Disney Parks Revenue up

[ParentsOf4]

Any hotel company will tell you 80% occupancy is w jat they shoot for and when it goes over 85% its time to start planning for expansion. Disney needs more rooms now. Universal is adding another 4,000 to the 6,200 they currently have. They will keep building and wind up with 15,000 on the property they own. They will also according to everyone here build one or two more gates on the land they purchased to go with the 5,000 more hotel rooms. Universal knows the market will continue to grow. Even the vast majority on the site know it. Its a minority who think Universal will grow and WDW will shrink. WDW will continue to grow and prosper. Look at all they are doing now and will be announced soon at Epcot. All 4 gates are being expanded and attendance is growing. 2016 was a bad year but just think, 2017 Pansora, 2018 Toy Story Land, 2019 Star Wars, 2020 The Rat and more in Epcot. 2021 the 50th with something new at MK ans 2022 a new Country and more in Epcot. How many more people will want go vacation at WDW witj all that?

Don't judge WDW like other hotels. WDW has a very different cost structure.

Disney has to pay for airport transportation, daily bus, boat, & monorail service, and Extra Magic Hours from its hotel income. Anything under 85% occupancy is a weak number for WDW, and under 80% is bad.

Even during the post-9/11 period, WDW's annual hotel occupancy bottomed out at 76%. This was a time when Disney laid off cast members and temporarily closing hotel wings. If I correctly remember, all of POFQ was closed.

Again, 80% hotel occupancy for WDW is a bad number.

Remember, when WDW's occupancy approaches 80%, it means the economy is bad and Disney typically is offering deep discounts to get it to 80%.

Conversely, when occupancy approaches 90%, Disney is offering considerably fewer discounts and the cash is rolling in.

It's only about a 10% difference between a really good and really bad occupancy number at WDW.

 

[csmat99]

Because they arent selling a stream only subscription - i already covered that. That's moot anyway when talking about what they are making available today or in the past via streaming.

The issue is how do they only sell stream subscription when they demand 10 bucks (including other channels) a month from Comcast to bundle it? They are going to have to go back and give them a discount.

 

[csmat99]

Don't judge WDW like other hotels. WDW has a very different cost structure.

Disney has to pay for airport transportation, daily bus, boat, & monorail service, and Extra Magic Hours from its hotel income. Anything under 85% occupancy is a weak number for WDW, and under 80% is bad.

Even during the post-9/11 period, WDW's annual hotel occupancy bottomed out at 76%. This was a time when Disney laid off cast members and temporarily closing hotel wings. If I correctly remember, all of POFQ was closed.

Again, 80% hotel occupancy for WDW is a bad number.

Remember, when WDW's occupancy approaches 80%, it means the economy is bad and Disney typically is offering deep discounts to get it to 80%.

Conversely, when occupancy approaches 90%, Disney is offering considerably fewer discounts and the cash is rolling in.

It's only about a 10% difference between a really good and really bad occupancy number at WDW.

So all hotels need to pay into boat and monorail service or just the ones that have direct access to those forms of transportation?

 

[Frank the Tank]

Yes, ESPN has the ability to stream (btw it sucks) but you must login to your cable/sat provider first. Comcast is the player ESPN needs to worry about. They already have regional sports channels in almost all the major markets and carry the local broadcast rights to some of the biggest teams in NBA like the warriors and in baseball as well. They also hold leverage when ESPN does finally try and offer streaming directly to customer.

It's interesting because Comcast is both ESPN's biggest revenue source (from cable subscriptions) and, as you've noted, arguably its biggest competitor (with regional sports networks and, to a lesser extent, NBCSN).

This is also further complicated because the fortunes of Comcast and ESPN (and frankly every other cable network) are largely intertwined. Comcast is still very dependent on cable subscriber revenue in its own right and sports are really the most important reason why people get and/or keep cable in the first place. The paradox is that cord cutters generally cite high costs as the largest reason why they drop cable, which is disproportionately caused by the high prices for sports networks. By the same token, though, the biggest reason why people *don't* cut the cord is because the sports that they want aren't available anywhere else. (I know that's true for me.) Essentially, we're in a situation where sports are both the biggest reason why one segment of people cut the cord AND the biggest reason why the other segment of people *don't* cut the cord.

That's why there's so much consternation with investors right now. It's not as if though ESPN suddenly isn't making money (see my post #94 above). Indeed, ESPN is the largest profit machine in the history of the entire entertainment industry. It's clear that this insane profit level that ESPN achieved over the past decade (where ESPN alone was generating profits on the level of the rest of the entire Walt Disney Company *combined*) can't last going forward. There just isn't a great answer on what is the best long-term course in the new paradigm where cable subscriber numbers are going down. It's easy for outside observers to state that ESPN should go to direct streaming to customers, but that model in and of itself can kill the very reason why ESPN was so unbelievably profitable in the first place. Like I've said, Disney is actually probably still better off with a basic cable model for ESPN and its other cable networks even if subscriber numbers are cut in half from where they are now (and if that's the floor, then Disney may not have much or any incentive to alter the current model).

 

[HauntedPirate]

If you want to see a truer picture of unemployment and inflation numbers, go look up "Shadow Government Statistics". Believing the government-manipulated numbers for either is foolhardy, at best. That's all I'm going to say, not getting into the politics behind it.

Disney has no real reason to fudge occupancy rates that I can see. As @ParentsOf4 has stated, the higher the occupancy, the bigger the profit, and Disney doesn't start making big money from hotel rooms until it hits ~90% and beyond, I believe? So fudging occupancy rate doesn't bring in any money, it only masks problems getting people to stay on-site.

 

[flynnibus]

The issue is how do they only sell stream subscription when they demand 10 bucks (including other channels) a month from Comcast to bundle it? They are going to have to go back and give them a discount.

You can still offer differentiated products to justify deltas. Besides, the old models arr going away regardless. But thats another topic anyway...

 

[ParentsOf4]

So all hotels need to pay into boat and monorail service or just the ones that have direct access to those forms of transportation?

The hotels have different transportation budgets depending on the type of transportation offered.

The easiest way to see this is to look at DVC annual dues, where costs are broken down. For example, at AKV, the cost is $21.27 per night. At BWV, it's $14.01 per night. So it would seem the BWV boats to Epcot and DHS cost considerably less than the AKV buses.

 

[larryz]

Don't judge WDW like other hotels. WDW has a very different cost structure.

Disney has to pay for airport transportation, daily bus, boat, & monorail service, and Extra Magic Hours from its hotel income. Anything under 85% occupancy is a weak number for WDW, and under 80% is bad.

Even during the post-9/11 period, WDW's annual hotel occupancy bottomed out at 76%. This was a time when Disney laid off cast members and temporarily closing hotel wings. If I correctly remember, all of POFQ was closed.

Again, 80% hotel occupancy for WDW is a bad number.

Remember, when WDW's occupancy approaches 80%, it means the economy is bad and Disney typically is offering deep discounts to get it to 80%.

Conversely, when occupancy approaches 90%, Disney is offering considerably fewer discounts and the cash is rolling in.

It's only about a 10% difference between a really good and really bad occupancy number at WDW.

My question: if bookings are so solid, why are they offering lodging discounts this summer?

 

[seascape]

The hotels have different transportation budgets depending on the type of transportation offered.

The easiest way to see this is to look at DVC annual dues, where costs are broken down. For example, at AKV, the cost is $21.27 per night. At BWV, it's $14.01 per night. So it would seem the BWV boats to Epcot and DHS cost considerably less than the AKV buses.

BWK also has lots of people who walk to Epcot and HS so its not a good comparison to a resort that is not near anything else. Also the boat costs are also paid by BC, YC, Swan and Dolphin. Now when the new DVC at CBR is done, it will be interesting to see what their costs are.

 

[HauntedPirate]

My question: if bookings are so solid, why are they offering lodging discounts this summer?

Why, indeed. My best guess is that they want to fill up as many of the remaining unbooked rooms as possible. Even with discounts those rooms would likely be highly profitable.

 

[ParentsOf4]

My question: if bookings are so solid, why are they offering lodging discounts this summer?

Please keep in mind that hotel occupancy and theme park attendance are solid exactly because Disney is offering discounts.

Disney offers hotel discounts every year, although it's possible that more rooms are available via discount this year than last year. This is supported by PRGS, which was up only 0.6% last quarter, historically a very low increase for the domestic resorts.

Discounts are offered when early bookings don't match expectations.

Why did early bookings not match expectations?

Now we are getting into speculation. Without data, one guess is as good as the next.

 

[ford91exploder]

My question: if bookings are so solid, why are they offering lodging discounts this summer?

Because try actually GETTING one of those discounted rates, those rates apply to a small subset of rooms. The whole point is for you to call and allow Disney to talk you into a stay at full rack rate

 

[DDLand]

With ESPN and other media accounting for 3 times the operating income of the parks, is it any wonder that Iger's attention cannot be on an unimaginative Imagination Pavilion and a flaccid TTA narration?

Movies are huge, and the cruise ship capacity will soon grow by 50% (2 more ships in addition to the 4 we already have).

Also, Shanghai is obviously the greatest growth opportunity among the parks. IP acquisition and new projects (much of it IP based) will drive growth domestically among those parks, but that is still a relatively small percentage of the corporation's overall revenues and operating income.

Yup, we frequent these boards because our primary Disney focus is the big park in Orlando, yet that park accounts for less than 10% of the company's operating income. The parks also cost much more to operate in many ways along with far greater potential downsides such as lawsuits. Put another way, It takes a lot more hands-on work to make a dollar of profit at the parks than it does to make a dollar in most other segments. My love of Disney, and my reason for participating in these boards, arise from the parks (especially Epcot). Yet the real money for Disney comes from areas that few people are as passionate about. Again, is it any wonder that the thing we love is not given the corporate attention that we desire?

This used to be the prevailing theory around both Forums like these and Disney Corporate. This was the 2000s mentality.

Not anymore.

Domestic Disney Parks have been on a period of remarkable growth. They have led the way to new heights of profitability for Parks and Resorts. They've helped push margins to levels we haven't seen since around 2002.

Domestic Parks are killing it.

At the end of FY 2011, the year Shanghai Disneyland's agreement was finalized, Domestic Parks and Resorts accounted for 9.3 Billion in Revenue. As of FY 2016 Domestic Parks and Resorts accounts for 14.2 Billion in Revenue. This was a 53% Increase in Revenue. Moreover, Parks and Resorts Operating Income, almost entirely driven by Domestic Results, grew a whopping 112%. *

These results are indicative of a business with more gas left in the tank, and Disney knows that. Universal has taken an even more aggressive approach to expansion and has reaped even more impressive rewards.

Right now Domestic Parks has one of the most ambitious lineups of new additions in the Park's history. From now until the early 2020s, we can expect new offerings yearly. Disneyland Resort and Walt Disney World Resort will finally get the chance to grow at a pace we haven't seen in years.

The best part is these assets already have their large fixed costs in place. Avatar and Star Wars will add some new costs, but it will be far less than a new park. These parks are finally going to maximize their existing infrastructure and that's going to push margins ever higher.

The vast majority of growth for the short to medium term is going to come from assets launched in 1955 and 1971.

Oh, and right about now Iger would much rather be talking about Parks and Resorts. Look at the beginning and ending of this interview. Poor Bob...
http://www.cnbc.com/2017/05/09/cnbc...nt-u201cclosing-bell-percent-u201d-today.html

*During the time period Aulani and The Disney Fantasy came online. Those assets fueled some of the Domestic growth, but the vast majority came from Disneyland Resort and Walt Disney World's consistent improvement. All with little new investment. One could also point out Disney Cruise Line's entire business model is tied in with WDW. WDW is the beating heart of various ancillary businesses like DVC and DCL.

 

[DDLand]

Earnings fun!

Right now the parks are taking a breather. Revenue continues to slow, but that's reflective of a period of time where Disney hasn't done all that much. Disney needed major expansion two years ago; Disney doesn't think ahead.

Luckily that will all change with Avatar. I'm hopeful that it will create Cars Land like ripples for the park. The park and Resort need good performance. I'm feeling pretty bullish on the idea that people will respond to the new area and change their visitation habits.

This seems like a good bet.

Disney Springs was mentioned in the release. It seems like it is doing brisk business which is also excellent to hear. I do wonder if it has shifted some of the spending to that site away from Disney owned properties as some have mentioned. That would be logical.

Still positive.

Disneyland and WDW are cutting themesleves loose of their respective drags on Margins. Disneyland's APs and WDW's weak hotel (particularly Deluxe) Performance. As the two have found success, they're gaining their more 1990s levels of Margins.

This will only improve with time.

A red flag appeared to me during the earnings call. Disney adjusted their CapEx down by 200 Million. At first I couldn't believe how stupid they were being, then it hit me.

Disneyland's Parking Garage is moving at the speed of Government Bureaucrats (fine, they're elected but still) and Hong Kong Disneyland's expansion found basically the same problem. Around the globe, local government officials and angry citizens holding up Disney's plans. That would account for the 200 Million. As Avatar winds down, we should start hearing about what's next. Spending will bump next year as they play catch up.

Shanghai's performance has been excellent. They built a quality product and people came.

Who would have thought? Someone go tell Jay and Paul!

Disney has promised more development at Shanghai, and I wouldn't be shocked if we hear about it sooner rather than later. It's going to be a compelling growth opportunity long term.

I'm still a little skeptical about Hong Kong short term. Disney apparently told Hong Kong "take it or leave it." I still think Hong Kong got the short end of the stick. Short term they should face some significant headwinds as they've just increased their room inventory by 75% at the same their occupancy has been soft. Hopefully the Explorers Lodge is compelling enough that it drives new guests.

Walt Disney Studios Paris needs Billions. They need to fix that park as soon as possible. Right now they're paying for a park that is underutilized and is representing a drag on the entire Division. Project Sparkle was just about getting the parks up to basic Disney Standards. Now it needs a total rebuild. I'm not opposed to tear down and replace. Give it the money and never worry about it again.

Good things are in the pipeline. More is needed.

 

[King Panda 77]

Earnings fun!
Walt Disney Studios Paris needs Billions. They need to fix that park as soon as possible. Right now they're paying for a park that is underutilized and is representing a drag on the entire Division. Project Sparkle was just about getting the parks up to basic Disney Standards. Now it needs a total rebuild. I'm not opposed to tear down and replace. Give it the money and never worry about it again.

Good things are in the pipeline. More is needed.

Maybe tear it down and start in a better location.

 

[seascape]

Maybe tear it down and start in a better location.

Paris was a big mistake, Euro Disney should have been built in Italy. It would have been better for Disney and Italy. Paris gave too much in tax breaks that made it sound better but if you don't make money, taxes don't matter.

 

[King Panda 77]

Paris was a big mistake, Euro Disney should have been built in Italy. It would have been better for Disney and Italy. Paris gave too much in tax breaks that made it sound better but if you don't make money, taxes don't matter.

To me Spain would be a better fit. they could have similar to Florida with Portaventura and Ferrari world being there.

 

[Ralphlaw]

This used to be the prevailing theory around both Forums like these and Disney Corporate. This was the 2000s mentality.

Not anymore.

Domestic Disney Parks have been on a period of remarkable growth. They have led the way to new heights of profitability for Parks and Resorts. They've helped push margins to levels we haven't seen since around 2002.

Domestic Parks are killing it.

At the end of FY 2011, the year Shanghai Disneyland's agreement was finalized, Domestic Parks and Resorts accounted for 9.3 Billion in Revenue. As of FY 2016 Domestic Parks and Resorts accounts for 14.2 Billion in Revenue. This was a 53% Increase in Revenue. Moreover, Parks and Resorts Operating Income, almost entirely driven by Domestic Results, grew a whopping 112%. *

These results are indicative of a business with more gas left in the tank, and Disney knows that. Universal has taken an even more aggressive approach to expansion and has reaped even more impressive rewards.

Right now Domestic Parks has one of the most ambitious lineups of new additions in the Park's history. From now until the early 2020s, we can expect new offerings yearly. Disneyland Resort and Walt Disney World Resort will finally get the chance to grow at a pace we haven't seen in years.

The best part is these assets already have their large fixed costs in place. Avatar and Star Wars will add some new costs, but it will be far less than a new park. These parks are finally going to maximize their existing infrastructure and that's going to push margins ever higher.

The vast majority of growth for the short to medium term is going to come from assets launched in 1955 and 1971.

Oh, and right about now Iger would much rather be talking about Parks and Resorts. Look at the beginning and ending of this interview. Poor Bob...
http://www.cnbc.com/2017/05/09/cnbc...nt-u201cclosing-bell-percent-u201d-today.html

*During the time period Aulani and The Disney Fantasy came online. Those assets fueled some of the Domestic growth, but the vast majority came from Disneyland Resort and Walt Disney World's consistent improvement. All with little new investment. One could also point out Disney Cruise Line's entire business model is tied in with WDW. WDW is the beating heart of various ancillary businesses like DVC and DCL.

True, the two domestic parks are an important part of the corporate mix, and are the core spirit of the Disney emotion. The growth is amazing. Nevertheless, WDW still seems to be a smaller cut of the corporate pie than people on these boards seem to think it is. It accounts for perhaps 10% of the operating income, and is a very labor intensive and potential downside riddled (lawsuits, labor issues) area of the business. Believe me, I'm overjoyed that the parks are growing like they are. But I have to think that Iger's time at work is not spent analyzing the Parks' details with the rigor that many of us assume. ESPN, ABC, cruise ships, movies, and other acquisitions likely make up the bulk of his time.

In his later years, Walt truly loved Disneyland, and his TV segments. That's where he was. The Florida project was his new toy and new area of great growth. In the mid 2000 teens, that area is still growing, but that wheel has already been invented, thus huge CEO attention is not going to be there. Disney has gone global and electronic. Mergers and acquisitions still abound. The cruise industry is booming. And overseas parks (especially in Asia) have huge untapped potential. Yes, WDW is increasing prices, hotels, and park capacity, but the growth potential of WDW and DL compared to other areas is probably more modest.

 

[DDLand]

True, the two domestic parks are an important part of the corporate mix, and are the core spirit of the Disney emotion. The growth is amazing. Nevertheless, WDW still seems to be a smaller cut of the corporate pie than people on these boards seem to think it is. It accounts for perhaps 10% of the operating income, and is a very labor intensive and potential downside riddled (lawsuits, labor issues) area of the business. Believe me, I'm overjoyed that the parks are growing like they are. But I have to think that Iger's time at work is not spent analyzing the Parks' details with the rigor that many of us assume. ESPN, ABC, cruise ships, movies, and other acquisitions likely make up the bulk of his time.

In has later years, Walt truly loved Disneyland, and his TV segments. That's where he was. The Florida project was his new toy and new area of great growth. In the mid 2000 teens, that area is still growing, but that wheel has already been invented, thus huge CEO attention is not going to be there. Disney has gone global and electronic. Mergers and acquisitions still abound. The cruise industry is booming. And overseas parks (especially in Asia) have huge untapped potential. Yes, WDW is increasing prices, hotels, and park capacity, but the growth potential of WDW and DL compared to other areas is probably more modest.

I agree with your point on Iger not obsessing over the tiny details at WDW. He visits a handful of times a year. Orlando isn't a passion of his like Shanghai.

At the same time Disney Corporate and Wall Street's focus is fixed on what Parks and Resorts can come up with. WDW is one of the key ways to deliver massive growth into the mid 2020s. WDW and Disneyland following SWE and the other upgrades in the pipeline could be reaching margins in the mid 20s. These parks have huge untapped potential that hasn't been exploited.

I can say with strong confidence almost all of the Operating Income Growth at P&R will come from Domestic Parks with WDW the primary contributor over the next 5 years.

Domestic P&R is the company's growth engine for the foreseeable future. How things have changed!

Maybe tear it down and start in a better location.

I would never call for the complete dissolution of Disneyland Paris. It has beneficial agreements, strong local buy in, a good location, and other contractual items that would make it a tough sell. That's also ignoring the success Parc Disneyland has found too.

No, what I would say is Walt Disney Studios needs to be completely rethought or razed. At this point the park is a Sunk Cost. There's no path forward that will ever ensure a positive guest experience up to the Disney Parks Brand. It is an awful excuse for a Disney Park.

I say start fresh as @the.dreamfinder has said (you blew my mind when you first said it, but honestly it's a no brainer). Take the whole thing down. Build a park that's good.

There are decent items within the park, but those are corrupted by horrendous placemaking and poor master planning. This bad design also hurts its neighbor park too.

It's unacceptable, and if they're prepared to spend Billions, why start within a framework that will ensure structural issues?

Never before has a Disney Park waved the white flag. Never before has a Disney Park been that awful.

Build it right, and never worry about it again. I'm sure those hotels would fill up nicely again too...

(I know about weak Tourism in France, but a good product can only help)

Correction: I had the wrong "dreamfinder"

 

[larryz]

To me Spain would be a better fit. they could have similar to Florida with Portaventura and Ferrari world being there.

They should have bought the Island of Malta and start building Euro-Disney World...