Eisner’s Options for Euro Disney: Few
Suppose you’re Michael D. Eisner, king of the Walt Disney Co. domain. You have piles of money and the undying respect of your corporate peers. The only real stain on your record is Euro Disney. But as time passes, the tiresome stain gets bigger . . . and bigger. What do you do?
Duck, possibly.
Wall Street analysts, consultants and others who follow the vagaries of the theme park business see surprisingly few options for Eisner on the European front. While the Disney chairman has a lot of his personal reputation tied up in the massive park, the prevailing view is that he can, at best, chip away at its losses, which hit Disney for $514.7 million this year.
“It’s an excellent park, but they built too damn many hotel rooms,” said one consultant who asked not to be named. “I don’t know how they work their way out.”
One of Eisner’s best hopes, which is also outside his control, is that economic conditions in Europe will improve. Euro Disney has been battered on two fronts: the lingering recession and the strength of the French franc against other currencies. Bad weather has also taken its toll, but Disney knew about the climate going in.
Then there’s the cultural issue. Aside from the bashing Disney has taken for importing its entertainment values to the farmland area 32 miles outside of Paris, the company has found that Europeans just aren’t as quick with a buck as it had expected. Souvenir sales are anemic and people often sneak in their meals to avoid using Disney’s restaurants, sources say.
Among the solutions Eisner can control, the most radical is abandoning the park. But hardly anyone expects him to do that, at least not for a long time. Analysts and consultants instead foresee everything from a massive financial restructuring to closing Euro Disney’s costly hotels and turning it into a seasonal attraction.
Here, then, is a look at those options.
* Shut it down. “There is a school of thought, which is admittedly still small, that they could just walk away and let it go under,” said one financial analyst. “I don’t see Disney putting in $300 million to $500 million a year (to keep the park going) for the next three to five years.”
Reality: Walking away from its European partners would result in the equivalent of image Armageddon. Disney, which owns 49% of the park, has far too much of its corporate self-pride wrapped up in theme parks to do something so drastic, most people close to it believe.
“They can’t afford to walk away from it,” said Tim O’Brien, an editor specializing in theme parks for Amusement Business magazine in Nashville, Tenn. “If they do, they would be in trouble with the entire European market when they sold anything in the future, including movies and merchandise. It would hurt that badly.”
* Close the hotels: While Disney doesn’t segment park costs, Euro Disney’s six hotels, with a combined 5,200 rooms, are seen as a major drag on earnings.
Disney spent heavily on the geographically themed hotels, which offer everything from a reproduction of the Rainbow Room to an indoor swimming complex.
“You can see the park in one day, so there is no need to stay in the hotels,” said one analyst. “They thought that people would drive two to three hours and stay there instead of going home, but that hasn’t been the case.”
Reality: Eisner is personally committed to the hotels, in whose planning he played a large part. The Disney chief has also called them a guard against the encroachment of outsiders. Still, some people think he will close at least half of them.
* Going seasonal: Some analysts argue for making Euro Disney an eight-month attraction to avoid the cold, rainy season.
Reality: The move would save money, but Disney might have a fight on its hands from the French unions involving layoffs.
* Move it to Spain: Dennis Speigel of International Theme Park Services in Ohio has worked on four theme park projects in France. In each case, he said, the locals turned up their noses.
“My feeling is that it should have been built in Spain,” Speigel said. “The French never support those projects. It’s a big cultural thing with them.”
Reality: Until someone builds a 5,000-acre moving truck, that’s not feasible.
* Financial restructuring: This is the one solution everyone agrees on. The question is how and at what cost? Few expect the French government to come to the rescue. Experts say Disney’s options include trading some of the park’s debt for equity, finding more outside investors and selling additional stock to the public.
“They have to find their economic equilibrium,” said Jeffrey Logsdon, managing director of Seidler Cos. in Los Angeles. “At what levels do they get bodies into the parks and hotels?
Reality: Finding more investors or holding a successful public offering is a real long shot. Who would invest?
