When Disney chief Michael Eisner visited the Paris Bourse to launch Euro Disney stock in 1989, protesters threw eggs and waved signs that read, "Mickey, Go Home!" Critics attacked Disney's European theme-park plans, with French movie director Ariane Mnouchkine warning of "a cultural Chernobyl." After the gates opened in 1992, Euro Disney did look disastrous. Attendance flagged and losses mounted, leading some to wonder whether a fairy-tale ending would, for once, elude the masters of make-believe.
It hasn't. Last weekend, Euro Disney celebrated its first park's 10th anniversary with the launch of a second one, the ?610 million Disney Studios. The expansion of the resort complex at Marne-la- Vallée, 30 km east of Paris, is a sign that the company has found not only stability as Europe's top tourist attraction but also renewed confidence in its long-term outlook.
When the company swaggered into town to build Europe's first Disney park on old beet fields, confidence was high. "My biggest fear is that we will be too successful," then-chairman Robert Fitzpatrick said. He needn't have worried. Many Europeans decided that Disney's vision of a good time high ticket prices to get into an alcohol-free park with unbearably long lines and inedibly fast food didn't match theirs. The company reportedly bled $1 million a day, analysts hinted that bankruptcy was an option and Eisner called the project Disney's "first real disappointment."
Today, following a series of management changes, massive debt restructuring and strategic shifts, Euro Disney is profitable. It made ?37.7 million on revenues of just over ?1 billion last year. Attendance is stable at about 12 million visitors a year, up from a low of 8.8 million in 1994. Occupancy at Euro Disney's six hotels is strong, with 86% of rooms filled in 2001. While analysts say the company is "settled" in comparison with years past, investors still shy from Euro Disney stock, which hovers around ?1, less than one-tenth of where it traded 10 years ago. That's due in part to wariness that lingers from the company's past performance. Debt at about two times equity is still a concern. And there are questions about an unusual corporate structure that gives the Walt Disney Co., which owns 39.1% of Euro Disney, not only management fees and royalties but also the power to change management singlehandedly.
Executives admit the company might have been naive in the past. "We had not yet had an on-the-ground experience in a multicultural environment," says ceo Jay Rasulo, a Disney veteran who took the helm of Euro Disney in 1998. "It was really the first park that had the majority of its guests coming from very diverse cultural backgrounds." Still, Euro Disney at first believed that Europeans wanted an American product. They didn't and lessons have been learned. The refreshment stands sell espresso, and you can now have wine or beer with your sit-down (and often tasty) lunch. The attractions at Disney Studios emphasize Europe's contributions to cinema. If you need a park map or want to take the backlot tram tour at Disney Studios, you can choose one of six languages Dutch, English, French, German, Italian or Spanish.
The company has also tweaked its sales strategies. Europeans rely more than Americans do on travel agents and tour operators, which Disney had largely neglected. Now the company actively cultivates relationships with these intermediaries, and Airtours, Britain's biggest tour operator, will manage one of the three new hotels that Disney is building. A continuing challenge for Euro Disney is to develop the German market, which accounts for only 8% of visitors. (By comparison, 40% come from France, 18% from the Benelux countries and 15% from Britain.)
One goal in opening the Studios, Rasulo says, "is to increase visits by lengthening the average stay," which is now two days and a night. With both parks open, Disney hopes visitors an expected two-park total of about 17 million in the Studios' first full year will stay an extra day and night. More time on-site means more time to spend on meals, rooms and Mickey Mouse ears. "The profit doesn't come from the theme parks," says Mark Abramson, an analyst with Bear, Stearns in London. "The profit comes from the hotels," restaurants and shops, all high-margin businesses.
At Disneyland Paris, the average visitor spends ?43 a day, about 20% less than a visitor to the California or Florida parks. Nigel Reed, an analyst at BNP Paribas, says part of that difference is a function of factors like climate you'll drink more sodas on a hot, sunny Florida day than on a drizzly, gray one in the Paris suburbs. While Euro Disney knows the U.S. isn't necessarily the best predictor of Continental attitudes toward amusement, both analysts and executives say there is room for spending growth.
Euro Disney isn't alone in seeing the European theme-park market as under-developed. This summer, Vivendi will open a new water park and two hotels alongside its Universal Studios Port Aventura park near Barcelona, making it the first competitor on a Disneyesque scale. At least three other large regional parks will launch in 2002. Bear, Stearns' Abramson sees the competition as a positive for Disney because it familiarizes Europeans with American-style theme parks. "Parks here have historically been some small amusement with a juggler and music playing somewhere," he says.
Like them, Disney will need exciting, new attractions to get repeat visitors. Ride enthusiasts expect soon to see a version of the Florida park's popular Twilight Zone Tower of Terror. A third separate operation, possibly a water park, may be built in several years. "Walt Disney said that Disneyland will never be finished," Rasulo says. "We've certainly emulated that here."
If competition doesn't hurt Euro Disney, timing might again. As in the early '90s, "the economic outlook for Europe is pretty unclear," says BNP Paribas' Reed. "They're adding something like 50% extra capacity when we've seen both slowing in European economies and several other parks open." Are consumers ready to spring for that three-day, two-night short break at Disney, or would they be just as happy to take the kids for an afternoon at a smaller, less expensive, less splashy park nearby?
Euro Disney's biggest advantage is, of course, that name. Nobody but Disney has Mickey and Minnie, Donald and Goofy, or the respected Imagineers who come up with the ideas for attractions and rides. But having these assets is one thing. Making money from them is another. And the real question is whether, in the world beyond the technicolor gates, those with the keys to the Kingdom can conjure profits that are anything close to magical.