Disney Somehow Earned $1.6 Billion from This Industry
During the summer of 2022, Disney Cruise Line finally unveiled its new luxury cruise ship, the Disney Wish.
The 4,000-passenger vessel took exactly five years to construct, but its odyssey mirrors the unlikely history of the company itself.
Here is how Disney almost unwillingly entered the cruise industry and became a $1.6 billion powerhouse, all because another company went broke.
Disney’s First Cruise Ship Flirtations
Premier Cruise Line was a cruise line (emphasis: WAS) that built its reputation around its big red boats.
Seriously, the company trademarked the nickname, The Big Red Boat. This cruise line debuted in 1983 and made its home in Cape Canaveral, Florida.
You’re probably already connecting plenty of dots here.
In 1985, Premier reached out to The Walt Disney Company and requested a license for the Disney brand.
Specifically, Premier wanted to advertise a series of family-friendly cruises by using the trustworthy Disney name.
Premier sold seven-day vacations that included land and sea options. Its aim was to market its upstart cruise line to Disney theme park vacationers.
Surprisingly, Disney agreed to this deal, and I say surprisingly because Disney would have preferred that all those guests stay at the parks all week.
However, Disney officials had recognized the growth of the cruise industry in the 1980s and expressed some interest in the business. Disney wasn’t about to invest the hundreds of millions of dollars it would cost to build its own cruise fleet without experimenting first.
The Eight-Year Cruise Experiment
Premier enticed Disney to get off the sidelines and begin a sort of starter course in cruise ship operations.
For eight years, Premier partnered with Disney in a way that benefited cruise vacationers who were also Disney fans.
Yes, for a time, you could board a Premier ship and find official Disney characters hosting meet-and-greets on the cruise decks.
That’s an impossible thought for a third-party vendor today, but it happened in the 1980s and early 1990s.
Premier offered cruises to The Bahamas that also dropped guests off for a few days at Walt Disney World.
These vacations offered flexibility, too. Guests could choose whether to spend more days in the Bahamas or Walt Disney World. It was a nice vacation package.
Disney Gets in the Game
During the early 1990s, Premier struggled financially.
More specifically, the parent company of Premier Cruise Lines, Premier Cruises — yes, it was different — faced staggering financial losses.
Premier cut corners and could no longer afford the Disney license.
The company attempted a pivot to Looney Tunes characters, but we all know that’s nowhere near as good.
For its part, Disney recognized an opportunity. Executives appreciated how much money vacationers spent on cruises.
Even better, if Disney built its own cruise ship, it could vertically integrate in a way that it kept a traveling family’s entire vacation budget.
Once the Premier deal ended, Disney engaged in conversations with other cruise businesses like Royal Caribbean Cruise Line and Carnival Cruise Line.
Ultimately, Disney determined that it should operate its own cruise line. That would be more profitable. And the rest was financial history.
Starting the Magic
In May 1995, Disney Cruise Line started as a new business under Disney’s guidance.
Disney initially commissioned two ships, which is to say that the company invested $400 million to construct the Disney Magic.
In 1995, Disney chose a shipbuilder, Fincantieri, to craft the Magic and its sister ship, the Disney Wonder.
The process took four years for both ships to set sail, and audiences needed a bit longer to be convinced of Disney’s cruise appeal.
Still, no one questioned the remarkable quality of the Disney Wonder and the Disney Magic, two state-of-the-art cruise ships.
The two vessels could comfortably host nearly 5,000 guests, but they maintained that distinctive Disney vibe.
Disney Cruises Lose Bucks
Where else could people watch Mickey and Minnie Mouse provide entertainment by a cruise ship swimming pool?
The only downside stemmed from Disney’s need to change a static perception in the industry.
Young singles and couples took cruises to have fun, while the older crowd enjoyed the relaxed atmosphere.
So, Disney needed time to build a reputation. We’ve looked at the books and know how long it took.
For arcane reasons, Disney’s cruise operations come from a headquarters in England, The Magical Cruise Company.
Since Disney must disclose financials differently in England, we know how well its cruise business has performed over the years.
For example, Disney lost $102.6 million during its first five years of cruise operation.
Obviously, the explanation for the loss stems from the staggering cost of building two cruise ships from scratch.
Disney Cruises Make Big Bucks
During those early years, Disney Cruise Line developed a reputation for near-perfect Disney family vacation fun.
So, after Disney built its reputation in the cruise industry, it managed a feat that Premier could not. Disney Cruise Line became extremely profitable.
Forbes contributor Caroline Reed recently combed through the financial data for Disney Cruise Line’s 28 years in operation. It’s remarkable stuff.
After DCL’s rough start, the company has only failed to turn a profit five times. In three of those instances, the cause wasn’t a downturn in the industry.
Instead, Disney cruises proved so lucrative that the company expanded. In February 2007, DCL commissioned two more ships.
These luxury cruise ships cost more than $1.8 billion to build. The way that payments work, Disney wrote off the losses from 2009-2011.
Almost immediately afterward, the company was making substantially more revenue because it had doubled the size of its fleet.
More importantly, the new fleet could host a basement total of 5,000 guests and a maximum of 8,000 guests.
Disney’s Expansion Phase
With four ships at sea, Disney Cruise Line’s profits exploded. By calendar 2015, Disney’s cruise business was earning more than $250 million in annual profit.
In 2018 and 2019, DCL’s profit exceeded $400 million each year. Not coincidentally, the company commissioned even more ships.
Disney sought luxury cruise vessels this time, the kind that would somehow surpass the ones from the previous decade.
Obviously, ships like these cost a lot of money. Disney reportedly spent roughly $1 billion on the Disney Wish alone.
The results speak for themselves, as the Disney Wish redefines family cruise elegance.
Disney went through substantial frustration along the way, though. In 2020, the cruise industry collapsed due to the COVID-19 pandemic.
Disney Cruise Line’s earnings reached $1.6 billion in 2019. In calendar 2021, that total fell to roughly $100 million.
Meanwhile, social distancing requirements forced delays in the construction of the Disney Wish.
Ultimately, the Disney Wish needed more than six years from its commissioning announcement until its maiden voyage.
Disney’s Billion-Dollar Payoff
Thankfully, this behavior has already proven a blip on the radar. Disney’s recent cruise line projections indicate that the business has fully recovered from the pandemic.
Now, Disney’s fleet includes five vessels with a sixth, the Disney Treasure, arriving next year.
What Disney Cruise Line has accomplished is truly stunning. During the 1980s, the company didn’t even want to be in the cruise business.
Before the pandemic, cruises alone were earning $1.6 billion for the company. A $2 billion year appears likely by 2025.
In less than 30 years, Disney has carved out a lucrative niche in the cruise industry, and the Disney Wish and Disney Treasure will accelerate its growth.
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Feature Photo: Disney