Disney Looking for Boost in Paris

Walt Disney Co., which transformed the near-bankrupt Disneyland Paris into Europe’s most visited tourist attraction, adds some Hollywood glitz to its French resort with the opening Saturday of a theme park modeled on its studio tour in Orlando, Fla.

The 50-acre park, called Walt Disney Studios, is billed as a tribute to American and European cinema and is next to Disneyland Paris. The $530-million venture includes a studio tram tour with behind-the-scene views of movies, a special-effects show based on the movie “Armageddon” and a roller coaster.

Walt Disney Studios is expected to boost Disneyland Paris’ overall attendance from about 12 million to 16 million visitors annually. The park is Disney’s 10th and the third to open in 18 months, after Tokyo DisneySea in Japan and the struggling California Adventure in Anaheim. Disney also is building a theme park in Hong Kong, set to open by 2006.

“It shows the strength of our business in Europe, our confidence in Europe and our ability to grow,” said Paul Pressler, chairman of Walt Disney Parks & Resorts. “Cinema is something that is a global phenomenon. It speaks to our roots.”

As the domestic market matures, Disney and other theme park companies are tapping overseas locales, especially in Europe, where rising disposable incomes and changing vacation habits are creating strong demand for American-style amusement parks, analysts say.

Walt Disney Studios is among four theme parks that will open in Europe by 2003, including a Legoland outside Munich, Germany, and a Warner Bros. park Six Flags is building south of Madrid. Rival Universal Studios, which is expanding its theme park resort near Barcelona, Spain, also is exploring sites for a theme park in Germany.

“Paris is a market with 20 million residents and almost the same amount of tourists,” said John Robinett, a Los Angeles-based leisure industry consultant. “It’s a very, very strong market. Disneyland has benefited from that, and I think this new park will as well.”

Disney has invested $90 million in the Euro Disney project, in which it has a 39% equity stake.

The park’s opening won’t have much effect on Disney’s bottom line, which has been hurt by a decline in tourism and television advertising revenue. The company gets only about $28 million a year in management and royalty fees (5% to 10% of sales) from Disneyland Paris, which is managed through Disney subsidiary Euro Disney.

Adding a second gate in Paris helps Disney expand its brand in Europe and fits a longer-term strategy of building resort destinations modeled on Walt Disney World in Orlando, which attracts visitors for several days. Walt Disney Studios is expected to increase the average length of stay from two to three nights at Disneyland Paris, executives said.

Disneyland Paris, formerly Euro Disney, has come a long way since the early 1990s, when the project was hit with the recession, huge building costs, a glut of hotel rooms and derision from French critics who called it a “cultural Chernobyl.”

Under a rescue plan, Disney restructured its $3-billion debt, reduced its equity and postponed royalty and management fees for several years. Park officials also cut ticket prices and introduced alcoholic drinks and a broader range of food concessions and attractions. The strategy worked, and by 1995 Euro Disney had recorded its first annual operating profit.

“The first park we built during a boom, and a year after it opened we hit a huge recession,” Pressler said. “With [Walt Disney Studios], we know what we’re heading into, and we’re only hoping for upside.”

Unlike 1992, Disney won’t be stuck with a large amount of empty hotel rooms, Pressler said. Disney isn’t opening any hotel rooms, though third parties are developing three hotels in the resort area that will increase the total number of rooms from 5,800 to 6,900 in the next year.

Travel disruptions caused by Sept. 11, which have brought sharp declines in attendance at Walt Disney World and Disneyland, so far have had little effect on Disneyland Paris and may even have helped the resort. “We suspect that in both Tokyo and Paris, people are choosing to stay closer to home and are not making trips to the U.S.,” Pressler said.

Disneyland Paris drew 12.2 million visitors last year, up 2% from a year ago. Euro Disney Chairman Jay Rasulo has said attendance was holding up well despite the Sept. 11 terrorist attacks. (Euro Disney’s profit fell 21% to $27 million last year, mostly due to park opening costs.)

By contrast, overall attendance at Disney’s flagship resort Walt Disney World, which heavily depends on international visitors, remains 10% to 15% below last year’s levels. Despite an improvement in short-term vacation bookings, it’s too early to predict when U.S. theme parks will recover, Pressler said.

But Disneyland Paris “is doing very well, better than anyone expected,” said Sobani Warner, an analyst with Williams Capital Group in New York.

In developing its newest park, Disney has been mindful not to repeat past mistakes.

The changes include involving more locals and fewer expatriates in developing the park and paying greater heed to Europe’s diverse languages and cultures. Catering to European culinary tastes, such as serving five types of sausages, was especially important.

“We’ve learned a lot of lessons,” Pressler said.