Disneyland Shanghai will be one of the largest foreign investments ever made in China.
The Walt Disney Co. will break ground on the Shanghai theme park this week with CEO Bob Iger. After 10 years of negotiations with China government, “the $3.7 billion initial phase of construction expected to begin Friday will cover 1.5 square miles, with construction on a theme park and two hotels, and will reserve an additional 1.1. square miles for further development,” said China’s Xinhua news agency. Disneyland Shanghai plans to open in 2016 in the Pudong district made famous by the World Expo in 2010, will be Disney’s sixth theme park around the world, third in Asia after Tokyo and Hong Kong and first on China’s mainland. It will be about 1/26 the size of Walt Disney. Alan Gould, an analyst with New York-based Evercore Partners, said: “Compared with Disney’s land acquisition in Florida, the Shanghai park provides Disney with a powerful business partner (the Chinese government) and a blueprint for business expansion to fully exploit the surging domestic consumption in the fastest-growing economy in the world.”
Gould of Evercore estimates that Disneyland Shanghai will generate management fees of $65-70 million in its first fiscal year of operations, 2016, and grow to more than $200 million in 10 years “assuming the park reaches 15 million in attendance.”
The ownership of the park in Shanghai — a city of roughly 20 million people about halfway between Hong Kong to the South and the capital Beijing to the north — is reported by Chinese media to be 57 percent by Shanghai Shendi Group and 43 percent by Disney, exactly the same as Hong Kong Disneyland. Since it opened in 2005, Hong Kong Disneyland has experienced lower-than-expected attendance with 42 percent of its guests last year coming from the mainland, according to the park’s statistics.
Disneyland Shanghai is expected to draw 7.3 million visitors its first year. “The park has ambitions to be both authentically Chinese and authentically Disney, and exemplifies the global power of the Disney brand portfolio,” Greg Brown said, an analyst with Memphis, Tenn.-based equity research firm Wunderlich Securities. “The Chinese government will be the majority owner of the park and arguably will benefit from the expansion of the Disney brand, the awareness of Disney content and the protection of Disney’s intellectual property in China,” Gould said.