Hong Kong Disneyland lifts lid on financial losses

HK Disneyland loses $169 million in 2009

Disney’s troubled Hong Kong Disneyland theme park made a net loss of HK$1.315 billion ($169.4 million last year while attracting 4.6 million visitors, in its first major admission of its financial performance since its opening in 2005.

Since opening to great fanfare, Disney’s first magic kingdom in China has struggled to attract the expected flood of visitors from mainland China, although its performance had been difficult to gauge given Disney’s initial refusal to fully disclose key results and attendance figures.

A paper by Hong Kong’s Tourism Commission for local lawmakers, however, said Hong Kong Disneyland made the net loss in 2009 partly because of the “unfavourable impact” of the H1N1 swine flu outbreak and the global financial crisis.

The paper, released on Tuesday, added that the park made a net loss of HK$1.574 billion in 2008, while hotel occupancy rates stood at 70 percent in 2009, a drop of eight percent from 2008.

“We would like to point out that (Hong Kong Disneyland) is a long-term asset that grows over time and it is still in its early years of development,” the paper said, while noting the park’s continued cost containment efforts.

The Hong Kong government, however, which has a 52 percent stake in the park — the Walt Disney Company (DIS.N) holds the other 48 percent — expressed disappointment with the park’s results, calling on it to improve.

“We are concerned about the situation and are dissatisfied with the financial performance (of Hong Kong Disneyland),” said Secretary for Commerce and Economic Development Rita Lau.

The park saw 4.6 million visitors in 2009, 2 percent more than 2008, generating revenues of HK$2.541 billion.

Last year’s attendance was lower than Disney’s first-year attendance target of 5.6 million, which it just missed. After the park’s expansion, however, the number of visitors is expected to swell to between 5.2 million-8 million visitors by 2015.

The park initially said it hoped to attract 10 million visitors per year after 15 years. With attendance falling short of targets, the government has been seeking ways to boost the number of visitors in the long term.

The theme park, Disney’s smallest, is now undergoing a $468 million expansion aimed at bolstering its competitiveness with a rival Disneyland that is scheduled to open in Shanghai in the next five or six years.

As part of the expansion deal, partly financed by the Hong Kong government, Disney pledged to boost the transparency of its operations by releasing annual operating and financial results. (Reporting by James Pomfret; editing by Ken Wills and Rupert Winchester)

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