The Magic Behind Disney’s $60 Billion Boost To France’s Economy

Euro Disney, the theme park complex on the outskirts of Paris, has been ranked France’s biggest employer on a single site with a workforce of 15,000 and around 8,000 new recruits taken on annually. Together they cast a powerful spell.

The results were revealed this month in a report by research firm Vigéo Eiris which found that there are 500 different job types at Euro Disney with staff who come from 100 countries and speak 20 languages. As Forbes has reported, Euro Disney’s latest blockbuster attraction, which is themed to the Oscar-winning movie Ratatouille, alone led to the creation of 200 new jobs with 4,000 people contributing to it.

Their careers get a sparkle as Euro Disney’s staff receive 400,000 hours of training annually which is more than three times the legal minimum. A total of 10% of hirings are senior citizens and 764 are handicapped.

They are all known as Cast Members due to the role they play in Euro Disney’s themed facilities. The company is listed on the Paris Euronext exchange and operates seven hotels, two convention centres, 55 restaurants and a 27-hole golf course. At the heart of its business are two parks – the fairytale inspired flagship Disneyland Paris and its movie-themed neighbour the Walt Disney Studios.

Classic attractions in the parks are currently being given a new sprinkle of pixie dust in renovations which will be ready in time for the resort’s 25th anniversary next year.

Synergy will come from a 3D upgrade to Star Tours, a motion simulator themed to the Star Wars sci-fi movie series. Media giant the Walt Disney Company bought Star Wars’ parent company Lucasfilm for $4 billion in 2012 and, since then, it has begun introducing the film’s colourful cast of characters to its theme parks around the world. They aren’t the only movie stars making their way to rides at Euro Disney.

Other additions are coming to Pirates of the Caribbean, the boat ride that the hit movie series is based on. Unlike its counterparts in the United States and Tokyo, the ride in Paris doesn’t yet feature the characters from the movie series but this is expected in an upgrade.

Rides aren’t the only assets which are getting a new lick of paint. In 2011 Euro Disney began a multi-year program to refurbish each of its 5,800 hotel rooms. The first to be finished were the 1,011 rooms at the Sequoia Lodge – a hotel which is built in the style of a huge hunting lodge complete with a giant stone fireplace in the bar and patchwork quilts on the beds.

A further 1,000 rooms have been refurbished at the Santa Fe hotel which takes its inspiration from the angular architectural style of the pueblo buildings in the American city of the same name. The rooms at the nautical-themed Newport Bay Club have also been renovated with touches such as wallpaper which incorporates portholes showing classic Disney characters dressed as sailors.

Adding and upgrading attractions draws in guests whilst hotel refurbishments encourage them to stay on-site. It is the magic formula for boosting revenue and profit.

Testimony to this, Euro Disney’s revenue for the year ending 30 September 2015 rose 9% to $1.6 billion (€1.4 billion) – its highest since the resort’s ornate iron gates swung open in 1992. Its underlying profit, known as Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), rose by $31.6 million (€28.1 million) last year to $159.4 million (€141.8 million) as average spending per guest increased 6% to $60.33 (€53.66).

Operators don’t make the biggest margins on entrance tickets or room bookings as theme parks and hotels are cost-intensive to run. Merchandise and food and beverage is a different story and is sold to a captive audience in theme parks. Accordingly, the goal is to draw guests in to the parks and get them to stay as long as possible so they will spend more.

Hotel occupancy at Euro Disney rose from 75.4% to 79.4% in 2015 as as 85,000 additional room nights were sold compared to the prior year due to more guests visiting from France and the United Kingdom. It remains to be seen whether the UK’s recent decision to leave the EU will bring any dark clouds to this positive trend.

Euro Disney’s latest financial statements show that in the six months to 31 March this year occupancy at its on-site hotels increased one percentage point on the same period the previous year to 78.1%. Combined with the average spending per room rising $2.62 (€2.32) to $241.57 (€213.55) it fuelled a 2.1% boost in revenue to $683.7 million (€604.4 million).

According to Euro Disney’s financial statements, the boost in average spending per guest was driven by increased admissions, merchandise and food and beverage takings. It demonstrates Euro Disney’s resilience despite the terrorist attacks in Paris which took place during the period and led to the parks closing for four days.

Nevertheless the group recorded a significant increase in net loss, to €184 million, driven by the increase in costs and expenses related to its continued investment in the guest experience. As Euro Disney has mentioned in its latest financial release, investments will continue to weigh on the cost base and cash.

Over the six months to 31 March it invested $100.2 million (€88.6 million) in upgrading attractions and financing its new Villages Nature holiday park. Funding for the improvements has been secured through a financial restructuring plan which was completed last year and cut Euro Disney’s debt by $660 million (€600 million) to $1.1 billion (€1 billion), with $464.6 million (€422.8 million) raised from a rights issue.

The debt was used to finance construction of Euro Disney’s two parks and was held by a consortium of banks until 2012 when it was taken over by Disney. It gave Euro Disney comfort and stability and the restructuring is proof of this.

The $660 million saving came through a debt for equity swap which left Disney with a 76.7% stake in the company. Saudi investor Prince Alwaleed holds 10% with the remaining 13.3% of Euro Disney in the hands of institutional and individual shareholders.

Upgrading the attractions will lure in more guests though Euro Disney is already Europe’s most-popular tourist attraction by a considerable margin.

The resort had 14.8 million guests last year with the French comprising 48% of all visitors followed by 16% from Britain and 9% from Spain. Euro Disney’s closest rival is Germany’s Europa Park but that has barely a third of its visitor numbers according to the 2015 Global Attractions Attendance report from research firm AECOM and the Themed Entertainment Association.

In fact, Euro Disney’s attendance is nearly as high as that of its three closest rivals combined. The resort provided nearly a quarter of the 61.2 million guests who visited the top 20 theme parks in Europe last year according to the Global Attractions Attendance report. It all adds up and since Euro Disney opened, more than 290 million guests have visited it. They have had a huge impact.

An economic study published in 2012 by an inter-ministerial delegation revealed that in its first 20 years Euro Disney generated $56.8 billion (€50 billion) of added value to the French economy and 6.2% of foreign exchange income. It is the magic touch which the French government envisaged when it signed an agreement with Disney in 1987 to develop its European outpost.

The agreement granted Disney a plot of land which is almost a fifth the size of Paris. It was originally home to five villages and sprawling beet fields which had been earmarked for development. These plans were frozen following the 1973 oil crisis but Disney put them back on the agenda with a wave of its magic wand.

To ensure that Disney benefits the local area, and that development isn’t rushed through, the government only sells it land in stages once previous plots have been completed.

This relieves pressure on Disney and it has a wide window to develop the land as the 1987 master-plan expires in 2030. Disney has been allocated a total of 2,230 hectares and 1,133 have been developed so far. The project was the first public-private partnership in the history of French national and regional development and it has paid off.

Just a short drive from the theme parks is the new town of Val d’Europe which is designed by American firm Cooper Robertson and is signed off by Disney. Foreign consultants also had a hand to give the town a European flair. The central café was conceived by Belgian Léon Krier, an architectural advisor to Britain’s Prince of Wales, whilst Italian Pier Carlo Bontempi came up with the idea for the oval-shaped square, Place de Toscane.

Val d’Europe is built on land which Disney bought from the government and sold to developers who funded the construction. Schools, sports centres and other public facilities are financed through taxes on on-site hotels and businesses. Disney is the largest contributor and has paid more than $1 billion of tax into the local area which benefits businesses and residents.

The original five villages only had 4,000 residents in total but 28,593 live in Val d’Europe now and its population is projected to soar to 60,000 by 2030. Val d’Europe is home to a total of 28,000 jobs and, surprisingly, Disney staff only make up around 10% of the town’s residents. Other businesses have been the biggest driving force and this is highlighted through the results of a 2012 study by accountancy firm KPMG. It revealed that four to five companies are opening offices in Val d’Europe every week giving a current total of approximately 4,000. In 2011 alone more than 2.44 million square metres of office space was sold.

Since Euro Disney opened, it has contributed $5.7 billion (€5 billion) to the development of Val d’Europe compared to $570 million (€500 million) from the French government. It is hard to imagine that nearly 25 years ago there was barren land where Val d’Europe and Euro Disney stand today and that really is a happy ending.

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