There were times in the early 1990s that the fledgling Euro Disney's fortunes were looking as bleak as any Dickensian story. After the grand opening on April 12, 1992 was blighted by the French Press and the local labor unions the future was looking gloomy.
In part two of our look at the opening of Disneyland Paris, or Euro Disney as it was called in the early 1990s we'll look at what went wrong.
The first and most pressing problem was that those Guests that did go to the new resort didn't spend their money there. The company had made a series of financial and cultural miscalculations that killed much of the Guest's goodwill that was counted on. They didn't understand the fundamental differences between their new European Guests and their traditional American Guests. Most tellingly, Euro Disney maintained the alcohol-free policy of its other parks in Paris, arousing the ridicule of a country where wine is a part of the culture.
Then the cost of a park passport, the Guests ticket to the new park was a staggering 30% higher than the same ticket to enter the Magic Kingdom at Walt Disney World. Add to this, no seasonal pricing and no matter what day in 1992 you were going to the park, you were paying top dollar. This might be the new jewel in the Disney crown, but its new customers didn't see it that way.
This might be the new jewel in the Disney crown, but its new customers didn't see it that way.
The situation was worsened by the fact that the cheap US Dollar at the time was persuading more and more people to go to the 'real' Disney in Florida. Also, the French Franc had risen dramatically against other European currencies, especially the British Pound. Florida was a far more attractive option for many Europeans than the new resort on their doorstep.
Euro Disney's hotels were another miscalculation. Expecting their Guests to echo their American cousins and book an average four-day stay, just as they did for a WDW vacation, Disney was surprised to find that the majority of their room bookings were only for one night stays. European transportation meant that a family could travel to the resort and enjoy it with only a single overnight stay. The truth was that the resort was over-populated with hotels, especially for a park that could be reasonably well explored within a full day.
Coupled with high prices for food and souvenirs across the property, the Euro Disney Company started to close hotels during the winter months in an attempt to stop haemorrhaging cash and even considered the seasonal closure of the park itself.
Unsurprisingly, Disney had misjudged its Guests eating habits too. They believed that the Europeans would not want fast food in the theme parks. The 'more cultured' Guest would want fine dining in one of the five table service restaurants throughout the Magic Kingdom. By the end of the first summer, the Explorer's Club in Adventureland was regularly closing before the end of the night, and by the next summer it had been reborn as Colonel Hathi's Pizza Outpost.
In the hope of better understanding their customers, it was deemed time for a change in management. American Robert Fitzpatrick, who had overseen the phase one construction, was replaced by Frenchman Phillippe Bourguignon. His new team began looking to address the resort's problems.
Bourguignon found himself in charge of a Euro Disney caught in the recession of the early 1990s. Many of its best laid financial plans had foundered, and the interest rates on the company's loans were rising fast. It had counted heavily on the French property market, basing up to 45% of their projected revenue on it. When it collapsed in the early 1990s, the company's property developments failed to materialize, leaving a huge hole in the business plan. At the same time, staffing costs were going through the roof. Pre-opening calculations for staffing suggested the bill would be just 13% of total revenues. In fact, labor costs rocketed from an actual 24% in 1992, to 40% revenues by 1993.
The park's name was officially changed from Euro Disney to "Disneyland Paris." In the words of the press release, "in order to more closely link the park with the romantic city of Paris," and to disassociate itself with the poor reputation that had become linked with the phrase "Euro Disney." Another sea change was that the no-alcohol policy was modified allowing wine and beer to be served at the park's table service restaurants. At the same time, they amended the ticketing prices for the park, introducing high, medium and low season pricing, and lowering room rates for some of the resort hotels.
Another sea change was that the no-alcohol policy was modified allowing wine and beer to be served.
By the end of 1993, things were going from bad to worse. In the first year, Euro Disney suffered a loss of more than one billion dollars and its debts were four billion dollars. The company was facing bankruptcy. While the French management team was making savings where possible, US Disney CEO, Michael Eisner, was now publicly suggesting that the resort could close.
The European media had a field day with 'Disaster for Disney' stories and the British tabloid press - never known for their high standards - had their reporters photographed in deserted parts of the Magic Kingdom on wet mornings. A brave face was put on the first anniversary of the park's opening and Sleeping Beauty's Castle was decorated as a giant birthday cake to celebrate the occasion, but by December 1993 with its losses growing to one billion dollars and its debt load nearing four billion dollars, Euro Disney had run out of cash.
Everything was brought to a head in March 1994 when the Walt Disney Company went to the banks. The Company's finance team went into the meeting with an ultimatum. The WDC would provide sufficient capital investment for the park to continue to operate until the end of the month, but unless the banks agreed to restructure the debt that the park's construction and operation had run up, Disney would close the resort and walk away from the whole European venture - leaving the banks with a bankrupt theme park, seven hotels in the middle of nowhere, and a massive expanse of virtually worthless real estate.
Disney then forced the bank's hand by calling the annual share-holder meeting for March 15th. Faced with no alternative other than to announce to the share holders that the park was about to close, the banks started looking for ways to refinance and restructure the massive debts. Then to further increase the pressure on the banks, Michael Eisner, Disney's CEO went public shortly before the stock-holder meeting and announced that Disney was planning to pull the plug on the venture at the end of March 1994 unless the banks were prepared to restructure the loans.
Disney was planning to pull the plug on the venture - unless the banks were prepared to restructure the loans.
Finally, on March 14th, just before the annual meeting, the banks capitulated, and agreed to Disney's demands, effectively writing off virtually all of the next two years worth of interest payments, and a three year postponement of further loan repayments. In return the Walt Disney Company wrote off $210 million in unpaid bills for services, and paid $540 million for a 49% stake in the estimated value of the park, as well as restructuring its own loan arrangements for the $210 million worth of rides at the new park. This momentous deal effectively saved Disney's Paris resort, but it was still a long way from profitability.
With its debt load halved, Euro Disney found help from a surprise quarter - Prince al-Waleed bin Talal, nephew of King Fahd of Saudi Arabia and a powerful businessman in his own right. The Prince announced his intention to buy 24% of Euro Disney for $500 million.
After narrowing its losses to $360 million on $820 million in revenues in 1994, Disneyland Paris finally turned a modest profit in 1995. With this first good news the company started making plans for its future.