It’s a small world with a big budget. Despite evidence of an economic slowdown in China, The Walt Disney Co. (NYSE: DIS) has agreed to invest an additional $800 million in Shanghai Disneyland, bringing the theme park’s total budget to $5.5 billion, the largest foreign investment in China to date.
Disney is sharing the financing with the state-run holding company Shanghai Shendi Group, which will control 57 percent of the joint venture, and Disney will have a 43 percent stake. However, Disney will have operational control of Shanghai Disney, and Disney and Shendi Group own 70 percent and 30 percent, respectively, of the Shanghai International Theme Park Resort Management Company Limited.
Disney CEO Bob Iger made the announcement on Monday at the Milken Institute Global Conference in Beverly Hills. He said the decision to invest more in the Shanghai Disney Resort was prompted by forecasts that the market for travel in China is set to increase drastically. A study by PhoCusWright, cited by Disney in its announcement, forecast a 34 percent increase in Chinese tourism from 2012 to 2015.
“We’ve been impressed with the growth of China’s economy, especially the rapid expansion of the middle class and the significant increase in travel and tourism,” Iger said in a statement.
The additional $800 will be used to build additional rides and attractions at the park and its surrounding complex, the Shanghai Disney Resort, which are scheduled to open in December 2015.
It took two decades for Disney and the Chinese government to agree on plans for Shanghai Disney, according to the New York Times. An important condition of the approval was China's requirement that the park not retain the America-centric branding found at other Disney parks. Whereas visitors to other Disneyland parks arrive through a themed main entrance named Main Street, U.S.A., visitors to Shanghai Disneyland will instead enter through Mickey Avenue.
At the conference, Iger cited the relaxation of China’s one-child policy, which is expected to result in some 4 million more births across China than would occur without the policy change over the next 20 years, all of whom could be potential eager Shanghai Disneyland visitors.
“Thumbs up to that from Disney,” Iger said.
Disney has demonstrated a strong interest in getting Chinese children hooked on its brand at an early age. In addition to the planned theme park, Disney operates dozens of English language schools throughout China, where the curriculum is taught by using Disney characters and stories as teaching aids.
The Shanghai Disney Resort will be Disney’s first theme park and resort in mainland China, though it maintains another Disneyland resort in Hong Kong. Disney operates three other resorts in California, Florida and France.