Walt Disney Co broke ground on its long-awaited Shanghai Disneyland theme park in China's financial hub on Friday, banking on new attactions to draw millions of visitors and boost its profits in the region.
The Mickey and Minnie Mouse duo kicked off the fanfare dressed in traditional Chinese garb to a cacophony of drums, launching a Magic Kingdom-style park tailored specifically to China.
Disney's first theme park in mainland China and its third in Asia will cost an initial 24.5 billion yuan (USD 3.7 billion).
Disney has long sought to build in Shanghai, a wealthy city of about 20 million that is ringed by the prosperous Yangtze River Delta, home to tens of millions more potential visitors.
"Our Shanghai resort will be a world-class family vacation destination that combines classic Disney characters and storytelling with the uniqueness and beauty of China," Robert Iger, chief executive of Walt Disney Co, said in a statement.
"Working with our Chinese partners, the Shanghai Disney Resort will be both authentically Disney and distinctly Chinese," he said. The park will include an interactive castle unique to Shanghai Disneyland.
Situated in an eastern suburb of Shanghai, the park aims to attract 7.3 million visitors annually when it opens in about five years, the Shanghai government has said.
An additional 4.5 billion yuan will be invested to build other aspects of the resort, including hotels and retail, dining and entertainment.
The investment amounts will be split between Disney and the Shanghai Shendi Group, with Disney holding 43 percent of the shares of the owner companies and government-backed Shendi holding the remaining 57%.
A joint venture management company will also be formed, with Disney having a 70% stake and Shanghai Shendi Group holding a 30% stake.
Disney's theme park foray into mainland China is a long-awaited move as the entertainment giant seeks to expand its international footprint in an effort to offset soft growth back home. The start of construction of Shanghai Disneyland is the culmination of years of negotiation with China.
Last November, Disney signed an agreement with the Shanghai company to build the park.
Analysts said the location of the park in Shanghai is ideal, as a number of wealthy cities lie around the Yangtze Delta region where Shanghai is located.
"Disney has a huge opportunity in China. You've got about 80 million people living within a five-hour train ride of Shanghai," said Shaun Rein, managing director of Shanghai-based China Market Research.
Disney does not have a television channel in China, where the media industry is tightly regulated. However, it runs several English training schools for children across Shanghai and Beijing.
Not Hong Kong Disneyland
Disney opened Hong Kong Disneyland in 2005 and suffered years of slow attendance growth and net losses. In the park's 2010 fiscal year, it suffered a net loss of HK$718 million (USD 92.4 million).
Rein said the problem with the Hong Kong park has been that it was too small and lacked rides. Given that an average Chinese person did not grow up watching Disney characters such as Cinderella and Snow White, the characters lacked emotional resonance with visitors.
"The Hong Kong Disneyland didn't seem like it had size and the Chinese like the biggest of everything," he said, adding that his primary worry is that the Shanghai Disneyland would not be big enough.
"Everybody in China is waiting for Disney to come here... It's an event that everybody is just so excited for it to happen and so if it doesn't match expectations, it will make people upset," Rein said.
The total size of the Shanghai park will be bigger than the Hong Kong park, which is undergoing expansion. Hong Kong Disneyland said it drew 5.2 million visitors in 2010, an increase of 13%, and that more than 40% of visitors were from the mainland.
(USD 1 = 7.771 Hong Kong dollars)
(USD1 = 6.542 yuan)
