Why Hollywood Studios is being rebuilt

[pheneix]

I thought it would be fun to consolidate some of the rumors and speculation going on in other threads and also to bring a slightly more business focused narrative to the rumor outbreak regarding upcoming developments at DHS. I caution that a lot of what will be mentioned here is speculation based on "solving for the missing variable" logic in the rumors that are being spread around, but this should hopefully paint a picture about why Disney has rather suddenly decided to call it lights out for Hollywood Studios and start over from scratch.

First off. Hollywood Studios has a dramatic audience retention problem, and it is now also a dramatic attendance problem. Actual attendance figures are basically state secrets and the "attendance estimates" circulated every year are basically BS on a stick, so instead I am going to point to evidence that anyone can investigate using publicly available data and experience.

Much has been made of Animal Kingdom and the "3pm problem" where most of its guests are ready to peace out after six hours. The truth is, Hollywood Studios has the same problem and it really began to show after Wizarding World of Harry Potter opened. Universal Orlando successfully pulled a day off of the typical one week Orlando visit and this is a day that would have been spent at Disney. Probably half at a water park and maybe the evening at a theme park. Or maybe at DTD or at the pool or riding horses at Ft. Wilderness. Whatever. What most guests ended up doing was shortening their time spent at DHS and DAK and consolidating those visits into other activities planned on the same day to accommodate for the time spent at UO. This means Disney still gets that "first click" daily attendance math that gives DHS and DAK abnormally high yearly attendance numbers, but the truth is those visits are shorter and guests are spending less money. Go hang out at the Backlot area of DHS on any given day after 6pm and you will see this in action. It is a ghost town. Star Tours 2 routinely is a walk on in the late evening at Hollywood Studios. Star Wars is a keystone of the upcoming plans for DHS and one of the most popular rides at Disneyland Park in Anaheim at all hours of the day. For this ride to routinely operate as a walk on in Orlando, something is very wrong.

Let's be very clear: up until July 2012, Disney was perfectly fine with this. New Fantasyland was set to dramatically increase guest spending and time spent at their largest and most profitable park and this would naturally lead to a huge increase in earnings from Orlando. Avatar is coming to DAK in a few years. Epcot still sells enough booze to justify its existence. We have a weak link. Who cares. Hotel rooms still sell.

Then, all of a sudden, Universal reduces Soundstage 44 to a pile of rubble and immediately commences construction on Transformers. The concerns about Harry Potter phase two recreating the same attendance miracle at Universal Studios now become reality. In fact, Universal has basically decided to go DCA on the park and completely revitalize it ahead of Diagon Alley. Universal is going to pull a second day off a Disney vacation. Done deal. And it doesn't take a fool to figure out where Disney's theme park product is most redundant at. Oh, by the way, Universal is building a hotel that is squarely aimed at Disney's hotel market. Hotel business doesn't look so safe anymore.

 

[pheneix]

So, now faced with the upcoming reality that Universal was going to completely put Disney's own movie studio park out of business, with a helping assist from New Fantasyland dramatically adding to MK's visitation and guest spending... at the expense of Disney's other parks, the decision was made to do something about the weak link. This was about the same time that Avatar was finally taken seriously by WDPR and given the financial commitments it needed to become a legitimate world class product.

It is important to note that the upcoming improvements to Hollywood Studios are NOT on the magnitude of the work done at DCA or even on the magnitude of Pandora. This is a collection of value engineered improvements, mostly cherry picked from an upcoming project for Disneyland Paris that was already value engineered to death because of that resort's own financial difficulties. The snapshot of what is planned for DHS, when I saw it (I heavily caution that there are large gaps in my knowledge and I will point out where when needed), was very much focused on re-using existing infrastructure whenever possible. Kitchens, restrooms, in one case entire dining rooms are all to be preserved while other major work goes on around them. This is a page borrowed from Universal's playbook and it will save them a lot of money. Disney will still find ways to it away elsewhere, but hey, they're learning!

The list of attractions slated to close as part of this overhaul should not surprise anyone. They are also going to be very cheap to demolish and in one case reuse for a new attraction. At the time I received a snapshot of this project, this list included:

Muppetvision
Backlot Tour
LMA
Indy Stunt Show
Honey Playground

There are also some dining locations that will cease to operate in their current form and will be reused in the new development. This list includes:

Backlot Express
Sci Fi Dine In
Mama Melroses

You can use your own heads to figure out which retail locations are going to bite the dust.

 

[pheneix]

What is to replace such a large swath of real estate? Well, in short:

Cars Land, largely intact with two major exceptions. Those exceptions are the elimination of Luigi's Flying Tires and Radiator Springs Racers basically being an entirely different ride. I should note that there is a pretty good chance that the dark ride that is being subbed for Racers probably will not suck, but it is not going to be the mindblowing world class standout that RSR is at DCA, or Forbidden Journey is at IOA. I think Disney is completely out of their mind for going this route, but hey, its their money.

Star Wars Land:

This is where I have to dive into the world of speculation a bit because the snapshot I received was still full of questions about this part of the project. A second major Star Wars e-ticket is planned and I hope this ride will deliver. We shall see. Other components proposed included turning Muppetvision into the Star Wars themed show intended for the Captain EO space at Disneyland Paris and also the "Star Wars Cantina" bar/restaurant that Disney has wanted to build for quite some time. I highly suspect there is more planned for this than these additions alone but that is where the rumor mill is still sorting things out.

Disney wants to spend <$600 million on these developments. The impression I received is that Disney is more concerned with rebranding and relaunching this park on a budget than they are in building a world class park that will stand out. That is why while I think they will succeed with increasing DHS attendance and length of stays, they will fail in actually competing with Universal in getting some of their market share. In fact, Universal is probably going to continue to gain marketshare in spite of Pandora and DHS 2.0, which is a rather frightening reality that Disney should have confronted before blowing $2 billion+ on their stupid nextgen project. But like I said, its their money.

 

[PhotoDave219]

Well here's some actual details and a source willing to stand by some information.

I thank you and hope that some of this pans out.

 

[pheneix]

More rambling before I head off to sleep:

Star Wars Weekends is basically DHS's version of Halloween Horror Nights as far as business impact. The park makes more money during this event than any other time. Contrast that with the fact that Star Tours 2, the park's signature Star Wars ride, is pretty much a walk-on after 5pm at any other point in the year.

There is enough pent up demand for Star Wars for a theme park land to do very well if they don't screw it up. I know they are taking the Star Wars side of these developments a lot more seriously than the Cars Land duplication. The problem is, this expansion is going to come way too late. Disney's Hollywood Studios is a failing park and next year Universal Studios Florida will be putting the place down for good. There are discussions elsewhere about the impact this will have on things like the Osbourne Lights and holiday offerings. Again, these are very popular during the limited time of the year they are offered but they are otherwise existing in a park that is failing and actually even bleeding money by more than one accounting metric.

DHS is not going to be a movie studio park when this project is completed. It is also likely going to be a smaller park as well, albeit with more focus and much better offerings.

 

[coolbeans14]

I'm going to be really thick here, and ask:

In what way is the park becoming smaller? In physical size or as in the number of attractions?

 

[danlb_2000]

So, now faced with the upcoming reality that Universal was going to completely put Disney's own movie studio park out of business, with a helping assist from New Fantasyland dramatically adding to MK's visitation and guest spending... at the expense of Disney's other parks, the decision was made to do something about the weak link. This was about the same time that Avatar was finally taken seriously by WDPR and given the financial commitments it needed to become a legitimate world class product.

It is important to note that the upcoming improvements to Hollywood Studios are NOT on the magnitude of the work done at DCA or even on the magnitude of Pandora. This is a collection of value engineered improvements, mostly cherry picked from an upcoming project for Disneyland Paris that was already value engineered to death because of that resort's own financial difficulties. The snapshot of what is planned for DHS, when I saw it (I heavily caution that there are large gaps in my knowledge and I will point out where when needed), was very much focused on re-using existing infrastructure whenever possible. Kitchens, restrooms, in one case entire dining rooms are all to be preserved while other major work goes on around them. This is a page borrowed from Universal's playbook and it will save them a lot of money. Disney will still find ways to it away elsewhere, but hey, they're learning!

So what you are saying is that they are going to do things in a way that will actually require a DCA style makeover for the park in a couple more years.

 

[Gomer]

Sci-Fi is going but ABC commissary stays? How would that work? My guess from its location is that would fall on the Star Wars side of the retheme, but Sci-Fi shares restrooms and a kitchen with ABC. It would be difficult to do an immersive Star Wars theme at that restaurant and integrate it with ABC at the same time. Unless maybe they make it a light re-theme and still have the Hollywood/CA theming but watching Star Wars clips or something. Could serve as a buffer between themes?

Maybe just wishful questioning on my part. I want nothing more than SW Land, but I love Sci-Fi and it would be a tough loss.

 

[FigmentJedi]

Sci-Fi is going but ABC commissary stays? How would that work? My guess from its location is that would fall on the Star Wars side of the retheme, but Sci-Fi shares restrooms and a kitchen with ABC. It would be difficult to do an immersive Star Wars theme at that restaurant and integrate it with ABC at the same time. Unless maybe they make it a light re-theme and still have the Hollywood/CA theming but watching Star Wars clips or something. Could serve as a buffer between themes?

Maybe just wishful questioning on my part. I want nothing more than SW Land, but I love Sci-Fi and it would be a tough loss.

Agreed. ONe of the coolest places to eat on property and it could still cooperate as a transition considering that besides the Sci-Fi theme, you could associate it with American Graffiti or something.

Gonna miss Muppets and it's a shame that Pixar's expansion seems to be just the Carsland solution when they could represent multiple properties in that space.

 

[aladdin2007]

What about the hideous american idol? and um do I dare bring up the hat in this plan lol?

Would hate to see sci-fi go though that would be a shame.

 

[djlaosc]

So, based on everything so far (although subject to change)...

BEING KEPT:
The Great Movie Ride
The Hollywood Brown Derby
The American Idol Experience
Star Tours: The Adventure Continues...
Hollywood & Vine
Disney Junior Play 'N Dine at Hollywood & Vine
Tune-In Lounge
50s Prime Time Café
Min and Bill's Dockside Diner
ABC Commissary
Toy Story Midway Mania!
Hey Howdy Hey Take Away
The Legend of Captain Jack Sparrow
Walt Disney: One Man's Dream
Voyage of the Little Mermaid
The Magic of Disney Animation
Disney Junior - Live on Stage!
Beauty & The Beast-Live on Stage
Rock 'n' Roller Coaster Starring Aerosmith
The Twilight Zone Tower of Terror
Fantasmic!
Starring Rolls Café
Toluca Legs Turkey Co.
Anaheim Produce
Rosie's All-American Café
Catalina Eddie's
Fairfax Fare
Hollywood Scoops

BEING REMOVED:
Sorcerer's Hat
Indiana Jones Epic Stunt Spectacular!
Backlot Express
Oasis Canteen
MuppetVision 3D
Honey I Shrunk the Kids Movie Set Adventure
Lights, Motors, Action! Extreme Stunt Show
Studio Backlot Tour
Pizza Planet Arcade
Mama Melrose's Ristorante Italiano
Studio Catering Co.
High Octane Refreshments
Backlot Canteen
Sci-Fi Dine-In Theater Restaurant
The Osborne Family Spectacle of Dancing Lights
Streets of America

NEW:
Cars Dark Ride
Star Wars E-Ticket
Muppet Attraction
Backlot Express Replacement
Pizza Planet Arcade Replacement
Mama Melrose's Ristorante Italiano Replacement
Studio Catering Co. Replacement
Backlot Canteen Replacement
Sci-Fi Dine-In Theater Restaurant Replacement



Anything in the wrong place/missed out?

...are VotLM and B&TB-LoS still going as well?

 

[Clamman73]

What about the hideous american idol? and um do I dare bring up the hat in this plan lol?

Would hate to see sci-fi go though that would be a shame.

Put the hat over the top of American Idol

 

[GoofGoof]

Looking at all of this from a business prospective: How much money does Disney really lose if people spend a day or 2 at Universal? With multi-day passes the difference in cost between a 5 and 7 day ticket is completely negligible. Even if everyone drops down to a 5 day pass they aren't losing much on ticket revenue. On the resort front Universal still doesn't have the hotel capacity to put a dent in Disney's resort revenue. If a lot of people are still staying on property at WDW they get that revenue whether the people spend the day in a Disney park or off property.

Where they lose out is in merchandise sales and meals. The meal issue is partially mitigated by the highly popular DDP. When they get you to pay rack rate for your room and then give you free dining they have locked in the revenues even if you eat several meals off property. They actually make more money since there is no cost to Disney for the food. As an example if they offered a package that includes free dining and a room at the Poly for $4,000 they are giving you a room which after regular discounts would probably cost $3,000 for the week so they are getting $1,000 for the dining plan. Now if you eat lunch and dinner off property 2 days at Uni they still get that $1,000 but don't have to actually serve you 4 meals. For the guest they figure "my dining plan was free anyway so who cares if I waste a few meals" or more likely they bank the credits and use 2 the next day for the buffet in the castle. Point is they really don't lose much from people on the DDP. Merchandise is more problematic. Potter stuff sells like crazy. They were hoping that NextGen and the magic bands would help pry ore cash from guests. who knows if that plan will ever really work. In come Star Wars and Cars which both have huge merchandise appeal.

Some people would make the argument that guests will start splitting hotel time between the resorts and/or use Universal as their base and stay there. This could be an issue in the future for WDW if Universal added a 3rd gate, a waterpark and a whole lot of rooms. The split stay still happens, but the mouse offers their magical bus to and from the airport and a lot of people don't want to deal with the hassle of switching hotels. Remember that WDW's core business is the tourist market. Tourists who don't visit as frequently are less likely to be comfortable dealing with switching rooms and/or renting a car to get back and forth. Universal definitely has the locals market cornered. Disney has virtually written off locals by jacking up AP rates and reducing benefits for locals. Universal caters to this crowd.

 

[JustInTime]

This thread is too wordy.

 

[PeoplemoverTTA]

Looking at all of this from a business prospective: How much money does Disney really lose if people spend a day or 2 at Universal? With multi-day passes the difference in cost between a 5 and 7 day ticket is completely negligible. Even if everyone drops down to a 5 day pass they aren't losing much on ticket revenue.

I think the point is inherent in what you wrote - the cost difference between days is negligible. Disney can afford to make tickets so much "cheaper" when people stay longer because they don't make most of their money on tickets. Massive profits for Disney come from in-park spending (merchandise, food, beverages, etc). And that's where 2 days at Universal means a massive hit to Disney. If WDW guests (even those staying on Disney property) start venturing to Universal for 2 days out of their 6-day vacation, that's a 33% hit on their in-park revenue. And that is a very big deal.

 

[danlb_2000]

I think the point is inherent in what you wrote - the cost difference between days is negligible. Disney can afford to make tickets so much "cheaper" when people stay longer because they don't make most of their money on tickets. Massive profits for Disney come from in-park spending (merchandise, food, beverages, etc). And that's where 2 days at Universal means a massive hit to Disney. If WDW guests (even those staying on Disney property) start venturing to Universal for 2 days out of their 6-day vacation, that's a 33% hit on their in-park revenue. And that is a very big deal.

Another thing that is going to factor into this is the total cost of tickets for the guest. For an adult, non-hopper ticket, 6 days at Disney is $299 and 4 days at Disney + 2 at Uni is $428. Unless people are increasing their vacation budget that money is coming from somewhere, maybe from less in park spending.

 

[englanddg]

Another thing that is going to factor into this is the total cost of tickets for the guest. For an adult, non-hopper ticket, 6 days at Disney is $299 and 4 days at Disney + 2 at Uni is $428. Unless people are increasing their vacation budget that money is coming from somewhere, maybe from less in park spending.

If my kid has more thrills and fun at Uni, I'm gonna go there, no matter how much I love Disney.

 

[GoofGoof]

I think the point is inherent in what you wrote - the cost difference between days is negligible. Disney can afford to make tickets so much "cheaper" when people stay longer because they don't make most of their money on tickets. Massive profits for Disney come from in-park spending (merchandise, food, beverages, etc). And that's where 2 days at Universal means a massive hit to Disney. If WDW guests (even those staying on Disney property) start venturing to Universal for 2 days out of their 6-day vacation, that's a 33% hit on their in-park revenue. And that is a very big deal.

I don't know what the breakdown is between park tickets, food/beverage and hotels, but my best guess is they make the most money by far on hotel rooms. The parks exist to encourage people to come and stay on property and that is why they offer less discounted park tickets on longer stays. When a room at the Polynesian goes for $600 a night and an equivalent room off property goes for $150 that's massive profits.

 

[PeoplemoverTTA]

I don't know what the breakdown is between park tickets, food/beverage and hotels, but my best guess is they make the most money by far on hotel rooms. The parks exist to encourage people to come and stay on property and that is why they offer less discounted park tickets on longer stays. When a room at the Polynesian goes for $600 a night and an equivalent room off property goes for $150 that's massive profits.

I'm far from an expert, but I disagree with you. New Fantasyland was created with very little to actually "do" and lots of things to spend money on. It demonstrates TDO's commitment to increasing dollars spent per guest in the parks. I don't know the budget of NFL, but to invest hundreds of millions of dollars in mostly gift shops and restaurants tells me that in-park spending constitutes the majority of guest spending.

I mean the number of guests who stay off property is very high as well...the focus on Disney getting guests to stay on property and be "trapped" there (DME) seems to me a way to keep raising that in-park spending number.

No doubt the markup on hotels is insane (I paid $249 for a passholder rate at the Poly in 2004...crazy to think about the prices now); however, there are still 10s of thousands of guests staying off property each day. Hotels definitely equal profits, but I still think that in-park spending is a huge bulk of the profits. Because in-park spending includes all of those on- and off-property guests.

I agree with you that hotels are a nice sum of money for TDO, I just believe strongly that in-park spending consitutes a higher percentage of profits for them (without any actual knowledge to back it up...just a hunch ). And I just disagree that because guests are staying in a Disney hotel means that 2 days in Uni doesn't hurt Disney. It hurts them in a big way, regardless of where they're staying (but arguably more for the on-property guest, since Disney probably thinks they can "count" on that in-park spending from them since they're "trapped" on property).

 

[topher]

I still can't comprehend the elimination of the Osbourne Lights. They play an integral part in bringing in multiple demographics that would not otherwise spend a dime in HS. The attendance of those individuals will not be swayed by Carsland or a Star Wars land.
I'm sure SWL and CL will cover the loss but why forfeit one of the most popular attractions in all of WDW when there are ways around it.
I'm going out on a limb here and saying if anyone at TDO is still in their right mind they will work this expansion around the SoA.
I still think the SWL expansion needs to occupy Indy, Sounds Dangerous and Idol. That location is extremely close to the hub... They would just need to build another visual curtain to keep the area separated.