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Hong Kong Disneyland reopens amid uncertainty over expansion plans

Resort loses government land for second park amid pressure to develop housing

Visitors welcome the reopening of Hong Kong Disneyland on Sept. 25. The theme park operator this week lost its option to purchase an adjacent 60-hectare patch of land for expansion.   © AP

HONG KONG -- The reopening of Hong Kong Disneyland on Friday eased some of the short-term financial pressures over the troubled resort, but did little to settle doubts that emerged this past week over its longer-term prospects after its expansion plans were quashed by the local government.

Hong Kong Disneyland Resort lost an option to expand its site after authorities decided to not renew an agreement with the amusement park to develop a neighboring site, raising questions about the theme park's future as a regional tourist attraction as it reels from disruptions brought on by the coronavirus pandemic.

After having been closed for most of the year, the theme park opened its doors again on Friday as the city has largely reined in its third wave of the COVID-19 outbreak. Despite that temporary relief, Hong Kong Disneyland is bracing for uncertainties over its future development.

Citing current economic conditions, the Hong Kong government on Wednesday said that it would not extend the option for Disneyland to purchase a 60-hectare patch of land adjacent to its theme park. The land had been reserved for Disneyland's possible expansion since 2000 and was intended for a second park.

"We are extremely disappointed with the Hong Kong government's decision not to extend the Phase 2 land expansion option," a spokesman for The Walt Disney Co. said in response to a query from the Nikkei Asian Review, adding that the company would continue investing in its current expansion plans on its existing land site.

Disneyland staff greet guests at the Hong Kong resort's reopening on Sept. 25. The park is allowed to operate only at half capacity with health and social distancing measures in place.   © Reuters

The decision comes as the Hong Kong government faces mounting pressure from the public to earmark new land for the development of residential housing. Hong Kong's unaffordable property prices are believed to have helped fuel anti-government protests that rocked the city last year.

Hong Kong tycoons have offered to donate land or cash to the government following criticism by Chinese state-run media over the widening of the city's wealth gap.

Frank Chan, Hong Kong's secretary for transport and housing, earlier this year urged Disney to "consider its corporate social responsibility" as he expressed his wish to build temporary residential units on the site.

"I believe the government's decision was a fair one," Yiu Si-wing, the lawmaker representing the city's tourism sector, told Nikkei. "We don't see Disney having a near-term plan to commit in the expansion. And Hong Kong is facing an extreme shortage of land," he said.

Yiu added that Disney "seems to have placed more emphasis" on developing its Disneyland resort in Shanghai, where the number of visitors and revenue have already exceeded those of the Hong Kong park -- the world's smallest Disneyland resort.

Since the Hong Kong Disneyland Resort's launch in 2005, the park has recorded a net profit only three times -- during a run from 2012 to 2014. Battered by the social unrest in 2019, its loss doubled to 105 million Hong Kong dollars ($13.5 million) in the 2018-19 financial year.

Although the park currently is allowed to operate at half capacity with health and social distancing measures in place, the financial hub's prolonged travel restrictions will put the resort's income under pressure, as only 41% of its visitors last year were Hong Kong residents.

Disneyland has said it planned to expand its existing theme park by adding at least one new attraction almost every year through 2023, costing at least HK$10.9 billion, according to a paper submitted to the city's legislature in June.

Hong Kong's Disneyland resort, which is located near the city's international airport, is jointly owned by the local government and Disney through a joint venture, Hong Kong International Theme Parks, or HKITP, in which the Hong Kong government holds a 53% stake and Walt Disney Co. owns the rest.

The Disneyland resort also is coming under public pressure due to its huge losses. These have created a financial burden for the Hong Kong government, which is expected to run a budget deficit in the coming years due to coronavirus relief measures.

In May, Hong Kong lawmakers approved a HK$5.4 billion bailout fund for another struggling theme park, Ocean Park, amid much controversy.

A spokesperson for the city's Commerce and Economic Development Bureau said in a statement that it would be more "prudent" for Disney to focus on its existing resort in the coming few years in lieu of a geographic expansion.

"HKITP's strategic direction is to focus on the ongoing multi-expansion plan featuring a series of new attractions that will continue to position Hong Kong Disneyland as a premier tourism destination in the region," the spokesperson said. "The government continues to fully support the existing expansion plan for the resort despite the prevailing worldwide tourism downturn."

Hong Kong Disneyland first closed in January, during the early days of the pandemic. It reopened in June, after the city's COVID-19 infection levels fell, but closed again in July as cases spiked.

"Hong Kong cannot rely on one single theme park to attract tourists in the long-run," said Yiu, the tourism sector lawmaker. "We need to explore different attractions for our tourism industry to be more sustainable."

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