Originally Posted By jonvn "Actually, it's a condensation of the big issues, and it IS pretty much the big picture. " The misjudged what people wanted to buy as souvenirs, they sat on shelves and no one bought them. They underestimated how much labor was going to cost them, by as much as 40%. They were planning on creating a business park and housing complex, but the recession at the time stopped that, as well. This was going to account for around half of their revenue. And so on. Again, this has been discussed many times. " I don't remember any official using the hotels to make excuses for poor returns of revenue" Actually, it has. Every time someone brings up that they did not do well there they say "We built too many hotels." That covers up the fact that they screwed up so badly in building and financing this park. Wraps it up in a neat little bow. But it's more than that. The hotels did not have that bad an occupancy rate, but they did close one hotel in the off season due to lack of attendance. Really, they built two hotels too many. The entire resort was not going under because of this. You don't lose 1 million a day because you have two extra hotels. There are many things that dragged down the park. Outrageous spending in construction that basically made the park nearly impossible to operate at a profit was the main one. However, there were many other issues as well, and the park from the get go never had a chance financially. With the combination of high construction costs, and a severly less than expected flow of revenue, they went bankrupt, basically. The lesson here is that all the beauty and attendance in the world means nothing if you can't pay for it.
Originally Posted By arstogas >>>The hotels did not have that bad an occupancy rate, but they did close one hotel in the off season due to lack of attendance.<< The hotels rarely cracked the 50% occupancy rate. That's death for a Disney hotel, and very bad for most hoteliers in general. Labor costs didn't go 40% higher, it was actually closer to 18% higher. Still a HUGE miscalculation, I'll give you that. Souvenirs and food services were a miscalculation, but I promise you, again... Look at actual operating costs for the park alone, and ticket sales on a SLOW day would have got them to breakeven. This is true for any Disney park, and the fact that DLP cost way more than it should have DOES, indeed, make it a higher stress burden on the bottom line. But the truth is the hotels did perform TERRIBLY. And the only thing performing was the park. Essentially we're in agreement here... the park's cost, plus the debt burden and no profit being generated by hotels (I know the hotel industry, and this was a huge factor, can't be diminished in DLP's case, just because the execs liked to cite it) it all just added up to a weight to heavy. Again, they never sold the park, and they did have suitors. It's never made sense to sell the park. And if you want some evidence as to DLP's strengthening, check the latest report... one of the websites has it, I think that DLP-Guide place. It's not outrageous good news, but it shows stability.
Originally Posted By arstogas Along the same thread... the residential district adjacent to DLP is underway now, isn't it? I can't remember if they've broken ground or not.
Originally Posted By jonvn No. The park was not performing. The park was not getting as many guests as hoped for, the costs in running it were much higher than expected, and the people who did go were not buying any of the souvenirs. Here's a link that talks about some of these things: <a href="http://www.hiddenmickeys.org/Disney/Paris/English/LynEuroDisney.html" target="_blank">http://www.hiddenmickeys.org/D isney/Paris/English/LynEuroDisney.html</a> No, they did not sell the park in total, but the did sell a large percent of the park. Here is an Amazon link to a book that talks about construction and the final bail out: <a href="http://www.amazon.com/exec/obidos/ASIN/070060989X/qid=1012352405/sr=1-2/ref=sr_1_11_2/102-5006056-6683319" target="_blank">http://www.amazon.com/exec/obi dos/ASIN/070060989X/qid=1012352405/sr=1-2/ref=sr_1_11_2/102-5006056-6683319</a> What it comes down to is that they so badly miscalculated what they did in Paris on so many levels, that they became very conservative and cautious. This was in fact mentioned in internal documents that the company used in presentations.
Originally Posted By fredb >>>The whole Disney's America thing was an ambush on the Mouse... it was pretty ugly and unfair, frankly. Disney's aim, certainly, was to make money, but you had some rich fox-hunters pairing up with some historians willing to literally fudge with historical data, in order to make Disney look like an apathetic squatter...<<< From what I could tell Disney blundered into the minefield, all on their own. and then it got Ugly. And on fudging historical data, In the course of the Civil War, some army tromped thru someone granddaddies cornfield in Virginia every day of the week, and if Disney in one of their only times of building a park outside of CA or FL, had done some proper land use studies, they could have shown how there are Houses, Malls, Government Buildings, Roads on So called "Civil war land", instead they got Blindsided by it. I would have loved to have a park nearby.
Originally Posted By arstogas Well, one, Lyn Burgoyne's paper is a Master's Thesis. These are 1) never challenged and 2) written almost always with a strong bias towards proving a point, regardless of what facts reveal. Now he/she DOES cite many sources, BUT some of them are just plain wrong. I mean, he/she's got facts that aren't facts. They weren't even facts back in 1982: "One mistake was allowing other companies to build lucrative hotels surrounding their theme park, as happened at Walt Disney World in Orlando, Florida, where the Walt Disney Company owns only 14% of all hotels." Aside from the Hotel Village on the Southeastern side of the property, and the Swan, Dolphin and Shades of Green, Disney owns all their hotels. It's a much higher percentage than 14%. And if the author meant (and this is bad construction if that's what he/she meant) that Disney owns 14% of all hotel rooms in the Orlando AREA, then the point is moot, because Disney's "discontent" with the number of hotel rooms never was an issue unaddressed, particularly in the Eisner era, where they kept adding and adding over the years. This writer also (correctly) states that the Mouse didn't sell of properties that it could have, though you're right, Jon, regarding the reorganization that split off some of the overall assets in return for the bailout. But Disney still holds a very sizeable chunk, there IS reinvestment going on in a major way, and you don't do that if you're only "surviving". The various partners wouldn't allow it. He also cites that they hit their first year target of 11 million, though in the next sentence acknowledges a lack of substantive revenue to meet the debt accrued. And again, over TWO THIRDS of that debt was caused by hotels. There WERE other problems, sure. If people had bought more "stuff", if they'd eaten more at the restaurants, if this, if that, then the Magic Kingdom would have been this amazing inflatable super-sized liferaft that floated all the other losses. But if they'd built TWO hotels initially, instead of -- what was it, six? -- then the bleeding would not have been catastrophic. As to the book, haven't read it, sure it's a good read, and probably has more to defend your points. I'll try to get a copy to read soon, and thanks for pointing it out.
Originally Posted By jonvn I suggest reading the book as well. "But Disney still holds a very sizeable chunk, there IS reinvestment going on in a major way, and you don't do that if you're only "surviving". The various partners wouldn't allow it." My understanding is that there is a contractual obligation to build a second park. I may be wrong about that. In any case, while the park is profitable, it's just barely profitable. It is hanging on. By adding this new park, it is hoped they can help fill up some hotel space and keep people on property. What caused the debt was financial irresponsibility. Because they spent far more than they had originally intended to, they had to borrow the extra at a much higher rate than they could basically pay off. If they had built four hotels instead of six, then they wouldn't have overbuilt hotels. Two hotels alone were not cause the financial problems EDL had.
Originally Posted By arstogas >>>My understanding is that there is a contractual obligation to build a second park. I may be wrong about that.<<< That's right... It kind of goes under the principle of broadening the capital value of the initial investment. >>Two hotels alone were not cause the financial problems EDL had.<<< You are correct. As I maintained, they built six, when they should have built two, three at most. Check their occupancy rates -- they were abysmal. Those hotels and related infrastructure represented 2/3 of overall investment, and I'll agree with you that within that amount, they STILL paid more than they should have, or intended to. It wasn't the hotels alone, but it was a HUGE factor. They planned for Orlando-style visitors (which is cited in that master's thesis, and is correct) and very much misjudged the mobility and conservative spending practices of Europeans. In a way, it's tough to blame them. Eisner's insistence on quality regardless of cost... how many of us today bemoan what EuroDisney wrought in him? Few argue that it's Disney's most beautifully realized park (perhaps outside of TDS) but gee, it's been ten years... Perhaps the success of TDS will serve to embolden Eisner to return to something of at least a moderate level of spending for the quality we were used to for so long. I for one, would like DCCA (Disney's cardboard cutout America) to be transformed into DCA (Disney's Concrete America). mmmm... concrete.... mmmmmm
Originally Posted By AgentLaRue "Perhaps the success of TDS will serve to embolden Eisner to return to something of at least a moderate level of spending for the quality we were used to for so long." I suspect it may only spur him to look harder for additional $3 billion donors. Perhaps Mark Cuban? He seems to have a good deal of money to waste lately. Dallas Disney, coming soon.
Originally Posted By jonvn The problem with you keep saying that it was mostly the hotels is that it ignores all these other factors, such as a the extremely high cost of labor, nearly double, than what they expected of it. The other issue is that they only overbuilt hotels by about two. Four hotels would have been an ok amount, based on occupancy rates. You simply can not pin the fact that the place was losing so much on two hotels. "In a way, it's tough to blame them." Actually, it is quite easy to blame them. They didn't listen to their research, they ignored the financial needs of creating a profitable park, and they had to sell a large chunk of the place off in order to maintain operations. These are gross errors that should not have happened. You don't run businesses like this and stay in existence, as they found out with EDL. Even the name of the place was offensive to people. "Euro Disneyland." It would be as if they named their park here "Dollar Disneyland" and charged massive amounts of money to get in. That's how little thought they put into this stuff. "how many of us today bemoan what EuroDisney wrought in him?" If I read this right, most everyone does, as the financial disaster and embarassment that this park created for him and the company has caused them to become overly cautious and unwilling to spend more money than they knew they could account for in revenue. I really don't blame them for that at all, as it's a fiscally responsible thing to do, but they probably are a bit too cautious at this time from it. "Perhaps the success of TDS will serve to embolden Eisner to return to something of at least a moderate level of spending for the quality we were used to for so long." Disney hasn't built a park like this before in this country, so they can't go back to that level. It's an enormous investment that you're just not going to see here. Why? Because the amount of money that it would take to build something like that here could never be justified by the expected revenue. Secondly, the Tokyo market is far more active than the market here in the United States. Theme parks in Japan are simply much more popular than they are here, the public there spends more in the park while they are there, and they go more often. Universal Studios Tokyo had one million people go into it alone during its first month of operation. There is just not the same level of support for this sort of operation. TDS is not likely to show Eisner all that much. The basic problem with getting a park like that in this country is that it could not be paid for. One of the major goals of the expansion of Disneyland over the last couple of years is that it be immediately profitable. This is an obvious response to the financial disaster of EDL, and to a lesser extend Blizzard Beach. There is only so much you can in reality squeeze out of these places, and they are pretty much maxing out on that. Investment in parks is really not as worthwhile as other investments the corporation can make. For each dollar spent on a theme park, they get less in return than money spent on other forms of entertainment. That is why you see them spending so much on things like ABC as opposed to the parks, because there is a lot more potential money to be made there. And, that ABC purchase has been very good for them. Most people don't recall that it also included several cable stations such as ESPN, which has been a money machine. Sitting on the outside, and not really knowing the precise numbers regarding all these issues, it is very easy to say "Why don't they do this?" Of "Why are they spending so much on that part when this part needs it more?" Well, they're not stupid, and they are not psychotic. They spend what they do because they want to invest the money in the best manner possible, given potential revenue. There are just a lot of factors involved that come into play, and it's a bit more complex than just spending untold amounts of money on one aspect of the business to the exclusion of others, especially when that portion of the business has no potential for a solid return on the invetsment.
Originally Posted By jonvn Actually, I think labor costs actually ended up being triple what they expected, not double.
Originally Posted By arstogas Essentially we're going to have to agree to disagree. But I found it amusing that in a couple of your previous posts, you contradicted yourself... I didn't point it out then, but you're doing it again... first I wrote (which you quoted): >>>"In a way, it's tough to blame them."<< To which you replied: >>Actually, it is quite easy to blame them. They didn't listen to their research, (etc.)...<<< Then two paragraphs later, you stated the following, essentially making my point (pay attention especially to the last sentence): >>>If I read this right, most everyone does, as the financial disaster and embarassment that this park created for him and the company has caused them to become overly cautious and unwilling to spend more money than they knew they could account for in revenue. I really don't blame them for that at all...<<< I just had to smile when I read that. Sorry... years of debate and forensics forge an imprint... We both have facts and figures... I know what I know due to some friends that worked accounting for the Mouse, and you have read a book or two and some thesis papers (the latter of which is rarely a reliable source of totally accurate info). We agree overall that the Mouse miscalculated, we disagree on where, and the fact that the hotels were terribly under their occupancy targets, which I frankly know to be fact. Overall, we agree, on the rest, we agree to disagree, and in the future, we might find something more in common to support! And thanks for maintaining my point that most of us DO bemoan what Eisner became as a result of these mistakes. It was a loss for all of us who love the Disney parks. On that, among other things, we most definitely DO agree. Oh, and as to the assertion that Disney had never built a park like EuroDisney in the States, on this we also differ. I think you forgot EPCOT Center. Capital investment in EPCOT Center, as of opening day, was ALREADY greater, in 1982, than the totality of what was spent on the Magic Kingdom in France. Figure on ten years' inflation, and you're looking at a much bigger outlay compared to DLP's park (JUST the park, not the rest, not the hotels).
Originally Posted By arstogas >>>Actually, I think labor costs actually ended up being triple what they expected, not double.<<< I'm really smiling, now, Jon... I'm going to have to ask for your source on that, because the figure I had was 18-20%. If you're RIGHT, and you can source it with something other than a term paper, I'll buy you lunch at DCA.
Originally Posted By jonvn "I just had to smile when I read that. Sorry... years of debate and forensics forge an imprint..." Well, I think we're talking about different things. They are to blame for the bad things they did, but are not to blame for trying to correct them. I actually also know people who have worked there, as well. The information in the thesis paper I posted seems rather unbiased and agrees with other things I have read and know about. Epcot Center is not like TDS. I believe the price tag for Epcot was around $750 million, which is about 1/2 of what TDS cost, adjusted for inflation. Epcot is far less ornate than TDS is. It has also never been as popular as was hoped for. I suggest picking up the book I mentioned. It's a fairly good source, although it does seem weak in the middle.
Originally Posted By Dlmusic <<Epcot Center is not like TDS. I believe the price tag for Epcot was around $750 million, which is about 1/2 of what TDS cost, adjusted for inflation.>> I have always heard EPCOT was 1.1 billion which if you use inflation is quite high by today's standards. <<Epcot is far less ornate than TDS is. It has also never been as popular as was hoped for.>> What does ornateness have anything to do with anything? EPCOT hasn't been "as" succesful as they hoped for but it still is second only to the Magic Kingdoms for attendance (although TDS will change that).
Originally Posted By jonvn "What does ornateness have anything to do with anything?" The conversation was comparing Epcot to TDS. People keep talking about how great TDS is, and its main difference is in its ornateness. "EPCOT hasn't been "as" succesful as they hoped for but it still is second only to the Magic Kingdoms for attendance (although TDS will change that)." Given the amount of money spent on Epcot, vs. the amount of money spent on WDW's MK, it ended up being a poor performer. Tokyo Disneyland ALREADY gets more visitors than MK in WDW. As has been stated many times already, one of the reasons that a park as expensive as TDS was built was probably because the attendance figures and money spent in the park could justify its costs. You just don't build giant things. You have to justify the costs through expected revenue that is derived at in a realistic and informed manner. This was not done in EDL, and they paid dearly for it.
Originally Posted By woody >>Tokyo Disneyland ALREADY gets more visitors than MK in WDW. As has been stated many times already, one of the reasons that a park as expensive as TDS was built was probably because the attendance figures and money spent in the park could justify its costs.<< With TDL's attendance as the benchmark for money spent on the parks, $3B for TDS is STILL extremely high. TDL's attendance is 30% better than DL's. Of course, TDL guests spend more money than their US counterparts. TDL, 17M est. in attendance; TDS costs $3B (whole thing). MK, 14M est. in attendance; EPCOT costs $3B (est current figure). DL, 13M est. in attendance; DCA costs $1.4B (whole thing). I'm looking at it generally. I'm not going to do a full financial analysis of the situation, but I think they underspent on DCA. I'm sure they're making up for it right now. I can't wait for the Feb 8th announcements!!!
Originally Posted By woody >>DL, 13M est. in attendance; DCA costs $1.4B (whole thing).<< If we use DCA's costs as a benchmark for the possible TDS expansion costs, this is what we end up with. DCA $1.4 Billion times 17/13 (attendance) = 1.8B for TDS. Suppose Japanese guests spend 30% more than US guests. $1.8B times 1.3 = $2.34 B. Therefore TDS should cost around $2.4 Billion for their project. On the other hand, we can use the $3B as the benchmark to calculate DCA's costs. TDS $3B times 13/17 (attendance) = 2.29 B. Suppose US guests spend 30% less than US guests. $2.29B times 0.7 = $1.6 B. From these calculations, you can see there are no proportionality. DCA was underfunded while TDS overspent. Currently, TDS and DCA are meeting attendance projections, although we can say TDS is doing so without heavy discounting and its attendance is better than anticipated.
Originally Posted By disneywatcher >> DCA was underfunded while TDS overspent. << Not helped by Eisner's conceptual judgement and some Imagineers' clunky creativity. (And Epcot was listed as costing over $1 billion in 1983 dollars.)
Originally Posted By gmaletic There's an interesting attitude here that Michael Eisner and his accountants are behind everything bad that Imagineering does, but that everything good comes from...I don't know, some particularly talented Imagineers that happen to get out from under Eisner's thumb for brief periods of time? Even though Eisner has given us a somewhat underwhelming California Adventure, wasn't he in charge when Disney-MGM Studios was built? Disneyland Paris? The beloved Animal Kingdom? (Not beloved by me, but by a lot of people on these discussions.) Splash Mountain? The Indiana Jones Adventure? DisneySea, plus the great attractions built at Tokyo Disneyland in the past decade? I'm curious: why do people feel that he's responsible for the bad stuff, but not the good stuff?
