<How your government cheats : Part 3>
Part 1 on electricity market
Part 2 on West Rail
Our Disneyland is in red – both the operating income (profit before interests and depreciation) and net income.
Appledaily reported the following fantasy and reality comparison :
入場人次
當初估計：每年 560萬
最新實況：每年平均 475萬
營運狀況
當初估計：開幕後第二年收支平衡
最新實況：首四年每年都虧蝕
旅客成份
當初估計：本港居民僅佔 19至 23%
最新實況：本港居民佔 41%
I will comment on how these data affect the possible economic contribution by Disneyland.
The most important contrast is the patronage : the revised projection is almost 20% lower than the original forecast (conducted in 1999). So other things constant, the economic benefit by Disneyland will reduce by 10% – which, to be honest, remained gigantic SHOULD government’s original assessment is correct (the internal rate of return is 25% – see page 2 here!!! Roughly speaking, a reduced 20% return is still attractive)
But there are reasons to believe the actual impact could be substantially less than the forecast.
First of all, the 5.6 million forecast patronage was mostly head-count (i.e. with limited repeated entrance); but the 4.6 million actual patronage contained much repeated entrance (due to the annual pass feature). And from the composition of visitors, most are local HK residents.
These mean instead of being a strong magnet of tourists, HK Disneyland seems more like a local resident hot spot.
There is nothing economically wrong for having much local residents, but, relatively speaking, economically-wise there will be much difference between 1 tourist and 1 local resident visiting Disneyland :
— The local resident, by spending money in the theme park, will somewhat reduce its spending somewhere else in the rest of Hong Kong. Thus net-net the economic impact to Hong Kong will be smaller than a tourist visiting the theme park. He/ she may reduce some of the spending in the rest of Hong Kong (“crowding-out); but the impact would be smaller
Thirdly, note that the HK Disneyland has been losing in the past 4 years, either in EBITDA or net profit. Part of it could be attributable to lower-than-expected patronage, but some should be due to lower-than-expected per-capita expense in the part as well. Page 11 of this report showed a 1% decrease in per-capita expense in 2009. The actual per capita expense cannot be calculated and unknown (that cannot be calculated from dividing the income by patronage; the per-patronage expense is $552 in 2009, 3.7% lower than the $570 in 2008).
In any case, the low per-capita expense can also be manifested by the drop in hotel occupancy rate (78% in 2008; 70% in 2009).
One likely reason for the low per-capita expense is the existence annual pass since repeated visitors are less likely to purchase a lot of souvenir every time they visit the park. Another reasons, though not quantifiable, is the lack of attractive souvenir. If you visit the theme park, all they sell are only popular items. You can barely see individual items for some not-so-hot characters. But this reason, even legitimate, is not so relevant. Reportedly, souvenir sales in the park is very satisfactory. I believe this is purely my bias towards the too-ugly Donald Duck souvenir in the park.
So lower-than-expected patronage, compositional change and weak per-capita expense all together suggest the economic benefit brought by the Disneyland would be significantly smaller than forecast.
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