View from City Road: Facing up to reality in French fantasy land

Reality has begun to dawn in fantasy land, and not before time. For far too long the management of the struggling Euro Disneyland resort in France has believed its own propaganda. The determined smiles on the faces of the park's so-called cast members were mirrored by the equally determined insistence by its executives that the product was fine and all would come right eventually if only investors would be patient.

Those changes to the original grand design as were made, such as the decision not to go ahead with the property developments that were supposed to provide profits to fund the park's future phases, have been seen as issues of timing. The financial and conceptual structure remained intact.

Indeed, with breathtaking optimism, Philippe Bourguignon and his team have repeatedly maintained that Euro Disney should press ahead with another Fr9bn ( pounds 1bn) theme park next to the loss-making Magic Kingdom. Faced by attractions too numerous to be enjoyed in a single day, visitors would be forced to stay overnight at the half-empty and overpriced hotels and, hey presto] the profits would start rolling in.

Euro Disney's US parent, the Walt Disney company, has similarly been in Never-Never land, agreeing only to defer, rather than waive, its high management fees in view of the park's rapidly mounting losses.

Yesterday's decision - seemingly at the instigation of the Americans - to put the proposed MGM studio theme park on ice, while a root and branch re-evaluation of both the development and its financing is carried out, appears to signal a welcome shift of emphasis.

It may be the case that there is some logic in expanding the theme- park element of the resort; certainly the aggressive retailing and the numerous hotel bedrooms seem out of proportion to the modest size of the existing attractions.

But such choices cannot be made until all the original assumptions about the number of visitors, the amount they are likely to spend, the long-term prospects for commercial and residential development in the area, and, most controversially, the profit share taken by the American group, have been re-examined.

Investors could take cheer from the fact that the problem is beginning to be addressed, though they should also bear in mind that only fairy tales guarantee happy endings. Continue to avoid the shares.