At the end of the day, movies can be a long term investment. Disney continues to mine and profit off of decades old IPs.
Things also cost less to produce back then, if we really wanted to get into “profitability”
I want to preface this by saying I am a fan of PATF. The movie also did make a solid profit, grossing $271 mil worldwide on a $105 mil budget. I don't even buy claims that it was responsible for the death of hand drawn, it was more successful than the previous three non-Pixar CGI Disney movies Chicken Little, Bolt and Meet the Robinsons (the latter of which did do quite poorly, and I really liked it too).
I will also say that I don't personally care about whether a movie does well. It's not necessarily a sign of either the quality of the film, nor an indication of its success in the long term Pinocchio and Fantasia were some of the biggest bombs from Disney ever, they failed to even make back their budgets and lost the company millions (in 1940 dollars with a company that didn't have the cash to spare) and nearly bankrupted the company. Yet both are considered beloved classics now, with releases in the coming decades much more profitable. When You Wish Upon A Star basically became the company's theme song.
With all that said, corporate did and still does consider PATF a failure by their expectations. I think they were expecting something on the level of Lion King or Beauty and the Beast success. I don't personally consider this to be a fair assessment, but my opinion isn't relevant to the company's own. Until the plans to replace Splash Mountain came up, Disney had relatively little interest in the IP. I also don't think it has grown significantly in popularity since release. In the decade following release, there hasn't been nearly as much merch for it as other movies. And it's highly uncommong to see kids wearing Tiana dresses, they definitely don't sell as much as other pricesses (though there are other unique demographic factors behind this, not just because the IP itself isn't well liked).
The decision to use Tiana in Splash was because of a lack of other appropriate choices. They needed an established kid friendly IP with a black character, and their options were limited. Their only Marvel options as far as I know can't be used at WDW. Tiana being a princess was a plus for corporate, and Disneyland at least won't have the placement problems WDW will.
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