"Michael Nathanson, a longtime media analyst, estimates that Disney will spend $24 billion on new attractions, hotels and ships over the next five years. That’s more than Disney paid for
Pixar,
Marvel and
Lucasfilm combined."
This number is inflated.
$750 Million of that comes courtesy of the beleaguered Hong Kong government. $2.3 Billion will be invested into Tokyo Disney Sea’s new port. Around $500 Million USD to finish off Tokyo Disneyland's expansion. Say Zootopia ends up costing 300 million, so there's another solid $150+ Million from Shanghai Disneyland. So around $4 Billion of that doesn't even count as a Robert Iger investment. He can thank his many partners for coughing large sums of money.
And a contraction in CapEx at the parks is coming if something is not done soon. Disneyland's parking garage is done, Galaxy's Edge is done, Falcon is finished, and RotR is almost finished (though rather over budget). They have a glorified Spiderman Toy Story Midway Mania coming, some painted warehouses, and clone of a screen based attraction on its way. Disneyland's spending in early 2020 should be a fraction of early 2019. Walt Disney World is finishing up its own Galaxy's Edge, Mickey Ride, Skyliner, and Rat ride in under a year. While it feels like there is a lot in the pipeline at Walt Disney World, most announced major expenditures should wrap up in 2 years.
Disney is doubling down on its old favorite business, the cruise line. Very very high margins and speedy return on investment. Want to know what Iger was doing during the period of neglect in the early 2010s? He was spending it on cruise ships!
I think this would be more accurately stated as "not doing much of anything with the domestic parks."
Most of the attractive economic growth in the world has not been taking place in California, and only slightly more has happened in Florida. His decision making has reflected that.
Revenue and profit does not. Where has the majority of growth come from over the last decade? Walt Disney World and Disneyland have been on an incredible run. Disneyland's attendance has shot up by nearly 50% since 2009! Walt Disney World has had softer attendance growth, but remarkable hotel occupancy driving the best performance in decades. These supposedly slow growth markets have been the source of almost Walt Disney Parks and Resorts' success. All with minimal investment on the part of Iger. What about the big investments internationally? Let's see... From the beginning of his tenure Disneyland Paris experienced a nightmarishly destructive decade. Hong Kong Disneyland has had hundreds of millions invested while still making essentially no money. Shanghai Disneyland, Iger's legacy project, has either posted losses or essentially broken even since opening.
That's not to say they shouldn't invest in international properties or accept medium term losses for longterm success, but the success has come from the very businesses he hasn't invested in. Adding capacity to these parks shouldn't only be a matter of driving new gate clicks (though that will follow) but also ensuring millions of guest's first exposure to Disney is positive. Most theme park leaders would panic if attendance rose 50% at their complex, and rush to add expansions to make sure each guest felt comfortable and satisfied. Not Disney! As lines get longer and prices go up, a sour taste is being left in thousands of guest's mouths. Often I'm shocked at what they let us experience.
Their product is a theme park, and they do nothing to improve for the sake of improvement. That's like if Apple never updated the iPhone because the iPhone is successful. Yes it is, but in order to keep it at the forefront of design and drive repeat customers constant change should be happening. Is updating the iPhone bad for margins? Yes! But it's worth it to keep customer satisfaction high and drive repeat sales. Plussing should be happening to the attractions constantly. An attraction should look better 10 years after it was built than it did opening day. One off attractions like Tron at the Magic Kingdom should be being announced yearly to constantly expand capacity.
What's really amazing is how affordable what I described is. With depreciation spread over 40 years, Disney could spend $200 Million USD a year on new attractions and updates at each resort, and the whole thing would cost them $10 Million USD a year in additional depreciation. Instead of sinking massive amounts of capital into rock work, Disney could spend on things like the Big Thunder upgrades, Fantasyland dark ride improvements, and the adding the Hatbox Ghost. Relatively cheap things compared to Rise of the Resistance that ended up becoming beloved instantly.
But nah, that's not quite as exciting as a synergistic celebration of one the brands that drives revenue across multiples businesses while maximizing returns for shareholders and creating longterm value for our portfolio all while decreasing risk and improving margins increasing customer satisfaction creating positive guest interactions improving free cash fl...
www.nytimes.com
