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Copyright 1999 Thunderbird, The American Graduate School of International Management. All rights reserved.This case was written by Research Assistant Tanya M. Spyridakis under the direction of Associate Professor J. StewartBlack, with the assistance of Associate Professor Hal Gregersen and Research Assistant Sonali Krishna, for the purpose ofclassroom discussion only, and not to indicate either effective or ineffective management.

EuroDisneylandOnly one year after the grand opening of EuroDisneyland, Robert Fitzpatrick left his position asEuroDisneys chairperson, citing a desire to start his own consulting firm. In April 1993, PhilippeBourguignon took over the helm of EuroDisney, thought by some to be a sinking ship. EuroDisneypublicly reported a net loss of FFr188 million for the fiscal year ending September 1992, though cumu-lative losses through April 1993 approached half a billion dollars.1 The European park also fell onemillion visitors short of its goal for the first year of operations, with the French comprising only 29% ofthe parks total visitors between April and September 1992a far cry from the predicted 50%.2

In addition to the financial woes weighing on Bourguignon, he was also expected to stem the flowof bad publicity which EuroDisney had experienced from its inception. Phase Two development atEuroDisneyland was slated to start in September 1993, but in light of their drained cash reserves (FFr1.1bnin May 1993)3 and monstrous debts (estimated at FF421bn),4 it was unclear as to how the estimatedFFr8-10bn Phase Two project would be financed.

Despite this bleak picture, Michael Eisner, CEO of Walt Disney Co., remained optimistic aboutthe venture: Instant hits are things that go away quickly, and things that grow slowly and are part of theculture are what we look for. What we created in France is the biggest private investment in a foreigncountry by an American company ever. And its gonna pay off.5

The Dawning Of Disney

After first attempting to start a commercial arts firm in 1917, Walt Disney, along with his partner UbIwerks, joined the Kansas City Film Ad Company, and began to learn the craft which would carry himto famecartooning. By 1919, Walt was making independent short cartoon ads for theatres. In 1920,Walts brother Roy became a partner, and soon thereafter the group moved to Hollywood. There, theydeveloped a standardized cast of cartoon characters, which were mass-produced using a large staff andartists working on a single easy-to-draw cartoon. The year 1928 saw the creation of Mortimer Mouse,later renamed Mickey.

1 David Jefferson. American Quits Chairman Post at Euro Disney, The Wall Street Journal (January 18,1993), p. B1.2 Ibid.3 Euro Disney: Waiting for Dumbo, The Economist (May 1, 1993), p. 74.4 Peter Gumbel and Richard Turner. Blundering Mouse: Fans like Euro Disney But Its Parents GoofsWeigh the Park Down, The Wall Street Journal (March 10, 1994), p. A12.5 Jefferson, American Quits Chairman Post at Euro Disney, p. B1.

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In 1955, Walt decided to send his entourage of characters into the real world, through the creationof Disneyland in Anaheim, California. Walts Disneyland dream was to create a place where peoplefrom all over would be able to go for clean, safe fun, unlike the less-than-wholesome carnivals of the day.He wanted a place that would teach both young and old about Americas heritage and about the diver-sity of the world.

Since July 17, 1955, Disneyland has stood as the icon of Walts dreama park for family-typeentertainment that would provide clean, safe fun. Cleanliness is a high priority. By 8 a.m., when the parkopens, the cleaning crew will have mopped and hosed and dried every sidewalk, every street, and everyfloor and counter. This begins at 1 a.m., when more than 350 of the parks 7400 employees commencethe daily cleanup routine. This routine includes using steam machines, razor scrapers, and mops towedby Cushman scooters to literally scour the streets and sidewalks in an effort to rid them of the chewinggum and other garbage left behind. Other examples of the emphasis placed on the small details includeone person working a full eight-hour shift to polish the brass on the Fantasy merry-go-round; treatingthe meticulously manicured plantings throughout the park with growth-retarding hormones to keepthe trees and bushes from spreading beyond their assigned spaces and destroying the carefully main-tained five-eighths scale modeling that is used throughout the park; the maintenance supervisor of theMatterhorn bobsled personally walked every foot of the track and inspected every link of tow chain eachnight, despite the $2 million in safety equipment built into the machine. All this old-fashioned dedica-tion has paid off. Since the opening day in 1955, Disneyland has been a consistent moneymaker.

The death of Walt Disney in 1966 was a harbinger of turmoil for the Disney Corporation. Disney,under the direction of E. Cardon Walker from 1976 to 1983, lost touch with its traditional audience. In1977, Roy Disney (nephew of Walt and son of Roy Disney, Sr.) quit as Disneys vice president. OtherDisney executives commented that Walker ignored any point of view but his own, which he basedentirely on what he thought Walt would have done.

This conservative approach led Disney to produce a stream of tired, formulaic movies that fewerand fewer customers would pay to see6a phenomenon that eventually spilled over into televisionprogramming. By mid-1983, CBS canceled the hour-long program Walt Disney. For the first time in 29years, the company was without a regular network program. Disney was a giant entertainment companythat looked as though it might lose all channels to its audience.

At this point, Ron Miller took over the helm with a style that fell at the other end of the spectrumfrom Walkers. Where Walkers reign could be described as dictatorial and Walt-Centric, Millers wasdelegative and decentralized. Sensing a need for rejuvenation, Miller did manage to produce the box-office hit Splash, under the newly created Touchstone label. Unfortunately, this did not become thenorm, but rather was merely a blip on an otherwise unprofitable screen. One box-office bomb afteranother led to a sharp decline in profits. This decline extended to the theme parks, which representedabout three-quarters of the companys revenues. Revenues began to level off, and the stock price fell.During the period of April 1983 to February 1984, the stock price went from $84.375 per share to$48.75.7

As the company fell from riches-to-rags, Roy Disney, Jr., was forced to watch the Disney Empirebuilt by his uncle, Walt Disney, and his father, Roy Disney, Sr., crumble. He also saw his personalholdings in the company drop from $96 million to $54 million. Roy had always held a firm belief that

6 Myron Magnet. The Mouse at Disney, Fortune (December 10, 1984), pp. 57-64.7 Ibid.

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the various divisions of the company were synergistic. For the theme parks to grow, movie and televisionproduction had to be strong.

Few listened to Roy; he was labeled the idiot nephew. However, this idiot nephew outsmartedthem all. In 1984, Roy Disney aligned himself with Stanley Gold, a tough-talking lawyer and a brilliantstrategist. Together they persuaded Frank Wells, then vice-president of Warner Bros., to become presi-dent at Disney if all went as Gold and Disney, Jr., planned.

It did. Old top management was forced out, and the company emerged from its past equippedwith a skilled new top management team poised for a bright future. There was only one moment whenthe board leaned towards an older, more buttoned-down candidate for CEO (versus Michael Eisner,who had been proposed by Roy). In efforts to persuade the board, Gold made an impassioned speech tothe directors: You see guys like Eisner as a little crazy but every studio in this country has been runby crazies. What do you think Walt Disney was? The guy was off the goddamned wall. This is a creativeinstitution. It needs to be run by crazies again.8 Eisner and Wells lobbied the individual board mem-bers to explain their vision for the company. In September 1984, Michael Eisner was officially ap-pointed CEO, and Frank Wells was named as President. Eisner attributed their success at convincingthe board that I did not come in a tutu, and that I was a serious person, and I understood a P&L, andI knew the investment analysts, and I read Fortune.9

DisneyWorld, Orlando, Florida

By the time Eisner arrived, DisneyWorld in Orlando was already on its way to becoming what it istodaythe most popular vacation spot in the United States. However, the company had barely tappedinto a rich aspect of the businesses: hotels. Disney had only three existing hotels at DisneyWorld andone hotel complex in Anaheim, probably the most profitable in the U.S., registering occupancy rates of92-96% versus the industry average of 66%. Because there was little room in Anaheim for hotel expan-sion, Eisner set out to fill this void with an ambitious $1bn hotel expansion plan in Orlando. As a result,Disneys Grand Floridian Beach Resort and Disneys Caribbean Beach Resort opened during 1987-89.Disneys Yacht Club and Beach Resort, along with the Dolphin and Swan hotels (owned and operatedby Tishman Realty & Construction, Metropolitan Life Insurance, and Aoki Corporation, respectively),opened during 1989-90. With this addition of 3,400 hotel rooms and 250,000 sq. feet of conventionspace, Disneys hotels represented the largest convention center east of the Mississippi. Before the ex-pansion plan, the Orlando area had 64,000 hotel rooms; fewer than 10% belonged to Disney. With theexpansion plan, the total number of hotel rooms owned by Disney exceeded 20,000. Prices ranged from$104-455/night.

October 1982 brought yet another addition to the Orlando theme parkthe Experimental Pro-totype Community of Tomorrow, or EPCOT Center. This new park consisted of two large complexesthat are completely different in nature. FutureWorld was a series of pavilions designed to show thetechnological advances expected in the next 25 years. World Showcase was a collection of foreign vil-lages designed to allow various countries to present some aspect of their country and culture.

Tokyo Disneyland

Mickey Mouse, or Mikki Mausu in Japanese, took the country by storm. Tokyo Disneyland opened ona nasty winter day, April 15, 1983. On opening day at Tokyo Disneyland, 13,200 visitors passed through

8 Stephen Doepp. Do You Believe in Magic? Time (April 25, 1988), pp. 66-73.9 Magnet, The Mouse at Disney pp. 57-64.

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the gates for the very first time. August 13 of that same year registered a one-day attendance of 93,000far surpassing any previous U.S. Disney attendance records.

This high attendance level became the norm; over 10 million people visited the park by the end ofyear one. It only took four years for Mikki Mausu fans to break yet another single day attendance record:111,500. Between 1983 and 1988, nearly half of Japans entire population, or about 50 million people,had walked through the turnstiles.

Financially, this translated to consistently high revenues for the Oriental Land Company, ownerof Tokyo Disneyland. Walt Disney Co. opted for no equity in the park, and chose merely to license theJapanese company. A 45-year contract between the two companies gives Disney 10% of admissions, 5%of food and merchandise sales, plus licensing fees.10

Tokyo Disneyland is 204 acres of American culture placed on Japanese soil. All signs are in En-glish, with only small katakana (a phonetic Japanese alphabet) translations. The food is mainly Ameri-can, and Disneys strict rule of no alcohol and no outside food allowed is enforced.

Every attempt was made to create a mirror image of Anaheims Magic Kingdom. Seven residentAmerican Disney managers worked closely with their Japanese counterparts from Oriental Land Co. inorder to ensure that the park was in keeping with the Disney Doctrine. Everything we imported thatworked in the U.S. works here, said Ronald D. Pogue, Managing Director of Walt Disney AttractionsJapan Ltd.11 American things like McDonalds hamburgers and Kentucky Fried Chicken are popularhere with young people. We also wanted visitors from Japan and Southeast Asia to feel they were gettingthe real thing, said Toshiharu Akiba, a staff member of the Oriental Land publicity department.12

All this is not to say that the creators of Tokyo Disneyland, with all their care and attention, didntencounter any problems along the way. Some physical features and cultural differences had to be takeninto account: a Japanese restaurant had to be added to accommodate older patrons; the Nautilus sub-marine ride could not be built on and reclaimed from the ocean; more areas had to be covered to protectagainst rain and snow; queue paths for attractions had to be rerouted because it is considered verydiscourteous in Japan for one to cross in front of another. Slogans and ad copy, though often in English,had to be Japanized. For example, Lets Spring was the motto for one highly successful ad campaign.However, it wasnt until almost opening day that management discovered almost 100 public phoneswere installed too high for Japanese guests to reach them comfortably.

Another difference of perception between Disney and Oriental Land managers included the con-struction of rustic-looking Westernland, Tokyos version of Frontierland. The Japanese like everythingfresh and new when they see it put in, explained James B. Cora, Managing Director of Operations forthe Tokyo project. They kept painting the wood, and we kept saying, No, its got to look old. Finally, the Disney crew took the Japanese to Anaheim to give them a firsthand look at the Old West.13

The opening of Tokyo Disneyland coincided well with the escalation in value of the yen againstthe dollar, as well as the strong increase in the average Japanese income level. Demographics also played

10 Awata Fusaho. Disneylands Dreamlike Success, Japan Quarterly (January-March, 1988), pp. 58-62.11 In Japan Theyre Goofy About Disney, Business Week (March 12, 1990), p. 64.12 Ibid.13 Mary Ann Galante. Disneys Ambassador Guides Foreign Policy for a Magic Kingdom, Los Angeles Times(May 27, 1987), p. 1.

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well for the park30 million Japanese live within 30 miles of the grounds, three times the populationfor Anaheims Disneyland within the same radius. Also, the Japanese have a tradition of omiage, or littlepresent, bought for friends and family members who are not able to go. In 1988, the total bill for allDisney omiage (in the form of Mickey Mouse watches, t-shirts, bed linens, etc.) purchased in the parkand other Disney retail stores in Japan was over $1 billion.

With the park nearing capacity, and unanimous feelings of its unqualified success, Oriental Landand Disney have a 50/50 joint venture plan for a Tokyo version of the Disney-MGM studio tour to bebuilt next door.

EuroDisneyland

With the continued success of its two parks in the U.S. and the one in Japan, the promise of a newEuropean Union was too much to resist. The question wasnt whether or not to build a Disney themepark in Europe, it was where: Spain or France. Both countries bureaucrats were under mandates fromtheir prime ministers to help Disney in its quest for the perfect location. France set up a five-personteam, headed by Edith Cresson, Special Advisor to Foreign Trade & Tourism. Spains team was led byIgnacio Vasallo, the Director-General for the Promotion of Tourism. Both governments were besiegedwith requests from Disney executives for detailed information. The only thing they havent asked usfor is the color of the tourists eyes, moaned Vasallo.14

Both governments put together extensive enticement packages. Spain offered tax and labor incen-tives, and possibly as much as 20,000 acres of land. The French proposal, slightly less generous, in-cluded spending $53 million to improve highway access to the proposed site and perhaps speeding upa $75 million subway project. Disney officials remained noncommittal, commenting only that Spainhad better weather, while France had a better population base.

March 24, 1987, signaled the end to talks that had dragged on for more than a year; negotiationshad been delayed by a change of hands in the French governmentfrom Socialist to Conservativecontrol. The Americans attempts to plan ahead for every possible contingency also bogged down talks.Michael Eisner and Jacques Chirac, then the French prime minister, signed a contract for the buildingof a Disney theme park at Marne-la-Vallee. At the signing, Robert Fitzpatrick, fluent in French, recipi-ent of two awards from the French government, and married to French national, Sylvie Blondet, wasintroduced as the president of EuroDisneyland. Fitzpatrick was expected to be a key player in wooingsupport for the theme park from the French establishment.

Explanations for location choice included Marne-la-Vallees close proximity to one of the worldstourism capitals (it is 20 miles from Paris), and approximately 300 million people throughout France,Belgium, England, and Germany were within a days drive or high-speed train ride. Good transporta-tion was another advantage mentioned; one of the train/RER lines of the Paris Metro subway ran toTorcy, located in the center of Marne-la-Valle. In addition, the French government promised to extendthis line to the actual site of the park. The park would be close to A-4, a modern highway that runs fromParis to the German border, as well as to a freeway that runs to Charles de Gaulle airport. Finally, thechunnel between France and England was expected to be completed near the time of EuroDisneysopening.

14 Linda Bernier, Susan Roberts, and Elizabeth Ames. Monsieur Mickey or Senor Miqui?: Disney Seeks aEuropean Site. Business Week (July 15, 1985), p. 48.

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With a signed letter of intent in hand, Disney knew that the French government had too much atstake to let the project fail. This knowledge was enough to allow the company to hold out for concessionafter concession: the normal 18.6% VAT (Value Added Tax) on ticket sales was reduced to only 7%;15

subsidized loans were secured to fund one-fourth of the building costs; contractual disputes would besettled by a special international panel of arbitrators, rather than by the French courts. Disney, however,did have to make a concession: it would respect and use French culture in its themes.

The parks development was to consist of two major phases. Phase One of the park would be atheme park as well as a complex of hotels, golf courses, and an aquatic park. Phase Two, slated to beginconstruction after the gates opened in 1992, entailed a community to be built around the park, includ-ing a sports complex, a technology park, a conference center, a theatre, a shopping mall, a universitycampus, villas, and condominiums.

In total, EuroDisney had 5,000 acres to play with. The theme park itself would initially occupyabout 200 acres, totaling 730 acres by 1995.16 Opening was set for early 1992, with a predicted atten-dance level of 11 million visitors annually, and an estimated break-even point somewhere between 7 and8 million. Phase Ones preliminary estimations on cost were $1bn, the largest single foreign investmentin France. A French pivot company was formed to build the park with starting capital of FFr3bn, split60% French and 40% foreign. Disney invested $160 million directly into the project; a total of $600million in foreign investment was expected to flow into France each year.

At this point, the fact that no definite plans for Phase Two had been laid out made it difficult to domore than guess about the final size of the park. Costs, however, were expected to surpass the price tagof the first phase. In addition, in November 1989, Fitzpatrick announced plans for a European versionof the Disney-MGM studios, based on the original located at DisneyWorld in Orlando, Florida. Thestudios would increase Disneys production of live action and animated filmed entertainment in Europefor both the European and world markets. Opening was projected for sometime in 1996.

Optimism was at an all-time high; individuals and businesses alike raced to become part of theMickey Mouse money machine. The phones been ringing here ever since the announcement, saidMarc Berthod of EpaMarne, the government body that oversees the Marne-la-Vallee region.

Weve gotten calls from hotel chains to language interpretersall asking for details onEuroDisneyland. And the individual mayors of the villages around here have been swamped with callsfrom people looking for jobs, he added.17

It was also hoped that EuroDisney would provide the region some relief to the unemploymentrate, which had hovered around 10% for the past several years. EuroDisney expected to generate asmany as 28,000 jobs, from permanent park employees to construction workers; a new laundry facilityalone would employ 400 outside workers, just to wash the fifty tons of laundry expected to be generatedper day by EuroDisneylands 14,000 employees.

In the midst of the furor, one worry was that EuroDisney would cannibalize the flow of Europeanvisitors to Walt Disney World in Florida. This fear was calmed by European travel agents, who said thatcustomers were still eager to go to the sunshine state.

15 EuroDisneyland: Mickey Hops the Pond, The Economist (March 28, 1987), p. 85.16 France, Disney Ink $2-Bil Contract to Construct Euroland, Variety (March 25, 1987).17 Jaques Neher. Mickey and Money for France, The Journal of Commerce (February 26, 1986), p. 1.

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Wanted: Dollars for Disney

Eisner, confident of EuroDisneys success, secured a 49% stake in the project for Disney; the remaining51% of stock was distributed through the London, Paris, and Brussels stock exchanges. Of this stock,half was set aside for the French, one-fourth went to the English, and the remaining 25% was diffusedthroughout the rest of the European Community (EC). The initial price offer, FFr72, was much higherthan the pathfinder prospectus, due to an expansion in the park capacity. The price was projected toreach FFr166 by opening day. This was expected to yield a compound return of 21%.18

Though putting up only $160 million of its own capital to fund the project (versus over $800million in low interest loans on the part of the French national and local authorities, and another $800million for new infrastructure), Disney kept management control. Advertising and marketing were keptin-house, though Ogilvy & Mather (O&M) International was hired as an outside advisor. O&M willhelp us reinforce our creative ideas, said Gerbeaux, communications vice president of EuroDisney,Because we have to advertise in every country in Europe, we need outside advice on how to approachthe markets.19

Other avenues of funding included twelve corporate sponsors. One of these sponsors, Mattel Inc.,was rewarded for its support with the Hot Wheels logo emblazoned on the cars for the autopolis ride forchildren.

For Disney, payoff would begin as soon as the park opened. The Walt Disney Company was set toreceive the same commission rate as in Japan: 10% of admission fees, 5% of food and merchandiserevenues. In addition, Disney would collect management fees, incentive fees, and 49% of the profits.20

Expected profits in the first year were $230-600 million and between $320 million and $1bn in thesecond year.

Cultural Chernobyl?

The deal of the century, as many called EuroDisney, came under protests from all sides. Communistsand intellectuals protested heavily. Ariane Mnouchkine, a theatre director, described it as a culturalChernobyl. I wish with all my heart that the rebels would set fire to Disneyland, thundered oneintellectual in the French newspaper Le Figaro. Mickey Mouse, sniffed another, is stifling individu-alism and transforming children into consumers. Other criticisms of the park cited the project asanother attack on Frances cultural landscape, already under siege from American movies and music.The theme park was damned as an example of American neoprovincialism.21

Never ones to suppress their emotions, the farmers of the Marne-la-Vallee region staffed protestsof their own. Incited over terms of the governments contract with Disney in which the French govern-ment would expropriate the necessary land and sell it without profit to EuroDisneyland development

18 Judson Green. Brought to Account: Not a Mickey Mouse Organisation, Accountancy (November, 1989),pp. 16-27.19 Cindy Gourlay. Disney keeps O&M on tight rein in Europe; Ogilvy & Mather Intl.s advertising contractwith EuroDisneyland, Information Access Company; Haymarket Publications Ltd. 1991 (March 28, 1991), p.8.20 Robert Wrubel. Le Defi Mickey Mouse, Financial World (October 17, 1989), p. 21.21 Richard Turner and Peter Gumbel. Major Attraction: As Euro Disney Braces for its Grand Opening, theFrench Go Goofy. The Wall Street Journal (April 10, 1992), pp. A1.

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company, farmers lined the roadside with signs such as Disney go home, Stop the massacre, andDont gnaw away the national wealth. Local officials, though sympathetic to the plight of the farmers,were unwilling to let their predicament interfere with the Disney deal.

One other front to be contended with by Disney was the communist-dominated labor federa-tionthe Confederation Generale du Travail (CGT). The CGT was skeptical of Disneys job creationclaims. The CGT fought against the passage of a bill which would give managers the right to establishflexible work hours. This was believed to be essential for the profitable operation of EuroDisney, espe-cially with its seasonal attendance variations.

Working to allay fears of traffic congestion, noise, pollution, etc.all stemming from the projectDisney launched an aggressive community relations program. Efforts included: inviting local childrento a birthday party for Mickey Mouse, sending Mickey to area hospitals, and hosting free trips toDisneyWorld in Florida for dozens of local children and officials. This type of business relations is ararity in France; businesses make little effort to establish good relations with local residents.

Layout of the Land

In actuality, the first opportunity to experience Disney lies before the gates of EuroDisneyland: BuffaloBills Wild West Show, a cavernous theatre and restaurant featuring a panoply of Le Far West, includingsome twenty imported buffaloes, as well as actual cowboys and authentic Indians. All employees areAmerican (an exception mutually agreed upon by the French government and Disney). Upon enteringthe attraction, all are given a straw hat to wear and take home with them. Photographs are taken of theguests in their straw hats, which most purchase on their way out. Despite the meal being served in aniron skillet, a firmly set standard menu of spare ribs and chicken, and a set price of FFr300, this attrac-tion has proven to be among the more popular, and is sold out most nights.

Once inside the park, visitors face Main Street, USA (a turn-of-the-century American town), thefirst of five lands in the Magic Kingdom theme park, modeled after Disney parks elsewhere. Despiteresearch findings indicating a European love for the Prohibition Era, Eisner vetoed plans for a 1920sversion of Main Street, stating that the images of gangsters and speakeasies were too negative. A slightlymore ornate and Victorian version of Main Street was kept. In all, there are 29 attractions throughoutthe theme park; the familiar cast of Mickey, Minnie, Donald, Daisy, Pluto, Goofy, etc., are not hard tofind.

Modifications to the park had to be made to protect against changes in weather. The park iscrisscrossed with covered walkways. Eisner personally ordered the installation of 35 fireplaces in hotelsand restaurants. People walk around DisneyWorld with humidity and temperatures in the 90s, andthey walk into an air-conditioned ride and say, This is the greatest, said Eisner. When its rainingand miserable, I hope they will walk into one of those lobbies with the fireplace going and say the samething.22

Next Exit: Food and Hotels

Gearing for a daily attendance of 55,000, EuroDisneyland planned to serve an estimated 14,000 peopleper hour. To do this, 29 restaurants were built. Menus and prices were varied with American flavorpredominant, as well as Disneys rule of no alcohol. The most noted exception was in Fantasyland,

22 Ibid.

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where the food service reflected the fables country of origin: Pinocchios facility has German food;Cinderellas French; Bella Nottes Italian, etc. Patio seats, 2,100 of them (30% of park seating), wereinstalled to satisfy Europeans preference of eating outdoors when the sun shines.

In test kitchens back at DisneyWorld, recipes were adapted for European tastes. A few things wedid need to change, said Walter Meyer, executive chef for menu development at EuroDisneyland andexecutive chef of food projects development at Walt Disney World, but most of the time people kepttelling us, Do your own thing. Do whats American.23 Tex-Mex dishes were toned down; a specialcoffee blend was developed for universal appeal; even hotdogs had a wide range of tastes and composi-tions. Japanese pancakes, grilled bratwurst, ice cream, and a new yogurt projectdeveloped with Nestlewere all available from cart vendors.

Once having fed the projected 55,000 daily visitors to the park, planners turned their attention toaccommodating them for the night. Big-name architects from all over submitted plans for consider-ation. The result: six theme hotels, which offer close to 5,200 rooms (see Exhibit 10). This figure isexpected to grow in conjunction with the long-term expansion plans of the resort itself. By year 2017,EuroDisneyland, under the terms specified in its contract with the French government, was required tofinish constructing a total of 18,200 hotel rooms at varying distances from the resort.

Guests can also avail themselves of the 27-hole golf course located on the grounds. In addition tothe hotel accommodations, the resort has the Davey Crockett campground, offering 414 cabins and181 camping sites. Unfortunately, in the first year of operation, these Phase One hotels had a combinedoccupancy rate of only 37%.

Dress and Indoctrination At Disney

Creating a fantasy of the Magic Kingdom required more than just buildings and technology; it requiredpeoplea lot of people. Disney needed 12,000 employees for the theme park alone. Unlike either ofthe two U.S. theme parks, which have many seasonal and temporary, part-time college workers, theseemployees would be permanent cast members on the EuroDisney stage. Casting centers were set up inParis, London, Amsterdam, and Frankfurt, in a drive to mirror the multicountry aspect of EuroDisneysvisitors. It was nonetheless understood between the French government and Disney that a concentratedeffort would be made to tap into the local French labor market. Overall, Disney was looking for workerswho had good communication skills, spoke two European languages (French and one other), wereoutgoing, and liked to be around people.

As with all the parks, EuroDisney set up its own Disney University to train workers. Not known forhaving the same definition of service, speculation abounded as to whether Disney would find enoughEuropeans with the right attitude for the job. However, with 24,000 applicants by November 1991, thisproved not to be a problem. A lot of people made assumptions about France and Europe that have notturned out to be true. We find that we are attracting the same kind of people we did in the U.S., saidThor Degelmann, a native Californian who had been with Disney for more than 25 years and was nowEuroDisneys personnel director.24

23 Disney Magic Spreads Across the Atlantic; Popular US Theme Park Prepares for Opening of EuroDisneyland Resort Near Paris in April, 1992, Nations Restaurant News (October 28, 1991), p.3.24 Rone Tempest. Challenging Casting Call for Disney; Help Wanted: Native American Indian, French-Speaking Preferred, To Play Sitting Bull in Wild West Show . . . Los Angeles Times (November 8, 1991), p.A5.

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Controversy did arise over Disneys strict appearance code, enforced in all its parks. The rules werespelled out in a video presentation and in a guidebook given to all new cast members. The guidebookdetails the requirements for just about everything one could imagine. Mens hair must be cut above thecollar and ears; no beards or mustaches are allowed; all tattoos must be covered. Women must keep theirhair in one natural color, no frosting or streaking. Use of makeup is limited. False eyelashes, eyeliner,and eye pencil are completely off limits. Fingernails are not allowed to pass ones fingertips. Jewelry isallowed at an absolute minimum: women can wear only one earring in each ear, but the earring mustnot go beyond the specified three-quarters of an inch diameter limit. Men and women alike are re-stricted to one ring per hand. In addition, women must wear the appropriate undergarments, and onlytransparent pantyhose are permitted. Cast members were also informed that they were expected to showup fresh and clean each day. A related training video contained a shower scene, indirectly saying thata daily bath was required.

French labor unions mounted protests against the appearance code, which they saw as an attackon individual liberty. Others criticized Disney as being insensitive to French culture, individualism,and privacy, because restrictions on individual and collective liberties are illegal under French law,unless it can be demonstrated that the restrictions are requisite to the job and do not exceed what isnecessary. Disney countered by saying that a ruling that barred them from imposing a squeaky-cleanemployment standard could threaten the image and long-term success of the park. For us, the appear-ance code has a great effect from a product identification standpoint, said Degelmann. Without it wecouldnt be presenting the Disney product that people would be expecting.25 Degelmann also pointedout that many other companies, particularly airlines, had appearance codes just as strict. Disneys justhappened to be written down. Aware of cultural differences, the company, according to Degelmann,had toned down the wording from the original American version. Degelmann also noted that no morethan 5% of all applicants interviewed and provided the initial orientation decided against working atEuroDisneyland.

EuroDisney also faced the challenge of getting the new cast members used to smiling and beingpolite to park guests on a consistent basis. Responding to a criticism of Disneys indoctrinating people,Degelmann stated, You cant make someone be sincere all day. We select people who want to work hereand are predisposed to do well in this environment. We dont try to change people; we arm them withthe tools and motivation to perform.26

Other Problems Along the Way

Disneys first ads for work bids were all placed in English, which left small- and medium-sized Frenchfirms feeling like foreigners in their own land. A data bank was eventually set up with information onover 20,000 French and European firms looking for work. The Chamber of Commerce, with the aid ofDisney, developed a video text information bank which the smaller companies would be able to tapinto. Local companies were told they would get work, but had to compete for it.

The building of EuroDisneyland was plagued by construction delays and modifications. All fa-cades were given six coats of paint versus the standard one coat in the two U.S. parks. Le Visionarium, a360-degree Circle-Vision screen movie, finished construction with $8-10 million in extras. At onepoint, Eisner ordered a $200,000 staircase removed because it blocked a view of the Star Tours ride.

25 A Disney Dress Code Chafes in the Land of Haute Couture, New York Times (December 25, 1991), p.1.26 Anne Ferguson. Maximising the Mouse. Management Today (September, 1989), pp. 60.

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This further hiked-up the EuroDisney bill, which already had to deal with construction costs being, onaverage, 20% higher than for similar jobs in the U.S. Another setback occurred when a fire, sparked bya short circuit, caused minor damage to the Sequoia Lodge while it was under construction.

EuroDisneylands Grand Opening

April 12, 1992, France-Soir enthusiastically predicted Disney dementia. Mickey! Its madness, read itsfront-page headline. Would-be visitors were warned of chaos on the roads. A government survey indi-cated that half a million people carried by 90,000 cars might try to get in. Would people be turnedaway? French radio warned traffic to avoid the area. By lunch time, the parking lot was less than halffull, suggesting an attendance level below 25,000. Speculative explanations ranged from people heedingthe advice to stay away to the more likely one-day strike that cut the direct rail link to EuroDisney fromthe center of Paris.

Queues for the main rides, such as Pirates of the Caribbean and Big Thunder Mountain, wereaveraging around 15 minutes, less than for an ordinary day at DisneyWorld in Florida. Despite this fact,English visitors found the French reluctant to stand in line and wait. The French seem to think that ifGod had meant them to queue, He wouldnt have given them elbows, commented one.27 Differentcultures have varying definitions of personal space. EuroDisney guests problems ranged from peoplewho either got too close or who left too much space between themselves and the person in front ofthem.

It was thought that the competition from French theme parks, which had significantly loweradmission costs, might be a concern. However, Fitzpatrick did not appear to be daunted. We arespending 22 billion French francs before we open the door, while the other places spent 700 million,he said. This means we can pay infinitely more attention to detailsto costumes, hotels, shops, trashbasketsto create a fantastic place. Theres just too great a response to Disney for us to fail.28

Bourguignons Predicament

With these bold predictions of his predecessor echoing in his ears, Bourguignon stared at his desk.Surrounding him were piles of financial statements drowning in red ink (to the tune of $500 million),stock market reports chronicling EuroDisneys falling price from FFr166 to approximately FFr65, andnewspapers full of stories of EuroDisneylands cultural blunders. Bourguignon wondered where hewould find the magic to turn this kingdom around.

27 Frank Barrett. French Play Cat and Mouse with Mickey, The Independent (April 13, 1992), p. 10.28 Steven Greenhouse. Playing Disney in the Parisian Fields, The New York Times (February 17, 1991), p.C1.

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EXHIBIT 3 Park Attendance

Location Park AttendanceUrayasu, Japan Tokyo Disneyland 15.8 millionLake Buena Vista, Fla. Walt Disney World 12.0 millionAnaheim, Calif. Disneyland 11.4 millionMarne-la-Vallee EuroDisneyland 10.0 millionLake Buena Vista, Fla. MGM Studios at Walt Disney World 8.0 million

Source: Amusement Business; figures are for 1993.

EXHIBIT 1 Product Segment Data (000s) 1992

Sales Op. Income Assets Cap. Ex. Deprec.Theme Parks & Resorts $3,306,900 $644,000 $5,076,800 $380,900 $249,800Filmed Entertainment $3,155,200 $508,300 $2,370,900 $76,700 $29,500Consumer Products $1,081,900 $283,000 $642,800 $38,600 $16,800Corporate $2,231,700 $48,200 $21,200Investment in EuroDisney $539,500 Total for U.S. $7,504,000 $1,287,100 $10,861,700 $544,400 $759,600

Sources: Worldscope Database and Disney Annual Reports.

APPENDIX

Walt Disney Co.

EXHIBIT 2 Mickey Goes to France: The EuroDisney Deal

1984-1985 Disney negotiates with Spain and France for site of European Disneyland; France is chosen;protocol letter is signed by Eisner and Laurent Fabius, French Prime Minister.

1986 Farmers protest against government plan to expropriate necessary land.1987 Disney and Jaques Chirac, French Prime Minister, sign letter of intent.1988 Selects lead commercial bank lenders for the senior portion of the project. Forms the Societe

en Nom Collectif (SNC). Begins planning for the equity offering of 51% of EuroDisneylandas required in the letter of intent. Disney and Michael Rocard, French Prime Minister, sign arider to give Disney rights to the land immediately instead of 1989, as originally planned;construction begins.

1989 European press and stock analysts visit Walt Disney World in Orlando. Begin extensive newsand television campaign. Stock starts trading at 20% to 25% premium from the issue price.Disney announces plans for a European version of the Disney-MGM studios with a projectedopening in 1996.

1991 Disney sets up casting centers in Paris, London, Amsterdam, and Frankfurt. Controversyerupts over dress codes.

1992 Disney bails out subcontractors. Pre-opening party held at Buffalo Bills Wild West Show;threat of strike hangs over EuroDisneylands Grand OpeningApril 12, 1992.

1993 Phillipe Bourguignon replaces Robert Fitzpatrick.

Source: LEXPANSION, January 1994

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EXHIBIT 6 Admission Rates

Average total $ spentPark 0-3 yrs. 4-11 yrs. 12-17 yrs. 18+ yrs. per person in parkDisneyland, Anaheim 0 $23 $29 $29 $45-60DisneyWorld, Orlando 0 $28 $35 $35 $45-60Tokyo Disneyland, Japan 0 $27 $35 $38 $70-85Euro Disneyland, France 0 $33 $47 $47 $30-45

Adapted from: The Herald, April 11, 1994, Lets Go Cal, Lets Go France, Fedors Japan.

EXHIBIT 4 The EuroDisneyland Resort

Plans for the EuroDisneyland Resort Phase I Phase I + Phase IIMagic Kingdom Theme Park 200 acres 730 acresHotel accommodations 5,200 rooms 18,000 roomsGolf course(s) 27 holesShopping center 215,200 sq. ft 968,400 sq. ftRestaurants 29Housing units 500 5,100Industrial park 591,800 sq. ft. 8 million sq. ft.Office space 322,800 sq. ft. 753,200 sq. ft.Retail stores 699,400 sq. ft.Conference center 430,400 sq. ft.MGM Studios Not yet determinedEPCOT Center Not yet determined

Source: Business America, Dec. 2, 1991.

EXHIBIT 5 And the Park GrewEstimated Costs on Construction

1985 $1.0 billion1986 $1.5-2.0 billion1987 $2.5 billion1989 $2.9-3.0 billion1991 $4.4 billion1992 $4.4-4.5 billion

Adapted from The Washington Post,The New York Times, The Los Angeles Times,The Economist, Amusement Business.

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EXHIBIT 10 Visitor Profiles

Average Percentage ofAverage Number Average Annual Income Available for

Location of Weeks Vacation Income (per capita) Leisure/Cultural ActivitiesUnited States 2-3 $22,000 5%Japan 2-3 $25,430 4.7%Germany 6 $27,064 5.1%United Kingdom 4 $18,143 5.8%France 5 $23,026 4.6%Spain 4 $13,755 1.9%

Adapted from: EIU Country Profiles, 1993; Country Chambers of Commerce, EuroMonitor ConsumerReports, 1993, 1994.

EXHIBIT 9 Disney Temperature Ranges

Location Average temp. (F): January Average temp. (F): JulyOrlando, Florida 49-70 74-90Anaheim, California 48-67 64-84Tokyo, Japan 29-47 70-83Barcelona, Spain 43-55 70-82Paris, France 32-42 55-76

Exhibit 8 Disneys Payoff on Euro Disneyland

Royalties from admission 10%Royalties from food, merchandise, and hotels 5%Dividends on Net Income 49% of Parks net incomeBase Management Fees: First 5 years 3% of revenuesBase Management Fees: After 5 years 6% of revenuesBMF if Operating Cash Flow = +$ 220mm 30% of revenuesBMF if Operating Cash Flow = +$ 450 mm 50% of revenuesSource: Financial World, October 17, 1989

EXHIBIT 7 EuroDisneyland Hotels

Construction CostsHotel # Rooms Price Range per room in 1988 FFrEuroDisneyland 500 $190-340 875,000Hotel New York 575 $190-340 875,000Newport Bay Club 1,098 $130-190 560,000Sequoia Lodge 1,011 $130-190 560,000Hotel Cheyenne 1,000 $95-130 315,000Hotel Santa Fe 1,000 $95-130 315,000Total 5,184Davey Crockett Campground 414 181 $ 48

Source: Hotels, October, 1991.