simple economic rules.

[Lensman]

You do understand money is everything in a publicly traded company?

Disney is OWNED by the shareholders, who all expect a return. Disney's management has a fiduciary responsibility to manage our money in a way that maximizes shareholder value.

I love Disney more than anyone, but it's a business and they are going to maximize the profit as best they can.

Again, Disney's margins are public information. The margins made at Disney Parks are totally reasonable. They make 20-25% operating margin at the parks which is 20-25 cents on every dollar brought in, BEFORE taxes. It costs a lot of money to run these parks.

I've been to Tokyo Disney 3 times. While tickets are cheaper, Tokyo is one of the most expensive cities in the world and everything inside Tokyo Disney is similarly priced to WDW. Overall, I spent over $10k+ to visit Tokyo for 7 days with 2 people.

Understood, but it's simplistic to think that the only way to maximize profit is to shake every last coin out of your current customers. Many companies prefer to maximize shareholder value by pursuing a growth strategy - and in fact such a strategy, successfully implemented, will reward shareholders in excess of the growth in profits that result due to the higher price-to-earnings multiple that growth companies receive over slower-growing value companies.

Back in 1999-2001, Parks and Resorts was achieving 10-12% year-over-year earnings growth through 10% revenue growth with 20-25% operating margins.

Back in 2003-2007, Parks and Resorts achieved steady 10% year-over-year earnings growth through 10-15% year-over-year revenue growth with 12-17% margins. That revenue growth was achieved through a 3-5% year-over-year attendance growth and a 5% year-over-year growth in per-guest spending. Operating margins were between 12-17%.

Between 2012-2017, Parks and Resorts achieved 10-15% year-over-year earnings growth through 8-12% revenue growth. That revenue growth was achieved through -1 to 5% attendance growth and 4-8% growth in per-guest spending, with that attendance growth coming increasing from international operations. And as you said, operating margins returned to 20-25%.

In all three periods, shareholder value was "maximized", but in very different ways. I preferred the strategies from the earlier eras to the most recent few years, both as a customer (obviously) and as an investor. As a long-term investor, recent results worry me as being short-sighted, as the margin expansion has been increasingly achieved through price increases rather than attendance growth or increased purchasing.

 

[Chef Mickey]

Understood, but it's simplistic to think that the only way to maximize profit is to shake every last coin out of your current customers. Many companies prefer to maximize shareholder value by pursuing a growth strategy - and in fact such a strategy, successfully implemented, will reward shareholders in excess of the growth in profits that result due to the higher price-to-earnings multiple that growth companies receive over slower-growing value companies.

Back in 1999-2001, Parks and Resorts was achieving 10-12% year-over-year earnings growth through 10% revenue growth with 20-25% operating margins.

Back in 2003-2007, Parks and Resorts achieved steady 10% year-over-year earnings growth through 10-15% year-over-year revenue growth with 12-17% margins. That revenue growth was achieved through a 3-5% year-over-year attendance growth and a 5% year-over-year growth in per-guest spending. Operating margins were between 12-17%.

Between 2012-2017, Parks and Resorts achieved 10-15% year-over-year earnings growth through 8-12% revenue growth. That revenue growth was achieved through -1 to 5% attendance growth and 4-8% growth in per-guest spending, with that attendance growth coming increasing from international operations. And as you said, operating margins returned to 20-25%.

In all three periods, shareholder value was "maximized", but in very different ways. I preferred the strategies from the earlier eras to the most recent few years, both as a customer (obviously) and as an investor. As a long-term investor, recent results worry me as being short-sighted, as the margin expansion has been increasingly achieved through price increases rather than attendance growth or increased purchasing.

They aren't shaking out every last coin...I don't agree with that.

Double digit growth gets harder as the sales get larger.

Disney is too large to consider parks their only lever anyway. Operating margins of 12-17% I'd view as too low.

 

[Cheekylittlerobot]

Honestly so, what? It's actually safer for the guests that way. What if a disaster were to happen and people needed to get out quickly? That's one reason why they have occupancy limits, plus it would be an overall better experience for the guests. I know they are a business, but they need to care more about their guests, cast members, and their overall quality.

If traveling were cheaper, I would rather go to Disneyland Tokyo, quality seems to be better there. Not sure about pricing though. Why can't Americans have nice things?

Understood, but it's simplistic to think that the only way to maximize profit is to shake every last coin out of your current customers. Many companies prefer to maximize shareholder value by pursuing a growth strategy - and in fact such a strategy, successfully implemented, will reward shareholders in excess of the growth in profits that result due to the higher price-to-earnings multiple that growth companies receive over slower-growing value companies.

Back in 1999-2001, Parks and Resorts was achieving 10-12% year-over-year earnings growth through 10% revenue growth with 20-25% operating margins.

Back in 2003-2007, Parks and Resorts achieved steady 10% year-over-year earnings growth through 10-15% year-over-year revenue growth with 12-17% margins. That revenue growth was achieved through a 3-5% year-over-year attendance growth and a 5% year-over-year growth in per-guest spending. Operating margins were between 12-17%.

Between 2012-2017, Parks and Resorts achieved 10-15% year-over-year earnings growth through 8-12% revenue growth. That revenue growth was achieved through -1 to 5% attendance growth and 4-8% growth in per-guest spending, with that attendance growth coming increasing from international operations. And as you said, operating margins returned to 20-25%.

In all three periods, shareholder value was "maximized", but in very different ways. I preferred the strategies from the earlier eras to the most recent few years, both as a customer (obviously) and as an investor. As a long-term investor, recent results worry me as being short-sighted, as the margin expansion has been increasingly achieved through price increases rather than attendance growth or increased purchasing.

Thank you! I'm not an adult, so I'm not very knowledgeable about shareholders, but I do know there are less greedy ways to make a hefty proft.

 

[Lensman]

They aren't shaking out every last coin...I don't agree with that.

Sorry, that is my shorthand for increasing revenue simply by raising prices without raising product quality.

Double digit growth gets harder as the sales get larger.

True, but that's the legitimate reason CEOs deserve to be paid hundreds of millions of dollars - to achieve double digit growth no matter what. Otherwise you're just a sales manager applying textbook b-school principles while standing on the shoulders of the giants who came before you and built the brand equity.

And like I said, my real concern is the past few years where they've achieved 10% revenue growth on the back of relatively static attendance, because you risk losing your customer base.

Disney is too large to consider parks their only lever anyway.

I'm not sure what your point is with that.

Operating margins of 12-17% I'd view as too low.

I agree. Yet their operating margins were over 20% before 9/11 and the recession in 2001, and I think everyone on these boards would suggest that their value proposition was much better back then.

They brought it back up from 12 to 20 using a combination of growth in attendance (5%) and per customer spending with price increases (5%). This isn't as good as what they did in the previous period (increase attendance by 7% and prices by 3%), but is acceptable.[/quote]

 

[Smiley/OCD]

You know, if the parks are too small and can only hold a certain amount of people. Why don't they just limit the amount of ticket sold per day? EX: Say that the parks can hold 10,000 people. Only 10,000 tickets should be sold on for each day. June 5th: 10 k tickets sold. June 6th: 10 k tickets sold , etc.

They do this at theaters and sporting events, so why not Disney if crowding is REALLY the problem?(and not simple greed!)

OK, You and the family save for your trip for 5+ years, fly 3000+ miles have a FINITE time there, take the bus (or your car) to the MK, go thru the checkpoint, get to the MB scanner, only to find out the park is over crowded, so you can't enter...as a matter of fact, it'll be overcrowded all week, so you can't enter....ARE YOU SERIOUS????? It's not JUST the daily guests, as a matter of fact, I really don't think the daily guests are the problem...what's the answer? I really don't know, but I can assure you that your idea isn't the answer.

 

[Cheekylittlerobot]

OK, You and the family save for your trip for 5+ years, fly 3000+ miles have a FINITE time there, take the bus (or your car) to the MK, go thru the checkpoint, get to the MB scanner, only to find out the park is over crowded, so you can't enter...as a matter of fact, it'll be overcrowded all week, so you can't enter....ARE YOU SERIOUS????? It's not JUST the daily guests, as a matter of fact, I really don't think the daily guests are the problem...what's the answer? I really don't know, but I can assure you that your idea isn't the answer.

Tickets would only be purchasable online or through a phone order. You would be made aware ahead of time which days are taken.

 

[Willmark]

MONEY ISN'T EVERYTHING DISNEY.

Ummm.

They are a corporation, everything is money.

 

[Cheekylittlerobot]

Ummm.

They are a corporation, everything is money.

It wasn't always that way... Making money is fine, just give us something worth paying for.

 

[thomas998]

You do understand money is everything in a publicly traded company?

Disney is OWNED by the shareholders, who all expect a return. Disney's management has a fiduciary responsibility to manage our money in a way that maximizes shareholder value.

I love Disney more than anyone, but it's a business and they are going to maximize the profit as best they can.

Again, Disney's margins are public information. The margins made at Disney Parks are totally reasonable. They make 20-25% operating margin at the parks which is 20-25 cents on every dollar brought in, BEFORE taxes. It costs a lot of money to run these parks.

I've been to Tokyo Disney 3 times. While tickets are cheaper, Tokyo is one of the most expensive cities in the world and everything inside Tokyo Disney is similarly priced to WDW. Overall, I spent over $10k+ to visit Tokyo for 7 days with 2 people.

I agree with most of what you say... except the operating margins at the parks. We don't know what they actually are and you will not find that information in the annual reports either because conglomerate type corporations are masters at how they allocate shared services and corporate overhead to the point that a shareholder can never really know what the true margins are on a operating unit. I worked for years in a large diversified conglomerate and saw first hand how they would manipulate costs to lower profitability in one unit to either benefit another or in some cases because they were embarrassed by the excessively high returns they were getting in some. Now the folks inside Disney know which of their many operating units are making a lot of money and which aren't but often times the view the outside world gets is different from reality.

 

[thomas998]

You know, if the parks are too small and can only hold a certain amount of people. Why don't they just limit the amount of ticket sold per day? EX: Say that the parks can hold 10,000 people. Only 10,000 tickets should be sold on for each day. June 5th: 10 k tickets sold. June 6th: 10 k tickets sold , etc.

They do this at theaters and sporting events, so why not Disney if crowding is REALLY the problem?(and not simple greed!)

Well the reality is each park does have a limit to the number of people that they can hold. Only problem is that limit is much higher than most people like. Have you ever been to a sold out showing at a theater? I have and it sucked. If you were one of the few that got there really late you were stuck on the front row looking up at a highly distorted image because of your viewing angle... Well Disney has limits to and if they are reached they stop letting people in. Not sure when the last time it happened at MK but it tends to happen at DL each year on days like Christmas... If it happened with regularity at MK I would expect them to start selling tickets for specific days, but because it is a rare event there is no reason to. The only time they do is the special event tickets, so if you like limited crowds (which to me have already gotten pretty heavy) just go during special events and you can assured that the crowds will be limited.