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Disney's Grand Plan To Terrify Europe? (Int'l Edition)

International -- Intl' Business: FRANCE


It's the scariest ride you'll find at any of the four Disney theme parks. First, a giant launching tube catapults you vertically into darkness. After a moment of weightlessness, you land in a roller-coaster "spaceship," which hurtles past meteors, flips upside-down, and corkscrews in eerie silence through space--all in the dark. "My knees were shaking afterwards," says Nigel Reed, a financial analyst at Paribas Capital Markets in London.

Euro Disney hopes the new Space Mountain ride at its struggling theme park near Paris will set all of Europe's knees quivering. Costing a dazzling $120 million, the attraction opened on May 31 with the loudest hoopla since the park's 1992 launch. Subway posters, newspaper ads, and TV spots blanket Europe. Rock star Elton John has begun a two-month European concert tour sponsored by Space Mountain. At the opening, Walt Disney Vice-Chairman Roy Disney welcomed 144 contest winners from around Europe who, upon returning home, will be interviewed on TV about the fearsome new ride.

There's strong cause for this marketing blitz. Space Mountain, a wilder version of rides found at both U.S. parks, is the make-or-break vehicle that will determine whether the loss-plagued park survives, many analysts believe. It's aimed at Europe's teenagers, who have shunned the park for its lack of thrill rides and have kept attendance far below expectations. "This ride puts us in a different league," says Stephen B. Burke, president of Euro Disney, the park's publicly traded owner. "It's the culmination of our plan to relaunch the company."

BIGGER CROWDS. That plan began with a massive financial restructuring a year ago that postponed debt payments, added equity, and halted management fees to Walt Disney Co. in the U.S. On Apr. 1, Euro Disney cut park entrance fees 20%. It has also overhauled advertising, playing up the emotional side of a visit to the park rather than describing its attractions. One ad, for example, shows a girl and her grandfather beaming with joy thanks to Mickey and friends. And the park has a new name: In place of Euro Disneyland, it's now called Disneyland Paris.

These changes are paying off--for now. After falling every year since the park opened, attendance rose 11% in the quarter ended Mar. 31 and continues to rise, says Burke. He sees hotel occupancy hitting around 55% this year, vs. 45% last year. That's crucial progress, since two-thirds of park revenues come from hotels, food, and merchandise. Euro Disney will report a loss for its Sept. 30 fiscal year--after losing $752 million since the gates opened. However, Burke expects profit in fiscal 1996 and beyond, despite the gradual end to the respites from debt service and management fees.

Investors like Mickey's new Euro-smile. Euro Disney stock has nearly tripled since October, to $3.40. That's still far below its 1992 high of $14.30, however.

Yet many analysts are dubious that the park's turnaround is permanent. "Space Mountain is a truly awesome ride--I can't wait to try it," says Jeff Summers, research chief at London brokerage Klesch & Co. "But it won't be enough," he believes, to offset servicing $3.2 billion in debt after 1997. By then, he thinks Euro Disney will need at least 3.5 million additional visitors to break even. Last year's tally was 8.8 million, 25% below original forecasts.

SPANISH RIVAL. Growing competition from other European parks won't help. Since opening on May 2, Spain's Port Aventura park south of Barcelona has been packing in 20,000 visitors a day on weekends, "right on target," says Ray Barratt, managing director. Its owners include Anheuser-Busch Cos. and Britain's Pearson PLC. In Britain, the Alton Towers theme park is luring visitors with it's new Nemesis roller coaster and a ride simulating a raft in a force-9 ocean gale.

Although Euro Disney's Burke isn't trumpeting success yet, he thinks skeptics are wrong. "The building blocks are in place, and it seems to be working," he says of the new plan. He believes Paris teenagers will flock to Space Mountain. And he notes that high-speed trains from London, which already arrive at the park's gates, will rapidly become more frequent. Next year, Burke hopes to charter these Chunnel trains and put Disney characters, films, and merchandise on board. As rides go, that one will be tame. Something far more nerve-jangling will await passengers at their destination.By Stewart Toy in Paris, with Al Goodman in Madrid

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