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Bad Decisions At Euro Disney

Essay by   •  January 3, 2011  •  701 Words (3 Pages)  •  1,646 Views

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Two years after Walt Disney Co. opened its new part in France, Euro Disney was losing $1 million per day, despite over a million visitors per month. What had gone wrong?

Disney was overly ambitious, and had made serious strategic and financial miscalculations. It relied too heavily on debt, just as interest rates started to rise. It assumed a real estate boom would continue, allowing it to see some properties to pay off its debts. It made mistakes in the park itself, including cost overruns, a no-alcohol policy (in a country where a glass of wine for lunch is standard), too few bathrooms, and a mistaken assumption that the French would not want breakfast at the hotel restaurants.

The company blamed its problems on a severe European recession, high interest rates, and the devaluation of several currencies against the French franc. But is had alienated the people with whom it needed to work. Disney thought it knew best, and persistently imposed its will on others. "They were always sure it would work because they were Disney," said one French construction-industry official. Disney's European executives felt they were always playing second fiddle to corporate executives.

Disney showed its overconfidence in many ways. Executives boasted they could predict future living patterns in Paris; they predicted people would move to the east near Euro Disney. They believed they could change European habits. For instance, Europeans are more reluctant than Americans to let their kids skip school, and prefer longer vacations to short breaks. Disney believed it could change this.

"There was a tendency to believe that everything they touched would be perfect>" said a former Disney executive. Disney believed that what it could do in Florida, it could do in France. The perceived arrogance, and a critical press, demoralized the workforce, and initially kept visitors away.

The risky financing of Euro Disney was based on a highly optimistic scenario with little margin for error. When critics said the financial structure was far too clever for its own good. Disney's attitude was that cautious, old-world European thinking couldn't comprehend U.S.-style, free-market financing.

Eventually, the park had as many visitors as projected. But costs were way too high, and the economic environment had changed. To cover costs, park admission was set at $42.45 higher than in the United States. But Disney failed to see the warnings of a European depression. Said one executive, "Between the glamour and the pressure of opening and the intensity of the project itself,

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