Disney earnings offer few signs of theme-park turnaround
Featured, Jason Garcia, News — By Jason Garcia on February 9, 2010 at 4:26 pm
Walt Disney World and the rest of the Walt Disney Co.’s theme parks, battered for more than a year by the economic downturn, still aren’t showing many signs of a turnaround.
Disney said Tuesday that room reservations at its U.S. resorts for the January-through-March quarter are running 10 percent behind last year’s levels, the weakest booking pace the company has reported since the global recession began.
“Consumers remain tentative,” Jay Rasulo, the parks-chairman-turned-corporate-chief-financial-officer, told analysts during a conference call to discuss the company’s latest quarterly earnings. “We expect the environment to remain challenging in the coming quarters.”
The sober outlook followed a better-than-expected fiscal first quarter for Walt Disney Parks and Resorts. After a year of plummeting profits, operating profit at the division slipped just 2 percent to $375 million during the three months that ended Jan. 2, on total revenue that was essentially unchanged at $2.7 billion.
Those results, along with improved advertising sales at the company’s cable-TV networks, helped Disney top Wall Street estimates in the final three months of 2009 with a quarterly profit of $844 million, flat with a year earlier. Total revenue inched up 1 percent to $9.7 billion.
The first-quarter results for the parks were inflated by a quirk in Disney’s fiscal calendar: Because the quarter ended Jan. 2, it included the full benefit of the Christmas-New Year’s holiday travel rush — unlike the previous year, when Disney’s fiscal first quarter ended Dec. 27.
With that favorable timing, combined attendance at Disney World and Disneyland in Anaheim, Calif., was 9 percent higher than a year earlier. But when the New Year’s effect was stripped out, attendance was up 4 percent — down 1 percent in Orlando but up 15 percent in California. Average hotel occupancy at Disney World was down four percentage points from a year ago, to 81 percent.
Combined guest spending between Disney World and Disneyland fell 4 percent for the quarter, reflecting the continued discounts Disney has been offering to keep its theme-park turnstiles clicking.
While Disney has in recent months been attempting to wean travelers off such promotions by offering less-generous packages, company executives acknowledged Tuesday that pulling back is tricky.
“What we do is we test the marketplace. …You maintain pricing — meaning higher pricing — to a point, and, then, if the marketplace doesn’t respond to that, that’s when you judiciously roll out your promotional strategy,” Disney Co. President and Chief Executive Officer Bob Iger said. “I’m pretty confident that we’re going to be able to drive the volume that we need over the course of the year. The question is how much we will have to discount to get it.”
Those discounts might have to deepen quickly for Disney to narrow the 10 percent booking gap going forward, said Laura Martin, a stock-research analyst with Needham & Co.
“They’ll have to add back promotions,” Martin said, though she said she still does not expect the discounts to be as deep as they were in early 2009, when the global recession was at its worst point.
Disney, Martin added, also appears to be grappling now with some of the downside to its discount strategy. The soft pace of bookings so far this spring, she said, suggests that last year’s promotions may have left a whole in demand this year, as vacationers who might have made their trips in 2010 traveled in 2009 instead to take advantage of the deals.
“It looks as if they may have pulled attendance from this year into last year,” Martin said.
Still, Disney said it is confident that at least some of the lag in future bookings will narrow, given travelers’ increasing tendency to wait until the last minute to book trips. “The 10 percent that we are down today for me is not fully indicative of where the quarter is going to end up,” Rasulo said.
Beyond its theme parks, Disney was once again boosted by its television networks, where operating profit climbed 11 percent to $724 million. Disney’s cable-TV channels were again a particular source of strength; sports giant ESPN, for example, churned out record ratings and higher affiliate and advertising revenue.
After a dismal fiscal 2009, operating profit at Disney’s movie studios rose 30 percent during the first quarter to $243 million, and executives said they have high hopes for upcoming releases such as Alice in Wonderland and Toy Story 3. Iger said Toy Story 3, which will be infused throughout the company’s properties, “represents the essence of our franchise strategy.”
Operating profit at Disney’s consumer-products division fell 8 percent to $243 million, weighed down by slowing sales of High School Musical and Hannah Montana merchandise. Losses at Disney’s video-game unit narrowed from $45 million to $10 million.
Tags: Disney World, News, Walt Disney Co.
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30 Comments
Gee, could it possibly be that they keep raising their prices over and over and over and over again? I think their marketing director needs to be replaced. Sure, Disney, let’s raise prices in a recession and see how goes over. I guess reality just set it, huh?
Glad you said all that, I agree entirely
Going back to the day when scum like Michael Eisner started the gouging of the public I could care less about Disney. Been there done that.
Good. Stay away.
Enjoy your tractor pulls and bowling alleys.
If they it’s flat now….WAIT TILL UNIVERSAL STUDIOS ORLANDO OPENS THE WIZARDING WORLD OF HARRY POTTER IN A FEW MONTHS. Disney will be flatter than a sheet of paper and the parks will be ghost towns!!!!
Uhhhhh…..yeah right.
Whatever you say.
yea sure…. it will probably help the attendance at the parks!
I think the post was that when the Wizards attraction opens, folks won’t be going to Disney.. thus Disney will suffer.
What Disney needs is the screw the theory that they shouldn’t do discounts. Remove the stupid 1 Million limitation on volunteering, so folks aren’t forced to do it as soon as they can, but rather space it in the year.
The $99 for 4-day pass, make it valid all year, not through May 25th. Offer a monthly payment plan on the annual passes. Paying almost $1000 for a family of 4 up front is crazy. Keep the birthday offer.
I agree, if they stop raising prices, people would come back to their parks. People can not afford to decide to pay their bills or go to disney.
Well if Disney is doing this well with the markets at Rock bottom I wonder when things start to pick up how well they will be doing??
We were vacationing this past September (slow Season) in Disney World and still had to wait over 60 minutes for most popular rides…go figure
Not super slow as some folks up north have a weeklong break from school..
Very curious about this “strategy.” Why not set a price and stick to it? Disney theme park tickets are not a commodity. If consumers could know well in advance what they are going to pay, they could budget — but when a budget is blown by 10% simply because the company raised prices, it makes consumers wary.
So, my humble suggestion: roll back ALL prices for admission and eliminate ALL discounts. Yes, ALL of them. Set a base price for a one-day adult ticket at $50 for every single person who wants to get in (though retain multi-day pricing at WDW). Eliminate the surprise. Maintain pricing consistency. Remove from your consumer base those customers who pay a low price and have low (or nearly zero) per-capita spending. Be able to anticipate revenue and create a consistency that can be maintained during downturns. Raise prices by no more than 3% a year, and STICK TO THIS PLAN.
There’s a fallacy that consumers think that the lower priced theme park choice is the “worse” choice. Consumers want value. And companies need consistent revenue.
If you make EVERYONE who sets foot in your park pay a standard price, you’ll eliminate negative revenue surprises and ultimately increase quarterly and annual revenue, while developing a brand that stands for quality AND integrity.
Maybe they should focus on quality and not so much on profit!
I guess that’s what happens when you have a batch of finance guys running the place.
We visit WDW several times a year and each visit seems to be getting less magical. The Cast Members aren’t enjoying their jobs and the resort rooms always seem to have a problem or two.
Disney is providing less of a Guest experiance while expecting to be paid more for it.
So Sad
Agreed. The last couple trips were not as good.
Higher prices, combine with cutbacks = less value.
The food and wine festival had very little decor, Christmas decorations were cut back, etc.
totaly agree, i first went to Dsiney back in 2001 (from uk) and to be honest nothing much has changed since, apart from higher ticket prices, while Universal studios & sea World continue to invest high levels in it parks, its sad to say that when we are back in Orlando this may, we wont be visiting any of the Disney parks….
With all due respect to the other poster on this article but I am sick and tired of hearing how Disney keeps raising their prices and this is what they deserve….blah, blah, blah. Do I need to reming everyone that there are 3 MAJOT THEME PARK RESORTS IN ORLANDO. All of them are class acts but despite what any of you think it is SEAWORLD that raises their prices first and the other parks respond. Have you seen what Universal has recently done?????
I will fully agree with another poster on here in that the Magical Experience is coming less and less. Disney needs to return their focus to guest service and reinvesting in what they currently have instead of expanding and building ouside those walls. We are seeing some of that to come with Fantasyland and Star Tours and there will be a few more to come in the near years but I can’t discuss that here….:) As a stock holder I’m pleased with the way the company has held “somewhat” steady and am willing to patiently wait while the parks division returns to it’s old form.
I like Universal, but other than the Seuss area on IoA, its not a good fit for my 5yo. She’s too short still to ride on any roller coasters there, so paying $80 for a ticket would be a waste for me. If I was going alone, i’d rather do that than Disney, but I don’t go alone, so Universal is out for a few more years. Actually, a bit longer as I have to wait until little brother who is younger is big enough too.
Same thing with SeaWorld… We cannot do the roller coasters there, and I’d rather buy an annual pass here at the Florida Aquarium or Lowry park than do Seaworld at this point. I’ve been thinking of dropping the Disney passes and doing the Fun Cards here at Busch now that the Sesame Street area is opening up…
Get at least one Busch Gardens annual pass — it includes parking & discounts and a $90 kid’s annual pass is only $20 more than the $70 Fun Card. (Their website says parking is not included on kid’s annual passes but I doubt that’s true. You may want to call ahead and check before buying online.)
Joe is right – Disney needs a monthly plan for annual passes… they’re the most expensive of the Florida theme parks, but the only ones that are cash up front.
Disney will keep boosting prices as long as the non-resident guests keep showing up. If a family only gets down once every 5 or 10 years, the 7-day Magic Your Way, $200 a night moderate and dining plan aren’t that outrageous. Add in the fact that many families include children, and so aren’t making terrific cost-benefit-based choices ($200 for a 6-year-old’s Princess makeover, anyone?); why would the Mouse tamper with success?
Finally, remember the other Disney divisions… “Princess and the Frog,” while cute, isn’t exactly a worldwide hit. And, seriously, the tooth fairy? ABC looks good only compared to the disaster that NBC has become, Disney Channel is unwatchable for anyone over 12, and E! has found a niche with stagey ‘reality’ shows about talentless women from all over Los Angeles County.
Certainly Eisner started this, but when is Iger going to hit the breaks?
Oh, I say the Disney channel is even off for the younger kids. My 2 kids don’t quite care for the cartoons in the morning. I think the only time we see Disney now is when they air one of the Pixar movies. I cannot remember the last time we watched disney cartoons in the morning just to watch. Usually its Noggin (now Nick Jr), Sprout, or any of the PBS kids channels, along with the Smile of a Child network.
Disney programming is gearing for that middle school element, and phasing out the younger kids, imo.
Gee, they told me that their hotels were booked solid for the next 500 days. I guees they meant for the rooms allocated for the Florida Resident’s discount. Wierd!!
Everyone commenting on here is an idiot. Including me.
well….with a name like Ken………….
Disney ALWAYS complains that they’re not making enough money. They’re not very believable. None of the Disney parks have had small crowds and short lines since the 80s.
You all obviously have way too much time on your hands.
One reason some people may be visiting their favorite theme parks a little less could be the ‘credit crunch’. I, like many Americans, at least partially rely on credit cards for vacationing. However, since the cc companies have initiated their nasty little interest raising, credit limit lowering tactics I’ve all but stopped using credit altogether. If I can’t pay cash I’m not buying. And believe me, since I live about nine hundred miles away, a vacation to Disney is NOT something I can do strictly on a cash basis! Not to mention that Disney keeps raising prices. Seems to me they would be better off reigning in the prices and lowering a few salaries instead. Like those of the elitists who run the company. Come on guys, what are you planning to do? Take all that money with you when you die?
My wife, 9, 7 & 4 year olds & I just returned from a week at Disney’s Yacht Club, where I had a fun & expensive time. I made the reservations last summer to take advantage of the room discount described in the article above.
The cheap ($69 each way) airfare helped reduce the sting, but there’s no denying the fact that going to WDW is a luxury.
An in-room offer of the same discount that prompted me to make the reservation for last week induced me to make arrangements to return in late August. Happily there’s $69 fares at that time also as Airtran and Allegiant compete for my patronage.
Disney’s share price has recovered nicely since last year at this time, when it was about $18. I’d just returned from my first trip to WDW, a four day visit during a conference at the WDW Hilton.
I was opposed to making the trip for various reasons [too expensive, the kids were in school, the youngest was too young to appreciate it, etc.) and returned home so impressed with DIS (and my kids' behavior) that I bought some of their stock which has almost doubled in value since.
I used to contemptuously think of Disney-philes [like some of my relatives] as Stepford wives or Kool-Aid drinkers, but I’ve done a 180 degree about-face on the subject.
Still, I would have stayed at the WDW Hilton if the discount on the Disney resort had not been offered. Now that I’ve stayed on-property, I think it’s probably worth the extra cost to be closer to the theme parks (for me).
All respect given to what WDW USED to be, it’s cut corners EVERYWHERE it can, and is not WORTH it. Disney fan. Disney parks now are super-sized sales points, more stores, less attractions, less castmembers, more lines. Food quality and offerings are 1/10th what they used to be. Parks are in need of some love. We now go and spend much time saying “remember when they used to….”. The magic is gone. No shock they’re flat. I believe they’ll go out of business honestly at current rate. Poor declining produce=we go rarely, and we live less than an hour from Magic Kingdoms front door. Sad.
I had hoped to spend my Birthday in Walt Disney World this past Dec 4th. I had even signed up for the coupon on the Birthday web site in July and started prep work in plenty of time. I had received several emails from Disney about discounts so I contacted Small World Travel to book.I had used them 2 years ago and was very happy…well not this time. The agent would not answer my questions and if she did the reply made no sense so I thought I would go directly to Disney. They are the ”Magical” specialists. Not so fast, I was told that there were no rooms available for the week of my birthday ( I had already checked on line and there were open rooms at the resort. Not only that but when I was there there were many empty rooms) at the Polynesian so the closest I could get was 12/10 to 12/17…no Birthday celebration…but I could call (from Pa) to ask about cancellations because they get them all the time. Well after many calls from Pa I was always told the same thing..NO! So now what do I celebrate??? My Mother had died recently and I needed some happy time so we went anyway. This is the happiest place on earth isn’t it?
I have been to WDW many times in the past so I know what it used to be and what a change now!! The famous ”Magic” is nowhere to be found. The cast members have no happiness in their eyes any more like they did before, no more chit chat with guests. There were floats on Main Street at dark with no ropes up and no lights on the floats. We also went to the countries one evening to find that most of the walkway lights were out and it was very hard to walk and avoid walking into other guests. I know everyone is trying to conserve energy but not only is this dangerous it was not enjoyable at all for the guests. Then there were the problems with the monorails that were unbelievable!! What has happened ??? Is it all about money now??
I have shed so many tears over this vacation. I was so hurt and disappointed by my experience that I can not put it into words. I really feel like with all your advertising about” celebrating your Birthday at Walt Disney World” I was robbed of my Birthday celebration and I had a very unhappy vacation. When someone asks me about my trip I can only tell them the truth, Walt is probably spinning in his grave.
Writing from the UK, Disney needs a back to basics approach, there is no point in papering over cracks, the basic fundamental foundation for successes being service, prices and products.
I agree with an earlier posting that staff are a little more unhelpful than in previous years, investing in your staff has to be a priority as they are the main interface with the customers.
Sometimes the basic answers are the most effective, once you make discounts, offers too complicated it is a real turn off for people.
Disneyland Paris is probably an perfect example of how spending a fortune to enhance the offering but the basics are not in place to deliver a magical holiday, means it is a bit of a let down.
I am a huge Disney fan but the magic has lost a little of it’s sparkle, perhaps a board should be set up including annual passholders or international loyal customers to share real experiences via a private community portal.
Give people what they want, when they want it, at the price they want to pay and they will come..