Tuesday, April 26, 2011

" Squaring the Circle " or : What you need to know to understand DLP management



Since DLP Big Thunder Mountain accident last monday most of the comments whether on D&M or on other websites complain - or even accused - about DLP "supposed" bad maintenance of the park. The whole story is much more complicated than that and i'd like to take a minute or two to explain you why you shouldn't blame DLP management - specially before we know precisely the reason of the accident.

Let's begin by the beginning, i.e back almost 20 years ago, when the financial problems of the park began. When Disneyland Paris - at that time still called EuroDisney - opened, everyone celebrated the opening of a gorgeous Magic Kingdom. From the first year the park was a huge success and became instantly, not only the most visited place in France but also in Europe with more than 11M guests visiting the park. The park was so popular that DLP decided to build as quick as possible new rides.

However, in the next years problems on the financial situation of EuroDisney began and the good question is: why? Why a place which was the most visited place in Europe had this financial problem. The answer is in one word: Hotels. From day one DLP had seven hotels built on site, including the Davy Crockett Ranch. Right now the hotels are doing fine but at the beginning it was different. So, seven hotels from day one, not one or two, SEVEN! Many voices shouted "Fools!" to the management, knowing that there was so many hotels in Paris that building seven on-site hotels was going to be a financial failure.

So, why the WDC decided to build seven hotels on the site when they could have simply built only two, and more afterwards if necessary? Two words: Michael Eisner. You, see, Eisner, who was as we know WDC CEO at that time has always been a "wannabe architect". For those of you who don't understand what a "wannabe" is, it means that a person has always wished to be something that, sometime she succeed to be, or, most of the time, she never succeed to be. In the case of Eisner, he became the CEO of a big company, but never an architect.

So what did Michael when it was time to design hotels for the DLP project? He hired some of the best architects - and probably some of his favorites - and asked them to design great buildings for DLP hotels resort. The hotels section of the project was one on which he had the final cut and having them designed by the best architects was his way to live his "wannabe" dream to be an architect. And it would have not be a problem if Eisner had decided to build only two hotels, but instead seven hotels were built which means a huge maintenance cost, not to mention the salary cost of all the people working at the seven hotels.

Right now the hotels are doing really well, but back in 1992 it was not the case at all. And what had to happen happened: the hotels costs were a burden in DLP accounts and Michael Eisner's dream was finally responsible of the beginning of DLP financial problems. Eisner never admits his responsability but he was not the kind of guy to admit his faults, anyway.

So, first problem, too many hotels from day one. Again, the hotels are doing very well now, the mistake was only to have seven hotels operating from opening day. Then the park decided what was indeed the best thing to do to resolve the problem, i.e to build DLP second gate, the Walt Disney Studios. Good idea, if you have two parks, you necessarily will have more guests spending nights in the hotels. But it's a good idea if the park is just as good as the first one was. And when the WDS opened - and although WDI Imagineers did their absolute best with the money at their disposal - everyone complained, one about the lack of theming, another that it was a half day park, or that there was not enough attractions for young kids, etc...

Mind you, there was many other designs for the WDS but finally the WDC chosen the one we know, probably thinking that "the guests won't see the difference" which is probably the most stupid phrase that any executive can say as the guests always see the difference. And, talking about executives, guess who was WDC CEO at that time and had the final cut on the budget allowed for the WDS? That's right: Michael Eisner. Second mistake, and this one was going to cost a lot to the park. Since then, for all DLP's executives, ruling DLRP is like squaring the circle.

Those of you who have followed DLP financial news might say "wait a minute, i thought that the park had 400 M euros of cash flow at the bank?" That's right that's more or less the amount they have but what you don't know is that they can't use the money just like they want. Each time the park needs money for a new project whether it is, for instance, the new World of Disney Store, or a new attraction, or a big rehab program as they currently do, they need the bank agreement for the needed amount. Considering the park's debt i can understand that the banks wants to make sure that the money will be well spent, but, still, it doesn't make the job easier for DLP management.

So, as you probably understand now, the job of the park is, finally, to find the best way to manage a budget. They need money to build new attractions to have the guests coming back and increase parks, hotels and merchandise revenues AND they need money to transform the WDS in a full-day park AND in the same time they need money for the park maintenance AND they need money to reduce the park's debt to the banks. And it is more complex that we can think as, as we know, if they don't build new rides guests won't come back AND so the resort revenues will not get better AND so they will not have money to reduce the debt with the banks AND so the banks will not accept to give them money to build new rides, etc... As i've said it's almost like squaring the circle, and i can assure you that DLP management is doing absolutely their best, and it's not easy, considering they've inherited of these two major mistakes explained above, mistakes that they are not responsible of.

So, please keep in mind all the complexity of the situation when you'll write your comments, that will be fair for all the people doing their best at DLP.