Will Tokyo Embrace Another Mouse?

Disney's second park is facing a swarm of challenges

It features a choreographed parade of boats, a Pacific Island volcano, sea-salt flavor ice cream--and, of course, the world's most famous rodent. Welcome to Disney & Co.'s (DIS ) big second act in Japan. On Sept. 4, Disney and its Japanese partner, Oriental Land, threw open the gates to DisneySea, a $2.8 billion marine-themed attraction built right next door to Tokyo Disneyland, which opened in 1983.

Disney and Oriental Land are betting that Mickey Mouse in an admiral's uniform will lift Disney's Tokyo fortunes. Attendance at the original park peaked in 1998 (chart), and daily spending per guest, while still the highest of any Disney park, slid 5% over the last two years, after a 13-year streak of gains. In May, Oriental Land reported that group net profit fell 52.2%, to $395 million, for the year ended in March, despite a 15% gain in sales, to $1.7 billion. "Over the past decade, Tokyo Disneyland has managed to shield itself from [Japan's ailing] economy," says Hiroshi Okubo, an analyst in the Tokyo office of UBS Warburg. "But the drop in guest spending suggests those days may be ending."

Disney needs to goose receipts in Tokyo because it wants to show the Mouse franchise is alive and well even as U.S. parks struggle to attract visitors. Disney and Oriental Land expect both Japanese parks to host a combined 25 million visitors a year, up from the current 17.3 million for Tokyo Disneyland alone. Tokyo-based Mitsubishi Research Institute Inc. estimates that Tokyo DisneySea will generate $15 billion a year in economic activity, if one includes such related businesses as area malls, gas stations, and support services. For its part, Disney, which put up a paltry $20 million for basic pre-construction design work, gets about 10% of the gate, 5% of food and merchandise sales, and 10% of corporate sponsorships.

While advance tickets for the grand opening sold out in hours, some wonder if DisneySea will live up to all the hype. One fear is that it will cannibalize visitors from the original park. Disney's record of adjacent attractions is not reassuring. For example, the company's surf-and-sand-themed California Adventure park is right next door to the original Disneyland in Anaheim, Calif. It has failed to generate the anticipated traffic. Not a problem in Tokyo, asserts Oriental Land. It says Tokyo DisneySea will act as a catalyst, increasing the number of visitors to both parks and how much they spend on mouse-ear caps and gourmet popcorn. "We're confident that guest spending levels have bottomed out and will pick up from here on out," says company spokesman George Yasuoka.

BOOZE AND BACKRUBS. The key is to make DisneySea sufficiently different from its neighbor. Oriental Land is pitching it to a slightly older, more male clientele than the original park, where about 70% of guests are female, mostly 20- to 30-year-olds--some with kids, others with dates or girlfriends. DisneySea offers booze, a hair-raising roller coaster ride in a mock Incan temple, and an on-site spa. Visitors can even get married in the park.

But DisneySea faces other challenges. As the economy sinks back into recession, Japanese may become hesitant to pay the $46 entry fee. And there's the increasing competition. In March, Universal Studios Japan opened in Osaka. The $1.4 billion movie-theme park is a potential threat because it offers residents of western Japan a closer alternative than Tokyo Disney.

Still, thanks in part to field trips that introduce legions of kids to Mickey and his friends, the Disney experience has become ingrained in Japanese life. In his 1993 book, Disneyland as Holy Land, University of Tokyo professor Masako Notoji wrote: "The opening of Tokyo Disneyland was, in retrospect, the greatest cultural event in Japan during the '80s." Or at any rate the most profitable. The $2.8 billion question is whether DisneySea can engender similar enthusiasm--and keep the turnstiles spinning.

By Chester Dawson in Tokyo

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE