News Star Wars Galaxy's Edge opening day reports - Disney's Hollywood Studios

[MisterPenguin]

It's clear that, by itself, SWL was not enough to overcome block out dates and September doldrums and price hikes. That is the surprising part and unexpected part.

However, black out dates and higher prices and September doldrums and hurricanes have suppressed attendance overall... unless someone wants to explain how SWL made the rest of DLR and WDW a ghost town at times. SWL couldn't prevent that from happening, but it didn't cause it.

 

[Sirwalterraleigh]

It's clear that, by itself, SWL was not enough to overcome block out dates and September doldrums and price hikes. That is the surprising part and unexpected part.

However, black out dates and higher prices and September doldrums and hurricanes have suppressed attendance overall... unless someone wants to explain how SWL made the rest of DLR and WDW a ghost town at times. SWL couldn't prevent that from happening, but it didn't cause it.

My theory?

There’s a recession on deck and that fear, combined with the last couple of years of price hikes and upsell rollouts...has finally caused the consumer pause.

Just a hunch

 

[RobWDW1971]

SWGE didn't cause the issues and it appears it actually has had very little impact at all on either resort. Hence the problem when it's a billion dollar investment.

 

[drod1985]

But the billion dollar investment will likely pay off once whatever external factors causing the dips in overall park attendance have run their course. Barring a recession creating years-long impact, of course.

As it stands Savi's alone has bringing in ~$130k per day. I'm sure money is being made on Batuu.

 

[Sirwalterraleigh]

I’m hoping this triggers massive pricing incentives. We passed up the six months free on a Uni pass last time cause we just couldn’t swing both resorts anymore. I just think a lot of people are feeling some financial pressure even though the economy has been good. I know for us, our income was several thousand dollars less than the year before but my taxes were over a thousand dollars higher than the previous year (made a lot less in tutoring income). That was quite a shock. I know the tax cuts benefited a lot of people so I’m not trying to be political but they actually hurt us as we lost some deductions that had benefited us in the past and we didn’t qualify for the new things that were supposed to help. For example, since we itemize deductions and have for the last 20 or so years, we weren’t benefited by the higher standard deduction. Anyway, I just wonder if more people are hurting more than the apparent good economy would make it seem. Combine that with Dorian, the fact that it’s September, all the price gouging, the looming possible recession, the fact that RotR isn’t opened yet, and maybe all those things together explain the current situation. I mean I just don’t believe people are tired of having fun or suddenly hate theme parks.

Ok...you bring a fantastic real world situation here that will specifically impact travel and Disney in particular.

In 2018, the federal government collected 93,000,000,000 less in commercial taxes...but collected $91,000,000,000 more in INDIVIDUAL taxes. (Yes...they managed to lose in the deal...which is surprising to no one)

Not be political...but is that a tax cut? In the academic or applied sense?

No...it was not. It was a complete bait and switch.

Why does this matter? Because leisure is the FIRST thing to be cut when people encounter an economic hurdle...it’s why Orlando is what I’m gonna tell junior below the next quote.

Vacations are relatively painless to cut and are expensive.

Now...I know I got destroyed on taxes this year (close to 5 figure difference) without doing anything different...I even changed withholding when i found out I was getting a “tax cut” that I knew would cost more (this country is the dumbest on public policy recognition maybe in the current world...it’s great)...
The reality is I am not currently patronizing or planning to patronize Disney parks. If I hadn’t gotten tax crushed...would I be sucking it up and considering paying? I’m human (until they develop a blood test that can detect cylons)...so honestly: yeah...I just might have. But I won’t now.

Gonna take some deals, Bob.

Between the expanding population growth of central Florida and Orlando being an obvious destination for conventions, the areas tourist industry is somewhat recession proof. Nothing that can't be managed by adjusting park hours and attraction closures for maintenance.IMO.

Hold up here, Sister...

Orlando is the LEAST recession proof place in the United States. They don’t even have a silver medal.

You haven’t seen a recession, have you?

When the rest of the country/world gets a cold...Orlando gets the flu.

Wow...you win...I’m just not gonna tell you what you’ve “won”

I can’t believe you typed that.

 

[RobWDW1971]

But the billion dollar investment will likely pay off once whatever external factors causing the dips in overall park attendance have run their course. Barring a recession creating years-long impact, of course.

As it stands Savi's alone has bringing in ~$130k per day. I'm sure money is being made on Batuu.

They don't take revenue to the bank - the merch sales out of Savi's (minus labor, COGS, opex, any offset to other merch per cap, etc) are nice but pale in comparison to just that depreciation number. Not to mention all of the opex for MF, entertainment, etc. that are not revenue generating.

The scale of this investment is just massive - they obviously need a significant lift in total park attendance and per cap, hotel occupancy/ADR, and incremental park spend to begin to generate a return, which they obviously aren't seeing yet, but it's just the beginning.

The start of the land will put even more pressure on the hotel which is an entirely incremental investment.

And add the Skyliner, which will need to drive a bump in ADR and offset in transpo costs or that is also a drag on the P&L.

Not to mention all of the un-sexy infrastructure investment like rebuilding the entire DHS parking lots, bus stations, and entrances while out at DL you have Project Stardust, rerouting the entire ROA and train infrastructure, new parking structure, etc. All of that is just dead weight on the P&L that adds to the return challenge of the investment.

Have spent the last 20+ years in corporate finance and IR (not at Disney) and I can assure you that is how the analysts are looking at it - anything resembling status quo is a real issue.

 

[Sirwalterraleigh]

SWGE didn't cause the issues and it appears it actually has had very little impact at all on either resort. Hence the problem with a billion dollar investment.

The issue it appears is pricing. Star Wars: edge of profit can’t do anything for that.

But the billion dollar investment will likely pay off once whatever external factors causing the dips in overall park attendance have run their course. Barring a recession creating years-long impact, of course.

As it stands Savi's alone has bringing in ~$130k per day. I'm sure money is being made on Batuu.

The flaw in this repeated “analysis” is assuming that the droids, lightsabers, and bar are going to filled in perpetuity.

They will not. The captive audience is what is being served now and they were going to buy anyway. Half the people in the sparten land when I was there were in costumes or Star Wars apparel.

That isn’t a good sign.

And there will 100% be another recession and we are inching there. And that crushes travel.
This is a guarantee...it’s a “when” not “if”

Disney will have no leadership when it happens. Another issue

 

[Sirwalterraleigh]

You don't take revenue to the bank - the merch sales out of Savi's (minus labor, COGS, opex, any offset to other merch per cap, etc) are nice but pale in comparison to just that depreciation number. Not to mention all of the opex for MF, entertainment, etc. that are not revenue generating.

The scale of this investment is just massive - you need a significant lift in total park attendance and incremental spend to begin to generate a return, which they obviously aren't seeing yet.

The start of the land will put even more pressure on the hotel which is an entirely incremental investment.

And add the Skyliner, which will need to drive a bump in ADR and offset in transpo costs or that is also a drag on the P&L.

Thank you...

I don’t understand how seemingly intelligent posters repeatedly do simple multiplication on prices and declare that total “profit”???

It’s like “subliminal arithmetic” or something...

 

[Kram Sacul]

It's clear that, by itself, SWL was not enough to overcome block out dates and September doldrums and price hikes. That is the surprising part and unexpected part.

However, black out dates and higher prices and September doldrums and hurricanes have suppressed attendance overall... unless someone wants to explain how SWL made the rest of DLR and WDW a ghost town at times. SWL couldn't prevent that from happening, but it didn't cause it.

 

[marni1971]

@marni1971 have you heard anything re capacity of MF and RotR?

Just above 1700 for both. Actual as opposed to THRC.

 

[marni1971]

It certainly didn't start out that way. I don't know how much operations have improved, but actual capacity was dramatically lower than theoretical capacity in that first month.

Very true. The ride system issues were almost up there with Gringotts.

 

[Bastet]

Does WDW have more domestic or international guests? I would imagine that many international guests that were aware of GE planned thier trip around the original planned opening date, rather than than the earlier one

 

[Steph15251]

Does WDW have more domestic or international guests? I would imagine that many international guests that were aware of GE planned thier trip around the original planned opening date, rather than than the earlier one

When I worked there a ton of international guest ,I would say it is about even.

 

[seascape]

And that was last quarter with only one month (June) of sub-par performance of DL's SWGE - next quarter will be a full quarter of DL's low attendance and WDW with one month (Sept). Not going to be a great story, but he will use "Dorian impact" to buy time until next quarter where the normal holiday attendance will help mask the issue.

You won't see the real picture until you get to the end of next fiscal year, then you will see the full impact of the huge incremental depreciation (partial year for both ROTR's) and incremental operating costs burdening the OI for both parks all year.

Just do the cocktail napkin math on a billion dollar investment (I don't think it's that much for each park, but that's the rumor and it makes the math easy) - average depreciation schedules will be 10-15 years on the merch, F&B locations, equipment and the buildings/infrastructure will be on a 25-30 year schedule, so let's use 20 years average on the entire investment. That means the P&L will take a $50M hit before the incremental operating costs of labor, utilities, COGS, etc. of operating the land. Won't be able to hide that next year.

The bigger issue of course is the actual return on the investment, from a cash perspective factor in a corporate cost of capital of probably about 10% and you will need probably $2B incremental OIBDA discounted back over that 20 year period to get just a minimal corporate expected return so that is $100M/year more growing with inflation. Hence, the panic.

"It's the same as last September" ain't getting you there....

You are right. analysts need more time to determine if the land is a success or not. However, a success has nothing to do with the rides, it is how the merchandise. food and beverage sales go. The attendance was a major problem because huge crowds were causing lower satisfaction. I have no problem with higher ticket prices if it makes the experience better. I also plan on buying lots of stuff in GE. I never purchased one of their overpriced cheap lightsaber but can't wait to pay a reasonable 200+ for a high quality Lightsaber. I also love the droids. The success or failure of a themepark is it's total revenue and profits,. Reasonable crowd make the shopping experience much better and will result in higher sales and more profits.

 

[danlb_2000]

You were lied to it someone told you the land is complete. Big time.

The roaming character and interactivity of the land were a major selling point of the land. I can understand opening with just one ride because the other was not ready, but there is no good reason to hold off on the other stuff until later, you want to open with your best product possible.

 

[drod1985]

I don’t understand how seemingly intelligent posters repeatedly do simple multiplication on prices and declare that total “profit”???

I was only talking about revenue. That’s why I said “bringing in” and didn’t need mention anything about profit.

And profit margin on something like Savi’s has to be through the rough even when you consider COGS, overhead, etc. - it’s just a few die cast parts, LEDs, RFID...all cheap components, especially given the scale at which they’re being produced/ordered. One actor and a crew of maybe a dozen baseline cast members are operating this all day. The development costs were probably minimal as well, the only component of them that isn’t fairly standard for sabers are the RFID Kyber crystals.

For expenses like MF:SR I would assume they at least consider a portion of it to be CAC. And while it seems they’re not acquiring the customers they’d hoped to be right now, it is also a park wide issue. So something is bottle necking GE performance, likely the reasons you mentioned: fear of a looming recession and the rising cost of a WDW vacation.

 

[olie64]

I am hoping these light crowds hold on for a few more weeks until my trip.

When is it? I’m going in about thirty days but can’t get a room upgrade since they said they are full.

 

[monothingie]

The roaming character and interactivity of the land were a major selling point of the land. I can understand opening with just one ride because the other was not ready, but there is no good reason to hold off on the other stuff until later, you want to open with your best product possible.

But it’s Star Wars and guests will just flock to it mindlessly because it’s Star Wars so only the bare minimum needs to be done. They don’t even need to advertise it, because it’s Star Wars!

 

[Sirwalterraleigh]

I was only talking about revenue. That’s why I said “bringing in” and didn’t need mention anything about profit.

And profit margin on something like Savi’s has to be through the rough even when you consider COGS, overhead, etc. - it’s just a few die cast parts, LEDs, RFID...all cheap components, especially given the scale at which they’re being produced/ordered. One actor and a crew of maybe a dozen baseline cast members are operating this all day. The development costs were probably minimal as well, the only component of them that isn’t fairly standard for sabers are the RFID Kyber crystals.

For expenses like MF:SR I would assume they at least consider a portion of it to be CAC. And while it seems they’re not acquiring the customers they’d hoped to be right now, it is also a park wide issue. So something is bottle necking GE performance, likely the reasons you mentioned: fear of a looming recession and the rising cost of a WDW vacation.

To be clear...that wasn’t specifically pointed at you. You seem to get these things just fine...

Sorry...I used your post to make a greater point.

But the “gold mine” argument made over the last 3 months is a hard sell. It’s also being morphed into this idea that even though it’s not crowded and isn’t increasing attendance - which is 100% the goal of building something like this - then it’s still a smart move by Disney.

Nope...the goal is to drive an uptick In attendance and total ancillary spending across the whole resorts complexes in both Florida and Orlando. They don’t want to “limit attendance through pricing”...they want to “increase it with pricing”

This is basic Wall Street.

I like the detail of the land...they didn’t build enough - however. But the attendance is more reflective of pricing decisions and the state of star wars IP in my opinion.

 

[Sirwalterraleigh]

Does WDW have more domestic or international guests? I would imagine that many international guests that were aware of GE planned thier trip around the original planned opening date, rather than than the earlier one

Domestic by a ton.

International guests tend to follow “spurt” patterns...such as now during “Brit” season...

But over the aggregate year it’s heavily weighted still towards an American crowd.

When I worked there a ton of international guest ,I would say it is about even.

Not even close...though I can see how it may seem that way.

Two big myths about attendance is that “way more foreign visitors in wdw than Disneyland”...that is not true...it bears out pretty even and the percentage is not huge.
The other is that Florida residents/locals really dictate the overall crowd levels at wdw. That is not the case with few exceptions - October being one due to the cult following of food and wine.