A SaveDisney.com article:
Thinking Inside Disney's Box
Imagineering the Budget for Walt Disney Studios Paris
By Tom Morrow
Imagine, if you will, a Disney theme park with no centerpiece-no castle or geosphere, no ornate Chinese Theater or majestic Tree of Life. Imagine a Disney theme park with no Audio-Animatronics figures or full service restaurants or nighttime fireworks display. Impossible right? Well, nothing's impossible for the dream makers at Disney. Once again Walt Disney Imagineering has done what many thought impossible. They created a theme park less impressive than Disney's California Adventure.
Walt Disney Studios Paris is basically a collection of soundstages grouped together with asphalt paths and some landscaping (and everything is a lovely shade of pale tan). It's billed as a full-day Disney theme park but has only 10 attractions, 3 quick service restaurants and 5 shops. That's a worthwhile way to spend a day out of your expensive European vacation, isn't it?
Okay maybe not, but it sounds like Disney saved a lot of money on the project, so at least the shareholders should be happy...but they're not. Because on June 30th the Walt Disney Company agreed to a restructuring of Euro Disney SCA (the owner and operator of Disneyland Paris and Walt Disney Studios) that will cost them hundreds of millions of Euros (which is trading higher then the dollar by the way). The goal is to prevent Euro Disney SCA from defaulting on $2.9 billion of debt.
On June 9th of this year, Bloomberg Market News reported: "Euro Disney's debt problems stem at least in part from the Walt Disney Studios park, which it opened in March 2002. The park has failed to attract enough visitors to help Euro Disney meet its debt payments."
The resort is no stranger to financial hardship. It opened in 1992 amid a recession and incurred harsh criticism from French intellectuals and was dubbed a "cultural Chernobyl" by the press. Corporate management in Burbank did what they always do, found a scapegoat, fired him and then hired two people to replace him. In this instance they hired the right two people, Philippe Bourguignon and Steve Burke. The pair bridged the cultural gap by making concessions to the French including selling wine in the park (the French like wine, who knew?) and implementing an aggressive financial restructuring. When the dust settled, the strategy had worked. Disneyland Paris saw its first profit in 1995 and remained profitable for the next six years. In March of 2002, the Walt Disney Studios Park opened. In 2002 and 2003 the resort once again reported losses.
How does something like this happen? Disneyland Paris is one of the great Cinderella stories (yes, a bad Disney pun) of American business abroad. How could they screw it up twice?
Misidentifying the problem
In a universe defined by a spreadsheet, intangibles don't exist. Cultural differences, taste, and emotional connections are absent. There is only investment and return. The management of the Walt Disney Company seems to have come to the conclusion that Disneyland Paris failed because too much money was invested in it. If they had built a smaller, less expensive park (see Hong Kong Disneyland) it would have yielded a better return on investment-theoretically. The Magic Kingdom at Disneyland Paris, for those of you not familiar, is easily the most ornate, beautifully themed, meticulously detailed kingdom of them all (there is even an Audio-Animatronics dragon living in a dungeon under the castle). This, management has decided, is the problem (the expensive theming, not so much the dragon). They refuse to acknowledge other drawbacks that have nothing to do with the level of investment in the park itself.
For instance, the climate. Paris is not Orlando or Anaheim. Its latitude is farther north than that of Seattle, Washington or Augusta, Maine or even Toronto, Canada. Also, it's in France. The French, need I point out, aren't fond of having their culture Americanized. They've been very vocal on this issue for the past fifty years. Can't imagine how the Disney executives missed it.
However, the biggest problem with the investment in Euro Disney was not due to climate or culture but was in fact financial. The pencil jockeys did get one thing right, the investment was too high. But, not necessarily in the theme park. They invested hundreds of millions in Michael Eisner's newest hobby...architecture (Eisner it seems was entranced by the pastels and minimalist structural forms found in postmodern architecture...whatever). Eisner was determined to use Disneyland Paris hotels as his foray into the world of "respectable" architecture. As a result, Disneyland Paris opened in 1992 with six hotels and a campground. Ever try to pitch a tent in frozen earth? Six hotels to support one park (Walt Disney World opened with two), when the train ride into Paris (which has a few decent hotels of its own) takes less then thirty minutes. It seems those Harvard MBAs missed the class on supply and demand. But the mistake could not have been their fault, they reasoned; it must be the fault of those annoying creative people. They spent too much building the park. So, the MBAs decided that they would not let the creatives make the same mistake twice.
...and the pendulum swings to the other extreme
The clearly defined corporate strategy of the late 1990s was for all Disney resorts world wide to become "destination resorts" like Walt Disney World. Destination resorts are marketed to out-of-town tourists who spend significantly more than locals on everything from theme park admission to jacket potatoes to ice-lollies (the Parisian equivalent of turkey legs and Dole Whip). Plans were set in motion to add "second gates" to Anaheim, Tokyo and Paris. An executive decision was made. Without regard to local conditions, a blanket statement set a series of events in motion that would reverse all the good work done in the mid-1990s.
The executive who presided over this "expansion" was Jay Rasulo. Rasulo started his Disney career by joining the Strategic Planning fraternity in 1986. At the time, he lobbied against hefty investment in large scale E-ticket attractions. Since then, however, E-tickets like the Twilight Zone Tower of Terror at Disney-MGM Studios, Indiana Jones Adventure at Disneyland have been credited with driving attendance for a decade. More recently Mission: Space has been credited with reviving attendance at Epcot. Fortunately for those parks, Jay Rasulo and the other strat planning frat boys did not get their way.
This brilliant strategic thinking led to his promotion to Chairman of Disneyland Paris in 1998, where he kept costs low and saw to it that the "mistakes" of '92 would not be repeated.
Rasulo, like his shortsighted counterparts at corporate, believed that a second gate would extend the average guest's length-of-stay and help fill up Eisner's aging hotel rooms. But since the second gate was far from a full day experience, it did nothing of the kind. The second gate became a tremendous drain on the resort's bottom line. Ironically Rasulo spent about $600 million on the park; whereas an E-ticket ride would have cost him less then $200 million and would have been a more cost-effective way to bring additional traffic to the resort (evidenced by the attendance boost the park received when it added Space Mountain in 1994).
Jay Rasulo was once again rewarded for his "success" in Paris with a promotion to President of Walt Disney Parks and Resorts. He is now responsible for the operation of all Disney Theme Parks worldwide as well as Walt Disney Imagineering.
Rasulo, like Eisner, was caught up in the notion that two parks are better than one. Instead of looking at the simple fact that 14 million guests a year are better than 10 million guests a year, regardless of the number of parks. The first gate, the Magic Kingdom in Paris, wasn't filling to capacity. It could easily take on an additional four to five million people a year-the stated goal of Walt Disney Studios Paris. Rasulo believed that the addition of the second gate would entice people to extend their visit by one day. He didn't count on the fact that people have brains and can think for themselves. The extra-park-extra-day trick only works if the new park is both enormously appealing and is perceived to be a full-day experience (as Epcot was in 1982). The experience of Disneyland Paris can be seen as a microcosm for the problem with the entire company. The company is so obsessed with growth, it is ignoring the foundation that growth needs to be built on.
Disney's California Adventure was a product of the same shortsighted thinking on the part of strategic planners. The park has never recovered from bad word of mouth that it was a second-rate park by Disney standards. By contrast, Oriental Land Company went all out for its second gate at Tokyo Disneyland, creating a true companion experience for the original park. The spectacular Tokyo Disney Sea, designed by Imagineering, but budgeted and paid for by OLC, has been a spectacular success, even in a tough Japanese economy.
But nowhere in the world is the descent of Imagineering more evident than at the Disneyland Resort Paris. The most spectacular and the most banal of theme parks sit side by side in pasture outside of Paris. The contrast is striking. It is a living monument to the reactionary nature of the Walt Disney Company's current management and a testament to the folly of designing from a spreadsheet.
