Shanghai Disney achieves profitable opening and will have more than 10 million passenger traffic in its first year

On May 10, Walt Disney Company released its financial report for the second quarter of fiscal year 2017. Although Disney's total revenue fell short of expectations, the performance of theme parks and resorts became the highlight of the entire financial report. Among them, Shanghai, which will be open for a year. Disneyland achieved a small profit this fiscal quarter.

May 10. The Walt Disney Company released its second quarter financial report for the fiscal year 2017. Although Disney's total revenue fell short of expectations, the performance of theme parks and resorts became the overall financial report. Highlights, including Shanghai Disneyland, which will be open for a year, achieved a small profit this quarter. Industry insiders analyzed that in the hot domestic tourism market environment, Shanghai Disneyland's brand IP effect is much higher than that of other domestic theme parks. Coupled with factors such as freshness in the early stages of opening, it is not very difficult to achieve small profits and welcome tens of millions of visitors. However, it should also be noted that despite the chaotic situation of domestic theme parks, Shanghai Disneyland still has problems such as lack of refined management and long payback cycles. Faced with strong rivals such as Universal Studios and Legoland that are about to enter China, Shanghai Disneyland's road to continued profitability faces considerable challenges.

Walt

Disney Company announced profit In its latest financial report for the second quarter of fiscal year 2017, the company's revenue for the three months ended April 1, 2017 was US$13.36 billion, a year-on-year increase of 3%, attributable to shareholders. Net profit was US$2.388 billion, a year-on-year increase of 11%. In terms of sub-sectors, particularly eye-catching is the Disneyland business. In the second fiscal quarter of 2017, Disneyland's total revenue was US$4.299 billion, a year-on-year increase of 9%. According to the financial report, the revenue growth in this fiscal quarter was attributed to the opening of the Shanghai Disney Resort in the third quarter of the previous fiscal year and the growth of business in theme parks and resorts in the United States. Not only has the passenger flow increased at Disneyland, but consumers 'spending on accommodation and food in resorts in the park has also increased. It is worth noting that Disney's chief financial officer Sting McCarthy highlighted that Shanghai Disney has achieved a small profit and is about to usher in its 10 millionth visitor.

Robert Iger, Chairman and CEO of Walt Disney Company, said,"The number of visitors to Shanghai Disney has exceeded our most optimistic forecast. After the completion of the new 'Toy Story' park, it is believed that it will continue to increase the popularity of the park. Degree, and this is only the first of several expansion plans in Shanghai." It is understood that Shanghai Disneyland announced in November 2016 that it would add a new "Toy Story" park and plans to open it to tourists in 2018.

In fact, Walt Disney Company has been confident in the number of visitors and profitability of Shanghai Disneyland since its opening. Robert Iger said when Disney released its financial report for the first quarter of fiscal year 2017 that Shanghai Disneyland was operating at its maximum capacity during almost the entire New Year holiday. When Disney's 2016 earnings report was released, Disney CFO Sting McCarthy said that Shanghai Disney is expected to be "closer to breaking even" in fiscal 2017. Judging from this statement, Shanghai Disneyland achieved a small profit in the second quarter, which also exceeded Disney's expectations.

Brand effect

"With Wanda, Shanghai Disney will not be profitable in 20 years." The popularity of Wang Jianlin's rhetoric has not completely subsided, and Shanghai Disneyland has become the engine of growth for Disney's global park business in the second quarter. When more than half of the theme parks in China are still losing money, why can Shanghai Disneyland achieve a profit even after it has opened for one year? The reporter asked the relevant person in charge of Walt Disney's China Corporate Communications Department about this, but did not receive a reply as of press time.

At the time of the earnings report, Robert Iger said that Disney's strategic priorities for high-quality brand content, innovative technology and global development have been time-tested, and these three strategic priorities have also directly helped the company achieve strong performance. Many industry insiders also told reporters that Disney's brand awareness is a key factor in the park's outstanding domestic performance. Analyst Zhu Zhengyu of Analysys International analyzed that Disney's IP effect is very strong, much higher than existing theme parks in the Yangtze River Delta. The investment scale and IP appeal of theme parks such as Happy Valley and Fonte are difficult to compete with Disney. In addition, Shanghai Disneyland is backed by the Yangtze River Delta region, which has strong tourism consumption capabilities. At the same time, the convenience of high-speed rail and aviation, as well as visa-free policies, have also attracted tourists from other regions. It is not impossible for Shanghai Disney to reach 10 million annual passenger flow.

In addition, the growth rate of domestic tourism is relatively high this year. It can be seen from the flight data of China Airlines that tourists have become more popular for domestic tourism, which also allows Disney to intercept more tourists. And with the upgrading of domestic tourism consumption, traditional sightseeing tours have gradually been replaced by in-depth experiential tours. Judging from the May Day holiday data released by online travel platforms, Shanghai Disneyland ranks first among the top ten popular scenic spots in the country. The number of tourists exceeds that of traditional 5A-level scenic spots such as Huangshan Scenic Area and Emei Mountain.

According to an industry expert who declined to be named, according to a report jointly released by Euromonitor and the World Tourism Fair, by 2020, ticket revenue from China's theme parks is expected to surge to nearly 12 billion US dollars (approximately 81.5 billion yuan). It can be said that driven by the growing middle class, China's theme park industry is likely to surpass the United States to become the world's largest market in the next few years. "The huge market demand itself has become the profitability of the theme park."

Zhao Huanyan, chief knowledge officer of Huamei Consulting Group, pointed out that based on the effect of Disneyland, it can drive the benefits of tourism, hotels, catering, culture, clothing, toys, science and technology innovation, retail and other industries. It is estimated that the passenger flow of 10 million passengers in the first year will also generate considerable benefits for related industries. It is believed that after the expansion, not only Shanghai Disneyland, but also the entire Shanghai International Tourism Resort will have further performance improvement.

Siege

Although the theme park resort sector has performed well, the overall performance of Walt Disney Company is not ideal. In Walt Disney Co.'s earnings report, revenue from the consumer products and interactive media businesses fell 11% to $1.1 billion. Disney is the world's largest retail licensee, and its brand has many consumer derivative products. However, after "Frozen" and "Star Wars", the performance of consumer derivative products has not continued its former glory. In this quarter's earnings report, Disney attributed the decline in consumer goods revenue to the sold well of movie peripheral products such as "Frozen" in the same period last year, and the lack of comparable films in the same period this year. However, it is understood that "Frozen" was released in 2013. Some industry insiders said that Disney's statement confirms that Disney has not produced sensational IP enough to support consumer products in recent years. Even a major Hollywood company like Disney has spent several years working hard before coming up with an IP image that has both fame and fortune. It shows that the market sustainability of brand IP needs to be further improved.

As far as Shanghai Disneyland is concerned, as the first large-scale international theme park brand introduced in mainland China, it has also encountered some "acclimatization" situations, including equipment failures, scalpers, invalid online ticket purchases, long queuing times, and inadequate park management and operation, which once plunged Shanghai Disneyland into a whirlpool of public opinion. Zhan Dongmei, a doctor at the China Tourism Research Institute, said that Disney's operations in Shanghai are far less sophisticated than in Tokyo and Hong Kong. Of course, this has something to do with the excessive number of tourists. However, during the peak season, there are also many tourists to Tokyo Disney. The overall management is still orderly and tourists have a good sense of experience, which deserves reflection from the Shanghai park.

Domestic theme parks are fierce. Regarding Shanghai Disneyland's first-round victory, some industry insiders said that the freshness of Shanghai Disneyland's first year of opening may also have played a certain role. Currently, theme parks such as Nantong Fonte Adventure Kingdom in the Yangtze River Delta region and Hangzhou Songcheng Scenic Area and Shanghai Happy Valley cannot compete for the time being, but they can still play a certain role in diverting tourists. With Universal Studios, which has a strong IP brand, settling in Beijing, the competitive pressure of Shanghai Disneyland has further increased. In the future, with the successful passage of Hong Kong Disney's expansion plan, in addition to fighting with other brands of theme parks, Shanghai Disney will also have to be wary of its own Hong Kong colleagues.

In addition, although Shanghai Disneyland achieved a small profit in the second quarter of fiscal 2017, the profit here is based on variable costs and not a recovery of investment. Generally speaking, theme parks can recover investment costs in 7-10 years. As a business format with a long payback cycle, Shanghai Disneyland still has a long way to go before it can break even or achieve profitability in the future.

Editor: Nancy