Disney's FY20 Q3 Earnings (8/4/20)

[senor_jorge]

This has me wondering if Disney has/is going to mess with the Epcot capacity ratio for Food & Wine Festival. Getting local Passholders in to buy drinks & food at Epcot is better than it running under capacity.

At the moment, Disney is trying to attract Passholders back with some steep hotel discounts. However, the cheapest rate I can find is Pop Century for $139/night (taxes included) in the middle of the week in September, which might not be enough of a discount to attract the numbers I suspect Disney is looking for.

If they do I’m going to be curious to see what, if any, adjustments are made to their offerings. I have several friends that have been successful in the restaurant business. When meat processors where slammed by the virus and there were shortages and skyrocketing prices it was brutal. More than one has made menu adjustments to address the various issues they are dealing with. Controlling food costs, new items that are more efficient to prepare and serve to deal with labor issues, and so on. Food, beverage, and hospitality was already a challenging space before Covid. Now it’s more brutal than ever before.

 

[ElvisMickey]

Slice that Pop room rate in half and they'd probably get some takers. As is, it's far too high to attract many guests.

So... Some room deals, but not many. No fireworks. Little entertainment (comparatively speaking). Maybe half as many food venues open, and less selection at those still open (from what I was told about Epcot last night, at least). But with full-priced admission? Limiting capacity on a group of guests that would come, but since TDO seems to be hoping for buses of people to show up they aren't opening up more slots for them? I'm not seeing the logic.

Seriously. I was actually just looking at this the other day. I've paid less than $139 a night at Pop just last year at the AP rate when we WEREN'T in the middle of a pandemic. Even the heavy discounts at the Deluxe resorts are still too steep. Not sure why they'd rather have the rooms sit empty than offer more attractive discounts.

 

[Sir_Cliff]

This is wandering a little further afield, but I noticed a similar phenomenon at Disneyland Paris. Was considering a trip for this August, then looked at the hotel prices and quickly put that out of my mind!

Not sure how they are doing at DLP as no-one has really commented on that. They don't seem to be making much effort to entice guests, though.

 

[CastAStone]

At the moment, Disney is trying to attract Passholders back with some steep hotel discounts. However, the cheapest rate I can find is Pop Century for $139/night (taxes included) in the middle of the week in September, which might not be enough of a discount to attract the numbers I suspect Disney is looking for.

Slice that Pop room rate in half and they'd probably get some takers. As is, it's far too high to attract many guests.

Hmm.. Pop at $139 a night or the Hyatt Place LBV at $68 a night with actual hallways, free breakfast, 400 sqft rooms, your car a 2 minute walk from your room, and no parking fees. Currently both have the exact same EMH and FastPass benefits - None at all.

Even with the $25 a day to park at the theme parks its still $46 cheaper per night. So how much do you value the Skyliner and the bus right to the MK's front doorstep? Disney better hope the answer is $46 a night.

 

[JoeCamel]

Hmm.. Pop at $139 a night or the Hyatt Place LBV at $68 a night with actual hallways, free breakfast, 400 sqft rooms, your car a 2 minute walk from your room, and no parking fees. Currently both have the exact same EMH and FastPass benefits - None at all.

Even with the $25 a day to park at the theme parks its still $46 cheaper per night. So how much do you value the Skyliner and the bus right to the MK's front doorstep? Disney better hope the answer is $46 a night.

Or you could book Cabana Bay for $79 a night right now and have a resort to go with your room. Still pay a little parking but it is covered.

 

[Jrb1979]

Or you could book Cabana Bay for $79 a night right now and have a resort to go with your room. Still pay a little parking but it is covered.

More people need to come to the dark side.

 

[ElvisMickey]

Or you could book Cabana Bay for $79 a night right now and have a resort to go with your room. Still pay a little parking but it is covered.

For sure! As an AP holder to both resorts, I'd have no problem driving back and forth between the two if I wanted to take a little staycation for a few days.

 

[Jimmy Thick]

Or you could book Cabana Bay for $79 a night right now and have a resort to go with your room. Still pay a little parking but it is covered.

WOW!!! 79 bucks a night is insane, thats a deal. Cabana Bay is comparable to a Disney moderate in my opinion and everytime I've stayed there the employees were incredible. 79 bucks is soooo very tempting...

 

[JoeCamel]

WOW!!! 79 bucks a night is insane, thats a deal. Cabana Bay is comparable to a Disney moderate in my opinion and everytime I've stayed there the employees were incredible. 79 bucks is soooo very tempting...

JUst a little thick there Mr. Thick

 

[HauntedPirate]

Hmm.. Pop at $139 a night or the Hyatt Place LBV at $68 a night with actual hallways, free breakfast, 400 sqft rooms, your car a 2 minute walk from your room, and no parking fees. Currently both have the exact same EMH and FastPass benefits - None at all.

Even with the $25 a day to park at the theme parks its still $46 cheaper per night. So how much do you value the Skyliner and the bus right to the MK's front doorstep? Disney better hope the answer is $46 a night.

I found $126/night at Pop, September 14-18, for 2 adults as a Passholder rate. That's still ridiculous.

 

[easyrowrdw]

I found $126/night at Pop, September 14-18, for 2 adults as a Passholder rate. That's still ridiculous.

I found $97 for mid-August. I think it was probably a glitch, but it was bookable.

 

[nickys]

I found $126/night at Pop, September 14-18, for 2 adults as a Passholder rate. That's still ridiculous.

Was that with 30% off?
You can get a “2 bedroom suite” at Endless Summer for around $144 a night. 1 large studio room with 2 queen beds, kitchenette, picnic style table, separate bedroom with a 3rd queen bed. Early entry to the parks each day.

 

[flutas]

I found $97 for mid-August. I think it was probably a glitch, but it was bookable.

Hotwire has Pop for $79/night on their "mystery" deals.

 

[brianstl]

Was that with 30% off?
You can get a “2 bedroom suite” at Endless Summer for around $144 a night. 1 large studio room with 2 queen beds, kitchenette, picnic style table, separate bedroom with a 3rd queen bed. Early entry to the parks each day.

You can rent a dedicated five night standard view DVC studio at AKL for what works out to be $120.60 right now.

 

[easyrowrdw]

Hotwire has Pop for $79/night on their "mystery" deals.

Interesting. I looked and the $79 one said it had free breakfast. So that couldn't be Pop, right?

 

[winstongator]

My opinion is my opinion. Whether you agree or not has no bearing on whether its meaningful. You said people would be back, Disney has only been open 3 weeks. To me that is implying you think there will be an increase in demand soon. I agree, people will be back but I think it will take a while. Probably years to get back to what was the old normal and I think a big reason is that a large portion of their customer base doesn’t feel comfortable traveling to WDW right now. That’s my opinion and it’s backed by the current attendance numbers. Even Chapek said they were disappointed in the numbers.

As far as analysts go, its naive to think someone who follows the company for a living knows nothing. I never said they had a crystal ball and could predict everything with 100% accuracy, but they certainly know plenty about the business.

Didn't Chapek also say that the decreased attendance numbers were due to the increase in Coronavirus cases in FL? When Disney announced the reopening there were 3k cases/day being reported. Had we stayed at that level, that's 250k-500k less cumulative cases from then to now

It’s not really cash flow positive. When they say a positive net contribution they mean that revenues exceed variable costs. Any fixed or sunk costs are ignored because they exist whether the parks are open or closed. Many of the fixed costs are things like depreciation of the fixed assets which is non-cash, but there are other fixed costs that are cash based. For example if you look at something like labor costs there’s a variable component (CMs at the front gate) and there’s a fixed component relating to things like security, maintenance and various corporate functions like HR or IT directly related to WDW. If the parks are closed they still have to pay for those things. So in a basic example if it costs them $1B a month in expenses (no revenue less fixed costs) to keep the parks closed and they lose $500M a month with the parks open (revenues less variable costs less fixed costs) then they have a positive net contribution of $500M even though they are still operating at a loss.

I don’t have the specific numbers to make a graph but WDW has always been successful due to economies of scale. There are huge costs associated with just having the parks but they always made great profits by running massive numbers of people through the parks and hotels while maintaining a premium price. If you lose the high revenue numbers coming in it’s really hard to make profits considering the fixed costs of just existing are so high.

Thanks. That makes sense, but now I'm curious of how much labor cost is 'fixed' and how much are the CMs that would be considered 'variable'. I am also curious about how revenue and profit moves with crowds - how much more does WDW take in and net on NYE, or other 10/10 day vs September 16th or some other 1/10 day. Seeing the differences in the aggregated quarterly numbers isn't quite that interesting.

I've always viewed the marginal guest as almost pure profit. You're not changing staffing, but have another $100+ for a day ticket.

 

[winstongator]

The money coming in for the day is covering money going out for the day. That's an *operational* profit. However, there is more to expenses than operations for that day, such as depreciation. The operational profit isn't covering those extra 'business' costs. But, many of those business costs would still be on the books whether opened or closed, so, it's better to be open than closed, but not *completely* profitable yet.

@GoofGoof explained how there are a lot of fixed labor costs as well: HR, IT, some security. Your explanation is helpful too!

 

[GoofGoof]

Didn't Chapek also say that the decreased attendance numbers were due to the increase in Coronavirus cases in FL? When Disney announced the reopening there were 3k cases/day being reported. Had we stayed at that level, that's 250k-500k less cumulative cases from then to now

For sure that was the case. They expected to be able to ramp up capacity quickly. If you remember back to when they announced a re-opening date the assumption was the parks would be at or near the very limited capacity up front but assuming no issues with the logistics they would increase capacity quickly. They pulled off the opening without any major logistical issues but due to soft demand they never needed to worry about capacity limits. It’s pretty clear that a major driver of that soft demand was the spike in cases.

 

[Jrb1979]

For sure that was the case. They expected to be able to ramp up capacity quickly. If you remember back to when they announced a re-opening date the assumption was the parks would be at or near the very limited capacity up front but assuming no issues with the logistics they would increase capacity quickly. They pulled off the opening without any major logistical issues but due to soft demand they never needed to worry about capacity limits. It’s pretty clear that a major driver of that soft demand was the spike in cases.

I agree that's part of it. Many people are also not interested in going to any theme parks.

 

[GoofGoof]

Thanks. That makes sense, but now I'm curious of how much labor cost is 'fixed' and how much are the CMs that would be considered 'variable'. I am also curious about how revenue and profit moves with crowds - how much more does WDW take in and net on NYE, or other 10/10 day vs September 16th or some other 1/10 day. Seeing the differences in the aggregated quarterly numbers isn't quite that interesting.

I've always viewed the marginal guest as almost pure profit. You're not changing staffing, but have another $100+ for a day ticket.

The marginal guests are almost pure profit. On a night like NYE super profit since they also probably paid a boat load for their hotel room as well. There is very little incremental cost for a hotel room on NYE vs a Tuesday in Sept. For the parks you may need to bring on extra staff for cleaning or crowd control during high crowd times, but the extra revenue has to be exponentially more. If for example they brought on an extra staff member for every 100 guests in the park that’s up to $10,000 in extra revenue vs max $150-$200 for a 10-12 hour shift in labor costs. There may be some extra fuel and electricity costs as well for busses and boats but again, the revenue is huge compared to expense.