All amusement parks need a steady dose of capital expenditure (capex) to remain healthy. As the world’s premium theme park brand, this is particularly true for Disney. It’s this higher investment that makes Disney a premium brand, allowing them to charge more than other amusement parks.
Instead of increasing spending to maintain the brand, corporate Disney is on track this year to spend only 8% capex domestically, actually
below the post 9/11 level.
MyMagic+ has dragged the numbers down badly while much of Iger's and Rasulo's reputations are tied to MyMagic+. They've harped on about MyMagic+ for seven straight quarters without producing any tangible results, long enough for many on the street to start to question it. Iger and Rasulo are so desperate to make MyMagic+ look like a success story that they are taking a slash-and-burn approach to budgets to pump up margins, even if there are long-term consequences at WDW.
Walt Disney defined the company standard when he stated:
“The park means a lot to me. It's something that will never be finished, something I can keep developing, keep 'plussing' and adding to. It's alive. It will be a live, breathing thing that will need changes. When you wrap up a picture and turn it over to Technicolor, you're through. Snow White is a dead issue with me. I just finished up a live-action picture, wrapped it up a few weeks ago. It's gone. I can't touch it. There are things in it I don't like, but I can't do anything about it. I want something live, something that would grow. The park is that. Not only can I add things, but even the trees will keep growing. The thing will get more beautiful year after year. And it will get better as I find out what the public likes. I can't do that with a picture; it's finished and unchangeable before I find out whether the public likes it or not.”
It’s the public perception of this standard that allows corporate Disney to charge what it does. Without it, Disney’s theme parks slowly lose their competitive edge.
For Disney, public perception is everything yet Iger and company are playing a high stakes game with WDW's reputation just so they look good in front of Wall Street for the next quarterly earnings call.
Realistically, Disney should be spending about 13% on capex domestically in order to maintain its premium brand image.
Under Iger, Disney’s P&R capex has averaged 10.7%.
That 2.3% difference might not seem like a lot but since Iger took charge in 2005, that 2.3% equates to an extra $2.5B. Just imagine what today’s WDW would be like if Iger had spent an extra $2.5B.
Meanwhile, domestic capex in 2013 and 2014 are closer to 8%.
Allocating $500M in 2017 for Pandora is unacceptable. Anyone who defends that kind of capex budget is a Disney apologist, whether they realize it or not.
As long as corporate Disney continues to underinvest in WDW, WDW (and its fans) will continue to suffer.
