Walt Disney Co. and the Hong Kong government said Tuesday that they had agreed to a major expansion of the Hong Kong Disneyland theme park, a move that would boost an attraction that has struggled to meet expectations since it was opened in 2005.

Disney will pay about $450 million for the construction and convert its outstanding loans totaling about $340 million into equity in a joint venture company, Hong Kong International Theme Parks, officials said.

The deal would expand the park by increasing the number of theme areas from four to seven over the next five years, tackling criticism that the world’s smallest Disneyland did not offer enough attractions.

The announcement comes at a time when Hong Kong Disney could soon face a major competitor in Shanghai, which is still in negotiations with Burbank-based Disney to open a much larger $3.59-billion theme park as early as 2014.


“We, of course, would like to [start construction] as soon as possible,” said Rita Lau, Hong Kong’s secretary for commerce and economic development, at a news conference.

Officials determined that the expansion was needed to keep the park economically viable, though they said Hong Kong Disney has added an average of 0.2 of a percentage point to the territory’s gross domestic product in its first three years.

“If there is no expansion, then I think it is quite natural to expect that the attractiveness of the theme park will fall over time,” said the government’s chief economist, Helen Chan.

Disney’s experience in Hong Kong has been checkered. It has failed to meet attendance goals, was sullied by a mob scene of angry tourists denied entry during the 2006 Lunar New Year and has been accused of being uncooperative with the local government.


Last month, health officials complained that a promotion to attract more young children to the theme park interfered with emergency policies to curb the spread of the H1N1 swine flu virus.

Hong Kong Chief Executive Donald Tsang told reporters that the deal would “enhance the transparency of the park’s operation in [the] future” because part of the agreement required Disney to share more financial and attendance data.

The three new theme areas, called Grizzly Trail, Mystic Point and Toy Story Land, will give Hong Kong Disney 30 new attractions and boost the park’s size by 23%, officials said.