the end of the summer season, even more drastic changes (such a pure seasonal operation like at Port Aventura or selloffs of resorts). The bottom line is that the resort can not continue to operate as it is without a cash injection or a severe cutback in operations (even at the sacrifice of revenues). Even if they are turning a meager operating profit, the debt is piling on much faster than the money that is coming in.

The sad part is that although the Studios is a steaming pile of crap the loss of Disneyland itself would be a tremendous blow to the theme park industry, and would without a doubt seal the end of Disney building big theme parks ever again. This is a very scary scenario, even if it is only a potential one.

Testtrack321
11-14-2003, 07:50 PM
This is scarry. VERY. I can say that I think we will see major changes, and I think that we need to re-think our DLP advertisement stratagies. I think people want to go to DLP not that it was like America or an American-Paris park, but to escape and have fun, something Disney has forgotten and is ignoring.

magicMLV
11-15-2003, 02:16 PM
cutbacks in operations has been the strategy since 1992. it is hard to imagine further cutbacks. the operating margin is not that bad. options such as dark days or seasonal operations are not considered. in fact, they are building more and more hotels rooms to get more people in the park year-round. it is also the goal of special events such as halloween or christmas which are successful. the real issue is the debt reimbursement plan that is based on very optimistic scenarios. I can´t see any major change coming besides new entertainment, new marketing and more hotel rooms.

doubletrouble_vb
11-15-2003, 04:17 PM
What is DLP like in the winter?

pheneix
11-15-2003, 09:50 PM
>>>it is hard to imagine further cutbacks<<<

Really? The fear of financial ruin can lead to some pretty desperate decision making. I seriously would not rule out the Studios going to dark days if things do not improve over there soon.

>>>options such as dark days or seasonal operations are not considered<<<

They don't have to be now, but in January when the credit situation gets worse it probably will be. This resort has a mountain of debt to pay off AND it is losing money at the same time. That is a recipe for disaster.

>>>they are building more and more hotels rooms to get more people in the park year-round<<<

Correct me if I'm wrong, but haven't resort bookings took a tumble over there since the end of last year? I know that many rooms were built based on the bookings in '02, but this year has supposedly been very bad over there. And since they ARE building more rooms over there, it just adds fuel to the fire that they may end up selling some resorts to pay off that debt.

>>>I think that we need to re-think our DLP advertisement stratagies<<<

I really hate to say this, but I think the ONLY thing that will ever truly save DLP is a hardcore go-getter with deep pockets and patience to stay in for the long term and make things work. That did happen with the Saudi prince, but after his investment souring the last go around one wonders who else would step in and throw money at the resort.

wtg2000
11-16-2003, 07:47 AM
After attending and throughly enjoying DLP in 1997, I returned in 2002 to find a stagnant park with no new attractions and a sorely disappointing second gate. They really have no one to blame but themselves.

I know hindsight is 20/20, but I wonder what would have happened if they'd built the park in warm, sunny Spain instead of building it in Europe's version of New York?

megaelch
11-21-2003, 04:55 AM
In my opinion their main problem is the old debit from the opening in 1992 ... they invested way too much and have still 1.2 billion dollars to pay from 1992 debit . So now there is no money to invest into new rides or improve the Studios.. which had to be opened in 2002 due to a contract with the french government.
Otherwise Eurodisney would have lost land rights to the property ( land is kind of leased from the government ).

They should close the park for 2 month after the christmas season ( jan - march ) it is really bad weather and cold in Paris during this time and most of the days headcount is extremly low.. tourist season starts in march for the easter holidays again and crowds are good all through the year ( especially in october they did a great job establishing their Halloween activities ! ).

So why not save the money, use the time to prepare and paint the park and hotels for the season and start the year fresh and new...

But still they have to get rid of the old debit ... maybe a bancruptcy of Eurodisney SCA and a new start with a new owner who could buy the assets ( park, hotels, infrastructure ) would be a hard way to go ... but a good idea to give them the financial flexibility they need ....

Stephan

raidermatt
11-21-2003, 12:40 PM
Maybe some dark days in the winter is the right decision, but it's getting pretty late for those who have already booked vacations.

Also, as Six Flags has found out, things like amortization, depreciation, and debt payments don't disappear just because the parks are closed. Theme parks also generally have a pretty high fixed cost, meaning closing the park still leaves quite a few bills to pay, and with no income coming in.

Again, maybe its is the right decision under the circumstances, but its not a no-brainer either.


On a side note, I'm glad to see a few of our European friends chime in. WELCOME! Its great to get the thoughts of those who may have a different perspective, and have different sources of info.

After attending and throughly enjoying DLP in 1997, I returned in 2002 to find a stagnant park with no new attractions and a sorely disappointing second gate. Since most of us haven't visited DLP, we've just speculated on this based on attraction counts and descriptions of the parks.

Do any of our newly found friends from Europe have any comments on this based on either personal experience or from "the word on the street"?

After all, whatever problems exist with the amount of debt and its structure, those problems wouldn't have any impact on attendance, which is falling well short of Disney's expectations.

wtg2000
11-21-2003, 01:27 PM
After all, whatever problems exist with the amount of debt and its structure, those problems wouldn't have any impact on attendance, which is falling well short of Disney's expectations. Prior to and following my visit in 1997, people would laugh and guffaw when I mentioned EuroDisneyland. They'd heard all the negative media coverage and translated that into a poor product. If people read that attendance is down they will stay away too - thinking that the place must not be very good. This is why studios release weekend movie grosses. Good attendance = good movie (not the other way around). That's how they think that the public thinks. I believe the bad press DLP gets due to its financial troubles adversely affects attendance.

raidermatt
11-21-2003, 01:36 PM
I believe the bad press DLP gets due to its financial troubles adversely affects attendance. I agree that has an impact, though I don't think its the primary driver.

Still, if that's the case, the company must do SOMETHING to break out of the cycle. Marketing is the easiest approach, but there has to be substance behind the marketing for it to succeed long term.

If Disney Studios Paris is another "shell of a park", DCA style, then it would seem Disney has merely given the negative spiral more momentum. If DSP were truly something that captivated the public and impressed them, I suspect attendance would not be the issue it is now.

The preliminary rundown of what Hong Kong DL contains gives me cause for concern for the same reasons.

Lynn R
11-21-2003, 07:03 PM
We live in Brittany in France and although it's 600km away we go to Disneyland as often as we can (and visit The World every year)
We go every year for the New Years period and stay for 4 days.
Of coure compared to WDW weather it's very cold we've been when it 's been -15 (celsius that is I'm sorry but I don4t know what that is in farenheit) and that's really cold even for our standards, but as long as your well dressed hat coat scarf and gloves it's fine. Disneyland Paris has a lot more covered walkways
and covered waiting lines than WDW and theres nothing nicer than waiting for the tree lighting ceremony in the cold, okay you can't feel your feet but when the lights start to go on and it's snowing (really snowing not Disney snow) it's really a magical momment. Like I said we've been going every year since the opening and we would'nt miss it for anything. However I must admit I love Florida in Feb ( warm but not too hot)

Mooobooks
11-21-2003, 10:36 PM
I visited Disneyland Paris and The Walt Disney Studios early last December. It was not my first winter visit.
What's it like in the winter? Like much of Europe in that area, it's frigid and very damp--so even if it's 40 degrees, it feels like 29.
It's either piddling rain or raining heavily much of the time. It's virtually always cloudy.
Sometimes it snows.
It's hard for Americans to imagine what it's like to visit a Disney park when it's freezing and raining, when you're wearing gloves and a scarf and a heavy coat.
It's an entirely different experience, and one I've never gotten used to.
That said, Disneyland Paris is a wonderful park, though some of the attractions are closed seasonally (such as the great walk-through of The Nautilus).
The Walt Disney Studios just plain sucks. It's a lousy cheap park with very few attractions, most of which are crummy. The stunt show is highly overrated, too--you'll see when it opens in Florida. There is a huge hole in the center of the park where the Tower of Terror is supposed to be and is not. A real mess.

stal
11-23-2003, 05:46 AM
Hi, I live quite near London, in England and have never been to DisneyLand in Paris, but have been to Disney World 4 times now. Why? Because the price of going to DLP for 3 or 4 days is about the same prices as going to Florida for a week. I do want to go to DLP, its just i would rather go to Florida, to have more choice of parks, better weather, longer holiday for around the same price.

:D

manning
11-23-2003, 12:15 PM
we've been when it 's been -15 (celsius that is I'm sorry but I don4t know what that is in farenheit)


That is +5 farenheit

matty624
11-23-2003, 06:18 PM
I took 47 children from my school (I'm a headteacher, UK version of Principal) last January. The children had a great time, but it remained at -10C or below, through the days and nights. It was so cold it took most of the morning for some of the rides to be thawed out to run. Suffice to say, we walked on to all the rides and didn't have to to queue for even 30seconds at any time.
That said, I will never again complain about the heat in Orlando in July/August.
Ian

JIMINOCCHIO
11-25-2003, 05:35 PM
i hope it doesn't close. i want to go back some day.

Another Voice
11-25-2003, 06:59 PM
This situation is going to become a vast international game of chicken.

The French government and most of the European investors have felt for a decade that The Walt Disney Company didn't put enough money into Euro Disney's debt restructuring plan. Essentially, Disney dropped the EDL problem into their laps and walked away. Things were fairly quiet while the fortunes appeared to the improving for the resort, but now that things are bad once again (or even worse than before depending on who you listen to) this time is going to get nasty.

The basic problem is that Euro Disney is not making enough money to pay for all the loans it took to build the place in the first place and all the loans it's taken out to pay off the loans it took to build the place in the first place. There is a real danger that it will soon not earn enough money even to pay its monthly bills, let alone pay off its credit cards. Under the terms of the last debt restructuring, if EDL misses payment the debtors can accelerate payments. If Euro Disney can't pay them immediately, the creditors can foreclose

Although Disney has already extended about $200 million in credit this year to keep EDL operating, France and European investors have been left holding billions in loans. The Euro Disney stock (owned by a lot of institutions) is politely called a "speculative stock" - meaning frame the certificate and mount it on the wall right next to your Pets.com holdings. The Saudi prince that bailed out the EDL the first time around has sold almost half his stake and is unlikely to put in more money (among his many other problems)*.

Essentially, either Disney and/or the French taxpayer are going to have to buy out all the debt so that EDL can start with a clean balance sheet and send the wolves home with full stomachs. We all know the likelihood that a French government right now is going to drop over a billion euros into the Hellmouth of American Imperialism: The Sole Source of All That Is Wrong In The World.

So that leaves Michael Eisner to square off against the Euromoney.

Disney has its own debt problems at this point and a billion or two hit would all but destroy any shot at putting Disney of strong legs again. Eisner also likes to boost about who he was willing to let EDL close down back in 1994 rather than put in more money. Internally it will be a tug of war between his greed (keeping all the money he can) and his ego (not admitting that Euro Disney is a long, drawn out failure). It's also a question about how far the Europeans will push the threat of foreclosure. Will they want to run the place on their own, or will they loose even more money to those "those greedy uncouth ignorant cowboys"?

Things will be quiet through December and into January. But the tug-of-war will start very soon after that. There are large payments due in March; the first battle will be whether those payments can be postponed. If I make this sound like a soap opera, it's intentional. This entire project from the very outset has been driven more by ego and greed than business sense.

I expect it will end like that as well.



* - You remember this guy. He's the one that showed up in New York and made a deal about handing Mayor Rudy a check for $10 million…and then promptly said that American deserved 9/11. Yea, same guy.

crusader
11-26-2003, 07:45 AM
I think Disney's disclosure of this issue in their recent earnings report is enough of a public statement of risk and uncertainty. What is it that egos and greed are preventing? I'm sorry, but I fail to see how that becomes the reason this venture is failing.

How many times have we been hearing from the many sounding boards here that throwing more money at a problem is not the solution. So what is it Disney should do in this particular situation?

Exactly what they are. They will need to restructure the debt before March's payment is in default. (and let's face it, it already is.) There is no way a forclosure is imminent. Trump had the same leverage Eurodisney does in terms of the financing morass surrounding this Taj Mahal size investment. It is so entwined with the stability of the banking community, there will be concessions and a probable stay from creditors to improve liquidity. That means Disney has to wait even longer to recoup what looks to be pennies on the dollar here.

I would also anticipate even more substantial internal organizational changes and a solicitation for takeover.

megaelch
11-26-2003, 08:31 AM
to add something to the arguments mentioned...

i am very sure the french government and the Ille-de-France region + city of Paris would grant financial help if they could, but european ( !!! ) law does not allow to sponsor a bancrupt company locally without helping all all competitors around europe.

we all love to have this park open in the future, but let`s face it .. like mentioned before operational income did not cover operational costs in the last quarter reported, in other words they don't make enough money to cover their running bills, not speaking about new rides or park improvements....or paying off large chunks of old debit ...

and the worst time of the year is still to come ( winter ) so i agree march will be the date to watch ...

in my opinion it is .. Eisner pays or they will go bancrupt and come back from the ashes and a new company name ..

Still wondering why the park was build by EURODISNEY SCA and not Walt Disney Co. itself ??????

hmmm

Stephan

DancingBear
11-26-2003, 09:36 AM
Originally posted by megaelch


Still wondering why the park was build by EURODISNEY SCA and not Walt Disney Co. itself ??????

hmmmStop wondering. Just as with the Japanese parks and the Hong Kong park, the use of separate entities and other investors' money is designed to protect Disney against the downside risks that are being experienced in Disneyland Paris.

sgtdisney
11-26-2003, 10:55 AM
EuroDisney Stock tanked after it opened and never recovered. After this recent news my Dad finally decided to sell his stock. If I remember correctly he purchased the stock at around 25.00 a share when it opened. It dropped to close to 1.00 a share shortly after and I think when my Dad sold it last week it was around .50 or .60 a share. In fact the brokerage house charged a premium to sell it because it is such a risky stock now. Such a shame for what EuroDisney could have actually been. Nothing against our French friends here on DIS and abroad, but I always wondered if the park would have been more profitable if it had been located in a different country. Maybe it wouldn't have made any difference..

megaelch
11-27-2003, 05:48 AM
Hey dancingbear.. that was meant to be sarcastic :-)))

I doubt it would have made a difference to open in another country... paris is one of the biggest tourist destinations around europe.. maybe the project is "oversized" and the new " small Disneylands " in Hong Kong and / or Shanghai are the right way to go in the future ???

Please don`t flame me i like my big fat Disneyland Paris park .. but from the financial view it failed..

Let`s discuss this ... i like this thread giving different views... :-)

Stephan