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Business

Hong Kong theme parks on the ropes

Disneyland's revival plan draws heat, while Ocean Park has worst year in decades

HONG KONG -- For theme park operators, there are happier places on Earth than Hong Kong at the moment. Parks here have suffered their worst year in decades, slammed by intensifying regional competition and China's slowing economy.

The loss-making Hong Kong Disneyland hopes to turn its fortunes around with a $1.4 billion revamp. However, doubts over the park's long-term profitability could put the project on hold.

According to plans unveiled in late November, new attractions will be introduced at the decade-old theme park from 2018 to 2023. These include a revamped Sleeping Beauty castle, new rides featuring characters from Marvel's "The Avengers" series and a theme area based on the animated hit film "Frozen," which would be a Disney first.

The Hong Kong government, which has a 53% stake in the park, will inject $750 million into the project, with Walt Disney covering the rest. Local lawmakers, however, are unhappy with the deal. The Legislative Council, Hong Kong's de facto parliament, passed an unbinding motion to postpone the expansion project until the terms are renegotiated.

Critics say Disney has created an "unequal treaty" with Hong Kong because it is able to charge royalty and management fees despite the losses. The world's smallest Disney theme park, Hong Kong Disneyland has turned an annual profit only three times since opening in 2005. It recorded a loss of $19 million last year and attendance slumped about 10% on the year, as China's economic slowdown led to a decline in mainland visitors.

Lawmaker Wu Chi-wai estimates that Walt Disney receives 200-300 million Hong Kong dollars ($25.8 million to $38.6 million) annually from royalties of 10% on ticket sales and 5% on merchandise and food. "This is like injecting public money into a Disney black hole," he said, citing the need for more financial transparency before moving head with the expansion. Others have said the government should seek third-party investors or divest its holdings.

The park's officials say business is not being hurt by the $5.5 billion Shanghai Disneyland that opened in June and is three times bigger. "In summer, Shanghai actually helped bring the Disney brand into Asia ... so we improved in terms of attracting more guests," said Managing Director Samuel Lau Wing-kee, without giving any figures. "We haven't seen an impact from Shanghai."

Strong undertow

Another Hong Kong theme park feeling the squeeze is Ocean Park, which reported its first loss since the 2003 outbreak here of SARS (severe acute respiratory syndrome). Its loss of HK$241 million for the year ended in June was its biggest in nearly three decades and comes after the previous year's profit of HK$45 million.

Ocean Park blamed a sharp decline in mainland visitors, who together with overseas tourists accounted for 60% of total visitors. Chairman Leo Kung Lin-cheng saw little chance of a quick turnaround, citing a sectorwide downturn amid rising competition from other parks in the region.

There are an estimated 40 marine-themed attractions in mainland China. Just an hour's ferry ride from Hong Kong is one of the largest ones: Chimelong Ocean Kingdom, in Hengqin, Guangdong Province. It is about twice the size of Ocean Park and three times bigger than Hong Kong Disneyland.

Ocean Park is betting big on the holiday season. It will splash out HK$10 million on Christmas attractions, including stage shows featuring finalists from the reality TV show "Australia's Got Talent." It also announced it will raise entrance fees by 14% from next year, just days after news broke that a rail line connecting the park with downturn areas would be launched on Dec. 28.

Asked about the impact of a fee hike, Kung said he is confident Ocean Park will retain its appeal due to projects it is cooking up. With the opening of an all-weather water park and two five-star hotels, including a Marriott hotel, there in the next three years, it hopes to transform itself from just a theme park into a resort destination. 

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