Reuters is reporting that EuroDisney may be forced to close

[gallaj0]

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]

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]

A closure of DLP will be a sad thing indeed. It is by far the best-themed Magic Kingdom-type park in existence.

 

[crusader]

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]

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]

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]

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]

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]

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]

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]

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]

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]

What is DLP like in the winter?

 

[pheneix]

>>>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]

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]

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]

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]

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]

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]

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)