ParentsOf4
Well-Known Member
Please bear in mind that capital expenditure does not equate to what the average amusement park goer would consider "improvements". For theme parks, most capex usually is spent on long-term maintenance. To understand how much is being spent on what fans would consider actual improvements, the numbers need to be examined more closely.
From FY2010 to FY2014, OLC averaged about ¥23.9B annually in what was mostly maintenance. With inflation, that might be between ¥250B to ¥300B over 10 years. This is fairly consistent with OLC's stated investment goals:
- ¥100B for "Investment in Backstage"
- ¥150B for "Investment for renewal and improvement"
- ¥250B for "Investment for enhancing value" where OLC defines "enhanc[ing] theme park value" as "introduc[ing] new products"
Cars Land and the 2 WWOHPs were both wildly popular so fans of Tokyo Disneyland should have something to be excited about.
Looking at it from a WDW and DLR perspective, it would be the equivalent of Disney spending roughly $6.3B in actual theme park improvements across its 6 domestic theme parks. That would be exciting!
Now let's consider the $1.457B you mentioned in domestic Parks & Resorts capex.
What you have to recall is what former CFO Jay Rasulo said about capex during the November 11, 2011 earnings call:
Let me start with your CapEx question, and this is one that I get asked often and I will try to give you some perspective on it. Five years ago or so we used to be pretty demonstrative about $1 billion number being an ongoing level without special projects added to it.
You have to remember though that in those five years in the capital projects that we have put in the ground, which each have their own growth strategy, each is filling in different parts of the portfolio, when they are back on board they all need ongoing FF&E and maintenance capital to keep them going.
So I would say that that $1 billion number is low.
You have to remember though that in those five years in the capital projects that we have put in the ground, which each have their own growth strategy, each is filling in different parts of the portfolio, when they are back on board they all need ongoing FF&E and maintenance capital to keep them going.
So I would say that that $1 billion number is low.
In other words, Rasulo was stating that $1B was what was needed "Five years ago or so" and was low for domestic/international Parks & Resorts maintenance capex in 2011. This lines up pretty well with what Disney spent in P&R capex in 2006/2007, almost exactly $1.0B on average for the 2 years. Depreciation for those 2 years averaged slightly under $1.1B so, in 2006/2007, Disney had to spend roughly the equivalent of depreciation on maintenance capex.
Many fans of WDW complained it wasn't enough, that there was a noticeable decline in WDW quality during those years. I can tell you that the first time Disney ever spent less than 15% above depreciation was in 2002 when the travel industry was coming off the rails. Still, let's use depreciation as a good approximation of what should be spent on maintenance capex in order to preserve the Disney standard of excellence.
Fast-forward to FY2015.
Domestic Parks & Resorts depreciation was $1.169B. So that $1.457B number you mention sure sounds nice until you subtract off depreciation and then spread it out across 6 theme parks, 2 water parks, multiple hotels, 4 cruise ships, yet another DVC and, of course, Disney Springs.
When you do that, Disney's "investment" in its domestic facilities gets spread pretty thin.
The reality is that there will be a major uptick in spending at Disney's domestic theme parks in the near future, something for all fans of WDW and DLR to be really excited about.
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