BRAND HEALTH CHECK: Disneyland Resort Paris - Disney magic has yet to take hold in Europe

Its precarious financial footing also means the theme park - 40% owned by Disney - is having to negotiate the financing of its debt with its bankers.

The company blames its poor performance on the downturn in European travel and tourism, strikes in France and the poor economic conditions of its key markets.

But with the vast majority of its visitors coming from France and its neighbours - 40% French, 21% British, 7% German - it is hard to see how travel could be a factor. Could a strong anti-American feeling in mainland Europe following the Iraqi war be affecting this US brand?

Some believe Disney has underinvested and misunderstood how to position the park. While it competes with, Parc Asterix for French visitors, for example, it has failed to cater sufficiently well for Germans; with their long holidays and ease of access, they should be a prime target.

The park has also never quite come to terms with the cultural anomaly of such corporate Americanism in the heart of France.

While it remains the number one tourist attraction in Europe - and opened a second park in Paris, Walt Disney Studios, closely modelled on Universal Studios in Florida, in March 2002 - visitors have not been flooding in.

Chairman and chief executive Andre Lacroix says it will implement a European marketing strategy "innovative and adapted to changing consumer behaviour" in 2004.

Will this be enough? We asked Stephen Knight, former vice-president for marketing and brand management at Disney, and now managing director of marketing agency Creata, and David Muir, group development director at Ogilvy & Mather, which used to hold its ad account.

VITAL SIGNS
                                 2003             2002           % chng
Revenues                          1053.1m euros    1076m euros      -2.1
Net loss                          56m euros        33.1m euros      69.2
Theme park guests                 12.4 million     13.1 million     -5.3
Theme park spending per guest     40.7 euros       40.1 euros        1.5
Hotel occupancy rate              85.1%            88.2%            -3.1
Hotel spending per room           183.5 euros      175.1 euros       4.8
Source: Euro Disney SCA, year to September 30

DIAGNOSIS

STEPHEN KNIGHT

Disneyland Resort Paris has clearly been hit by the downturn in European travel and tourism, but despite its well-documented financial difficulties, it remains Europe's leading tourist destination and the UK is its first market for international visitors.

Its product is unique in Europe. Nothing else has such a brand heritage and such a catalogue of well-loved characters, and it needs to focus on these core differences.

It lacks consistency in terms of brand message and the advertising and marketing campaign for the launch of its second theme park, Walt Disney Studios, failed to broaden appeal.

It has started to advertise again on its own, rather than with Walt Disney World in Florida and I believe that is the right route for the brand.

It is a short-break destination and should not compete with Walt Disney World, a two-week holiday destination.

Consistency in message and further investment in new attractions (especially in the new park) are now needed, together with a more flexible, local approach to communications - one size won't fit all.

DAVID MUIR

Disneyland Resort Paris faces a variety of environmental challenges.

First, a declining birth rate in Western Europe puts pressure on its volume projections. Second, the young children of Western Europe are getting older, younger. Third, there is frequent industrial action on the travel routes.

So even before it does anything as regards positioning, service enhancement, pricing or promotion, it faces some significant issues. In addition to this it has a capital structure that, with hindsight, uses too much debt.

This, in turn, puts considerable pressure on the business. Despite all this, there are signs that some things are working. For example, the spend per visitor has increased, suggesting that customers value the experience.

If I had to focus in on one area it would have to be the problem of children getting older younger, by far the greatest threat to this and other parts of the Disney empire.

Children aged between four and seven will be the key drivers of sales, so if I was chief executive I would engage with my marketing team on understanding this group.

TREATMENT

- Marketing alone can't resolve the issues: the financial structure of the company is holding back its full potential.

- The Walt Disney Corporation must invest in attractions, marketing, communications and training to continue to deliver the Disney magic.

- In the meantime, it needs to focus on the emotional nature of the brand and its core values.

- The brand must immerse itself in the lives of four- to seven-year-olds. And remember they aspire to the lives of ten- to 11-year-olds.

- They continue to be telly addicts, so the box is still best.

- They adore celebrity.

- This audience is always on. The company needs to fundamentally rejig the web site, which is not playful enough. It should be more like the Disney Channel's.