Disney: The Middle Kingdom is finally getting a Magic Kingdom. The Disney Company has been granted state approval to build a theme park and resort in Shanghai, an idea almost twenty years in the making. There is no guarantee that Chinese families will embrace Mickey and Minnie Mouse. But the country’s economic magic justifies Disney taking the investment risk.
Global brands cannot afford not to be in a market with 1.3 billion wallets. China’s domestic tourism is the biggest in the world, worth $100 billion in 2008. Its tourist trade is forecast to grow at almost 11 per cent a year over the next decade, according to the World Travel & Tourism Council. Rising affluence and improving infrastructure, including a high-speed rail link from Beijing to Shanghai, all point the right way.
For Disney, the way into this lucrative opportunity has been turbulent. Its cartoons reached China only in 1986, and a local version of the Disney Club programme first aired in 1994. The low point came when Disney produced a film on the life of the Dalai Lama. But with policymakers now actively set on boosting private consumption, Disney may find itself more welcome as a theme park provider. Few businesses are more suited to frivolous spending.
What Disney lacks in China is the deep historical and cultural roots it has in the West. The brand ranks below Industrial and Commercial Bank of China in the world’s most valuable marques, according to consultancy Millward Brown. China’s restricted media means Disney hasn’t been able to secure its broadcasting rights in the mainland, depriving it of a useful source of marketing magic for bringing visitors through the gates.
One kind of magic Disneyland Shanghai won’t need, however, is that which almost sunk its Parisian cousin: financial leverage. Disney’s European resort had to be restructured twice after falling visitor numbers drove it into losses. Disney even had to waive royalty fees while equity and debt investors slogged it out. Still, so long as Disney leaves the financial engineering to Beijing’s policymakers, it should be in with a chance of a decent return.
