Why Cruises Are Disney’s Next Big Business
The Walt Disney Company recently provided insights regarding its next three years of business.
As part of Disney’s analysis, the company suggested that Disney Experiences, generally known as the theme park division, is in excellent shape.
Photo: Disney
Disney expressed confidence that Experiences would increase its profits in fiscal 2025-2027.
They said that even as the company’s domestic theme parks appear to have flat demand currently.
Photo: DCL
So, what gives? The answer is hidden on the balance sheet. It’s Disney Cruise Line.
Here’s why cruises are Disney’s next big business.
The Early Days of Disney Cruises
Photo: Disney
As I discussed a few weeks ago, Disney Cruise Line (DCL) is about to embark on an unprecedented expansion.
Currently, the fleet consists of five vessels, one of which towers above the rest in terms of size and construction expense.
Disney Magic Cruise Ship
During the late 1990s, DCL started with two ships, and even that statement is a bit of a stretch.
The Disney Magic was Disney’s only cruise ship for more than a year before the Disney Wonder joined it.
These vessels anchored DCL for a dozen years, which means the Magic and Wonder were the only options for half the program’s existence.
These ships are smaller than the modern ones, hosting only 2,700 customers each, which makes them more intimate.
Disney Wonder Deck Pool
Not coincidentally, many early adopters of Disney cruises remain fiercely loyal to these two ships. They’re the original.
From Disney’s perspective, the cruise fleet wasn’t capable of hosting enough guests to make a dent in the bottom line, though.
Credit: Disney
So, Disney expanded in 2011 and 2012 by ordering two new ships…and larger ones at that.
The Disney Dream and Disney Fantasy can host up to 4,000 tourists each, which is nearly 50 percent more. That matters from a business perspective.
Photo: Disney
Since all four cruise ships kept selling out, Disney committed to an even larger expansion just before the pandemic started.
The Disney Wish also hosts 4,000 guests, but it’s a vastly superior cruise ship in terms of space and amenities.
This vessel hints at the future Disney envisions for the cruise ship experience, one we’ll witness to a larger degree this month.
An Even Bigger Expansion
The Disney Treasure set sail on its official maiden voyage on December 21, 2024, although MickeyBlog was fortunate enough to have taken an earlier preview cruise.
So, we’ll present more highlights of the new vessel, which will temporarily become the crown jewel of the fleet.
Disney Cruise Line
I say temporarily because a once-in-a-lifetime cruise ship will debut in 2025, but it’ll be based in Singapore.
At the start of the pandemic, an Asian cruise company went bankrupt and, therefore, couldn’t pay for its next ship.
DCL
The shipyard performing that build went to Disney and asked if DCL wanted the $2 billion vessel.
As I’ve joked on several occasions, Disney got such a great deal that it was the equivalent to having a 98 percent off coupon.
Photo: Disney
This ship, formerly known as the Global Dream, will debut in December 2025. It’s 44 percent bigger than the Wish or Treasure!
That’s (probably) not the new normal for Disney, just a one-off wherein they were offered such a great deal they couldn’t possibly say no.
Photo: Disney Cruise Line
Still, the amenities of the Disney Adventure surpass anything we’ve seen, even with the Disney Treasure.
On the Treasure, we’ll enjoy new pubs themed to Haunted Mansion and 20,000 Leagues Under the Sea, along with other dazzling amenities.
Photo: Disney
Conversely, you can and should think of the Disney Adventure as a theme park at sea. It’s even designed that way.
Disney has built it to consist of several themed areas, not unlike the themed lands at Disneyland and Magic Kingdom.
A Change in Philosophies Impacts the Bottom Line
Captain Minnie!
That’s the new style and design theory at play at DCL. Management wants to recreate the theme park experience.
The difference is that cruises provide a calmer environment for guests. It’s a place where we can enjoy Disney brands in a more tranquil setting.
Photo:visitorlando.com
As much as I love Disney parks, I’ll be the first to admit that standing in line for several hours can be grueling.
Historically, Disney wouldn’t have created true theme park concepts on a cruise ship to avoid competing with itself.
Photo: Disneyplanning.com
You’ll notice that the company’s philosophy has evolved over time, and the reason why is simple.
Disney now possesses more consumer behavior data, and there’s an inescapable fact here.
Photo: Disney Parks Blog
The company has more demand than supply. In fact, Disney estimates that it has a factor of eight more demand than supply!
So, Disney plans to use its cruise ships to satisfy some of that demand…and at a highly profitable price.
Photo: Disney
DCL’s margins are already among the highest in Disney Experiences, which makes perfect sense.
Cruise ships cost about $1 billion to build. Once you pay for one, every future customer is pure profit.
Photo:Disney
That’s a different behavior from theme parks, which require frequent upgrades to remain fresh.
As an example, Disney spent more than $1 billion on Star Wars: Galaxy’s Edge at Disney’s Hollywood Studios.
Disney
Five years later, the park is adding Monstropolis as well. The need to improve each theme park causes constant pricing pressure.
Disney doesn’t face that concern with ships. There are operating expenses like fuel and (especially) staff, but it’s a high-margin business.
Why Cruises Are Disney’s Future
Disney Cruise Line Port of Everglades
The average Disney cruise costs at least $1,500 per person. With a capacity of 4,000, each short cruise earns more than $6 million.
Remember that the average price is even higher than the lowest entry point. So, it’s closer to $10 million.
Photo: Washington Post
Also, those numbers grow exponentially for longer cruises. My numbers are for three- and four-day itineraries.
Each time Disney adds a new vessel, it increases the weekly/monthly/annual revenue ceiling for DCL as a whole.
Photo: skillastics.com
So, when Disney says that it’ll operate 13 cruise ships by 2031, it’s more than doubling its potential revenue.
Since those earnings are from a high-margin business, cruise ships reflect a much more profitable investment than theme park expansion.
Don’t get me wrong. There’s plenty of money to be made with park expansion. Otherwise, Disney wouldn’t do it.
In investment terms, it’s like comparing an average stock in your portfolio to your most profitable one.
Photo: Disney Cruise Line
For Disney, DCL has evolved into THE growth business. That’s why executives feel so confident about Disney Experiences as a whole.
DCL should become so profitable after the introduction of the next three ships over the next 12 months that it’ll elevate the entire division.
Walt Disney Company
In a way, that safeguards Disney in case theme park attendance suddenly flattens even more.
Since cruises are cheaper, fans will continue to take them even if they don’t visit the parks.
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