Imagine, if you will, a Disney theme park with no centerpiece—no castle or geosphere, no ornate Chinese Theater or majestic Tree of Life. Imagine a Disney theme park with no Audio-Animatronics figures or full service restaurants or nighttime fireworks display. Impossible right?
Well, nothing’s impossible for the dream makers at Disney. Once again Walt Disney Imagineering has done what many thought impossible. They created a theme park less impressive than Disney’s California Adventure.
Walt Disney Studios Paris is basically a collection of soundstages grouped together with asphalt paths and some landscaping, everything coated in lovely shades of pale tan. It’s billed as a full-day Disney theme park but it opened with only 10 attractions, 3 quick service restaurants and 5 shops. That’s a worthwhile way to spend a day out of your expensive European vacation, n’est pas?
Okay maybe not, but it sounds like Disney saved a lot of money on the project, so at least the shareholders should be happy.
But they’re not.
On June 30, 2004 the Walt Disney Company agreed to a restructuring of Euro Disney SCA (the owner and operator of Disneyland Resort Paris) that would cost them hundreds of millions of Euros. The goal was to prevent Euro Disney SCA from defaulting on $2.9 billion of debt.
On June 9, 2004, Bloomberg Market News reported: “Euro Disney's debt problems stem at least in part from the Walt Disney Studios park, which it opened in March 2002. The park has failed to attract enough visitors to help Euro Disney meet its debt payments.”
The resort is no stranger to financial hardship. It opened in 1992 amid a recession and incurred harsh criticism from French intellectuals, the press dubbing it a “cultural Chernobyl”. Corporate management in Burbank reacted the way they always do; they found a scapegoat, fired him and then hired two guys to replace him.
In this instance they hired the right two people, Philippe Bourguignon and Steve Burke. The pair bridged the cultural gap by making concessions to the French including selling wine in the park (the French like wine, who knew?) and implementing an aggressive financial restructuring. When the dust settled, the strategy had worked. Disneyland Paris saw its first profit in 1995 and remained profitable for the next six years. In March of 2002, the Walt Disney Studios Park opened. In 2002 and 2003 the resort once again reported losses.
How does something like this happen? Disneyland Paris is one of the great ‘Cinderella’ stories of American business abroad. Just how could they screw it up twice?
Misidentifying the problem is a big problem.
In a universe defined by a spreadsheet, intangibles don’t exist. Cultural differences, taste, and emotional connections are absent. There is only investment and return. The management of the Walt Disney Company seems to have come to the conclusion that Disneyland Paris failed because too much money was invested in it. If they had built a smaller, less expensive park (see Hong Kong Disneyland) it would have yielded a better return on investment—theoretically. The Magic Kingdom at Disneyland Paris, for those not familiar, is easily the most ornate, beautifully themed, meticulously detailed kingdom of them all (there is even an Audio-Animatronics dragon living in a dungeon under the castle). This expensive theming, management decided, is the problem and refused to acknowledge other drawbacks that have nothing to do with the level of investment in the park itself.
For instance, the climate. Paris is not Orlando or Anaheim. Its latitude is farther north than that of Seattle, Washington or Augusta, Maine or even Toronto, Canada. Also, it’s in France. The French, need I point out, aren’t fond of having their culture Americanized. They’ve been very vocal on this issue for the past fifty years. Can’t imagine how the Disney executives missed it.
However, the biggest problem with the investment in Euro Disney was not due to climate or culture but was, in fact, financial. The pencil jockeys did get one thing right; the investment was too high. Just not necessarily in the theme park.
It was Disney’s investment of hundreds of millions in Michael Eisner’s newest hobby, architecture, that truly blew the bank. (Eisner, it seems, was entranced by the pastels and minimalist structural forms found in postmodern architecture. Whatever.) Michael was determined to use Disneyland Paris hotels as his foray into the world of “respectable” architecture. As a result, Disneyland Paris opened in 1992 with six hotels, all to support one park (Walt Disney World opened with two). The train ride from the park to Paris, a city with a few decent hotels of its own, takes less than thirty minutes. It seems those Harvard MBAs missed the class on supply and demand.
But the mistake could not have been their fault, they reasoned; it must be the fault of those annoying creative people. They spent too much building the park. So, the MBAs decided that they would not let the creatives make the same mistake twice. Many of the creative folks responsible for the original Paris park were slowly weeded out over time and were replaced by “more cooperative” creative executives--possibly the most serious result of the whole debacle.
Fast forward to the late 1990s when the clearly defined corporate strategy was for all Disney resorts world wide to become “destination resorts” like Walt Disney World. Destination resorts are marketed to out-of-town tourists who spend significantly more than locals on everything from theme park admission to jacket potatoes to ice-lollies (the Parisian equivalent of turkey legs and Dole Whip). Plans were set in motion to add “second gates” to Anaheim, Tokyo and Paris. An executive decision was made. Without regard to local conditions, a blanket statement set a series of events in motion that would reverse all the good work done in the mid-1990s.
The Walt Disney Company vowed that the “mistakes” of ’92 would not be repeated. They believed that a second gate would extend the average guest’s length-of-stay and help fill up Eisner’s aging hotel rooms. But since the second gate, built by that new breed of more cooperative Imagineers, was far from a full day experience, it did nothing of the kind. The second gate became a tremendous drain on the resort's bottom line.
Euro Disney SCA spent about $550 million on the park; whereas an E-ticket ride would have cost him less than $200 million and would have been a more cost-effective way to bring additional traffic to the resort (evidenced by the attendance boost the park received when it added Space Mountain in 1994).
They were caught up in the notion that “two parks are better than one.” Instead of looking at the simple fact that 15 million guests a year are better than 10 million guests a year, regardless of the number of parks. The first gate wasn’t filling to capacity. It could easily take on an additional four to five million people a year—the stated goal of Walt Disney Studios Paris.
The extra-park-extra-day trick only works if the new park is both enormously appealing and is perceived to be a full-day experience (as Epcot was in 1982). The experience of Disneyland Paris can be seen as a microcosm for the problem with the entire company; a company so obsessed with growth that it was ignoring the foundation that growth needs to be built on.
No where in the world is the descent of Imagineering more evident than at the Disneyland Resort Paris. The most spectacular and the most banal of theme parks sit side by side in pasture outside of Paris; a contrast so striking that it’s nearly impossible to imagine they were birthed by the same company.
Ultimately Disney Studios Paris stands as a sad testament to the folly of designing from a spreadsheet.