I'm sorry I still haven't seen a decent reconciliation of how Iger is a penny pincher but he spent an absurd am out of money on Next Gen (and China, etc). It's a mistake to claim he's not investing in the product for the future. He's spending. You just don't like HOW, which is a separate conversation. "Iger is cheap" is, at best, a shaky premise on which to build your criticism.
Don't make
@ParentsOf4 break out his capital spending graphs.
Agreed that I'm not a fan of the way he's spending P&R money. I could live without another park in China. DCA 2.0 was his greatest achievement in P&R.
I'm more negative about the cost cutting than lack of new investment. Just fix what's there and it would be a great start. My personal opinion is the next billion at WDW should be spent on major refurbs instead of new stuff.
Don't invoke my name unless you want a graph.
It's an interesting topic. How much has Disney been investing in its Parks & Resorts segment under Iger?
By now, those who read my posts know that I rarely discuss absolute dollars because (for example) $100M spent in 1972 is not the same as $100M spent in 2015. IMO, inflation calculators are poor ways to compare eras so I don't use them. Similarly, spending $100M when a company operates 1 theme park is not the same as spending $100M when a company operates 5 theme parks.
To normalize the effects of both, I tend to look at percentage of revenue. In my experience, this is consistent with the thinking of many corporate leaders. Companies tend to set budgets with total revenue in mind. A company with $1B in annual revenue has different cost expectations than a company with $5B in annual revenue. Looking at the
percentage of how much they invest gives insight into that company's business strategy.
The Disney of 1982 spending $1B to build EPCOT Center is
much more aggressive than the Disney of 2015 spending $2B (i.e. 43% of $5B) to build Shanghai Disneyland. Whether you look at company-wide revenue or just Parks & Resorts revenue, the Disney of 1982 truly went out on a limb for EPCOT Center. In 2015, the entire Shanghai Disneyland venture could be a colossal failure and yet it would represent much less than one year of Disney's stock repurchase plan or only a fraction of one year of Parks & Resorts revenue.
Another item to consider when evaluating Disney's Parks & Resorts investments is depreciation. Amusement parks are physical asset intensive. Over time, these deteriorate and need to be repaired or replaced. Day-to-day maintenance is covered as an operating expense. However, long-term maintenance typically is covered as a capital expenditure.
Over the last 5 years, Disney's P&R depreciation has been about 10% of P&R revenue. If this seems high to you, then consider that it is lower than the other amusement park companies that I follow with the exception of Merlin Entertainments, which is only slightly lower. This is not because Disney's assets are aging less
, but because Disney's revenue is strong relative to its physical assets.
Since companies don't report maintenance and growth capex separately, one method used estimate growth capex is to assume that maintenance capex should equal depreciation. At a theme park, this can be as minor as replacing rotting structures to a complete revamp of an attraction. For the purposes of determining how much a company is investing (versus simply maintaining), capex spent above depreciation can be considered growth capex.
With all of the above explanations out of the way
, the following graph (yet another one from me!) gives some idea of how much Disney has spent on the growth of its domestic and international Parks & Resorts business since the opening of Walt Disney World on October 1, 1971, with most major capex projects (except hotels) identified:
Please note that 1995 is a special case. There were multiple simultaneous smaller projects ongoing, the net effect being a huge spike in capex in 1994.
I look at this graph and conclude that Iger is the Disney CEO who has invested the least in his Parks & Resorts segment, even taking into account his large investments in Shanghai and on cruise ships. Iger might have spent over a billion dollars on NextGen but once that cost is spread over the several years it took to develop and deploy, it represents only a fraction of what Disney's Parks & Resorts segment is generating.
