The Walt Disney Co.'s (NYSE:DIS) theme parks and resorts segment grew its profit 20% year over year in fiscal year 2014. As Disney's second largest segment -- more than twice the size by revenue of the studio entertainment segment that is responsible for Disney's feature films -- theme parks are very important to the overall growth of the company.
Domestic park revenue and earnings growth were the main drivers of those 2014 earnings increases, but going forward, it's going to be the company's Chinese operations that drive the most growth for this segment. Investors have long awaited the opening of Disney's newest theme park, opening in Shanghai, China, in early 2016. Now, here's how Disney's theme parks could potentially get another huge boost in China.
Hong Kong Disneyland might double in size
The Hong Kong government, 52% partner in the Hong Kong Disneyland property, has stated that it is planning to work with Disney to develop a "phase 2" of the park: an addition as large as the current park size.
Hong Kong itself recorded a record number of visitors in 2014 at over 60 million, up 12% year over year, according to the government's statistics. Because Hong Kong Disneyland has become an integral part of the tourist attractions offered, the Hong Kong officials want to ensure the park keeps up with a growing number of visitors.
This phase two -- which the government hopes will bring even more tourism income and economic growth to the region -- will include additional attractions, new retail areas, and more hotels. The current park is already Disney's largest international park, at about 150 acres total (compared to about 115 for Tokyo Disney and 140 for Disneyland Paris).
Even at 300 acres, the new, doubled Hong Kong Disney will still pale in comparison to Disney's Orlando properties, but it will be a great stride forward for Disney's international growth. This would be the biggest expansion to the park since it opened in 2005.
But still less than 1/3 of the size of this new park
While the doubling of Hong Kong Disneyland would be impressive, its 300 acres would still be less than a third of the nearly 1,000 acres planned for Disney's new park coming to Shanghai in 2016. This new park, at an investment of $5.5 billion, is going to be a massive new push for Disney's international theme park segment.
The park will have a typical Disney-style theme park and will feature the largest princess castle of any Disney resort yet. It will also include multiple hotels (one being a first of its kind Toy Story-themed hotel), as well as other retail, dining, and entertainment venues.
One reason this theme park is so highly anticipated is that it could become Disney's most-visited park. The anticipated annual number of guests to this Shanghai park during its first year open is 25 million, compared to about 20 million expected for Disney's current most-visited park (also the world's most-visited park), Magic Kingdom in Florida.
Since we first broke ground in Shanghai we've been very impressed with the growth of China's economy, especially the rapid expansion of the middle class and the significant increase in travel and tourism [...] Our accelerated expansion, including additional attractions and entertainment, will allow us to welcome more guests for a spectacular Disney experience on opening day. -- Bob Iger, Disney's CEO