Hong Kong Disneyland opened to great fanfare in 2005, but the fact that it is still the smallest Disney park in the world remains a talking point. Losses in most of the 20 years since then have weighed against the case for expansion. However, a return to profit in the last two financial years could yet change the conversation.

The Lantau theme park has repaid loans from its two shareholders – the government and the US-based Walt Disney Company – and is debt-free for the first time. Profits are being invested in incremental expansion through new attractions. The question is whether it is time for Disney and the government – the major shareholder – to explore a timeline for the next phase of the theme park to tap new tourism markets and ensure sustainable development.

The resort marked its 20th anniversary – in the financial year ended last September – by consolidating the return to profit in 2024 after nine years of consecutive losses. Encouraging as this is, the latest result was actually a 36 per cent drop in net profit to HK$536 million (US$68.4 million) amid higher costs, increased outbound travel by residents and weather disruptions.

After a less than impressive performance since the park opened two decades ago, the latest turnaround settles doubts about whether the government made a sound business investment. That said, there is no room for complacency. Concerns remain that tourists are bypassing theme parks and other conventional attractions in favour of immersive cultural experiences. Disneyland must therefore adapt and stay abreast of changing tourism trends. It is good that resurgent earnings are being reinvested in a number of new attractions.

In that regard, Disney should lose no time in addressing a decline in the share of visitors who are locals from 40 per cent to 36 per cent. That could be linked to locals’ appetite for overseas travel and easier cross-border short visits, but they remain an important demographic that should be targeted with incentives and discounts.

The resort reported revenue down by 1.35 per cent year on year to HK$8.69 billion and visitor numbers falling by 2.5 per cent to 7.5 million, from a record 7.7 million in 2023-24. Managing director Tim Sypko said last year’s net profit was still the second highest of only five in its 20-year history. Profits so far are far from enough for expansion into a second stage, but Disneyland still needs to pursue proper financial planning with the government and a strategy for differentiating itself from a rebranded Ocean Park and regional competition, especially from Shenzhen. We trust Disneyland will strive to keep profits rising. It could also be timely for it to resume discussion with the government for its second stage of development so as to offer something new.