Hong Kong: The Walt Disney Co. and Hong Kong have reached a deal to expand the territory’s Disneyland at a cost of about $465 million in hopes of boosting the theme park’s fortunes, officials announced Tuesday.
The deal will see the American entertainment giant invest new capital — some $3.5 billion Hong Kong ($450 million) — to pay construction and operation costs during the building phases.
In the works for two years, the expansion plan is part of an effort to turn around a park criticized for failing to meet attendance targets, being too small and lacking high-profile rides. Hong Kong is also under pressure to increase the theme park’s appeal to compete with a proposed Disneyland in Shanghai, which could open in the coming years, and would siphon off Chinese tourists.
“The expansion will be a catalyst to the park’s long-term development and bring benefits to not just the local tourism industry but also the entire economy,” Rita Lau, Hong Kong’s commerce and economic development secretary, told reporters.
The park is a joint venture between Walt Disney and the Hong Kong government. The expansion will add three new theme areas as well a 30 new attractions, enlarging the park’s size by nearly a quarter over the next five years.
Beyond the new investment, Burbank, California-based media Disney will convert into equity about $350 million in loans to the venture and maintain a credit facility of about $40 million.
“Disney is making a substantial investment in this important project,” Leslie Goodman, a Disney vice president, said in a statement.
Hong Kong, which shouldered much of the $3.5 billion original construction cost, will not add any new capital. But the territory will convert a large portion of its loan to the park into equity. In all, Hong Kong’s total stake is expected to decline from about 57% to 52%.
The park opened in 2005 to great fanfare, only to miss its targets for attendance in the first two years. However, traffic in its third year grew by 8%, according to figures provided by the Hong Kong government.
Sustaining that growth could prove all the more difficult with the allure of a Shanghai Disneyland. Disney Chief Executive Bob Iger said last month the company is awaiting word from China’s central government about the proposal.
Likely anticipating a Shanghai park, Hong Kong secured as part of the expansion proposal two new areas, called “Grizzly Trail” and “Mystic Point,” that will be unique among Disneylands worldwide when they open. The third area, “Toy Story Land,” will be exclusive in Asia.