FEATURE-Mickey up against the wire at Euro Disney
Thu Jul 8, 2004 10:16 AM ET
By Caroline Brothers
MARNE-LA-VALLEE, France, July 8 (Reuters) - Screams ring out from the Space Mountain rollercoaster, children wrestle with the robot hands on sale in the souvenir shops, and Mickey Mouse signs autographs for queues of pint-sized fans.
For Disneyland Paris, the most popular tourist attraction in Europe, it's business as usual. But it should be so much more.
A 610 million euro ($754 million) investment to open a second park, the Walt Disney Studios, on the doorstep of the Magic Kingdom in March 2002 should have galvanised business for operator Euro Disney (EDLP.PA: Quote, Profile, Research) .
Instead, visitor numbers are virtually flat, the new park has pushed the Walt Disney Co's (DIS.N: Quote, Profile, Research) European outpost into loss and it is now fighting to stave off financial collapse.
"Is there a second park?" said Virginie Yannicopoulos, struggling to keep three youngsters in a line to have their photo taken with Mickey Mouse inside the Magic Kingdom.
"The Walt Disney Studios? We thought that was a museum," added French-born Yannicopoulos, whose husband was nursing a headache at their hotel after too many Space Mountain rides.
Some 2-1/4 years after the second park opened, the four million visitors it should have added every year to the 12.2 million the original park pulled in on its own have not materialised, despite a stepped-up marketing campaign.
Numbers peaked at 13.1 million in 2002 and slipped back to 12.4 million in 2003, when war in Iraq discouraged travel.
The cost has been high. In August Euro Disney announced it was unable to meet 2003 and 2004 loan payments on its 2.4 billion euro debt, citing weak visitor numbers.
It is now holding knife-edge restructuring talks with its banks for the second time in a decade.
ARMAGEDDON
Ironically, visitor satisfaction at Euro Disney is high, its hotels have the best occupancy rates in the sector at 85.1 percent, and many guests insist they will come again.
But they are not doing so in big enough numbers to turn Euro Disney's fortunes around, and Disney watchers say the new park, dedicated to the world of cinema, has been a flop.
Smoke billows over the Stunt Show and the Armageddon space station promises to disintegrate in flames, but the Walt Disney Studios has not set imaginations on fire.
Dutchman Laendert Van Wel, ushering three children past a popcorn stand as the Star Wars theme boomed out, was blunt.
"The new park is smaller and a bit dull -- there are not enough attractions," he said.
Kerry Evans from England said she would only make the detour to the Studios for two attractions, as she stepped off the Rock-and-Rollercoaster -- a high-speed train that hurtles through darkness to the sound of U.S. rock band Aerosmith.
"You come in here, you go down this path to the Aerosmith ride and do the Tram Tour and then you go out again and back to the other park," said Evans, 26, pointing the way.
"It's a bit sparse -- they need a bit more wild stuff."
The Tram Tour winds through Catastrophe Canyon where a blast bursts a dam and water cascades towards the passengers.
Euro Disney's recently appointed Chairman Andre Lacroix wants to use part of a planned 250 million euro capital increase to build "exciting new rides and attractions".
ANOTHER BET
But his first major task has been tackling the debt mountain; last week he said Euro Disney had reached the next stage in life-saving negotiations with its lenders.
The company is seeking a reprieve on some royalty payments to its 39-percent parent the Walt Disney Co. Increased royalties and accounting charges pushed it to a net loss of 109 million euros in the six months to March 31, 2004 while sales were flat.
Euro Disney's bankers and the Walt Disney Co must reach agreement on the plan, which extends the maturity but does not forgive any debt, by July 31, along with the capital increase.
If not, Euro Disney -- which went through another painful debt restructuring in 1994 -- faces bankruptcy.
Most analysts say the proceeds of any capital increase should be used to pay back borrowings even though this would knock only 15 percent off its debt, according to Gilles Raffort at Oddo Securities.
"It's a another bet, just like the launch of the Walt Disney Studios," Raffort said, referring to plans for new rides. "(But) this arrangement saves Euro Disney from bankruptcy in the medium term and gives it a new chance at commercial reorganisation."
Billionaire Saudi Prince Alwaleed bin Talal Sheik Al Walid, who owns some 17 percent of Euro Disney, has not revealed whether he will bring his own cash to the rescue.
But few people believe that France, one of the company's biggest lenders through state-owned CDC bank, will let a business so vital to regional prosperity go under.
Thu Jul 8, 2004 10:16 AM ET
By Caroline Brothers
MARNE-LA-VALLEE, France, July 8 (Reuters) - Screams ring out from the Space Mountain rollercoaster, children wrestle with the robot hands on sale in the souvenir shops, and Mickey Mouse signs autographs for queues of pint-sized fans.
For Disneyland Paris, the most popular tourist attraction in Europe, it's business as usual. But it should be so much more.
A 610 million euro ($754 million) investment to open a second park, the Walt Disney Studios, on the doorstep of the Magic Kingdom in March 2002 should have galvanised business for operator Euro Disney (EDLP.PA: Quote, Profile, Research) .
Instead, visitor numbers are virtually flat, the new park has pushed the Walt Disney Co's (DIS.N: Quote, Profile, Research) European outpost into loss and it is now fighting to stave off financial collapse.
"Is there a second park?" said Virginie Yannicopoulos, struggling to keep three youngsters in a line to have their photo taken with Mickey Mouse inside the Magic Kingdom.
"The Walt Disney Studios? We thought that was a museum," added French-born Yannicopoulos, whose husband was nursing a headache at their hotel after too many Space Mountain rides.
Some 2-1/4 years after the second park opened, the four million visitors it should have added every year to the 12.2 million the original park pulled in on its own have not materialised, despite a stepped-up marketing campaign.
Numbers peaked at 13.1 million in 2002 and slipped back to 12.4 million in 2003, when war in Iraq discouraged travel.
The cost has been high. In August Euro Disney announced it was unable to meet 2003 and 2004 loan payments on its 2.4 billion euro debt, citing weak visitor numbers.
It is now holding knife-edge restructuring talks with its banks for the second time in a decade.
ARMAGEDDON
Ironically, visitor satisfaction at Euro Disney is high, its hotels have the best occupancy rates in the sector at 85.1 percent, and many guests insist they will come again.
But they are not doing so in big enough numbers to turn Euro Disney's fortunes around, and Disney watchers say the new park, dedicated to the world of cinema, has been a flop.
Smoke billows over the Stunt Show and the Armageddon space station promises to disintegrate in flames, but the Walt Disney Studios has not set imaginations on fire.
Dutchman Laendert Van Wel, ushering three children past a popcorn stand as the Star Wars theme boomed out, was blunt.
"The new park is smaller and a bit dull -- there are not enough attractions," he said.
Kerry Evans from England said she would only make the detour to the Studios for two attractions, as she stepped off the Rock-and-Rollercoaster -- a high-speed train that hurtles through darkness to the sound of U.S. rock band Aerosmith.
"You come in here, you go down this path to the Aerosmith ride and do the Tram Tour and then you go out again and back to the other park," said Evans, 26, pointing the way.
"It's a bit sparse -- they need a bit more wild stuff."
The Tram Tour winds through Catastrophe Canyon where a blast bursts a dam and water cascades towards the passengers.
Euro Disney's recently appointed Chairman Andre Lacroix wants to use part of a planned 250 million euro capital increase to build "exciting new rides and attractions".
ANOTHER BET
But his first major task has been tackling the debt mountain; last week he said Euro Disney had reached the next stage in life-saving negotiations with its lenders.
The company is seeking a reprieve on some royalty payments to its 39-percent parent the Walt Disney Co. Increased royalties and accounting charges pushed it to a net loss of 109 million euros in the six months to March 31, 2004 while sales were flat.
Euro Disney's bankers and the Walt Disney Co must reach agreement on the plan, which extends the maturity but does not forgive any debt, by July 31, along with the capital increase.
If not, Euro Disney -- which went through another painful debt restructuring in 1994 -- faces bankruptcy.
Most analysts say the proceeds of any capital increase should be used to pay back borrowings even though this would knock only 15 percent off its debt, according to Gilles Raffort at Oddo Securities.
"It's a another bet, just like the launch of the Walt Disney Studios," Raffort said, referring to plans for new rides. "(But) this arrangement saves Euro Disney from bankruptcy in the medium term and gives it a new chance at commercial reorganisation."
Billionaire Saudi Prince Alwaleed bin Talal Sheik Al Walid, who owns some 17 percent of Euro Disney, has not revealed whether he will bring his own cash to the rescue.
But few people believe that France, one of the company's biggest lenders through state-owned CDC bank, will let a business so vital to regional prosperity go under.