Disney's Shanghai Surprise

The global economy is weakening. A few amusement parks are scaling back or closing down entirely. I've got an idea: Why don't we build a theme park?

Family entertainment giant Disney (NYSE: DIS  ) is swimming against the current, confirming rumors over the weekend that it plans to open a theme park in Shanghai.

Polishing off new turnstiles certainly seems like a brazen move when everyone else is going the other way:

  • The ambitious Hard Rock Park in Myrtle Beach is liquidating this month, after the $400 million attraction failed to draw the head-banging masses in its debut season.
  • Coney Island's iconic Astroland boardwalk park closed for keeps back in September.
  • Florida's Cypress Gardens is scaling back its operations, gutting most of its amusement rides. It plans to reopen in March by emphasizing the remaining waterpark, a move similar to what Cedar Point (NYSE: FUN  ) dusted off a year earlier for its Geauga Lake attraction.

So why is Disney even thinking about breaking ground on what may be a $3.6 billion theme park?

I'll tell you. Disney is doing the right thing. For starters, this park won't open until at least 2014. No crystal ball will show you what the global economy will be like then, but it's unlikely to be worse than it is today.

This isn't in the mold of the risk-free licensing deals that stateside entertainment companies like Six Flags (NYSE: SIX  ) , Marvel Entertainment (NYSE: MVL  ) , and Dreamworks Animation (NYSE: DWA  ) inked in Dubai last year. Disney will have to roll up its sleeves and put money at stake here. However, it's not going in alone. Disney will actually have just a minority interest in the park, with the local Shanghai government picking up most of the tab in exchange for a majority stake.

Disney's track record with debutante parks is spotty. Hong Kong Disneyland, Disney's California Adventure in California, and Animal Kingdom in Florida all got off to slow starts. With the exception of its licensed parks in Japan, Disney tends to tiptoe slowly into new gated attractions before fleshing them out over the early years into full-day destinations. No one knows how ambitious its plans will be in Shanghai, though the reported price tag is certainly not cheap.

Ultimately, moving ahead at a time when everybody else is retreating is a good strategy if the industry has long-term viability. Theme parks clearly have appeal, especially as new interactive attractions are winning over even the more jaded patrons.

Good luck in Shanghai, Mickey Mouse.  

Other ways to throw up your hands and enjoy the ride:

Walt Disney is a Motley Fool Inside Value recommendation. Marvel Entertainment, DreamWorks Animation, and Walt Disney are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days. Hands up!

Longtime Fool contributor Rick Munarriz loves hitting amusement parks with his family over the summer. He does own shares in Disney, DreamWorks Animation, and Six Flags, and units in Cedar Fair. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (9)

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  • Report this Comment On January 12, 2009, at 5:52 PM, IrvThal wrote:

    Nice, balanced account, rather than the expected fawning over this move by Disney.

    With its once-vaunted "guest" service at possibly an all-time nadir, increasing fees for guests (like valet parking fees, which were traditionally free), cutback of hours (Epcot closes at 8 p.m.), reduction or elimination of entertainment, and other rather drastic and unpleasant cost-cutting measures at its US theme parks, Disney would probably be better off focusing on returning THEM to their prior glory than playing in China.

    Were NO lessons learned from the disaster of Hong Kong Disneyland?

  • Report this Comment On January 13, 2009, at 8:21 AM, HKConnection wrote:

    The most entertaining information about this article is how it related to the HK gov't. Disney swore up and down that HK would be the only park in China and that is how they convinced the gov't to pony up the bulk of the cash for this white elephant. I can't wait to read how the local gov't spins this information.

  • Report this Comment On January 13, 2009, at 9:18 AM, mcmost1 wrote:

    Could someone go back and check the ears on that mouse and see if it's legit

    http://www.chinadaily.com.cn/china/2009-01/08/content_738002...

    according to China these rumors of the Shanghai park are just that, rumors.

  • Report this Comment On January 13, 2009, at 4:44 PM, TMFBreakerRick wrote:

    mcmost, that China Daily link is from last week. Disney ultimately came clean about the Shanghai rumor. Here is the AP story:

    http://www.google.com/hostednews/afp/article/ALeqM5jltc__biU...

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