A Spirited Perfect Ten

[PhotoDave219]

For those of you who are interested, Disney released its 2015 proxy statement today.

Total Compensation:

• CEO Bob Iger: $46.5M, up 35%
• CFO Jay Rasulo: $16.2M, up 51%

Anyone care to calculate the CEO-to-CM pay ratio on that one?

Mas grande put as.

 

[ParentsOf4]

I'm sorry, I read the very opposite of unsuccessful in your numbers. I too detest the conversion of WDW - America's greatest urban and leisure experiment - into kiddieland dumbo toontown, but financially unsuccesful it is not.

A revenue increase of 62% without any meaningful capital investment (that 2%) by common standards is considered a sign of theme parks being excessively well ran. And why would one invest when prices can be raised 63% and still record crowds are drawn?

Disney with its 2% annual domestic theme park growth capex under Iger has seen revenue increase by 62% over 9 years, equating to a compound annual growth rate of 5.5%.

The unremarkable Six Flags, with a negative growth capex budget (capex is actually less than depreciation), has seen a compound annual revenue growth rate of 5.3% in recent years.

Wow, so Disney's domestic Parks & Resorts invests more than Six Flags yet its revenue growth is about the same, even though Six Flags is not spending enough to properly maintain its amusement parks.

With a little perspective, 62% over 9 years doesn't seem so good, does it?

Why would someone want to invest intelligently?

With Eisner's higher investment levels over his 21 years, Parks & Resorts compound annual growth rate was about 11%.

Universal's Theme Parks division, with a similar investment level, has realized a compound annual growth rate of about 13% since 2006.

Interesting.

Intelligent theme park investment produces superior growth.

Also, converting hotel rooms to time-shares means that WDW is apparently so successful Disney can sell its hotel rooms forty years in advance.

The Polynesian Villas & Bungalows (PVB) membership lasts for 50 years. Based on the performance of similarly sized DVC resorts, PVB memberships should sell out within 3 years.

After their initial purchase, it will cost PVB members $145/night to stay during spring break or summer at WDW's second-most expensive resort in rooms that normally start at $543/night and go up from there.

PVB means great cash flow at the Polynesian for 3 years and subpar cash flow for 47 years.

Does anyone recall when Iger plans to retire? Did I read somewhere that they extended his contract to 2018, 3 years from now?

I would love to see a deeper exploration of P&R gross margin over the years. And numbers broken down further. Pre-Eisner Disney had two smallish resorts. Iger era P&R is building up an empire in Asia, has a cruise division, a financially complicated European resort. So they may be difficult to compare.

Are we talking about the same Disney?

Between Disneyland, the Magic Kingdom, Epcot, and TDL, Walt Disney Productions (later The Walt Disney Company) was operating or had ties to the 4 most successful and profitable theme parks in the world.

Michael Eisner wasn't hired to fix Parks & Resorts. Even in 1984, Disney's Parks & Resorts was the world leader in theme parks. In 1984, Disney's Parks & Resorts was profitable, the only successful segment in the company at that time. Eisner was hired to fix the rest of Walt Disney Productions, which was performing abysmally.

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

I'm willing to bet good money that Iger has a higher margin on P&R assets already existing under Eisner than Eisner's Disney did, but with total margin lowered by the law of diminishing returns for extra revenue generated, and offset by expenditure elsewhere. For example, A sells a park ticket for $100, generating a margin of 22.2%. B sells same ticket for 100 with same 22.2% margin, but manages to add tour, pin and extra f&b for another 100, but this later 100 has a margin of 7.8%. This lowers total margin to 15%. Still, B is the better exploiter of the asset, despite the lower total margin.

Lastly, related to the bit above, if revenue is up, that drastically (62%), owing to price increases (63%), but gross margin is still down, then somewhere there must be massive expediture increase. The money must be somewhere. Where? Not a rhetorical question, but something I actually wonder about.

Gross margin is a function several types of expenses, with operating expense comprising the lion's share. Capex (in the form of depreciation) actually is Parks & Resorts smallest expense.

Heck, Disney spends more on the nefarious "Selling, general, administrative and other" than it does on depreciation (i.e. capex).

The problem with basing growth on higher prices is that you slowly price yourself out of your core market.

Let's look at the P&R numbers a bit more closely.

As we've already discussed, domestic P&R revenue is up 62% since Iger took charge while WDW ticket prices are up 63%. If attendance was flat, this would make sense.

However, attendance is not flat. Since 2005, domestic attendance is up 24%.

The problem is median household income is up only 17% from 2005 to 2013. (2014 numbers won't be released until September.) Vacationers can't keep up with WDW price increases. They still want to visit the parks but they can't spend like they used to. That means they spend less on all the other high margin items that Disney sells.

For example, in 2005, the "theme-park-admission-to-food,-beverage,-and-merchandise" ratio was 1.04. In other words, for every $1 Guests spent on admission, they spent $1.04 on food, beverage, and merchandise. In 2014, that number was down to 0.88, a number without precedent since Disneyland's opening in 1955.

In the end, higher prices boomerang on Disney. They've got 24% more people in the park but, relative to what they spent in 2005, those people are spending less. Disney's opex is up to handle all those extra people, yet Disney isn't realizing comparable revenue gains in other areas to offset those extra expenses.

Thus, despite an attendance increase of 24% along with higher ticket prices of 63%, domestic revenue is only up 62%. Margins become increasingly difficult to maintain because of higher attendance, resulting in Disney making quality cuts to keep margins up. This also results in Disney stretching out growth initiatives in order to prop up those same margins.

I'm not sure what your definition of financial success is, but I see a lot of red flags that suggest all is not well at WDW.

 

[Brewmaster]

Disney with its 2% theme park growth capex has seen revenue increase by 62% over 9 years, equating to a compound annual growth rate of 5.5%.

The unremarkable Six Flags, with a negative growth capex budget (capex is actually less than depreciation), has seen a compound annual revenue growth rate of 5.3% in recent years.

Wow, so Disney's domestic Parks & Resorts invests more than Six Flags yet its revenue growth is about the same, even though Six Flags is not spending enough to properly maintain its amusement parks.

With a little perspective, 62% over 9 years doesn't seem so good, does it?

Why would someone want to invest intelligently?

With Eisner's higher investment levels over his 21 years, Parks & Resorts compound annual growth rate was about 11%.

Universal's Theme Parks division, with a similar investment level, has realized a compound annual growth rate of about 13% since 2006.

Interesting.

Intelligent theme park investment produces superior growth.

The Polynesian Villas & Resorts (PVR) membership lasts for 50 years. Based on the performance of similarly sized DVC resorts, PVR memberships should sell out within 3 years.

After their initial purchase, it will cost PVR members $145/night to stay during spring break or summer at WDW's second-most expensive resort, rooms that normally start at $543/night and go up from there.

PVR means great cash flow at the Polynesian for 3 years and subpar cash flow for 47 years.

Does anyone recall when Iger plans to retire? Did I read somewhere that they extended his contract to 2018, 3 years from now?

Are we talking about the same Disney?

Between Disneyland, the Magic Kingdom, Epcot, and TDL, Walt Disney Productions (later The Walt Disney Company) was operating or had ties to the 4 most successful and profitable theme parks in the world.

Michael Eisner wasn't hired to fix Parks & Resorts. Even in 1984, Disney's Parks & Resorts was the world leader in theme parks. In 1984, Disney's Parks & Resorts was highly profitable, the only successful segment in the company at that time. Eisner was hired to fix the rest of Walt Disney Productions, which was performing abysmally.

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and in the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

Gross margin is a function several types of expenses, with operating expense comprising the lion's share. Capex (in the form of depreciation) actually is Parks & Resorts smallest expense.

Heck, Disney spends more on the nefarious "Selling, general, administrative and other" than it does on depreciation (i.e. capex).

The problem with basing growth on higher prices is that you slowly price yourself out of your core market.

Let's look at the domestic numbers a bit more closely.

As we've already discussed, domestic P&R revenue is up 62% since Iger took charge while WDW ticket prices are up 63%. If attendance was flat, this would make sense.

However, attendance is not flat. Since 2005, domestic attendance is up 24%.

The problem is median household income is up only 17% from 2005 to 2013. (2014 numbers won't be released until September.) Vacationers can't keep up with WDW price increases. They still want to visit the parks but they can't spend like they used to. That means they spend less on all the other high margin items that Disney sells.

For example, in 2005, the "theme-park-admission-to-food,-beverage,-and-merchandise" ratio was 1.04. In other words, for every $1 Guests spent on admission, they spent $1.04 on food, beverage, and merchandise. In 2014, that number was down to 0.88, a number without precedent since Disneyland opened in 1955.

In the end, higher prices boomerang on Disney. They've got 24% more people in the park but, relative to what they spent in 2005, those people are spending less. Disney's opex is up to handle all those extra people, yet Disney isn't realizing comparable revenue gains in other areas to offset those extra expenses.

Thus, despite an attendance increase of 24% along with higher ticket prices of 63%, domestic revenue is only up 62%. Margins become increasingly difficult to maintain because of higher attendance, resulting in Disney making quality cuts to keep margins up. This also results in Disney stretching out growth initiatives in order to prop up those same margins.

I'm not sure what your definition of financial success is, but I see a lot of negative trends that suggest all is not well at WDW.

....and Boom Goes the Dynamite!

 

[BrianLo]

Both require a fair amount of suspension of disbelief. Disney fans see screens everywhere. Universal fans see either small scale vignettes with moving mannequins or low lit warehouses with cheesy effects.

Much of it springs from nostalgia and the fact that Universal is at its best in Florida and Disney nearly at its worst. There is absolutely a place for both in theme parks and they can both be used when appropriate to make for a more immersive setting.

There's something to be said for nearly careening into an angry combine, being swung at by a whomping willow, getting screamed at by a lava monster, having a massive monkey shake your aerial tram, sailing in the middle of a pirate battle, having cop cars burst out of the bushes. Those really wouldn't have worked as effectively with a screen. A movie (generally) won't get the sympathetic drive tee'd up, but a 2 tonne hunk of animatronic coming at you sure will.

Screens are much better at creating a sense of speed, motion or flight (when there isn't one). AA's do a much better job with vignette's.

Oddly enough, in typing that up, I've actually come to realize exactly what my issue with Gringott's is that I never could put words to. Many of the vignettes or scenes the coaster parks you in front of could have been far better communicated with AA's (a couple of them aside). On the other hand, I'd never advocate for AA's in lieu of most of the screens on the likes of Spiderman/Transformers and portions of Forbidden journey.

Motion works with screens (even Soarin', Despicable Me, Star Tours and Simpsons get this), stagnant scenes (like much of Gringott's) just feel like the ride has parked you in front of a movie.

 

[StageFrenzy]

@ParentsOf4 Muhahahahahaha. Let’s just hand that to Iger on pink paper and see if he gets the message. Better yet print out lots of copies and distribute at the shareholders meeting.

 

[Mike S]

Disney with its 2% annual domestic theme park growth capex under Iger has seen revenue increase by 62% over 9 years, equating to a compound annual growth rate of 5.5%.

The unremarkable Six Flags, with a negative growth capex budget (capex is actually less than depreciation), has seen a compound annual revenue growth rate of 5.3% in recent years.

Wow, so Disney's domestic Parks & Resorts invests more than Six Flags yet its revenue growth is about the same, even though Six Flags is not spending enough to properly maintain its amusement parks.

With a little perspective, 62% over 9 years doesn't seem so good, does it?

Why would someone want to invest intelligently?

With Eisner's higher investment levels over his 21 years, Parks & Resorts compound annual growth rate was about 11%.

Universal's Theme Parks division, with a similar investment level, has realized a compound annual growth rate of about 13% since 2006.

Interesting.

Intelligent theme park investment produces superior growth.

The Polynesian Villas & Resorts (PVR) membership lasts for 50 years. Based on the performance of similarly sized DVC resorts, PVR memberships should sell out within 3 years.

After their initial purchase, it will cost PVR members $145/night to stay during spring break or summer at WDW's second-most expensive resort in rooms that normally start at $543/night and go up from there.

PVR means great cash flow at the Polynesian for 3 years and subpar cash flow for 47 years.

Does anyone recall when Iger plans to retire? Did I read somewhere that they extended his contract to 2018, 3 years from now?

Are we talking about the same Disney?

Between Disneyland, the Magic Kingdom, Epcot, and TDL, Walt Disney Productions (later The Walt Disney Company) was operating or had ties to the 4 most successful and profitable theme parks in the world.

Michael Eisner wasn't hired to fix Parks & Resorts. Even in 1984, Disney's Parks & Resorts was the world leader in theme parks. In 1984, Disney's Parks & Resorts was profitable, the only successful segment in the company at that time. Eisner was hired to fix the rest of Walt Disney Productions, which was performing abysmally.

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

Gross margin is a function several types of expenses, with operating expense comprising the lion's share. Capex (in the form of depreciation) actually is Parks & Resorts smallest expense.

Heck, Disney spends more on the nefarious "Selling, general, administrative and other" than it does on depreciation (i.e. capex).

The problem with basing growth on higher prices is that you slowly price yourself out of your core market.

Let's look at the domestic numbers a bit more closely.

As we've already discussed, domestic P&R revenue is up 62% since Iger took charge while WDW ticket prices are up 63%. If attendance was flat, this would make sense.

However, attendance is not flat. Since 2005, domestic attendance is up 24%.

The problem is median household income is up only 17% from 2005 to 2013. (2014 numbers won't be released until September.) Vacationers can't keep up with WDW price increases. They still want to visit the parks but they can't spend like they used to. That means they spend less on all the other high margin items that Disney sells.

For example, in 2005, the "theme-park-admission-to-food,-beverage,-and-merchandise" ratio was 1.04. In other words, for every $1 Guests spent on admission, they spent $1.04 on food, beverage, and merchandise. In 2014, that number was down to 0.88, a number without precedent since Disneyland opened in 1955.

In the end, higher prices boomerang on Disney. They've got 24% more people in the park but, relative to what they spent in 2005, those people are spending less. Disney's opex is up to handle all those extra people, yet Disney isn't realizing comparable revenue gains in other areas to offset those extra expenses.

Thus, despite an attendance increase of 24% along with higher ticket prices of 63%, domestic revenue is only up 62%. Margins become increasingly difficult to maintain because of higher attendance, resulting in Disney making quality cuts to keep margins up. This also results in Disney stretching out growth initiatives in order to prop up those same margins.

I'm not sure what your definition of financial success is, but I see a lot of negative trends that suggest all is not well at WDW.

 

[BrianLo]

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

So what you are saying is, if you want to truly grow domestic revenue, you need to build more domestic parks.


I will totally say that I think Iger has missed the boat (ha ha) on DCL. I don't think it's feasible to double the number of Disney Parks domestically anytime soon, but there is no reason DCL couldn't have been as bullishly expanded as Eisner did to the parks in the 90s. Disney is still very niche in that market, they could easily be sailing 20+ ships around the work today.

 

[Cesar R M]

It all comes down to the survey.

I was tagged at HS this summer upon entering the park just prior to the daily Frozen parade. The surveyor was fishing so hard for me to give Frozen as the reason I was at HS. I refused to bite and she was almost in tears by the end of her statistically unbiased inquisition.

I think someone should also ask this question to Mr. Iger.
About how their underlings below him are all lying thanks to skewed surveys.

 

[Cesar R M]

HFCS is very similar to honey and glucose, fructose, and water do exist in nature. I would be willing to bet that the "honey sauce" used by KFC is HFCS. You could argue quite convincingly that it is over used in the food industry, but if you're arguing that it is inherently bad because the precise mixture of these molecules doesn't exit in nature then I could postulate that the pizza I just ate will certainly kill me.

just because it doesn't kill you outright, doesn't mean its not bad :>

also, the idea about "this doesn't exist in nature"... its because our body is used to process natural stuff.
If you put a different chemical. Does the body know how to process it? maybe it will skew the inner process and make sideeffects?

 

[Cesar R M]

We shall simply ignore execution for the sake of argument.

dunno, I found the pop version annoying and extremely repetitive.
Didnt fit the song as Idina's version.
But if you hear the international version (of all the languages) you will see a few singers who are waaay better.

 

[Cesar R M]

Since Antojitos got the Spirited seal of approval, I'm curious what people would recommend on the menu. I know a lot of people mention the tableside guacamole. Anything else come highly recommended?

As a Mexican.. I always recommend trying Pozole, Mole, Carnitas, Torta Ahogada, Flautas and Enchiladas.

 

[dupac]

Always try mole. Always.

 

[Absimilliard]

Disney with its 2% annual domestic theme park growth capex under Iger has seen revenue increase by 62% over 9 years, equating to a compound annual growth rate of 5.5%.

The unremarkable Six Flags, with a negative growth capex budget (capex is actually less than depreciation), has seen a compound annual revenue growth rate of 5.3% in recent years.

Wow, so Disney's domestic Parks & Resorts invests more than Six Flags yet its revenue growth is about the same, even though Six Flags is not spending enough to properly maintain its amusement parks.

With a little perspective, 62% over 9 years doesn't seem so good, does it?

Why would someone want to invest intelligently?

With Eisner's higher investment levels over his 21 years, Parks & Resorts compound annual growth rate was about 11%.

Universal's Theme Parks division, with a similar investment level, has realized a compound annual growth rate of about 13% since 2006.

Interesting.

Intelligent theme park investment produces superior growth.

The Polynesian Villas & Resorts (PVR) membership lasts for 50 years. Based on the performance of similarly sized DVC resorts, PVR memberships should sell out within 3 years.

After their initial purchase, it will cost PVR members $145/night to stay during spring break or summer at WDW's second-most expensive resort in rooms that normally start at $543/night and go up from there.

PVR means great cash flow at the Polynesian for 3 years and subpar cash flow for 47 years.

Does anyone recall when Iger plans to retire? Did I read somewhere that they extended his contract to 2018, 3 years from now?

Are we talking about the same Disney?

Between Disneyland, the Magic Kingdom, Epcot, and TDL, Walt Disney Productions (later The Walt Disney Company) was operating or had ties to the 4 most successful and profitable theme parks in the world.

Michael Eisner wasn't hired to fix Parks & Resorts. Even in 1984, Disney's Parks & Resorts was the world leader in theme parks. In 1984, Disney's Parks & Resorts was profitable, the only successful segment in the company at that time. Eisner was hired to fix the rest of Walt Disney Productions, which was performing abysmally.

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

Gross margin is a function several types of expenses, with operating expense comprising the lion's share. Capex (in the form of depreciation) actually is Parks & Resorts smallest expense.

Heck, Disney spends more on the nefarious "Selling, general, administrative and other" than it does on depreciation (i.e. capex).

The problem with basing growth on higher prices is that you slowly price yourself out of your core market.

Let's look at the P&R numbers a bit more closely.

As we've already discussed, domestic P&R revenue is up 62% since Iger took charge while WDW ticket prices are up 63%. If attendance was flat, this would make sense.

However, attendance is not flat. Since 2005, domestic attendance is up 24%.

The problem is median household income is up only 17% from 2005 to 2013. (2014 numbers won't be released until September.) Vacationers can't keep up with WDW price increases. They still want to visit the parks but they can't spend like they used to. That means they spend less on all the other high margin items that Disney sells.

For example, in 2005, the "theme-park-admission-to-food,-beverage,-and-merchandise" ratio was 1.04. In other words, for every $1 Guests spent on admission, they spent $1.04 on food, beverage, and merchandise. In 2014, that number was down to 0.88, a number without precedent since Disneyland's opening in 1955.

In the end, higher prices boomerang on Disney. They've got 24% more people in the park but, relative to what they spent in 2005, those people are spending less. Disney's opex is up to handle all those extra people, yet Disney isn't realizing comparable revenue gains in other areas to offset those extra expenses.

Thus, despite an attendance increase of 24% along with higher ticket prices of 63%, domestic revenue is only up 62%. Margins become increasingly difficult to maintain because of higher attendance, resulting in Disney making quality cuts to keep margins up. This also results in Disney stretching out growth initiatives in order to prop up those same margins.

I'm not sure what your definition of financial success is, but I see a lot of negative trends that suggest all is not well at WDW.

Excellent post! On the subject of Six Flags, to avoid their old demons, they've been under spending in the theme parks. Nearly all of the recent large expansions have been replacing existing attractions with either recycled rides or just renovating broken down wooden coasters. Like WDW, they've shrunk the number of attractions in all their parks and are in that "replace or remove if breaks" mode. They used to have the opposite attitude and Six Flags drove themselves into bankrupcy by spending way too much on CapEx and park acquisitions. Can Six Flags find a middle ground? Allow the parks to maintain themselves and grow normally?

 

[RSoxNo1]

Ponder this: like it or loathe it, but DCA 1.0 was a more cohesive thematic product at opening than three out of four WDW gates are today.

I'm not sure whether or not you're saying DAK or MK were more cohesive. I assume DAK? I would definitely agree that DCA 1.0 was more cohesive than DHS or Epcot post Frozen.

 

[bhg469]

As a Mexican.. I always recommend trying Pozole, Mole, Carnitas, Torta Ahogada, Flautas and Enchiladas.

No El pastor? Place by my house has it in the menu but they're always out of it.

 

[Gabe1]

Boat rentals went from a 30% discount to a 15% discount this month also. There's probably other "stealth cuts" as well. And a rumored increase in price for Tables in Wonderland coming sometime this year.

I just don't get it. So often most of the boats for rent are still in their slip. 70% of rack rate is still a chunk of money in Disney's coffers. It is just a bad business model. The AP holders are likely the ones to participate in these extras as they are at the World more frequently and don't need to commando through the parks. And if there are fireworks and special boat rentals that do sell out just exclude those from the discounts.

I feel the same way about the CM discounts. If historically there is a 60% occupancy rate, fill some of the 40% with CM's. Their families are still paying a chunk for the room, eating, drinking and purchasing in the parks.

Foolish Mortals.

 

[wogwog]

Changes they just keep a come'n. Now the petty. AP discount of 50% for mini golf to 15%. So instead of AP holders putting 50% into the pockets of Disney likely most will not part with anything now. Silly perk to take away. The rehab of Winter mini must be cost'n. Sign of the times.

You may be on to something. The refurb was just extended two weeks on Winter so they needed the money from some place.

But at least he only extended his tenure until June 2018.

 

[BrerJon]

I feel the same way about the CM discounts. If historically there is a 60% occupancy rate, fill some of the 40% with CM's. Their families are still paying a chunk for the room, eating, drinking and purchasing in the parks.
Foolish Mortals.

They seem to have the mentality that because they can raise prices and people still pay when it comes to things like park tickets, that across the board the same amount of guests are going to purchase activities regardless of the price, and discounting is thus a needless waste of money.

I bet surveys have told them that there is just enough of a percentage of users of those amenities who would still pay the price that the income would be more, even if the amount of people using them is less.

It's all about the money, with no regard that by making it accessible for less guests, that's less people to experience the fun and go home and tell their friends how good it is, etc. Such short term thinking. Want to increase income from boat rentals? Increase the amount of people using the boats! Instead they just raise the margins and see what they can get away with. Like in the parks, there's a mortal fear of investment and expansion, with extraction and margin squeezing being the preferred modus operandi.

I worry that reducing discounts will lead to reduced usage, which then gives the excuse for more closures. We know there's nothing WDW loves more in life than shutting things down, and 'guests don't want that anymore' is a natural conclusion from business drying up due to the lack of discounting.

 

[Nubs70]

Disney with its 2% annual domestic theme park growth capex under Iger has seen revenue increase by 62% over 9 years, equating to a compound annual growth rate of 5.5%.

The unremarkable Six Flags, with a negative growth capex budget (capex is actually less than depreciation), has seen a compound annual revenue growth rate of 5.3% in recent years.

Wow, so Disney's domestic Parks & Resorts invests more than Six Flags yet its revenue growth is about the same, even though Six Flags is not spending enough to properly maintain its amusement parks.

With a little perspective, 62% over 9 years doesn't seem so good, does it?

Why would someone want to invest intelligently?

With Eisner's higher investment levels over his 21 years, Parks & Resorts compound annual growth rate was about 11%.

Universal's Theme Parks division, with a similar investment level, has realized a compound annual growth rate of about 13% since 2006.

Interesting.

Intelligent theme park investment produces superior growth.

The Polynesian Villas & Resorts (PVR) membership lasts for 50 years. Based on the performance of similarly sized DVC resorts, PVR memberships should sell out within 3 years.

After their initial purchase, it will cost PVR members $145/night to stay during spring break or summer at WDW's second-most expensive resort in rooms that normally start at $543/night and go up from there.

PVR means great cash flow at the Polynesian for 3 years and subpar cash flow for 47 years.

Does anyone recall when Iger plans to retire? Did I read somewhere that they extended his contract to 2018, 3 years from now?

Are we talking about the same Disney?

Between Disneyland, the Magic Kingdom, Epcot, and TDL, Walt Disney Productions (later The Walt Disney Company) was operating or had ties to the 4 most successful and profitable theme parks in the world.

Michael Eisner wasn't hired to fix Parks & Resorts. Even in 1984, Disney's Parks & Resorts was the world leader in theme parks. In 1984, Disney's Parks & Resorts was profitable, the only successful segment in the company at that time. Eisner was hired to fix the rest of Walt Disney Productions, which was performing abysmally.

In addition to completely turning around the rest of the company, Eisner was the one who oversaw the creation of the modern WDW. He built 2 theme parks, 2 water parks, and 14 hotels. He doubled the size of DLR and invested internationally in Paris and Hong Kong. Eisner was the one who created Disney Cruise Line.

Despite inheriting the #1 theme parks in the United States (and the World), Eisner grew Disney's domestic Parks & Resorts revenue by over 650%, and total Parks & Resorts revenue by over 800%.

Kinda makes Iger's 62% domestic and 67% total seem paltry, doesn't it?

Gross margin is a function several types of expenses, with operating expense comprising the lion's share. Capex (in the form of depreciation) actually is Parks & Resorts smallest expense.

Heck, Disney spends more on the nefarious "Selling, general, administrative and other" than it does on depreciation (i.e. capex).

The problem with basing growth on higher prices is that you slowly price yourself out of your core market.

Let's look at the P&R numbers a bit more closely.

As we've already discussed, domestic P&R revenue is up 62% since Iger took charge while WDW ticket prices are up 63%. If attendance was flat, this would make sense.

However, attendance is not flat. Since 2005, domestic attendance is up 24%.

The problem is median household income is up only 17% from 2005 to 2013. (2014 numbers won't be released until September.) Vacationers can't keep up with WDW price increases. They still want to visit the parks but they can't spend like they used to. That means they spend less on all the other high margin items that Disney sells.

For example, in 2005, the "theme-park-admission-to-food,-beverage,-and-merchandise" ratio was 1.04. In other words, for every $1 Guests spent on admission, they spent $1.04 on food, beverage, and merchandise. In 2014, that number was down to 0.88, a number without precedent since Disneyland's opening in 1955.

In the end, higher prices boomerang on Disney. They've got 24% more people in the park but, relative to what they spent in 2005, those people are spending less. Disney's opex is up to handle all those extra people, yet Disney isn't realizing comparable revenue gains in other areas to offset those extra expenses.

Thus, despite an attendance increase of 24% along with higher ticket prices of 63%, domestic revenue is only up 62%. Margins become increasingly difficult to maintain because of higher attendance, resulting in Disney making quality cuts to keep margins up. This also results in Disney stretching out growth initiatives in order to prop up those same margins.

I'm not sure what your definition of financial success is, but I see a lot of red flags that suggest all is not well at WDW.

All while stock buy backs continue. WDW believes they have a price inelastic product. Reality shows that with every price increase WDW is becoming an elastic luxury.

 

[the.dreamfinder]

It appears someone wants to be COO.
http://variety.com/2015/biz/news/ja...inges-on-bob-igers-choice-for-coo-1201407531/