Any Theories as to why Disney frequently reduces the size and scope of new projects in the parks?

[Naplesgolfer]

Disney in recent years has reduced the length and detail of 7DMT. They decided to cut out the headliner ride, shortened the D ticket dark ride and eliminate the table service resturant altogether in Pandora. Now they have not built the table service resturant in GE. I understand corporate allocation of resources but with size of Disney's overall cap-ex these savings seem small and shortsighted . You end up with rides that are far less satisfying than they could have been. I also suspect the rides would have held up better to the test of long term popularity in the expanded forms. I would also have thought that the resturant's in particular would spin off so much cash that they would be self capitalizing. Before anyone comment's I don't think 150 people eating and another 25 waiting at a time in a resturant would harm operations in any meaningful way.

 

[ToTBellHop]

You know how sometimes people make a snap decision to buy into DVC and then are like “oh schnitzel that’s a lot of money” and you end up with Copper Creek resales a year after it opened?

Basically that. But we add WDI cost overruns.

They also think we won’t notice. 7DMT wait times support that theory.

 

[Sirwalterraleigh]

New construction costs money and longterm operational costs

Talk big...then whittle it down

 

[Mouse Trap]

Someone could give better details, but:

1. Project starts as big grand idea - This sounds great and fits a rough, broad budget with all the bells and whistles!
2. Actual expense of the project comes out - It's close to the "broad budget" but now there are real numbers to look at.
3. Someone decides "We can do without some of the extra, fancy show pieces- people won't notice - let's cut them to save money."
4. Somewhere along the lines there's a bump in the road and the project becomes way over budget - more cuts are needed because it's already costing more money than expected.
4A. Other financial issues arise within the company - costs need to be made up somewhere.
4B. Someone isn't going to meet their revenue/profit goals and needs a quick way to free up cash and hit their $$$ bonus.
4C. Costs rise during construction for materials, etc...

 

[lazyboy97o]

The days of the budget being cut after being approved are mostly over. Instead it is a situation of costs rising, so something has to be cut to stay within the budget.

 

[CaptainAmerica]

I would also have thought that the resturant's in particular would spin off so much cash that they would be self capitalizing.

The revenue at a new restaurant is almost 100% cannibalistic. Guests are a captive audience and they have to eat somewhere, so all you're doing is shifting revenue from legacy F&B to new F&B. Net zero gain.

Real F&B growth comes from attendance growth, so new restaurants are best viewed through the lens of how they support other meaningful expansions that actually drive incremental clicks.

 

[Naplesgolfer]

The revenue at a new restaurant is almost 100% cannibalistic. Guests are a captive audience and they have to eat somewhere, so all you're doing is shifting revenue from legacy F&B to new F&B. Net zero gain.

Real F&B growth comes from attendance growth, so new restaurants are best viewed through the lens of how they support other meaningful expansions that actually drive incremental clicks.

With 40% of guests being offsite I think a fully themed Pandora or GE resturant would increase Disney F&B revenue vs offsite resturants. Studio's and AK don't have enough TS as it is.

 

[peter11435]

It’s also not an entirely new or recent trend. It’s been happening basically since the beginning. Projects usually start off grander in the blue sky phase and revisions and reductions are made throughout the design phase. We are just far more aware of each phase of the process now.

 

[Rinx]

Logic: If you build it, 'they' will come.

Disney Logic: If you say you'll build it but then don't build it, they will still come.

 

[ChrisFL]

This definitely isn't new or recent, and it's pretty common in a lot of places.

Although I feel like Tokyo doesn't have this happen as often, seeing the results of their attractions vs. the concepts (yes, completely different ownership)

 

[MickeyMouse10]

1. Disney is cheap
2. They love spacing out announcements for D23
3. They want to bring back people in the future

 

[DisneyOutsider]

It's not a new trend and has happens across every type of business.. it even happened to Walt's original Disneyland. One big difference is we have the internet now enabling us to know things that we used to never have insight on.

 

[drizgirl]

New construction costs money and longterm operational costs

They should know that already.

 

[Naplesgolfer]

Someone could give better details, but:

1. Project starts as big grand idea - This sounds great and fits a rough, broad budget with all the bells and whistles!
2. Actual expense of the project comes out - It's close to the "broad budget" but now there are real numbers to look at.
3. Someone decides "We can do without some of the extra, fancy show pieces- people won't notice - let's cut them to save money."
4. Somewhere along the lines there's a bump in the road and the project becomes way over budget - more cuts are needed because it's already costing more money than expected.
4A. Other financial issues arise within the company - costs need to be made up somewhere.
4B. Someone isn't going to meet their revenue/profit goals and needs a quick way to free up cash and hit their $$$ bonus.
4C. Costs rise during construction for materials, etc...

The parks are a very big part of Disney's business. They are probably the most consistent profit center the company has. Movies are very hit or miss and the networks and streaming have numerous competitors and are full of uncertainties. The parks offer a steady stream of profits to act as a backstop and smooth out the rest of the company's quarterly results.

Disney is the arguably the best operator in theme parks and has limited competition with high barriers to entry. They should be nurturing the parks. This is why they need to keep up with maintenance and up the value they offer for money in food and merchandise . I am not saying to lower the cost but make people feel the experience is of high quality. This goes for rides, theming, staffing levels, park hours ,food ,everything. I wonder if they realize how rare it is to have a business that has so little competition and high margins. They should be extending the lead not resting on the laurels of the past.

 

[thomas998]

Someone could give better details, but:

1. Project starts as big grand idea - This sounds great and fits a rough, broad budget with all the bells and whistles!
2. Actual expense of the project comes out - It's close to the "broad budget" but now there are real numbers to look at.
3. Someone decides "We can do without some of the extra, fancy show pieces- people won't notice - let's cut them to save money."
4. Somewhere along the lines there's a bump in the road and the project becomes way over budget - more cuts are needed because it's already costing more money than expected.
4A. Other financial issues arise within the company - costs need to be made up somewhere.
4B. Someone isn't going to meet their revenue/profit goals and needs a quick way to free up cash and hit their $$$ bonus.
4C. Costs rise during construction for materials, etc...

In general it doesn't matter if the project is on track and on budget, way to often 4B comes into play either because something else has not made the revenue it was supposed to or, something else cost more than expected, or my favorite some idiot in management simply decided that they would look good if they could cut costs so they make decisions that cut cost to look good upfront knowing the will be long gone before anyone ever notices what they did.

 

[Goofyernmost]

They should know that already.

It has been my experience in construction that many times they never really know until they send out specs to bidders and the price comes back for each line item. When it is higher then what was anticipated, it is sometimes just cut out of the budget completely. Or they just decided that they didn't want it for some reason other then cost.

 

[Sirwalterraleigh]

Logic: If you build it, 'they' will come.

Disney Logic: If you say you'll build it but then don't build it, they will still come.

And this is the real problem and has been during the current “boom”

So they underwhelm fantasyland...and toy story.

This nobody argues...but then most of the same people that accept it buy DVC and wait 150 minutes for mine train or 115 for slinky dog and talk about “magic”

They drink the sand...why does Disney have a reason to spend a penny more than the minimum required for public perception?

We’re gonna find out in Anaheim in 14 days...another lesson in the book.

They should know that already.

They do...but see above

 

[Sirwalterraleigh]

It has been my experience in construction that many times they never really know until they send out specs to bidders and the price comes back for each line item. When it is higher then what was anticipated, it is sometimes just cut out of the budget completely. Or they just decided that they didn't want it for some reason other then cost.

It’s my experience in construction that everything is bloated to excess....

 

[Goofyernmost]

It’s my experience in construction that everything is bloated to excess....

Bidding is a lot like rolling dice. If you are desperate for the work you go for the low numbers. If not you jump the price up in the hopes of rolling a good number and winning big. The problem is that most places that ask for bids are not Disney. The price that Disney pays for construction, because of it's more specialty design, is off the comparable charts. If everyone feels the desire to make a killing they aim high and even the lowest bid is above the estimated cost of the build many times especially if there is a lot of work in the area.

 

[Heppenheimer]

Easy, quick answer: New projects need to make a big profit almost immediately so that the bond holders who financed the projects can get paid on time.

Long version: Although not always, new theme park projects are usually financed with corporate bonds that have a maturity date within the first two years or so after the attraction opens. Every time Disney builds something big or expensive, they're making a bet that it will immediately result in an up-tick in business so that they can both pay the bond holders and add to their short-term profits. If the new attraction (or parks, as in the cases of the original Eurodisneyland, California Adventure and Hong Kong Disneyland) don't hit those short-term revenue goals, then Disney must then divert money from elsewhere in their parks and recreations division to make up the shortfall, or else risk a degradation in their bond rating, which would make future projects even more expensive to finance. The company has over 60 years experience making these kinds of attendance projections, and by now, they probably have a pretty realistic estimate on how much extra revenue new additions can generate. So, this is probably why ideas get gradually whittled down. The Imagineers come up with an idea, and the dollars and cents guys make a projection, sell the bonds and tell the Imagineers how much they can spend to develope it. Inevitably, the original idea will be limited by budget and logistical concerns.

As other posters said, nothing new here. The only difference is that now Disney has an official fan club where they can make these announcements and the internet then amplifies the message.

If you own Disney stock, you can see some of this information in their annual reports.