How did attendance hold and revenue decline? Discounts. Massive discounts and less overall visitor spending.
So that's the question: Would you rather discount and hold on to visitors, taking a loss in revenue from those who might have come anyway... or not discount and take a hit on attendance (which might lead to just as large, or even larger, revenue loss as well)?
Personally, I've talked with many people in many industries who'd argue in favor of holding on to your customers and market share... at whatever cost. It's far easier, they say, to get existing customers to pay more to you, during a recovery, than to acquire new customers, especially ones that you lost.
Of course, discounts alone don't get the job done. Theme parks need to promote and advertise their discounts, and Disney's done that with a vengeance.
Universal's got some sweet discounts, too, but after the Super Bowl, I've seen few ads from them. I seen a few more from Busch/SeaWorld, but not nearly as many as from Disney. And I've seen zilch from Six Flags.
If you offer a discount, and no one hears about it, does it really exist?
Of course discounts move attendance (they do all the time in the regional market), and they also move money right down the drain if they are too deep. Honestly, I think that Disney may be too worried about attendance now and not worried enough about the financial long term. If they want to lower something, perhaps they should lower some in-park prices to get spending per guest up and not discount so deep on hotels. I just hope they don't start sacrificing quality of experience when money gets even tighter. Let's fast forward to the next year or two, when hopefully the economy has stabilized and people have the money to go to Orlando. Universal is opening a brand new coaster this year and Harry Potter later on. Sea World just opened their own new coaster. While those parks have been taking a beating lately, they are positioned for a faster recovery and potential to take some Disney guests anyway, because they have new attractions.
I guess we will have to see how it all pans out. The summer hasn't begun yet, and the quarters fall a little differently this year. The economy isn't moving yet, and Obama can't win this one by talking (which frankly is all I've heard). I wish Disney the best, but I fear that this is the beginning of one ugly year for the Mouse.
Disney are astute enough to know that their biggest asset is their customer. Buying. or in this case visiting , trends are often very fragile beasts. What they are doing makes good business sense.
- In a down economy when people are having to cut corners, thanks to the discounts they can still take their kids to the parks. Yes, I hate the crowds, but a lot of people are still getting to have fun at Disney's parks this year.
- The parks serve a purpose larger than just profit. They give people a strong connection to the Disney brand. Disney wants as many kids as possible to grow up loving Disneyland and Disneyworld.
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The Associated Press article that reported Disney's second quarter financials noted "its results narrowly beat Wall Street forecasts and shares rose."
Meaning (all things considered) the company did better than they were expected.
That logic makes sense, as the Disney company (which has often been regarded as spend thrift [to a FAULT]) started implementing dramatic cost cutting measures since early 2008
Jimhillmedia.co offered up this report last October:
"Based on what I've been told, the folks who work at Disney's Reservation Centers began raising red flags back in January. Even then, there was enough of a deviation from the way that people typically made their Disney World reservations, the numbers of days that Guests were opting to stay on Property, the types of packages that they were booking to suggest that late 2008 / early 2009 was going to be a real challenge for the Resort."
Those cost cuts ran pretty deep -- especially those management buy-outs and department consolidations.
But (as we all know) Disney did not just cut costs. Disney Marketeers stepped up and started throwin' punches.
Jim Hill again:
"I mean, think about it. Knowing now what they knew about how the Resort's advance reservations were falling off (at least from its stateside customer base), wasn't it clever -- gutsy even -- for Disney to craft a promotional campaign that would actually take into account the coming bad times? Which would then offer Guests free admission to a Disney theme park at a time when people might need an incentive like that in order to make a trip to the Parks & Resorts seem that much more affordable?"
And (as several have noted here) despite a late start to spring break '09, the WDW parks suffered only a 1% drop in attendance. Contrast that to Universal's 20% drop.
Having completed the second quarter, Spring break came, those promotions kicked in and WDW blew up!
Orlando Sentinel April 9, 2009
"No recession to see here: Walt Disney World’s flagship park, the Magic Kingdom, has apparently hit maxiumum capacity several times this week. On Tuesday, for instance, the park at one point had to stop letting any guests in at all because it was so full. Disney’s other three theme parks remained open, though the parking lot at Disney’s Hollywood Studios also filled up that day, forcing visitors there to park in the Epcot lot and ride a bus over to the Studios. There have been several reports from parkgoers that the Magic Kingdom hit capacity again yesterday. Expect them to continue the rest of this week. The week of Easter is historically one of the busiest single weeks of the year for the parks."
That same day Forbes.com reminded its readers:
"'The Mouse Is No Louse - Buy Disney' The Disney name is one of the world's most recognized brands across all of its major business segments," says George Putnam, editor of the Turnaround Letter. "While the company's financial results have been hurt temporarily by the global economic weakness, we believe it is well positioned to prosper again when economic conditions improve."
Central Florida tourism has a long way to go before it's out of these rough economic seas. But its flagship is holding up pretty darn well.