How Are Disney Parks Doing? Disney Just Told Us!
Placed on the defensive by an inexplicable feud with a struggling political figure, Bob Iger just leaned hard into one of his greatest strengths.
A master of public negotiations, diplomacy, and decisiveness, the CEO of The Walt Disney Company took a novel approach this past week.
Iger basically opened the books and provided a rare level of transparency about his theme park operations.
Since the pandemic’s start, fans and critics alike have loudly wondered how Disney’s theme parks have performed.
Now, on a seemingly random Wednesday in mid-August, Iger simply opened the door to Disney’s theme park vault and welcomed everyone inside.
Here’s what we just learned about Disney theme parks and other phases of the Parks, Experiences and Products division.
Attendance Is Way Up, But…
Let’s start with the conversation that provides the most intrigue.
As referenced, Iger finds himself unwillingly trapped in a prolonged battle with an objectively strange man who happens to be the Governor of Florida.
DeSantis most recently claimed headlines with his random declaration that he “welcomes Disney’s surrender.”
That statement forcibly reminded me of the moment in The Queen’s Gambit when the obviously losing player offered a draw. Hey, it can’t hurt to ask, right?
Because of this weird dynamic, financial investors, many of whom trend toward conservative politics, have loudly wondered whether the Florida Feud has hurt Disney.
From a financial perspective, it absolutely hasn’t, as we’ll discuss. We weren’t sure about the attendance portion until this week, though.
Now, Disney has confirmed that domestic attendance increased one percent year-over-year, which means it was flat.
However, Iger acknowledged that attendance has declined at Walt Disney World this summer compared to 2022.
As previously mentioned, Disney had alerted analysts to this reality as long ago as the fourth quarter of 2022.
Walt Disney World’s 50th-anniversary celebration and the strength of Revenge Travel on Florida tourism had spiked the 2022 numbers.
Disney never expected to match them. The surprise here is that it even came close.
Thanks to growth at Disneyland, overall domestic theme park attendance held year-over-year.
Meanwhile, Disney’s hotels declined in occupancy rate from 90 percent in last summer to 84 percent in summer 2023.
I liken this scenario to Steph Curry averaging 32 points per game one year, followed by 25.5 points per game the next season.
The latter total is great, just not an MVP performance. That’s Disney’s domestic parks, especially Walt Disney World, this summer.
The song isn’t the same internationally, which brings us to the money talk…
Disney’s Global Dominance
Domestically, Disney’s revenue expanded by four percent from last year.
That’s an impressive feat for the reasons I mentioned a moment ago. In 2022, Disney parks faced a better tourism climate.
Park strategists deserve credit for the fact that revenue increased during the summer of 2023.
However, such a modest improvement wouldn’t significantly impact a theme park operator’s bottom line.
Disney’s explosive growth stems from its international theme parks…and yes! Disney’s Parks division just experienced explosive growth.
Overall, theme park revenue increased by more than $1 billion from the same quarter in 2022.
What’s the explanation for the 13 percent growth within the division? Much of the $2.425 billion in operating income comes from international parks.
Remember the last three years when I hedged with every Parks division earnings report? Each time, I referenced COVID chaos overseas.
France, Japan, and China developed their own approaches to reopening and public safety.
For this reason, nobody ever knew when a park would operate or how long it would stay open before another outbreak shut it down.
That statement applies to Disney officials as well. They had no control over the erratic park closures/reopenings.
Last year’s nightmare has turned into this year’s success story.
This part of Disney’s empire improved by 94 percent. Attendance also increased by 88 percent.
Realistically, everyone should understand why. For the same quarter last year, Shanghai Disneyland remained open for exactly three days.
Friends, you’re gonna make more money in 90 days of business operations than in three days. Presumably, you’ll make a factor of 30 more.
Disney Rules the High Seas
Similarly, Hong Kong Disneyland improved dramatically compared to the same quarter in 2022.
That’s one-third of Disney’s parks right now. And Disney Cruise Line’s numbers border on comically great.
For the upcoming quarter, Disney has confirmed a 98 percent occupancy rate, which I find incredible.
When I worked in the hospitality industry, people got promoted for 70 percent occupancy rates!
I struggle to comprehend how Disney could book 49 out of every 50 cruise cabins on its five ships.
Not coincidentally, Disney bragged that two more ships will arrive by the end of fiscal 2026. These massive vessels will nearly double the potential inventory.
So, the explosive growth in the Parks division isn’t anywhere near reaching full capacity yet, either.
By the way, we shouldn’t underrate Walt Disney World’s significance in the Parks empire.
Even though attendance declined, Florida’s park revenue remains 29 percent ahead of 2019 (i.e., pre-pandemic) levels.
Disney did acknowledge some past missteps by the previous regime, though.
The Investor Relations PDF noted that one of the reasons that attendance dropped was due to pricing/inflation.
Disney also accelerated its charges on Star Wars: Galactic Starcruiser.
Knowing that its Parks division was exceeding all expectations, Disney took a $100 million charge this past quarter and will add another $150 million hit next time.
Disney has taken this approach because the operating income in the Parks division is so massive that it can easily take the hit without losing momentum.
Disney Forecasts the Future
Nine months ago, then-CEO Bob Chapek held the worst and last earnings call of his Disney career.
At the time, a lifeless Chapek failed to read the room as he blithely reported that Disney’s year-over-year revenue in 2023 would increase by single digits.
Jim Cramer lost his mind, Disney’s Board of Directors made a move, and now Iger has returned as the conquering hero.
All this chaos flashed through my mind when Disney’s acting CFO, Kevin Lansberry, stated:
“We are still expecting full-year total company revenue and segment operating income to grow at a high-single-digit percentage rate versus the prior year.”
In other words, Disney drove in a circle to reach the same destination. Along the way, they did throw Chapek out of the car, though.
Jokes aside, Lansberry stated something vital there. Disney’s first three quarters of the fiscal year haven’t paced as high as those numbers would indicate.
So, Disney’s CFO currently projects massive operating income in the Parks division during the fourth (i.e., current) quarter.
The anticipated growth is enough to lift the overall performance for all four quarters. The operating income would need to be a lot for that to be true.
That’s where the 98 percent occupancy rate comes into play.
The confidence also suggests that Disney’s hotel bookings, domestically and internationally, for this quarter are VERY good.
Disney’s acting CFO just described theme parks as one of two predominant growth drivers for achieving projected revenue estimates.
In the process, Disney’s transparency has underscored the fact that the Parks division remains a potent revenue source for the company.
The Parks division is doing so well that it’s one of the company’s two most critical components right now.
Also, Iger recently identified it as one of Disney’s three growth businesses over the next five years.
Here’s when I enter the speculative part of the discussion.
Based on other comments Iger made during the earnings call, I suspect he hinted at something bigger.
Disney’s attempts to control costs reflect the company’s need to establish its next growth phase.
I believe the theme parks are integral to that. In addition, I believe Iger just tipped people to the fact that big announcements are in the offing.
With Destination D23 less than one month away, I’ve raised my hopes that bold theme park project revelations are coming soon…
I don’t want to get you overly excited, though. As an FYI, Iger could just as easily mean the improvements occurring right now at international parks.
We’ll find out in early September!
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