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Administration's Paper on the Update on Hong Kong Disneyland Resort

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Administration's Paper on the Update on Hong Kong Disneyland Resort LC Paper No. CB(4)390/19-20(06) For discussion on 23 March 2020 Legislative Council Panel on Economic Development Update on Hong Kong Disneyland Resort PURPOSE This paper updates Members on the operation of the Hong Kong Disneyland Resort (“HKDL”) in Fiscal Year 2019 (“FY19”)1. OVERVIEW OF FY19 BUSINESS PERFORMANCE 2. During the first nine months of FY19 (from October 2018 to June 2019), HKDL achieved solid business growth with the launch of new attractions and targeted marketing and sales strategies alongside the rising trend in Hong Kong’s overnight visitor arrivals. However, the downturn of the tourism industry caused by the social incidents in Hong Kong in the second half of 2019 brought severe impact on HKDL’s business performance in the last quarter of FY19 (from July to September 2019) amidst some 30% year-on-year drop in Hong Kong’s overnight visitor arrivals during the period. 3. With the drastic change in tourism landscape in the last quarter of FY19, HKDL’s full-year park attendance recorded 4% year-on-year drop to 6.5 million, with local, Mainland and non-Mainland visitors accounting for 41%, 33% and 26% of the total attendance respectively. From its opening in 2005 until the end of FY19, HKDL received over 83 million visitors cumulatively, contributing to Hong Kong’s position as a premier destination for visitors from various markets over the years. Despite the drop in attendance and hotel occupancy in FY19, HKDL’s total revenue was largely on par with prior year at $6,047 million, which was attributable to higher guest spending at the theme park and hotels. Earnings before interest, taxes, depreciation and amortisation (“EBITDA”) were $1,126 million, making FY19 the tenth consecutive year with positive EBITDA. After deducting interest, taxes, depreciation and amortisation, FY19 saw a net loss of $105 million. 1 The fiscal year of HKDL is generally a 52-week or 53-week period with the Saturday closest to 30 September as the last day of the fiscal year. FY19 was a 52-week year, covering the period from 30 September 2018 to 28 September 2019. SERVICE PERFORMANCE 4. HKDL made continuous efforts throughout FY19 to enhance its attractiveness to local, Mainland and non-Mainland guests. As part of its multi-year expansion and development plan as well as ongoing efforts to make HKDL a major hub for “Marvel” experiences in Asia, HKDL debuted the new attraction, “Ant-Man and The Wasp: Nano Battle!” in end-March 2019, providing guests with interactive adventure based in Hong Kong as a continuation of the storyline of the existing “Iron Man Experience” ride. Furthermore, leveraging on the success of the Pixar movie “Toy Story 4” released in July 2019, HKDL introduced its strengthened summer event, “Toy Story and Pixar Pals Summer Splash”, which brought together the largest array of Pixar characters, dazzling new floats, water activities and performances. Other seasonal events held in FY19 included “A Disney Christmas” in 2018, as well as Chinese New Year celebrations, “Carnivale of Stars” spring event and “Disney Halloween Time” in 2019. 5. To drive hotel demand and park visitations, HKDL continued to expand its business in outdoor events in FY19. For instance, HKDL organised in November 2018 its annual “10K Weekend” running event, featuring popular characters from various Pixar movie series such as “Toy Story”, “Monsters University”, “The Incredibles”, etc. and attracting record-high 16 000 participants from local and non- local markets. Following the success of HKDL’s inaugural outdoor concert event held in FY18, HKDL hosted live shows by Ed Sheeran and Mayday in April and May 2019 respectively, which together attracted a total audience of about 170 000 from Hong Kong, Mainland and the rest of Asia. 6. Capitalising on the enhanced travel convenience to HKDL following the commissioning of major cross-boundary infrastructure, i.e. the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“XRL”) and the Hong Kong-Zhuhai-Macao Bridge (“HZMB”) in September and October 2018 respectively, HKDL proactively partnered with the travel trade to stage road shows and shopping mall events in key Mainland cities. HKDL also set up service centres, namely “Magic Gateway”, at the West Kowloon Station of XRL and the Hong Kong Boundary Crossing Facilities of HZMB to provide guest services, enhance marketing exposure and drive visitations. 7. HKDL continued to maintain its high-quality services in FY19. According to its guest satisfaction survey, 95% of theme park visitors and 93% of hotel guests rated their overall experience as “excellent”, “very good” or “good”. Also, HKDL received 59 awards from local and international associations and publications in FY19 in recognition of its design, marketing excellence, guest - 2 - service, employment relationship, and commitment to the community and the environment, bringing the total number of awards received to 787 since its opening. 8. HKDL remains to be one of the largest employers of entertainment and performance talents in Hong Kong. In FY19, it employed more than 5 500 full-time staff members and 2 400 part-time ones to cope with the additional demand arising from Halloween, Christmas, Chinese New Year, summer holidays and other special events. 9. The annual business review prepared by Hong Kong Disneyland Management Limited for FY19 is at Annex. ECONOMIC BENEFITS 10. As a major destination for family travel, HKDL continues to generate substantial economic benefits to Hong Kong. According to survey statistics from the Hong Kong Tourism Board (“HKTB”) and operational data of HKDL, the additional spending of all HKDL visitors in Hong Kong (i.e. over and above what would have been spent in the absence of HKDL) was $15.7 billion2 in FY19. Taking into account both the direct and indirect value-added generated from the additional spending, HKDL brought about $8.8 billion of value-added to Hong Kong in FY19, equivalent to around 0.32% of Hong Kong’s Gross Domestic Product (“GDP”), and created 18 100 jobs (in terms of man-years). Taking the past 14 years of operation together, the total value-added generated by HKDL amounted to $108.5 billion, equivalent to 0.33% of Hong Kong’s GDP. A total of 269 500 jobs (in terms of man-years) were also created over these years, providing considerable job opportunities for frontline workers and the travel industry. CORPORATE SOCIAL RESPONSIBILITY 11. HKDL is committed to Hong Kong and the community it serves. In FY19, HKDL worked with more than 400 organisations to provide over 100 000 complimentary park visits for underprivileged community members and contributing around 10 000 hours of volunteer services through its “Disney VoluntEARS” programme. Also, HKDL has been promoting volunteer service through the “Give a Day, Get a Disney Day” programme jointly organised with the Agency for Volunteer Service since 2010, which has encouraged community 2 All value figures in this paragraph are at 2017 prices. - 3 - members to contribute nearly 16 million hours of volunteer services in total up to FY19. 12. HKDL employed around 100 individuals with disabilities in FY19, and continued to offer an apprenticeship programme for the disabled. HKDL also took part in the Government’s Talent-Wise Employment Charter and Inclusive Organisations Recognition Scheme to promote an inclusive and disabled-friendly workplace. 13. In collaboration with the Committee on Home-School Co-operation, HKDL supported, for the sixth year in a row, the annual “We Did It!” Award Scheme during the 2018/19 school year to recognise students’ achievements in non-academic areas in pursuit of their interests and dreams, offering over 12 000 complimentary park admission tickets to about 6 200 students and parents from more than 300 primary schools. FUTURE DEVELOPMENT 14. FY20 started off with difficult operating environment where the social incidents in Hong Kong continued to pose negative impact to the tourism industry. As such, during the first quarter of FY20 (from October to December 2019), HKDL focused on boosting local visitations through tactical offers on annual passes, merchandise, hotel packages and dining. However, in view of the outbreak of the coronavirus disease 2019 (i.e. COVID-19), HKDL has temporarily closed its theme park and adjusted the level of service at its hotels since late January 2020 so as to contribute its part in containing the outbreak and protecting the health of its guests and staff. HKDL will continue to monitor the situation closely and decide when to re-open the theme park taking into account the development of the outbreak as well as the safety of its guests and staff. 15. Amidst the above unprecedented challenges faced by HKDL, its business performance in FY20 has no doubt been seriously affected. HKDL’s priority is to map out strategy to bring its operating and development back on track as soon as possible, including preparatory work for the theme park’s re-opening, rolling out marketing and sales programmes in different visitor source markets at opportune junctures as well as launching the next new attraction under its multi-year expansion and development plan, the “Castle of Magical Dreams”, when the tourism market shows signs of recovery. - 4 - ADVICE SOUGHT 16. Members are invited to note the above update on HKDL’s operation. Tourism Commission Commerce and Economic Development Bureau March 2020 - 5 - Annex HONG KONG DISNEYLAND ANNUAL BUSINESS REVIEW FOR THE FISCAL YEAR 2019 KEY HIGHLIGHTS 1. Hong Kong Disneyland Resort (“HKDL”) continues to play a pivotal role in its community and in fostering the development of Hong Kong as a top tourist destination in Asia. 2. For the period from July 2018 to June 2019 (i.e., the 12 months preceding the social incidents in Hong Kong), attendance, revenue and earnings before interest, taxes, depreciation and amortisation (“EBITDA”) were up 5%, 12% and 22% year-on-year, respectively, and HKDL delivered positive net income.
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