Disney halts Hong Kong park expansion, angers government

Walt Disney Co. has put the long-delayed expansion of its Hong Kong theme park on hold after failing to agree with the city's government on a cash infusion, the company said today. Disney and the Hong Kong government, which has a 57-per cent stake, have been embroiled in protracted discussions over financing a second phase of the world's smallest Disneyland and the first on Chinese soil.

But Hong Kong Disneyland's visitor number projections failed to reach initial bullish predictions with the key Chinese tourist market now bogged down by a worldwide credit crunch and a decelerating economy that is discouraging travel. Disney said it would fire about 30 Hong Kong-based employees dubbed "imagineers" that had helped conceptualise and plan the expansion.

''The uncertainty of the outcome requires us to immediately suspend all creative and design work on the project,'' Leslie Goodman, executive vice president of Walt Disney Parks and Resorts' worldwide public affairs, said in a statement today.

The Hong Kong government expressed "grave concern" about the decision and urged Disney to reconsider.

"We consider that (Disney's) laying off of Walt Disney imagineers who have been working on the design of Hong Kong Disneyland's expansion will not be conducive to the discussions and are puzzled by the company's decision," a spokesperson for the commerce and economic development bureau said in a statement. ''The government still hopes to reach an agreement with Walt Disney Co. as soon as possible,'' he added.

Opened in 2005, Hong Kong Disneyland has been criticised for being far too small to attract repeat visitors despite its proximity to mainland China. The amusement park, which is operated by Hong Kong International Theme Parks Ltd., planned to expand the park by a third to attract visitors, managing director Andrew Kam told reporters in December.

The park attracted 14.5 million visitors in its first three years, Kam said in January. The number of tickets sold rose 8 per cent to 4.5 million in the year ended September, he said. The park increased ticket prices by as much as 19 per cent last month, the first adjustment since it opened.

"Despite this setback, The Walt Disney Company remains confident and committed to the long-term success of Hong Kong Disneyland," Disney said.

An expansion could cost as much as HK$3 billion ($387 million), local media reported. In December, the Sing Tao Daily newspaper reported that Disney - in what was deemed an unusual concession - may give the government a greater share in the project in repayment of a cash loan of nearly $800 million that the city had extended previously to the theme park.

Hong Kong residents and lawmakers, for their part, have queried the financial viability of pumping more public money into the struggling park, on top of the hundreds of millions of dollars already loaned to the project. Disney has borrowed more than $1 billion for the project, including HK$6.1 billion it owed the city's government, due to be repaid over 25 years.