Did you know that up until 1988 Disney didn’t actually own the Disneyland Hotel, and that
Disney’s plan to buy it ultimately lead to the creation of Tokyo DisneySea?
Strange path from A to Z, right?
When Walt Disney built Disneyland, he put everything on the line to make his dream a reality.
At $17 million dollars, he had exhausted every option, including putting up some of his own
money, to pay for the project.
As a result, he wasn’t able to afford to build a hotel to go along with the theme park.
So instead he turned to outside friends to build and own one.
He initially asked his friend and television personality Art Linkletter, but fearing that
Disneyland wouldn’t be successful, Linkletter declined.
As a second choice, Walt pitched the idea to oil tycoon turned film producer, Jack Wrather.
Beyond an oil company and real estate, Wrather owned the rights to such classic shows as
The Lone Ranger and Lassie.
In return for building the hotel, Disney would grant Wrather a 99 year exclusive license
to build hotels in southern California using the Disney name.
Wrather jumped at the opportunity, and by October of 1955, just three months after Disneyland
opened to the public, The Disneyland Hotel was open for business.
Everything worked out pretty well, and in 1961 as an extension of the goodwill deal,
Disney would lease the use of the Disneyland Monorail at little cost to Wrather, with a
new station being built so that guests of the Disneyland Hotel could easily take the
monorail to Disneyland.
Over the following 30 years the hotel would both grow and fade.
Expanding to three main buildings, the hotel eventually totaled at 1,174 rooms.
However over time the quality of the hotel itself slipped, and it began to appear a bit
run down.
Beyond that Wrather’s company, Wrather Corp, fell into financial trouble.
In the mid 1980s a company called Industrial Equity, based in Hong Kong and run by a New
Zealand raider named Ronald Brierly, purchased 28% of Wrather Corp and informed the SEC that
they had intentions to buy at least half of the company, which usually meant that the
ultimate goal was a full takeover down the line.
Meanwhile Disney was anxious to regain their name rights for hotels in the southern California region.
They realized that even though they didn’t own or operate The Disneyland Hotel, guests
would associate the poor quality of the experience with them.
With a New Zealand corporate raider setting his sights on the company however, they understood
that any hostile takeover would only diminish their chances of cutting a deal.
So Disney executives Gary Wilson and Richard Nanula were tasked with finding a solution.
Instead of cutting off Industrial Equity, Disney proposed that they buy Wrather Corp
with Industrial Equity.
With the agreement, Disney and Industrial Equity would pay $152 million dollars for
the rest of the company with Disney paying $76 million of that to own half of it.
Disney would own the Disneyland Hotel, regain their name rights, get the 26 acres of land
south of Disneyland, and also get 300 acres worth of real estate in Long Beach California.
Industrial Equity would get everything else including the real estate and the oil business.
In order to get Wrather to bring down the price to that 152 million, Disney did a bit of strong arming.
Remember how earlier I mentioned that Walt leased the use of the monorail for The Disneyland
Hotel for a low price to Wrather?
Well that lease was about up for renewal, and Disney used that to their advantage.
Disney threatened to spike up the cost of the renewal if Wrather tried to sell themselves
to anyone besides Disney and Industrial Equity.
The monorail was crucial to the hotel’s value, and a spike in the lease would bring
down the value of the hotel and as a result the company as a whole.
The tactic worked and in 1988, after the purchase was complete, Disney owned the Disneyland
Hotel for the first time.
More importantly, they now had the rights to use the Disney name in any future hotels
they built in southern California, which would ultimately come in handy when they’d later
build Disney’s Grand Californian Hotel and Spa and Disney’s Paradise Pier Hotel.
Just a few months later after fully analyzing the worth of the company, Disney went ahead
and bought out Industrial Equity’s half of the company for $85.2 million dollars.
Disney would sell off the oil and gas properties to offset the cost, and keep what they had
originally aimed to acquire.
They also committed to spending $35 million dollars on upgrading and improving the hotel.
As for the additional land in Long Beach, Disney would eventually create plans for an
area called Port Disney a few years later.
It would include a shopping district, a cruise ship port, and a seaside theme park called DisneySEA
Ultimately the project would get cancelled.
Beyond local resistance from Long Beach residents, Disney was feeling the financial pressure
of Euro Disney.
On top of that with their sights set on a second gate over at Disneyland, DisneySea
took the backseat to plans for a west coast EPCOT called WestCOT, a good topic for another video.
However most good cancelled ideas at Disney find life elsewhere, and years later the theme
park idea would find a new home at Japan’s 2nd Disney theme park, Tokyo DisneySea which
would open in 2001.
The award winning park is enjoyed by over 13 million guests annually, so I guess in
a weird way it was a good thing Walt Disney didn’t own The Disneyland Hotel.