Bob Iger Touts Strong First Year at Shanghai Disney Resort

Disney CEO Bob Iger at Shanghai Disney Resort - Getty H 2016
Courtesy of Getty Images

At a glitzy anniversary event held within the Chinese park Friday, the Disney CEO revealed that year-one attendance figures far execeeded forecasts.

All is well within China's Magic Kingdom.

With fireworks bursting overhead and music from Pinocchio filling the air, Walt Disney Co. CEO Bob Iger took the stage in China on Friday to celebrate the one-year anniversary of the $5.5 billion Shanghai Disney Resort.

"[This] first anniversary is cause for great celebration for everyone involved in bringing this spectacular dream to life," Iger said, standing in front of the Shanghai park's 196.8-foot Enchanted Storybook Castle — the tallest castle Disney has built to date. 

A smooth rollout in China was far from certain for Disney just over a year ago, but on Friday, the House of Mouse appeared to have every reason to celebrate. "More than 11 million guests have already visited, and we look forward to welcoming many more in the years to come," Iger added. Disney says the resort's first-year performance "exceeded every one of [our] expectations, from theme park attendance to guest satisfaction."

Disney also reiterated earlier reports that two-thirds of visitors came from outside the Shanghai area, suggesting that the park has become a national destination for China.

"Given the significant unknowns about how well the China market would accept the Disney product, it's a huge sigh of relief," says Chris Yoshii, vp economics at U.S. consulting firm AECOM at its Hong Kong office. "What is more remarkable is this was achieved at a price point that was 100 percent above other local theme and amusement parks in Shanghai," Yoshii adds.

Whether Disney had calibrated its pricing effectively was one of the biggest unknowns ahead of the park's debut last year. Shanghai Disney admissions run 499 yuan ($73) on weekends — a considerable figure given the average monthly salary is under 6,000 yuan in Shanghai, where people earn more than other parts of the country. Concessions in the park — many of which have been tailored to local tastes, such as the popular Peking Duck Pizza — are also priced well above local norms.

But it's now clear that there was more than ample appetite for a prestige offering, which is how Shanghai Disney has come to be regarded in China.

"If anything, the challenge has been to meet the strong demand — the park is often at capacity, and people are staying longer in the day than expected," says Tim Nollen, an analyst at Macquarie Capital.

In China, more than anywhere, Disney's success is also a win for the local government. In order to gain access to the massive Chinese market — a decades-long negotiating dance that began as far back as the 1990s — Disney accepted an unprecedented 43 percent minority position in the Chinese park itself, while retaining 70 percent of the management company that runs it. The rest went to a consortium of Chinese state-controlled companies called the Shanghai Shendi Group. But the uneven arrangement also gave Shanghai Disneyland the tacit support of Chinese leadership, who had in interest in a smooth rollout.

Because of Beijing's strict control on foreign media, Disney has had to build its ecosystem of brand touchpoints in China without the usual TV channel or OTT service that it might have wished to tether to the launch of a theme park. Two months before Shanghai Disneyland debuted last year, DisneyLife, a local OTT channel that Disney had set up with Alibaba, was ordered shutdown by Beijing regulators.

Disney's films, lead by the Marvel franchises, however, are performing powerfully in the Middle Kingdom, with Disney box-office revenue tripling over the last two years. The company is also reaching Chinese youth through Disney English, an educational initiative set up in six Chinese cities, where students learn a second-language with the help of Mickey and Iron Man. Disney's retail platform in China is also expanding, with two Shanghai Disney Resort stores launched in Shanghai’s Hongqiao Airport this spring. 

On the service front, year one at Shanghai Disneyland has gone relatively smoothly — with nothing like the protests that marred Disneyland Paris' 1992 debut, or the immediate complaints about size that followed the Hong Kong Disneyland unveiling.

"The biggest complaints are about long lines for key attractions, so they are looking to add more capacity," Yoshii says. In November, Disney broke ground on a new Toy Story land, which is to be the park's seventh themed land and the "first of several planned expansions in Shanghai," according to Iger.

Simply getting into the park also presented some headaches to early visitors. To prevent scalping and ticket fraud, Disney requires the actual purchaser of the ticket to be present and to show an ID at the Shanghai park gates. The extra admissions steps resulted in huge bottlenecks at the entrance in the early months. Since then, Disney has added gates and streamlined its queue management.

There have been other innocuous small surprises around how the Chinese engage with the park, too. The high-speed Tron Lightcycle rollercoaster has proved the most popular attraction so far. "But many Chinese are not accustomed to high-thrill coasters, so quite a few guests have been reluctant to try it and are happy to stand nearby and watch," Yoshii notes.

Budding local competition was another potential concern — thus far, forestalled.

On the eve of Shanghai Disney's opening last year, Chinese billionaire Wang Jianlin, chairman of real estate conglomerate Dalian Wanda Group, threw down the gauntlet, boasting that he planned to drive the Burbank-based interlopers out of China with the launch of 12 Wanda-built theme parks across China.

That now appears most unlikely, at least in the near term.

"The quality of the Disney experience, and the appetite of the Chinese consumer for this status, will keep Disney ahead of competitors that don’t have the same level of IP," Nollen says.

Rapid growth in the Chinese parks market overall suggests that the sector is far from a zero-sum game. Theme park attendance in China is expected to climb by the tens of millions over the coming years, surpassing the U.S. as the largest market in 2020 with 280 million annual visits, according to AECOM. In 2016, the Shanghai theme and water parks run by OCT Group, one of China's largest domestic operators, reported strong performance despite the emergence of Disney's huge nearby footprint. 

Opening hurdles cleared, Disney's next test in China, according to analysts, will be endurance and avoiding the "sophomore slump" many new parks encounter. 

"The challenge is that people rush to see the theme park at opening and then take some time to come back again," Yoshii adds. "You need to stay active and engaged with the market and offer something new in year two."

Iger concluded his remarks in Shanghai on Friday: "Finally, I would like to say, this is only the beginning."