Case Study: 1
The Not-So-Wonderful World of Euro Disney
In April 1992, EuroDisney SCA opened its doors to European visitors. Located by the river Marne some 20 miles east of Paris, it was designed to be the biggest and most lavish theme park that Walt Disney Company (Disney) had built to date – bigger than Disneyland in Anaheim, California; Disney World in Oralando, Florida; and Tokyo Disneyland in Japan.
Much to Disney management’s surprise, Europeans failed to “go goofy” over Mickey, unlike their Japanese counterparts. Between 1990 and early 1992, some 14 million people had visited Tokyo Disneyland, with three-quarters being repeat visitors. A family of four staying overnight at a nearby hotel would easily spend $600 on a visit to the park. In contrast, at EuroDisney, families were reluctant to spend the $280 a day needed to enjoy the attractions of the park, including les hamburgers and les milkshakes. Staying overnight was out of the question for many because hotel rooms were so high priced. For example, prices ranged from $110 to $380 a night at the Newport Bay Club, the largest of EuroDisney’s six new hotels and one of the biggest in Europe. In comparison, a room in a top hotel in Paris cost between $340 and $380 a night.
Financial losses became so massive at EuroDisney that the president had to structure a rescue package to put EuroDisney back on firm financial ground. Many French bankers questioned the initial financing but the Disney response was that their views reflected the cautious. Old world thinking of Europeans who didn’t understand U.S.-style free market financing. After some acrimonious dealings with French banks a two-year financial plan was negotiated. Disney management rapidly revised their marketing plan and introduced strategic and tactical changes in the hope of “doing it right” this time.
A Real Estate Dream Come True : The Paris location was chosen over 200 other potential sites stretching from Portugal through Spain, France, Italy, and into Greece. Spain thought it had the strongest bid based on its yearlong temperate and sunny Mediterranean climate, but insufficient acreage of land was available for development around Barcelona. In the end, the French government’s generous incentives, together with impressive data on regional demographics, swayed Disney management to choose the Paris location. It was calculated that some 310 million people in Europe live within two hours’ air travel of EuroDisney, and 17 million could reach the park within two hours by car – better demographics than at any other Disney site. Pessimistic talk about the dismal winter weather of northern France was countered with references to the success of Tokyo Disneyland, where resolute visitors brave cold winds and snow to enjoy their piece of Americana. Furthermore, it was argued, Paris is Europe’s most-popular city destination among tourists of all nationalities.
Spills and Thrills: Disney had projected that the new theme park would attract 11 million visitors and generate over $100 million in operating earnings during the first year of operation. By summer 1994, EuroDisney had lost more than $900 million since opening. Attendance reached only 9.2 million in 1992, and visitors spent 12 percent less on purchases than the estimated $33 per head.
If tourists were not flocking to taste the thrills of the new EuroDisney, where were they going for their summer vacations in 1992? Ironically enough, an unforeseen combination of transatlantic airfare wars and currency movements resulted in a trip to Disney World in Orlando being cheaper than a trip to Paris, with guaranteed good weather and beautiful Floridian beaches within easy reach.
EuroDisney management took steps to rectify immediate problems in 1992 by cutting rates at two hotels up to 25 percent, introducing some cheaper meals at restaurants, and launching a Paris ad blitz that proclaimed “California in only 20...
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