Disney Double Parks

Cit

y rivalries, like those between siblings, intensify with proximity. Consider the uproar in Hong Kong last week when it was revealed that the Disney Co. had tentatively agreed to build a theme park in Shanghai—Hong Kong's commercial bete noire. Hong Kong three years ago partnered with the U.S.-based entertainment conglomerate to build the first—and some believed at the time, the only—Chinese Disneyland. But that was then. Now, says Hong Kong legislator Emily Lau, "it seems Disney doesn't give two hoots about Hong Kong."

The flap isn't solely about loss of face. It's about the loss of tourists' cash. Shanghai's version of the Magic Kingdom could open just two years after Hong Kong Disneyland on Lantau Island begins operation. Officials say that's too close for comfort. They fear the two facilities will wind up competing for visitors from mainland China, which had been expected to contribute about 75% of Hong Kong Disneyland's customers in its first few years. Hong Kong has a big investment to recoup: the city agreed to pay $2.9 billion toward the park's construction. Disney chipped in a mere $314 million, for which the company will get a hefty 43% ownership stake along with management fees.

Hong Kong officials feel they've been taken for a ride by The Mouse, but during negotiations Disney representatives made no secret of the fact they might want to build a second park on the mainland. The only assurances given were aired in February 2001 when Donald Tsang, then Hong Kong's Financial Secretary, claimed Disney officials told him there would be no second park in China until the first was "mature."

Hong Kong, a city of shrewd dealmakers, is left looking Dumbo for failing to get a noncompete clause in writing—which the Paris and Tokyo Disneylands had both secured. Still, Michael Chin, senior director of PricewaterhouseCoopers's North Asia leisure industry consulting group, believes China's huge population "is big enough to support both parks easily." It's not such a small world, after all.