OVERVIEW OF DISNEYLAND IN HONG KONG

The Disney Theme Park in Honk Kong was first announced to the public in 1997. Initially it was welcomed by the public after the Asian financial crisis because of the announcement of projected benefits coupling with “Disney” tourism and the associated employment opportunities.

Although the Walt Disney Company expressed a strong commitment and responsibilities towards conservation of natural resources, it had enormous environmental costs which resulted intense public criticism. The Disneyland earned less revenue than estimated. And Disney had to take immediate action to improve its operations and safeguard its “green” reputation.

The background of Honk Kong Disney land had a long history. After nine months of intense and detailed negotiations, the Hong Kong special Administrative Region Government and the Walt Disney Company reached a preliminary agreement to commence the construction in November, 2001.

After that Disney had taken some theme Park strategies. The company relied on two approach- expanding existing parks while entering into the new territories. And it was Disney’s trade mark tactic in attaining global profitability. Despite of ups and downs the company continued to approach governments’ worldwide including those at home.

In the early 1990s, Disney representatives approached the Hong Kong government. During the negotiation period with the Hong Kong administration, Disney also entered into discussion with the Shanghai Government. The message eventually broadcasted to the public as Disney would build a new theme park either in Honk Kong or Shanghai. But truly there was no serious intension to enter into Shanghai but to create support from Hong Kong people as Hong Kong seemed to be more profitable for the company.

Hong Kong was and remained as the central hub for international business travelers. Its exceptional shopping and fine dining opportunities also made it attractive for the tourists. And it was also the second most popular city in Asia. So, Disney went for a market in Hong Kong consisted mainly of family-oriented Asian tourists. The number of tourists entering Hong Kong was expected to continue to increase because of Hong Kong Disney Land. Hong Kong also represented a less language barrier than the US, Japan or France. Finally, alongside being one of the world’s busiest cities, Hong Kong was and remained a world class tourist destination because of launching the Disney Land Theme Park.

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CHALLENGES

The issue of pricing was a major concern. Asians (particularly the Chinese) are extremely price-sensitive. Hong Kong Disney had planned to charge an admission fee of HK$680, but China’s highly fragmented market suggested that this would be too expensive for the average visitor. Ignorance of strategic pricing factors had a drastic effect on Hong Kong Disney’s profitability.

In 2000, Ocean Park was the only amusement park in Hong Kong. It was much smaller and less extensive than the anticipated Disneyland, and local theme park competition was thus thought to be limited. The large amusement theme parks just across the border in Shenzhen, which could pose a threat to Hong Kong Disney. Competition from other Disney sites was of little concern because of the great distances and costs involved in visiting them.

Mega projects such as the new airport at Chap Lap Kok and the Cyberport at Telegraph Bay were popular topics in the media at that time, but with Disney’s proposal to reclaim and develop Penny’s Bay, Hong Kong seemed set to lose yet another part of its sensitive and dwindling ecosystem. The footprint that was left would affect not only the natural environment, but also society at large and the political reliability of the Hong Kong government.

The development of Penny’s Bay involved not only the actual building of the theme park, but also many ancillary works projects. These developments were accompanied by a long list of environmental issues. Usable land is scarce and precious commodity in Hong Kong. To create adequate space for the establishment of Disney theme park, the government planned to take up its usual practice of reclamation. In short, marine land reclamation is the process of mining substantial amounts of marine sand and earth from nearby areas with cutter and/or trailing suction hopper dredgers. This fill is then transported and discharged in the area to be reclaimed. In Hong Kong Disney’s case, the reclamation process would last 16 months, and the amount of land gained at Penny’s Bay would equate to 290 hectares (enough to fill five race courses). That land would be used for the development and construction of a theme park, a water recreation center, resort hotels, government/institutional/community facilities, roads, railways, ferry piers, and associated infrastructure. About 3,500 meters of seawall would also be erected.

The White-bellied Sea Eagle is a rare bird species that nested in the woodlands of Lantau Island. Scientists and environmentalists argued that the noise created by the park’s construction process and proposed firework displays would disturb and ultimately drive away this natural resident.

Hong Kong Disney’s response to the aforementioned environmental issues was “simple and sometimes naïve”. A Hong Kong Disney management claimed that, the best practices of its overseas locations would be applied to the Hong Kong site.

Hong Kong Disneyland project took almost six years to realize from conception to opening, and the construction was completed in phases. Building of the park and resort began in January 2003, and Disneyland Hong Kong opened on September 12, 2005.

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GREEN CHALLENGE

In addition to the challenged faced during construction of Disneyland in Hong Kong, Disney had to face some tough criticism once the project was completed. The company was primarily accused on negligence of environmental concern. In response to negative publicity, Disney offered 50 USD discount on entry until Christmas of 2005, to anyone carrying Hong Kong I.D.

Other criticism for the firm included, the firm operated as a private limited entity, however funding for the development of was park was mostly done using public Hong Kong based funds. The firm also received criticism from local artist, journalist and legislators, causing the firm to issue its first public apology. A Financial Times article quote management style at Disneyland Hong Kong to be as “scariest place after North Korea”. Soon after an artist Daniel Wu reported to the media, he was treated disrespectfully by Disneyland staff while filming around the premises.

The response within Disney's own staff caused other negative impact. “Character Performers” raised issues regarding being overworked leading to injuries, as well as demanding higher pay. In response, Disney did not raise wages, however they introduced longer breaks between work intervals, as well as cooling vest for all Character Performers in order to make their consumes more comfortable.

In 2005, Disney stated initiated their nightly fireworks displays. Local resident complained on the noise and smoke. This was much due to the fact, Disney’s management in Hong Kong were reluctant to install the same cleaner and less noisy air launch system, which the past has installed at its facilities in Disneyland California.

After being flooded with wide range of challenged, Disney finally decided to take construction measures in order to develop Green and Sustainable management style. Disney focused on achieving a more environmentally friendly approach to their business plan. Three major steps were taken including: “compliance with local laws and regulations; raising awareness and inspiring guests, cast members, and the broader community to engage in environmental action; and constantly seeking and driving environmental initiatives over and above local regulatory requirements”The measure significantly improved Disney’s image, which was important in maintaining the reputation of its facilities in Hong Kong, as well the company's overall image. Disney took its environmental challenges further by taking every step to conserve water, energy, reduce emission of green house gases and in general take every measure to protect the ecosystem. Overall, the company aimed to avoid all explicit and implicit impacts that its operations could spill over onto the environment.

The effort made by the company finally started to be payees off in 2008 when the company won Gold Awards in the Hotels, Restaurants and Catering Companies category of the Hong Kong Awards for Environmental Excellence, for its Hong Kong Disneyland Hotels and Disney Hollywood Hotel. The recognition was a significant milestone in the company’s achievements, as till date the company thrives to achieve excellence in sustainability and environmentally friendly work practices.

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OPINION

One of the biggest complaints heard from visitors of Hong Kong Disney, is the size of the park. The vast majority of visitors believe that the park is too small. The capacity of the park is 30,000 visitors per day. HKD is the smallest among Disney theme park properties in the world. The park currently occupies just 55 acres and has only four “lands” – Fantasyland, Tomorrow land, Adventure land, and Main Street USA. Our first recommendation would be to expand the park. HKD needs to tighten their relationship with travel agencies. Travel agencies are a valuable resource and if the relationships are cultivated properly this could prove to be very lucrative for HKD. HKD could offer better commission and incentives for ticket sales and perhaps be a more lenient with booking deadlines. Park attendance is an ongoing issue for HKD. The park attracted 5.2 million visitors in its first year, which was short of its target of 5.6 million. Visitor numbers fell 20% in the second year to 4 million, which again, was below company targets. However, park attendance is starting to increase. In 2008, park attendance increased by 8%, attracting 4.5 million visitors. In 2009, attendance rose by 2%, attracting 4.8 million visitors. Our recommendation would be to establish aggressive promotions to attract new visitors and add new attractions that are unique to the Hong Kong theme park to encourage repeat visitors. Hong Kong Disney will be celebrating its 5th year anniversary September 12, 2010. The anniversary will be laced with themes of “change” and “soar”. HKD couldn’t have selected a better theme, considering they may finally report a profit this year, before interest, taxes and other depreciation is calculated. After that, it will likely report a loss, but compared to previous years, this is the park’s best year yet. The park is said to have received higher attendance this year from both mainland China as well as international guests.

In negotiations between the Hong Kong government and Disney, we have established measures we would like to observe going forward. The most important matter included is job creation and economic boost to Hong Kong and the surrounding areas. Both parties (Hong Kong and Disney) can create value and gain favorable returns. Our negotiations are not limited and will be open to different plans.

From a cultural perspective, negotiations with the Hong Kong government are much easier than mainland China’s government. Saving time, money, and starting the projects faster will allow Disney to realize their desired profits. The government of Hong Kong would like Disney to be fully involved with this project. A joint venture appears as the best option for this type of deal. With Disney and Hong Kong fully involved in day-to-day business operations, both parties would assume similar risks. Hong Kong provides a large work force and land to accommodate such a large company. On the other hand, Disney brings its expertise and management skills. As a joint partner, both entities can create a profitable business model.

To keep consumer confidence high and competition low, Hong Kong would not allow any additional construction in regards to theme park attractions within the region. We would also like Disney to help ensure a favorable revenue stream for both parties by agreeing to not construct any additional theme parks in the region. We estimate about 25 years to realize true profits and consistent returns. After this period, terms of the arrangement between the Hong Kong government and Disney will be negotiable again. After phase 1 has been implemented and has proved to be successful, phase two of the project can also be negotiated.

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