WSJ: The Magic Kingdom Looks to Hit the Road

Discussion in 'Disney Rumors and News' started by CareBlair, Feb 11, 2007.

  1. CareBlair

    CareBlair Mouseketeer

    Mar 19, 2004
    The Magic Kingdom Looks to Hit the Road
    Walt Disney Co. Ponders Spinoffs of Theme Parks; Pirate Resorts, Wine Tours
    February 8, 2007; The Wall Street Journal; Page B1

    Ever since Walt Disney opened Disneyland in 1955, Walt Disney Co. has rarely strayed from his original vision of what a theme park should be. But at a top-secret development unit these days, the company is plotting a new spurt of theme park expansion that goes well beyond its traditional model of luring people to Disney resorts in Florida or California.

    Disney is hatching plans to take its theme-park experience to the masses, rather than the other way around. Instead of building more big parks, the company is sketching out a string of niche resorts and attractions around the world. That could include such things as stand-alone, Disney themed hotels in cities and beach resorts, Disney branded retail and dining districts, and smaller, more specialized parks.

    [A sketch for a possible Disney-themed retail and dining district in an urban center; the project is an idea and isn't planned yet.]

    In the near term, the company is using the Disney name to expand in other areas of the travel business. For example, it is ramping up an operation called "Adventures by Disney," in which travelers pay for guided Disney tours to popular destinations including Italy and Ireland. The company also plans to build its presence in time-share vacation homes in places like the Caribbean. And it is bulking up its popular cruise line, with more Disney ships in the cards.

    "Instead of saying where will the next Disneyland be, we need to think more in terms of where around the world we can deliver an immersive experience appropriate to the size of the market," says Jay Rasulo, chairman of Disney's theme park and resorts business. "Not every market can support a full-on Disney location."

    The expansion comes after a long stretch of rebuilding in the wake of 9/11. Only recently has Disney's theme park business returned to the 20% margins seen before 2001. After the success of last year's global campaign pegged to the 50th anniversary of Disneyland, a big question has been what the theme parks will do next.

    Mr. Rasulo says his strategy is aimed at tapping into a burst of growth in the travel market, particularly in the Asia-Pacific region. Branching outside of Walt Disney's theme park vision isn't without risk. Disney has tried it before and in some cases, failed. It closed an indoor, interactive theme park project called Disney Quest in 2001 that drew sparse crowds in Chicago. Its children's play center, Club Disney, shuttered two years earlier after failing to sustain an initial burst of interest.

    Mr. Rasulo, who took over as head of the parks in 2002, says his division learned an important lesson from those ventures: they made the mistake of trying something that didn't already have an established consumption pattern.

    As Disney began thinking about a new strategy, it conducted research on why people go to Disney's parks. Among the conclusions: people wanted to experience Disney in places other than the parks.

    Disney set to work sketching out some ideas. One concept is to create stand-alone versions of the Downtown Disney dining and shopping districts or resorts like the BoardWalk at Walt Disney World, which includes a hotel, clubs, arcades and other entertainment. An alternative is building a resort around an attraction like an indoor water-park or a theme like pirates or princesses. Another approach is building a family version of a casino, without the gambling.

    A big focus will be Asia. Japan, for instance, has an insatiable appetite for everything Disney but already has two parks. While a third park in another part of the country is unlikely, adding a boutique attraction could theoretically be possible.

    One issue is how to avoid cannibalizing existing parks with such attractions. Disney says the goal is to give guests in new markets a taste of Disney with the hope of driving them to the bigger parks. With guests at the domestic parks visiting on average every four years, the thinking is that the smaller attractions will also serve existing guests between visits.

    [Sketch of pirate-themed resort -- one idea Disney is considering.]

    Another challenge is tailoring the niche attractions to local markets while keeping the Disney brand intact, something that has proved challenging with Hong Kong Disneyland. Mr. Rasulo says there are no firm plans for any projects yet, with such ideas still in the conceptual or "blue sky" stage.

    More concrete are plans for the cruise lines. Mr. Rasulo says that business could double in the next few years, with a "few more cruise ships." Disney has been waiting for better contract terms and prices before going ahead with more ships, although it is likely to approve some soon. Disney Cruise Line now accounts for between 5% and 8% of the division's $10 billion annual revenue.

    After quietly experimenting in the guided-tour business, "Adventures by Disney" is meanwhile rolling out 12 itineraries in North/Central America and Europe, with two guides leading groups of up to 40 people.

    "It's not Mickey Mouse goes to the mountains," says Ed Baklor, who heads the Adventures business. "Instead we're telling a local story with local characters." The "Spirit of America" tour of Philadelphia, Washington, D.C., and Williamsburg, Va., for instance, includes meetings with local characters like Benjamin Franklin. The trips also try to entertain both adults and kids: On the Tuscany trip, adults go on a wine tasting while kids do a gelato tasting.

    The "Adventures" project raises a question: if the tours don't feature Mickey Mouse, why will families want to go on them? Scott Lerman, CEO of brand consultancy Lucid Brands says a big part of what guests expect from Disney is "fantasy," rather than "authenticity" and "reality." Disney says it believes its selling point is offering a family vacation with the safety and quality of the Disney brand as well as Disney-quality guides. They argue the story doesn't need to be Disney to be "immersive."

    Mr. Baklor notes that each trip includes some Disney "magic." One of example of that is on the London/Paris trip, which includes VIP tickets to Disney's "Mary Poppins" stage show and a backstage tour afterward.

    Disney's time-share business, Disney Vacation Club, is also plotting new locations. Outside of Florida, the company may consider locations such as California, Mexico and the Caribbean, says Mr. Rasulo. It could take several years for such new ventures to really move the needle, however.

    Disney will work its traditional theme parks harder. It has a second, full-scale park in China in its sights. That won't happen before 2012, though. Recent changes in local government have slowed discussions in Shanghai, and Mr. Rasulo says they are "waiting to re-engage when a new government is appointed." or

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