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California Misadventure -- Part 1

Jim Hill

Jim's musings on the history of and rumors about movies, TV shows, books and theme parks including Disneyland, Walt Disney World. Universal Orlando and Universal Studios Hollywood.

California Misadventure -- Part 1

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Walt Disney was desperate.

Here it was, early 1955. Walt had pumped every penny he had into building "The Happiest Place on Earth" out amongst the orange groves of Anaheim. When he suddenly realized: "There's no place for them to stay."

Who's "them?" Disneyland's customers. AKA the guests.

All those people who are going to drive up from San Diego, or down from San Francisco. They'd be tired after a full day of touring his "Magic Kingdom." Disney knew that these folks would want a nice, clean place nearby where they can stay.

But Walt didn't have the dough necessary to build a hotel next to Disneyland. He barely had enough cash to finish the park itself, let alone build lodgings nearby. But Walt knew that having a nice hotel right next to the park would play a crucial part in the project's success.

But what could he do? Roy certainly wouldn't give him the money. ABC was completely tapped out. And Walt had already cashed in his life insurance.

In desperation, Walt turned to an old friend: television producer Jack Wrather. Jack was someone Walt had been friendly with for years. They were both old pros when it came to surviving in the cut-throat world of the movie business.

These days, though, Jack was definitely on a hot streak. Having produced two of TV's earliest syndicated hits ("Lassie" and "The Lone Ranger"), Wrather was flush with cash. He had also invested wisely in real estate around Southern California -- ending up with big holdings in oil and natural gas.

Using the excuse that he wanted to pick Wrather's brain concerning his Disneyland project, Walt asked Jack to join him out in Anaheim for a tour of the construction site. It was only after Wrather got there that Jack finally realized that Disney didn't want to pick his brain. Walt was out to pick his pocket. There among the construction footings, Walt told Jack the story of Disneyland. How he dreamed of building a different kind of family fun park. How he'd need a clean new hotel nearby for visitors to stay in.

Jack listened. Nodded. Smiled. Then said "No."

Walt persisted. Jack resisted. I mean, to Wrather, Disney's idea made absolutely no sense. A 17-million-dollar amusement park, built out in the middle of the citrus groves on Anaheim? Who the hell was going to drive out from LA to visit this place, anyway? Walt didn't need a hotel. He needed his head examined.

But Walt wouldn't give up. He kept trying to sweeten the deal, first offering Wrather a 99-year lease on the property. Then Walt threw in the Disney name, saying that Wrather could use it on any other hotels he built in Southern California.

At this point, Walt was near tears. Embarrassed at the sight of the weepy movie mogul, Jack finally caved in and agreed to help his friend. But he wasn't going to build a hotel next to Disneyland. That would just be too expensive. Walt would just have to settle for a motel. And a small one at that.

Of course, everyone knows that Disneyland opened on July 17, 1955. After a somewhat shaky first summer, the park proved to be a hit with the public. On October 5th of that same year, the Disneyland Motel opened on a 60-acre site right across the street from the park. It too would prove to be very popular with the public.

Walt is thrilled with the success of Disneyland. But no more than Jack Wrather was with the success of his Disneyland Motel, which he rapidly turned into a resort-style hotel. Three huge high-rise towers -- the Bonita, Sierra and Marina -- were quickly thrown up, bringing the total number of rooms on property to over 1,100. Wrather also added several spectacular swimming pools as well as a convention center to the complex.

Walt never forgot Jack's generosity when it came to building the Disneyland Hotel. When few in Hollywood had any faith at all in Disney's theme park project, Wrather (albeit somewhat reluctantly) agreed to help his friend. This gesture had meant the world to Walt, so he was constantly looking for ways to repay Wrather for his kindness.

Take, for instance, the Monorail. When the Disneyland-Alweg monorail system was first installed at the park in 1959, it just took guests on a quick trip around Tomorrowland. But that wasn't good enough for Walt. He wanted his new train to actually go somewhere and provide a real service.

So, in 1961, Walt decided to extend the monorail's route. He had a track installed that took the trains out of the park and ran them across the street over to the Disneyland Hotel. Here, passengers could disembark to do some shopping and dining at the resort. Or they could just sit tight in their seat for the return trip to Tomorrowland.

Walt spent millions building the track to get the monorail over to Wrather's property. Mind you, he never asked Jack to help shoulder the cost. All Disney did was charge the Wrather Corporation a nominal fee to help maintain the hotel's monorail station.

This one generous gesture added immeasurably to the allure of the Disneyland Hotel. While there may have been other hotels in Anaheim that were more luxurious and better laid out, none of them were directly linked to Disneyland via a state-of-the-art transportation system. It was this distinction that led to the Disneyland Hotel having the highest occupancy rate in all of Orange County.

In his lifetime, Walt always made sure that Jack Wrather and the Wrather Corporation were well taken care of by Walt Disney Productions. It was only after Walt's death in December 1966 that the coziness between the two companies began to curdle.

The key sticking point was that deal Disney had worked out with Jack Wrather way back in 1955. By giving the Wrather Corporation a 99 year lease on the Disneyland Hotel site as well as the exclusive right to use the Disney name on any hotels built in Southern California, Walt had effectively cut his own company off from a huge revenue stream 'til 2054.

Think about it: All those hotels in Anaheim, making millions of dollars each year off guests who have come to see Disneyland. And the Mouse doesn't get a nickel of it -- all because of some desperate deal Walt cut with Jack Wrather while weeping in the Disneyland construction site.

Mind you, it's not like the Mouse didn't try. Each year, Disney representatives would contact Jack Wrather, saying that they wished to discuss terms for buying out his Disneyland Hotel contract. Each year, Jack would just laugh and say "Thanks but no thanks. I'm happy with the arrangement as is."

This continued right up until June 1984, when Disney Chairman Ray Watson personally approached Jack about buying back the Wrather Corporation's Disneyland Hotel holdings. Wrather -- whose health was fading at the time -- hinted at this particular meeting that he might finally now be ready to sell his property back to the Mouse. But before negotiations could officially get underway, Wrather died in November 1984.

By then, Michael Eisner and his new management team had already taken up residence at Walt Disney Productions. One of Eisner's first goals was to radically improve the company's bottom line, which meant he had to quickly increase the amount of money the company's theme parks generated.

To do this in Florida, Eisner just okayed construction of two huge new hotels at the WDW resort: The 900 room Grand Floridian and the 2,100 room Caribbean Beach Resort. Eisner had planned to do the same thing at Disneyland -- only to discover that A) the Disney Company didn't own any hotels in Anaheim, B) they didn't have sufficient land to build any new resorts, anyway, and C) only the Wrather Company had the rights to use the Disney name on hotels built in Southern California.

Eisner was dumbfounded when he heard about this. He turned to his newly hired Disney Chief Financial Officer Gary Wilson and said: "Handle this. I don't care how you do it, but I want that contract broken. The Walt Disney Company has to be the sole owner and operator of the Disneyland Hotel."

Wilson met with Watson and learned that Wrather had really almost been ready to sell Disney back the Disneyland Hotel when he passed away in November. In the meantime, Wilson gathered intelligence about the Wrather Corporation. He learned that -- since Jack's death -- the company had fallen on extremely hard times. To keep afloat financially, the Wrather Corporation had already sold off several premium assets: Its oil and natural gas holdings, as well as the syndication rights to "The Lone Ranger " and "Lassie."

It seemed like this financial crisis might be the ideal time to approach Wrather with an offer to buy up the Disneyland Hotel acreage and contract. And Wilson was just getting to do this, when word came from Wall Street that a New Zealand-based firm -- Industrial Equity -- had bought up 28% of the Wrather Corporation.

This firm -- run by corporate raider Ronald Brierley -- quickly made its intentions known: It filed reports with the Securities and Exchange Commission that it intended to buy up at least half of Wrather Corporation.

Sensing that Disney's opportunity to gain control of the hotel was slipping away, Wilson and his team moved quickly. They immediately asked for a meeting with Wrather Corporation management. While in that meeting, Wilson voiced Disney's disapproval that the ownership of the Disneyland Hotel could slip away to a foreign green-mailer like Brierley.

While Disney officially could do nothing to derail Wrather's deal with Industrial Equity, Wilson did point out that the hotel's monorail maintenance contract was soon up for renegotiation. Wilson then told Wrather management that the Mouse was considering a slight hike in the monorail maintenance fee. Like to -- say -- $10,000 a day?

Disney's threat was none so subtle, but very clear. Should Wrather try to sell off their Disneyland Hotel holdings to anybody but the Mouse, Disney would make operating the monorail so prohibitively expensive for the new owners that there was no way that they could ever make money off the hotel. Faced with these terms, Wrather had no choice but to begin serious sale talks with the Mouse.

Unfortunately, the Disneyland Hotel sale negotiations dragged on for months. Disney felt that Wrather was asking too high a price for the property, while Wrather's people thought that the Mouse's offers were embarrassingly low. With no resolution in sight, the sales talks plodded on into 1987, eventually rolling into 1988.

Desperate to finally get its hands on the Disneyland Hotel, the Mouse did the unthinkable: It actually got in bed with Ronald Brierley and Industrial Equity. Together, the two companies bought up the remaining 78% of Wrather Corporation for $109 million. Each firm got 50% of the Wrather Company. But only the Mouse got the rights to run the Disneyland hotel as well as develop the surrounding Anaheim property.

Six months later, the Mouse turned around and bought out Industrial Equity's portion of the Wrather Corporation. This took over $85 million, which Brierley gleefully pocketed before heading back to New Zealand.

So, in January 1989 -- after 34 years and a total of $161 million dollars -- the Mouse had finally regained control of the Disneyland Hotel. Given that Wrather Corporate has allowed the hotel's 1,100-plus rooms to fall into disrepair, the first order of business was a $35 million rehab of the entire resort.

But the big news is the Walt Disney Company had finally regained control of its own name. Now it could launch a whole series of Southern California hotels if it chose to ...

Only Michael didn't choose to. He realizes that Disneyland -- as it is currently configured -- is strictly a one-day park. Guests would typically arrive in Anaheim that morning to see the park and its new attractions, then drive back home that night.

Consequently, there was no point in doing a Walt Disney World-style ramp-up of the number of Disney-owned hotel rooms at the Disneyland resort.

Unless...

Unless there was a reason for all those people to now stay two days in Anaheim. Like -- say -- a brand new Disney theme park in Southern California for them to see?

Intrigued by this idea, Eisner calls in the Imagineers. He outlines his idea of building a second Disney theme park in Southern California. He sends them back to WDI, telling them to return in one month's time with plans for new Disney theme parks. His one creative directive: "Amaze me. Astound me."

When the Imagineers finally do return one month later to show Eisner their proposals for new Southern Californian theme parks, they did actually amaze their new boss.

They'd proposed building two distinctly different Disney theme parks in two unlikely locations -- one in Disneyland's old parking lot, the other along the waterfront in Long Beach.

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