Disney $1.3 Billion Rescue Shows Paris Parks Too Big to Fail

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Craig Hanna, Chief Creative Officer for Thinkwell Group, a company that designs theme park attractions, agreed the Disney Studios needs work.
“There are a lot of possibilities,” Hanna said. “There’s plenty of land in Paris.”

More than 8,000 people signed a petition last year on Change.org urging Walt Disney Co. (DIS) Chairman and Chief Executive Officer Robert Iger to “Save Disneyland Paris.”
The petition, written in six languages, registered complaints about poor maintenance, lousy food and mediocre attractions at the money-losing resort, which opened in 1992. This week, Iger showed he is listening.
A rescue package unveiled Oct. 6 will give Disneyland Paris and its sister park Walt Disney Studios at least 1 billion euros ($1.3 billion) over 10 years to add attractions and spruce up grounds. Euro Disney SCA (EDL) will probably upgrade the Star Tours attraction at Disneyland Paris, according to industry watcher Robert Niles, and the company said it is rejuvenating “Indiana Jones and the Temple of Peril” and “Big Thunder Mountain.”
“They’re going to need to make a significant capital investment,” said Niles, editor of the website Theme Park Insider. “It’s been 20 years.”
Euro Disney said it’s also refurbishing hotels and refreshing icons such as the Sleeping Beauty Castle (Le Château de la Belle au Bois Dormant). In July, Walt Disney Studios opened a Ratatouille ride and restaurant that have attracted more than 1 million guests, the company said.
More Needed
In the past five years, Euro Disney has spent more than 500 million euros , according to Burbank, California-based Walt Disney, the world’s largest entertainment company.
Mark Stead, Euro Disney’s chief financial officer, told The Guardian newspaper he hoped to bring technology from the U.S. to revamp and add new ride experiences. New blockbuster attractions are unlikely, he said.
More is needed, according to Dennis Spiegel, a theme park consultant in Cincinnati.
Euro Disney parks, especially the Walt Disney Studios, could benefit from attractions based on Marvel superheroes from Disney films such as “The Avengers” and “Iron Man 3.”
The Walt Disney Studios park is “too sterile and industrial looking, it doesn’t feel like a Disney park,” Spiegel said by telephone. “They’re not getting the same level of enthusiasm, the same level of people willing to spend.”
Disney’s California Adventure park in Anaheim, California, is the model to follow. Disney invested $1.1 billion in that park in recent years, including a Cars Land attraction that has helped lift attendance by 34 percent since 2011.
“Our industry lives on repeat visitation,” Spiegel said. “People want new attractions. Fantasyland, Cars Land, Star Wars, Avatar Land. It’s more than dropping in a single ride anymore. My money would be on Marvel.”
Euro Economy
Craig Hanna, Chief Creative Officer for Thinkwell Group, a company that designs theme park attractions, agreed the Disney Studios needs work.
“There are a lot of possibilities,” Hanna said. “There’s plenty of land in Paris.”
Euro Disney partly blames its woes on the struggling European economies. Attendance is forecast to fall about 5 percent this year to 14.2 million guests, the company said on Oct. 6. Hotel occupancy will also decline, while spending per room will be flat.
“The problem now is that the hotels are aging and some rides aren’t working as well,” said Didier Arino, chief executive officer of Protourisme, a tourism researcher in Bourdeaux, France. “That’s making the parks less attractive to consumers and, with the level of investment the company has to sustain, it’s obviously a problem.”
Previous Bailouts
This isn’t Euro Disney’s first financial restructuring. In 1994, two years after its opening, Saudi Prince Alwaleed bin Talal acquired a 10 percent stake in a refinancing. Two years ago, Euro Disney consolidated debt from a number of banks into a loan from the Disney company.
Now, the company’s dependence on its California parent company looks set to grow.
Euro Disney is tapping current investors, including Disney, for as much as 420 million euros through a rights offering. In addition, the California company is converting 600 million euros of debt into Euro Disney equity. Finally, Euro Disney is postponing principal payments on debt until 2024, freeing up as much as 800 million euros over 10 years.
Disney gained 1.2 percent to $88.11 at the close in New York. Euro Disney shares fell 0.3 percent to 3.11 euros in Paris, giving the company a market value of 121 million euros.
‘Great Transaction’
In tossing the money-losing Euro Disney operation a lifeline, the California company may end up as majority owner.
“This is a great transaction for the company, which will put us on a much firmer financial footing and give us the capacity that we need to really continue to invest in our destination,” Stead said in a Euro Disney website video.
Analysts say Disney can’t pull the plug on its biggest single investment in Europe and a huge promoter of its brand on the continent.
“Euro Disney went through some tough times financially, had it been any other company than Disney it may not have survived,” said John Gerner, a theme park consultant in Richmond, Virginia. “It was too big to fail.”
To contact the reporters on this story: Christopher Palmeri in Los Angeles at [email protected]; Marie Mawad in Paris at [email protected]; Julie Miecamp in London at [email protected]
To contact the editors responsible for this story: Anthony Palazzo at [email protected]; Kenneth Wong at [email protected]
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