The Only Part of Disney Losing Money - Euro Disney

Mona Lisas and Mad Hatters, sons of bankers, sons of lawyers.

I visited Euro Disney in 1994, two years after it opened. After informing our Parisian cab driver that we wanted to go to the new theme park, he nodded quietly, started the meter, and sped off. While a colleague checked on his current destination on the walkie-talkie, our driver chuckled while saying "Euro-disne." The cultural disdain the Frenchman had for this American affront (and the dumb tourists heading there, it must be said) was clearly palpable.

I suppose that this memory stays with me insofar as Euro Disney has been unprofitable for much of its existence. For what reason I have not really understood since it is virtually indistinguishable from any other Disney theme park in the world as far as I can tell. If they do well, then why can't Euro Disney? My memory aside, the fact is that for all the French snootiness about cultural preservation when faced with the onslaught of Americanization-as-globalization, the second-largest market for McDonalds worldwide is France. So, it cannot be a purely cultural phenomenon going on here as Walt's company engages in a debt-for-equity swap:

Walt Disney Company will inject cash into Euro Disney as part of a recapitalization plan worth about 1 billion euros, or about $1.25 billion, in hopes of improving the troubled theme park operator’s financial position. Disney, the California media and entertainment giant, will inject €420 million in cash in exchange for shares. Euro Disney’s debt will be reduced as the parent company converts about €600 million in debt into shares. Disney, which owns 40 percent of Euro Disney, will also defer certain loan payments until 2024.

For another thing, Euro Disney is hardly dependent on the French market. Remember that France is by far the world's most popular tourist destination. Partly chalk this down to a generalized European downturn, then, as bringing the family to the outskirts of Paris is one of the first things to go on the to-do list:

Euro Disney, which opened outside Paris in 1992, has struggled over the years with financial issues, mainly tied to its debt. The French company last turned an annual profit in 2008 ahead of the financial crisis, when it had an occupancy rate of over 90 percent at its resort hotels and more than 15 million visitors. Euro Disney earned €1.7 billion that year. 

It has posted an annual loss every year since then, topping €78 million for the fiscal year ending on Sept. 30, 2013. The company also has seen a severe decline in visitors in the past two years after surpassing 16 million in 2012. That year, Disney agreed to refinance €1.3 billion in debt for Euro Disney. The French company has suffered declining attendance this year, which has cut into its revenue forecasts. Euro Disney had 14.9 million visitors in 2013 but expects to have only 14.1 million to 14.2 million visitors this year.

They make business cases out of Euro Disney since its financial performance remains enigmatic until now. Meanwhile, the parent company is hardly strapped for cash so it's riding in to the rescue as it has so many times before. You have to wonder though if it may throw in the towel sometime after spending good money after bad time and again.