Globally, Disney spends a ton of cash on maintenance, with the largest amount going to WDW.
The question is whether Disney spends enough.
Recalling what CFO Jay Rasulo said about investments in 2011:
“Five years ago or so we used to be pretty demonstrative about $1 billion number being an ongoing level without special projects added to it.
"You have to remember though that in those five years in the capital projects that we have put in the ground, which each have their own growth strategy, each is filling in different parts of the portfolio, when they are back on board they all need ongoing FF&E and maintenance capital to keep them going.
"So I would say that that $1 billion number is low.”
With baseline capex at $1B back in 2006 along with inflation and the additional projects brought online since 2006, today’s Furniture, Fixtures and Equipment (FF&E) may very well be over $2B. Most of today's "investments" consist of basic maintenance, not "special projects". Whether $2B is enough for maintenance depends on what you think about quality at the parks.
Looking more closely at
2013, total company investments (which includes FF&E) were $2.8B. With FF&E approaching $2B, total annual revenue at $45B, and P&R revenue at $14B, it's apparent that the budget for all "special projects" (e.g. Pandora) being shared across all company segments is comparatively small. In 2013, Disney spent
6% of total revenue and
20% on P&R revenue on "investments", most of that simply on maintenance.
For comparison, in
1974 with company revenue at $430M and Parks & Resorts (P&R) revenue at $280M, total investments were $67M,
16% of company revenue and
24% of P&R revenue. The 1970s were a difficult period for Disney, with an energy crisis severely impacting travel, and they had cut back tremendously on investments in an effort to keep the company afloat.
In
1983, the year
after Epcot opened, Disney invested heavily in P&R. Corporately, there was a sense that WDW was the Disney brothers final legacy and a real commitment to seeing it turned into a complete resort. Until Eisner joined in 1984, Disney effectively had become a theme park company. With company revenue at $1.3B and Parks & Resorts (P&R) revenue at $1.0B, total investments were $418M,
32% of company revenue and
42% of P&R revenue.
In
1994, Disney was in the middle of the "Disney Decade". With company revenue at $10.1B and Parks & Resorts (P&R) revenue at $3.5B, total investments were $2.9B,
29% of company revenue and
83% of P&R revenue.
In
2004, P&R still was suffering from a post-9/11 economy. (Things began to improve at the parks with the introduction of the less expensive Magic Your Way ticket and Disney's Magical Express in 2005.) With company revenue at $30.8B and Parks & Resorts (P&R) revenue at $7.8B, total investments were $1.4B,
5% of company revenue and
18% of P&R revenue.
(In case anyone wonders why I picked these years, I wanted to do 10-year increments but don't have complete data for every year. These years are approximately 10 years apart.)
As has always been true ever since DLR opened in 1955, the lion's share of investments have been in P&R. For example, in 2013, Disney spent $1.14B domestically plus another $970M internationally in P&R, for a total of $2.11B. (Recall that total investments for the year were $2.8B.) The resorts really are tremendous physical assets requiring constant capital.
What sticks out is the jump in total revenue after Eisner joined in 1984. When Eisner was brought on board, Disney's only successful segment was P&R. After that, the company as a whole began firing on all cylinders. Eisner (along with
significant contributions from others) really did lead the effort to save Disney.
Still, Eisner invested heavily in the theme parks. Under Eisner, there were several years when annual investments exceeded $5B. This was in absolute dollars. In inflation-adjusted dollars, this was closer to $8B. Those of us who saw WDW expand tremendously during the "Disney Decade" know that a lot was spent in Orlando.
Just imagine what could be happening at WDW today if Disney was investing closer to $8B annually.
What also sticks out is that P&R investments have plummeted. Prior to 9/11, Disney was not afraid to spend big at the theme parks. Understandably, P&R investments collapsed in the post-9/11 economy, when travel and all vacation destinations were adversely impacted. However, it appears corporate attitudes never changed as the economy recovered.
When it comes to P&R investments, Disney's current senior executive management still operates like it's 2002.
