The cracks are starting to show at the magical world of Walt Disney. Boardroom fall-outs over direction, in particular at its theme parks, threaten to destabilise the company.
Roy Disney resigned recently (MW December 4) and is now lobbying for the removal of chief executive Michael Eisner, who he claims is not the best person to run the company. The nephew of founder Walt Disney has even accused Eisner of trying “to build theme parks on the cheap”.
Certainly Disneyland Resort Paris (DLRP) is in need of more than a sprinkle of fairy dust as the theme park fails to prove itself a big draw for both UK and European holidaymakers. Visitor numbers are down year on year and the financing of the resort is in a rocky state.
Walt Disney Parks & Resorts, which markets DLRP to the UK, hopes that a heavyweight television sponsorship package on ITV1 and advertising over New Year will work its magic and strengthen the number of UK visitors to the French resort (MW last week). Rather aptly, the sponsorship will introduce a new strapline for the resort: “Need Magic? It’s closer than you think”.
Euro Disney reported grim figures last month, with visitor numbers down five per cent to 12.4 million year on year, and a loss of &£39m, a 50 per cent increase on the previous year. Occupancy at the resort’s hotel rooms also fell 3.1 per cent. The company continues to negotiate with its creditor banks as it heads towards the end of a six-month moratorium on debt payments, which expires in March 2004.
The resort has always had problems. Only two years after opening in 1992, it was in financial meltdown and Saudi investor Prince Alwaleed bin Talal stepped in to take a 24.7 per cent stake in the operating company Euro Disney – since reduced to 16.3 per cent. Disney itself owns 39.1 per cent of the company, but has waived royalty rights for many years as part of the refinancing. In the hope that more visitors, both new and repeat, can be attracted to the park, the development process has not stopped and in March 2002 Walt Disney Studios was added.
Magic doesn’t come cheap
Sources suggest the high costs of food, merchandise and entrance fees, augmented by the strong euro against the pound, means repeat business at the resort is low – 70 per cent of visitors are first-timers. Adult admission prices on the official website are e39 (&£27.40) for a day ticket and e139 (&£97.75) for a three-day ticket. Children’s admission prices are e29 (&£20) and e78 (&£55).
Euro Disney blames the general economic climate, the reluctance to travel since September 11, the situation in Iraq and strikes in the French public and private sectors for contributing to the losses. As this article was being written, striking French merchant seamen were causing headaches at Dover and hindering ferry sailings.
The new marketing strategy for DLRP differs from last year’s “portfolio” campaign, which promoted Disney theme parks in a generic campaign. DLRP head of brand Tamara Sanghvi says: “With some of the things that have happened this year, we took a good long look at how we market to UK consumers and how we deliver the product.” She adds that the “Need magic?” tag is more “contemporary” than the previous line “The magic is closer than you think”, and that it suggests “freedom of choice rather than making an imposition”.
Sanghvi admits that there is a perception of high prices, but she adds that this is not borne out by reality, as admission prices are in line with UK theme parks. She claims that DLRP marketing in 2004 will address this problem.
Tom Allen, a former vice-president of marketing and sales for Walt Disney Parks & Resorts, and now head of his own specialist travel business Theme Park Holidays, believes there is nothing fundamentally wrong with the Euro Disney offering “which is essentially based on the US product”.
Rising to the occasion
The challenge for the resort’s marketers is “to get people there on a cold Tuesday in November”. Consequently DLRP business is more event- driven than its sunny Floridian and Californian counterparts, with special activities developed for Christmas, Hallowe’en, Bonfire Night, Chinese New Year and other created occasions.
Allen suggests that Euro Disney needs to address its marketing outside the key territories of France, the UK and the Netherlands, which provide the bulk of visitors, and look at Germany or Spain. Travel experts have noted that German tourism has dried up globally following September 11, but Allen adds that German holidaymakers do enjoy theme parks and there are strong offerings within the country. He also believes the Euro Disney’s marketing may be “a bit too centralised and could be more market-specific”, with individual territories allowed more input.
Gary Moss, director at branding specialist Brand Vista, which handles Tussauds Group including Chessington World of Adventure and Thorpe Park, says all theme parks benchmark against Disney, which sets the pace for service and queue management. But he says that the increasing fragmentation of the children’s market, which is resulting in an increasing gulf between the desires of a toddler, a nine-year-old and a young teenager, hampers Euro Disney’s appeal. He believes the DLRP experience can no longer appeal to the whole family and is most definitely skewed to younger children.
Sangvhi counters these criticisms by pointing out that DLRP can cater for all ages and the addition of Walt Disney Studios broadens the appeal for older visitors. Next year, a Manchester United Soccer School product will be introduced, offering training sessions with MUFC coaches, and a daily Lion King stage show specifically designed for DLRP will also make its debut.
DLRP is not the only Walt Disney theme park in the doldrums. Attendance at Walt Disney World resort in Florida dropped nine per cent year on year for April to June compared with the same period in the previous year, despite the fact that the summer season was expected to perform better. Disney president Robert Iger has stated that a recovery “will be gradual”.
Too much sugar, not enough spice
Moss identifies deeper, underlying problems with the Disney brand that affects the parks. He points out that the “sugary, saccharine” world offered by Disney is now out of step with children’s appetite for slightly darker escapism and fantasy in the Harry Potter and Lord of the Rings mould. He says that Disney’s operations in general, from the films to the parks, are stuck in a Fifties mindset and that the brand has not kept pace with the trend among young children for more sophistication and independence and less naivety.
Interbrand chairman Rita Clifton agrees and points to the film Shrek, made by DreamWorks, whose founders include one-time Disney golden boy Jeffrey Katzenberg, as getting the tone right for youngsters with its tongue-in-cheek mocking of the Disney formula. She says: “Powerful brands need to be clear and consistent, but they must not confuse this with predictability.”
The perception of the Disney brand is not helped by current boardroom infighting at Walt Disney itself.
Clifton says that while Disney is still one of the world’s most powerful brands it carries “an undeniable taint” thanks to the corporate bloodletting. “The core Disney brand contains no cynicism and is devoted to wholesome values. Corporate behaviour has got to be in line with the brand – there is no longer a ‘cordon sanitaire’ between the corporate brand and the consumer brand in any company,” she says.
Disney still puts tremendous store by its parks. Tokyo Disney Resort opened in 1983 and a new resort is being built in Hong Kong. Although Disney is not putting money into the venture – which will be government-owned – it is expected to receive royalty fees. The company has admitted that all the parks face difficulties in the short term and the response in the US is to cut employee benefits and insurance costs. Whether Euro Disney can implement such cost-cutting among its workforce, given that French workers seem ready to strike at the drop of a beret to protect their rights, remains to be seen.