Agreement reached on Disneyland expansion
Updated: 2009-07-01 07:42
By Colleen Lee and Peggy Chan(HK Edition)
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(From left) Helen Chan, government economist, Rita Lau, secretary for commerce and economic development, Margaret Fong, tourism commissioner and Clement Leung, deputy secretary for financial services hold up Disneyland designs at a press conference in Hong Kong yesterday. AFP |
HONG KONG: The government and the Walt Disney Company have reached a long-awaited agreement to expand Hong Kong Disneyland. The government's stake will be diluted by about 5 percent, but Hong Kong will make no additional capital injection into the expansion. The global entertainment giant also agreed to disclose its annual financial report for the local operation.
Disney will invest HK$3.63 billion to enlarge the park 23 percent of its present dimensions. It will add three new theme areas and more than 30 new attractions over five years.
Disney will convert its HK$2.76 billion loan to the joint venture into equity.The SAR government will convert its HK$5.89 billion loan to maintain its position as the majority shareholder.
Though the government doesn't spend a cent on the development, its interest will drop to 51.7 percent from the current 57 percent. Disney will hold 48.3 percent.
"Its expansion will bring significant benefits to our tourism industry and to the overall economy," said Chief Executive Donald Tsang Yam-kuen yesterday after meeting the Executive Council, which also supported the agreement.
The development will create about 3,700 jobs over five years, with 600 permanent positions after completion of the expansion in 2014.
It is estimated that the enlarged theme park will bring Hong Kong net economic benefits totalling around HK$64.7 billion to HK$117.3 billion over a 40-year period. That figure is substantially lower than the government's prediction of HK$148 billion made 10 years ago. The estimated return is up to 5 percent over a 40 years' term.
Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan admitted the government adopted a conservative approach. Taken into consideration were the impact of a rival Shanghai Disneyland and Universal Studios theme park in Singapore.
The Hong Kong Tourism Board predicted that each tourist who visits the city specifically to visit Disneyland will stay for 2.7 nights and spend an average HK$1,000.
"If there is no expansion in the theme park, then I think it is quite natural to expect that the attractiveness of the theme park will fall over time," Government economist Helen Chan said.
She added in the first three years of operation, on average the theme park has brought about 0.2 percentage point increase in GDP to local economy.
The annual attendance from 2005 to 2008 was 4,500,000, far below the predicted 5,600,000. The government also has adjusted down its projections for the future to around 5,211,000 by 2015.
Lau said upon the government's "firm request", Disney will make disclosure of the park's annual attendance and key financial performance indicators, including the balance sheet, for public examination. That will begin with fiscal 2008-09.
The board of directors will determine ticket prices, but it must provide sufficient ground for adjustments.
Though the venture will expand entertainment facilities by five hectares from the current 22.4 hectares, Lau said the facilities will be as large as those at Los Angeles Disneyland. However, the Hong Kong park will still be the world's smallest Disneyland.
The three new themed areas are respectively "Grizzly Trail", "Mystic Point" and "Toy Story Land", bringing the total attractions to over 100.
"Grizzly Trail" and "Mystic Point" are exclusive among all Disney theme parks, while "Toy Story Land" is limited within the Asian region. The first amusement facility will be in operation before 2012.
To uphold the uniqueness of Hong Kong Disneyland, these two distinctive areas will not substantially be replicated in any other Disney theme parks within five years.
The secretary described the negotiation as "challenging". The process started two years ago but Disney put the brakes on progress owing to the financial turmoil.
In May, the visit of Financial Secretary John Tsang to Los Angeles where he met senior Disney executives was seen as an important step forward.
Lau said there were differences of opinion during the negotiations and the government didn't accept the agreement blindly. The government refused Disney's request to pay for some of the designs Disney had produced.
The government invested HK$23 billion while Disney injected HK$2.45 billion in the park in 1999. The deal was criticized as unfair to the city.
"All along, the government has been striving to reach a deal that would make Disneyland more attractive whilst serving the overall interests of Hong Kong," Lau said, adding it was a win-win package.
Disneyland said the project was important.
"The expansion deal will contribute to Hong Kong's appeal as an international, family-friendly tourist destination and the resort's long-term success," said Leslie Goodman, executive vice president for Worldwide Public Affairs, Walt Disney Parks and Resorts.
The government will seek the approval from the Financial Committee of the Legislative Council on July 10. Construction will commence this year.
(HK Edition 07/01/2009 page1)