-
Welcome to the WDWMAGIC.COM Forums!
Please take a look around, and feel free to sign up and join the community.
Euro Disney Earnings Bloodbath
- Thread starter pheneix
- Start date
lazyboy97o
Well-Known Member
BoarderPhreak
Well-Known Member
While the U.S. is in its "recovery" keep in mind that the Eurozone lagged a bit behind; dragged down by various collapsing economies (e.g. Greece). So it's not surprising that DLP had a crap year.
BoarderPhreak
Well-Known Member
More like when it farts, everyone is forced to smell it.
The Empress Lilly
Well-Known Member
This is the kind of map that helped decide the case for Paris. A population map of Western Europe, because the East is still communist, and was expected to remain so for quite some time to come.
There is a 'blue banana' in Europe, a densely populated band, a quarter-circle, stretching from the southern half of England through the Randstad and Belgium and Nord-pas-de-Calais through the Ruhr and Rhineland to Switzerland and northern Italy. Population and spending power is massively concentrated here. Paris is outside the banana (the red dot), but in a way, also somewhat the midway point of the quarter-circle. Draw a circle of a few hundred kilometers around Paris, driving/train distance, and the majority of expected guests are within it.
There is a 'blue banana' in Europe, a densely populated band, a quarter-circle, stretching from the southern half of England through the Randstad and Belgium and Nord-pas-de-Calais through the Ruhr and Rhineland to Switzerland and northern Italy. Population and spending power is massively concentrated here. Paris is outside the banana (the red dot), but in a way, also somewhat the midway point of the quarter-circle. Draw a circle of a few hundred kilometers around Paris, driving/train distance, and the majority of expected guests are within it.
Last edited:
Oh the Hollande government will let Disneyland Resort Paris completely close and be forced to liquidate itself on principle to get Disney out of the operation. As are minority partners involved in the ownership of the resort. Disney IS the problem. The business model doesn't work. Much is made of Disney Parks grossly inflated attendance numbers but the reality is Disneyland Paris' volume IS the reason the resort is losing so much money. DLRP needs to go seasonal and reduce staff by 35-40% to have a hope of being a sustainable operation for the next two decades.
This is going to get UGLY folks. It will be a point of discussion in the WDC board meeting coming up.
The resort has about six months of cash left on the books given current conditions. Bear in mind Disney owns all debt from EDSCA save for a small amount of debt held by a French state run bank. If Disney wanted to make the debt go away, it could take a write down tomorrow and do it. WDC chose to do share buy backs instead.
lazyboy97o
Well-Known Member
The debt is the big obstacle and once it is gone the finances will improve. There was movement out of the strangling debt before more had to be taken in order to fulfill the second gate requirements. There is no way Disney could get away with just forgiving over $1 billion in loans to what is ostensibly a separate company, but they could if it was another internal division.
Also, DLRP's guests do not generate enough revenue to cover their costs. Increased attendance = increased costs = increased losses.
That big rail hub outside Disneyland.... It's great for churning out volume. Most other euro parks don't have this advantage and have to rely on the drive-in market to keep their parks alive. The ironic part being that cars are very expensive to own and maintain in EU, so when you grab consumers who own a car, you're likely grabbing consumers who haves lots of money to spend on other things. In DLRP's case.... Not so much.
That big rail hub outside Disneyland.... It's great for churning out volume. Most other euro parks don't have this advantage and have to rely on the drive-in market to keep their parks alive. The ironic part being that cars are very expensive to own and maintain in EU, so when you grab consumers who own a car, you're likely grabbing consumers who haves lots of money to spend on other things. In DLRP's case.... Not so much.
The debt is the 2nd biggest obstacle now. DLRP is losing nearly a million euro a day just keeping the lights on and entertaining the guests it does attract. Eliminating the debt means Disney spending many billions to roll this money loser of an operation directly into their portfolio and dilute their own earnings. Why would Disney do this when it can neatly contain the damage inside a French holding company until some new sucker comes along offering to sink cash into it?
I'm sorry pheneix but I must disagree with your numbers. According to my review of the statements, they lost 27.5 million euros last fiscal year from their operations, which amounts to less than 80,000 euros a day in loss from operations. Once debt service is added, it's a loss of about a quarter million euros a day. Yes, that's a big ouch, but it's not "losing nearly a million euro a day just keeping the lights on and entertaining the guests it does attract."
Further, they have 78 million euros in cash, which means they could continue as is for about 3 more years with a financial cushion (if not for their debt payments). And I believe they have another 250 million euros in revolving credit available that they haven't yet dipped into.
And they actually earned 3.4 million euros in 2012 from operations (before debt payments), and 11.5 million in 2011.
No, DLP is not yet profitable, but it's not a disaster either, from my review of the numbers. In the meantime, they have a huge asset that brings in 14 million visitors a year and rents out about 5,000 hotel units a day. The debt is the killer, but that's true of so many people, companies and governments. When you consider that many people have debts in their mortgages, cars loans, credit cards, and/or student loans that exceed their incomes by at least 3 or 4 times, I don't think DLP is that bad off. Most countries have national debts that exceed their Gross National Incomes by 2 times. DLP seems to be doing better than that, with yearly revenue of 1.3 billion euros and total debt of 1.7 billion euros. In short, debt is 1.3 times revenue, which most households in America would love to have.
DLP is a unique asset that is very hard to value, but it probably far exceeds in value what it owes. In short, I think it is a net asset with huge cashflow. The debt, ouch, is bad, but I think it's manageable given the probability of an upturn in the post-recession economy.
And if things go sour, Disney corporate could lend some more, or threaten to close the doors. If that threat is made, I guarantee that the governments in Paris and in the EEU will somehow step in to float more money and/or allow Disney more autonomy and/or ownership. Yeah, we all wish the place made bigtime profits, but it's not nearly as bad is it may initially look.
Further, they have 78 million euros in cash, which means they could continue as is for about 3 more years with a financial cushion (if not for their debt payments). And I believe they have another 250 million euros in revolving credit available that they haven't yet dipped into.
And they actually earned 3.4 million euros in 2012 from operations (before debt payments), and 11.5 million in 2011.
No, DLP is not yet profitable, but it's not a disaster either, from my review of the numbers. In the meantime, they have a huge asset that brings in 14 million visitors a year and rents out about 5,000 hotel units a day. The debt is the killer, but that's true of so many people, companies and governments. When you consider that many people have debts in their mortgages, cars loans, credit cards, and/or student loans that exceed their incomes by at least 3 or 4 times, I don't think DLP is that bad off. Most countries have national debts that exceed their Gross National Incomes by 2 times. DLP seems to be doing better than that, with yearly revenue of 1.3 billion euros and total debt of 1.7 billion euros. In short, debt is 1.3 times revenue, which most households in America would love to have.
DLP is a unique asset that is very hard to value, but it probably far exceeds in value what it owes. In short, I think it is a net asset with huge cashflow. The debt, ouch, is bad, but I think it's manageable given the probability of an upturn in the post-recession economy.
And if things go sour, Disney corporate could lend some more, or threaten to close the doors. If that threat is made, I guarantee that the governments in Paris and in the EEU will somehow step in to float more money and/or allow Disney more autonomy and/or ownership. Yeah, we all wish the place made bigtime profits, but it's not nearly as bad is it may initially look.
Last edited:
@Ralphlaw it is exactly those debt servicing changes that masked over operational losses in 2013. They used cash saved from not having to make debt repayments and paired them with real estate sale proceedings to arrive at their final yearly loss.
Operationally the resort is a train wreck, and in the off and mid season does indeed lose nearly a million euro a day. This is demonstrated in EDCSA's ever decreasing amount of cash on hand.
Wait till the 1H financial results are released next spring. I will be proven right. EDSCA is lucky that their 2H of fiscal year coincides with summer, when the resort actually does turn an operating profit.
Yikes, I wasn't aware of those shenanigans. I'm sure we both hope that you're wrong in your predictions, but obviously you have far more detailed information than I have. I'm curious to see how much real estate they sold, and how much in debt deferments that they enjoyed.
I'm from Wisconsin, and I'm now old enough to have seen how some farmers never had income of over $20,000 per year, yet they retire as millionaires. Most of this has to do with upticks in land values, and I wonder if DLP planned to sell or lease land to stay afloat when it first opened. As I recall, weren't the Swan and Dolphin at Disney World part of a similar scheme to finance Studios? And remember, nearly everything in Epcot has a sponsor. When you have a great asset, stuff can be done to bring in profits and/or repay debts using the parks and land as leverage of various kinds. That's why, rightly or wrongly, I'm not yet ready to predict disaster.
Thanks for the insight.
I'm from Wisconsin, and I'm now old enough to have seen how some farmers never had income of over $20,000 per year, yet they retire as millionaires. Most of this has to do with upticks in land values, and I wonder if DLP planned to sell or lease land to stay afloat when it first opened. As I recall, weren't the Swan and Dolphin at Disney World part of a similar scheme to finance Studios? And remember, nearly everything in Epcot has a sponsor. When you have a great asset, stuff can be done to bring in profits and/or repay debts using the parks and land as leverage of various kinds. That's why, rightly or wrongly, I'm not yet ready to predict disaster.
Thanks for the insight.
Last edited:
The Empress Lilly
Well-Known Member
I've got two questions:
What I don't understand is how the capital flows between the resort, TWDC, and the real estate development. Almosty sneakily, DLP has been building its own EPCOT city. In one of the most expensive real estate areas of Europe, DLP has been and is building a town for sixty thousand people, and a huge shopping mall. Five billion euros have been sunk into it. Which makes the 1.7 billion debt look like irrelevant pocket change. I think somebody understood that DLP received a huge plot of land through a favourable deal with the French government in the 80s, with excellent infrastructure, right in Europe's most dense and underserved urban area, and figured that you'd be mad to build golf courses and hotels instead of playing real estate developer.
As for the debt, the part owed to TWDC pays rent to TWDC. There is no reason for tWDC to get worked up about it. It is one subsidiary paying another. The major issue then is of clever fiscal construction.
Yes, questions without question marks, just hoping one of you fine knowledgeable gentlemen in this thread can enlighten me about these two issues.
What I don't understand is how the capital flows between the resort, TWDC, and the real estate development. Almosty sneakily, DLP has been building its own EPCOT city. In one of the most expensive real estate areas of Europe, DLP has been and is building a town for sixty thousand people, and a huge shopping mall. Five billion euros have been sunk into it. Which makes the 1.7 billion debt look like irrelevant pocket change. I think somebody understood that DLP received a huge plot of land through a favourable deal with the French government in the 80s, with excellent infrastructure, right in Europe's most dense and underserved urban area, and figured that you'd be mad to build golf courses and hotels instead of playing real estate developer.
As for the debt, the part owed to TWDC pays rent to TWDC. There is no reason for tWDC to get worked up about it. It is one subsidiary paying another. The major issue then is of clever fiscal construction.
Yes, questions without question marks, just hoping one of you fine knowledgeable gentlemen in this thread can enlighten me about these two issues.
Excellent questions, and I know not the answers to any of them. I know a few things about reading financials, and that's about it. But one of the other things that I know, and used my Wisconsin farmers as an example, is that huge wealth can be built up while carrying debt and having very little in net income. It's reassuring to hear how DLP is probably sitting on a huge amount of land and land development, and how its debt is essentially owed to the mother company.
Some of the greatest fortunes in America were built when the railroads went west, and the government gave these railroads essentially a square mile of land for each mile of track laid. That land, located right where the towns and villages eventually grew up, were hugely valuable.
Not to brag, but my business carries debt equal to about 75% of my gross revenues. Despite this, my net worth creeped over a million bucks last year. And my firm doesn't have anything in any way comparable to the type of asset that DLP is sitting on, even if you dropped a whole lot of zeros from the numbers. It's apples to radial tires. Overall, I'm optimistic about the whole thing.
Some of the greatest fortunes in America were built when the railroads went west, and the government gave these railroads essentially a square mile of land for each mile of track laid. That land, located right where the towns and villages eventually grew up, were hugely valuable.
Not to brag, but my business carries debt equal to about 75% of my gross revenues. Despite this, my net worth creeped over a million bucks last year. And my firm doesn't have anything in any way comparable to the type of asset that DLP is sitting on, even if you dropped a whole lot of zeros from the numbers. It's apples to radial tires. Overall, I'm optimistic about the whole thing.
cheezbat
Well-Known Member
If I were running the resort, I'd close or sell off two or three of the hotels. Why so many? The place doesn't need it.
Secondly, the parks would close three months out of the year, during the worst weather/least visited time of the year.
Thirdly...get the Studios park where it needs to be. A crappy half-day park isn't bringing anybody in, and the turn style clicks show that. They need some serious additions/park buildout to make it a worthy secondary gate. Once that's done, I think it'd help pull the resort into a profitable asset much faster.
Secondly, the parks would close three months out of the year, during the worst weather/least visited time of the year.
Thirdly...get the Studios park where it needs to be. A crappy half-day park isn't bringing anybody in, and the turn style clicks show that. They need some serious additions/park buildout to make it a worthy secondary gate. Once that's done, I think it'd help pull the resort into a profitable asset much faster.
lazyboy97o
Well-Known Member
Real estate development was always part of the deal with the French government.
Euro Disney SCA is not a wholly or even majority owned subsidiary, and this is why The Walt Disney Company wants to be paid. It may still exist somewhere, but the Euro Disney SCA website used to have a flow chart of the ownership and company structures. It was a mess of holding companies and subsidiaries.
Once Studios builds up to be a full day park, (which I agree would be the imperative next step in the process), I think keeping all the hotels will make a lot more sense. The hotels have an average of 18% vacancy right now, but turning Studios into a full day park will likely fill them up. After all, many more people will want to stay overnight if there are two parks that take a full day each to see. And once the hotels get the reputation of becoming fully booked, they can raise their prices substantially.
As for closing up in the winter, wouldn't it be difficult to gear up the place again after such a long layover? And keeping a workforce from year to year will be hard if they are essentially furloughed for a few months every year. Also, given the labor laws in much of Europe, DLP may still have to pay them full (or nearly full) wages during that time of layoff. It's not like here where laid off workers receive unemployment comp benefits but that actually costs only a little bit extra to the employer. In Europe paying workers nearly full wages to do nothing is often a huge ridiculous expense.
My feeling, if they're going to close up at all, pick a day in the week. According to Marty Sklar's book, Disneyland would close a day or two every week up until relatively recently like the 1980's, which somewhat boggles my mind. Day closings allow for hassle-free maintenance time, and gives CM's scheduled time off (not layoffs or furloughs), thereby cutting the workforce costs substantially. I think once Studios becomes a full day park, closing one park on, let's say, Tuesday and the other on Wednesday would potentially make sense. If guests show up, they'll at least have one of the two parks to visit.
I also think that Europe may eventually go the way of the U.S. in which lull times of the year even out. We usually go to WDW in mid-November because it's less crowded, but that's changing. There are far fewer lull times than there used to be, and I'm thinking that Europeans may eventually clue in on this and come during non-peak times as well. Or maybe not.
As for closing up in the winter, wouldn't it be difficult to gear up the place again after such a long layover? And keeping a workforce from year to year will be hard if they are essentially furloughed for a few months every year. Also, given the labor laws in much of Europe, DLP may still have to pay them full (or nearly full) wages during that time of layoff. It's not like here where laid off workers receive unemployment comp benefits but that actually costs only a little bit extra to the employer. In Europe paying workers nearly full wages to do nothing is often a huge ridiculous expense.
My feeling, if they're going to close up at all, pick a day in the week. According to Marty Sklar's book, Disneyland would close a day or two every week up until relatively recently like the 1980's, which somewhat boggles my mind. Day closings allow for hassle-free maintenance time, and gives CM's scheduled time off (not layoffs or furloughs), thereby cutting the workforce costs substantially. I think once Studios becomes a full day park, closing one park on, let's say, Tuesday and the other on Wednesday would potentially make sense. If guests show up, they'll at least have one of the two parks to visit.
I also think that Europe may eventually go the way of the U.S. in which lull times of the year even out. We usually go to WDW in mid-November because it's less crowded, but that's changing. There are far fewer lull times than there used to be, and I'm thinking that Europeans may eventually clue in on this and come during non-peak times as well. Or maybe not.
The Empress Lilly
Well-Known Member
I tried to untangle that mess just last year. I had to give up, realising it would take me all day long and even then I still wouldn't be sure if I got it right.