Disney theme parks are booming in Asia, but Chinese geopolitical risks loom

Disney CEO: A trade war with China would be damaging

With a population of 1.4 billion and a burgeoning middle class, China is fertile ground for theme park operators. The plight of a project in the country's northeast underscores, however, that geopolitics may ultimately stymie the success of foreign entrants like Disney.

Thus far, Disney has seen positive results in East Asia. Mickey Mouse is already eating Hello Kitty's cake in Japan, where footfall at Tokyo DisneySea and Disneyland outstripped those to local players at Hello Kitty-maker Sanrio's Puroland and Nagashima Spa Land.

This week, the House of Mouse reported favorable attendance numbers at its only theme park on mainland China amid questions about the fallout from a trade war between the world's two largest economies.

Geopolitical risks for theme park operators were highlighted on Wednesday, when South Korean conglomerate Lotte revealed that the Chinese government has ordered the company's 3 trillion won ($2.6 billion) theme park project in northeastern China to be halted, Reuters reported. The move, seen as retaliation against Seoul's deployment of an advanced U.S. missile system, underscores the business risks of operating in the Communist regime.

Speaking to CNBC's "Squawk Box" on Wednesday, Motley Fool analyst David Kretzmann acknowledged President Donald Trump's trade policy with China was still "a big unknown."

"That is a risk for Disney and other companies. In this case, it's clear to remember that Disney is truly a global company. Obviously, the company has put a ton into Shanghai Disneyland…(and) Disney has had such close ties with the Chinese government and with the Chinese society as a whole to get to this point," he added.

Shanghai Disneyland opened with a bang and has welcomed about 7 million visitors since the park's opening in June 2016.
Marcio Machado | Getty Images

The stakes are high for Disney, which welcomed more than 7 million guests since opening its Shanghai gates in June last year, CEO Bob Iger said.

"An all-out trade war with China would be damaging to Disney's business and to business in general. It's something I think we have to be very careful about," Iger told CNBC's "Fast Money" on Tuesday.

According to World Travel Market and Euromonitor, theme park sales in China will hit $12 billion by 2020, leapfrogging both the U.S. and Japan, the largest markets now.

It's not just Shanghai Disneyland: Another 60 theme parks are in the pipeline, threatening the iconic Hong Kong playgrounds of Disneyland and Ocean Park.

Other U.S. companies also eyeing the Chinese market include Comcast's NBCUniversal (the parent company of CNBC) and Six Flags.

According to a ranking by the Themed Entertainment Association and engineering firm AECOM, four out of the top 10 most visited theme parks in Asia in 2015 were located on mainland China and Hong Kong.

Theme parks and 'bo lo bao' in Hong Kong

"Regionally there are a lot of amusement parks that have been established. The competition is very stiff," said Gregory So, secretary for commerce and economic development of Hong Kong.

Faced with the prospect of fewer visitors, Hong Kong is aggressively upgrading its own parks with features such as new hotels, cultural attractions and food trucks.

Disney's Iger said in November there hasn't been a negative impact on Hong Kong Disneyland due to Shanghai's opening, which seems to have spurred the city's fighting spirit.

"In fact, there was some uptick initially on Hong Kong attendance when Shanghai opened. And there seems to be an interesting growth in pride locally in Hong Kong, in that park," he said.

"I guess their competitive spirits have, somehow or another, been stimulated."

Follow CNBC International on Twitter and Facebook.

Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.