The Walt Disney Company reported its Fiscal Year 2019 Third Quarter financial results this afternoon. Disney's acquisition of Fox complicated the numbers for the company overall, but Disney's Parks, Experiences and Products division reported a 7% increase in revenue and 4% increase in operating profit, despite reported lower attendance at its domestic theme parks.
So that perceived drop in attendance at Disneyland this summer wasn't just people's imagination. Attendance really did decline at Disneyland and Walt Disney World from April through June. From Disney's earnings report:
Parks, Experiences and Products revenues for the quarter increased 7% to $6.6 billion and segment operating income increased 4% to $1.7 billion. Operating income growth for the quarter was due to increases at our consumer products businesses and Disneyland Paris, partially offset by a decrease at our domestic parks and resorts. Results included a benefit from a shift in the timing of the Easter holiday. In the current year, the entire Easter holiday fell in the third quarter, while the third quarter of the prior year included only one week of the Easter holiday.The increase at our consumer products business was due to growth at our merchandise licensing and retail businesses. Growth at merchandise licensing was primarily due to higher revenue from merchandise based on Toy Story, partially offset by a decrease from Star Wars merchandise. The increase at our retail business was due to higher comparable store sales and online revenue.
Higher operating income at Disneyland Paris was primarily due to higher average ticket prices, partially offset by labor and other cost inflation and lower attendance.
The decrease in operating income at our domestic parks and resorts was due to higher costs and lower volume, partially offset by increased average per capita guest spending. Higher costs were driven by labor and other cost inflation and expenses associated with Star Wars: Galaxy’s Edge, which opened at Disneyland Resort on May 31. The decrease in volume was due to lower attendance, partially offset by higher occupied room nights. Guest spending growth was primarily due to higher average ticket prices and increased food, beverage and merchandise spending.
This was the quarter when Disney opened its highly anticipated and hyped Star Wars Galaxy's Edge land at Disneyland. However, the new Star Wars land failed to drive the attendance gains that Disney had anticipated with aggressive price increases and annual pass program changes.
Disney reported that domestic park attendance declined 3% in the quarter but that per-capita guest spending was up 10%, thanks in part to higher ticket prices. Per room hotel spending was up 3% on a 2% increase on occupancy, which stood at 88%.
Disney blamed lower annual passholder attendance for the decline at Disneyland, which Disney said it "managed" to preserve the quality of guest experience. Officials also noted that day-ticket sales were up even as AP attendance declined.
"Attendance was below what we hoped it would be," Disney CEO Bob Iger said. "There was tremendous concern in the marketplace that there were going to be huge crowds [for Galaxy's Edge] so people stayed away."
Iger also blamed higher prices being charged by Anaheim-area hotels as well as Disney's own price increases for discouraging attendance, in addition to Disney opening the land with just one ride instead of its originally expected two.
"That said, guest satisfaction is extremely high. Long term, we have no concerns. We feel great about the product we've created," Iger said. "But it is going to take some time for things to work themselves out as the marketplace reacts."
At Walt Disney World, Disney said that its survey data suggests that fans were postponing their visits awaiting the opening of Galaxy's Edge, though in later questioning, Iger said that "perhaps" Universal Orlando's discounting over the summer might have affected Walt Disney World's attendance, as well.
TweetTo be fair, Iger also blamed the ticket price increase. I've been doing rewrites as the call progresses, but will do a final write-through now that the call has completed.
"the entire Easter holiday fell in the third quarter, while the third quarter of the prior year included only one week of the Easter holiday."
So what if only 1 week over revenue for Easter would be in the numbers...even lower result.
"...a decrease from Star Wars merchandise"
Yep, the hype is real, fan's don't like what Disney is doing with Star Wars.
""Attendance was below what we hoped it would be," Disney CEO Bob Iger said."
But this is what Disney wanted, right, that is what the Disney fans are telling me.
"Iger also blamed higher prices being charged by Anaheim-area hotels..."
If Disney wouldn't have raised the prices the area hotels wouldn't either. Why make them part of the blame.
""perhaps" Universal Orlando's discounting over the summer might have affected Walt Disney World's attendance, as well."
Is this a first? Can't they ignore the big blue globe anymore?
I know 2 families who went to Disneyland Paris for the first time, they thought it was overpriced and didn't like it. And that was before the weather became unbearable.
Anyway, lets see what Disney is going to do to get their mojo back.
Eye catching headline, but the bottom line is, well, the bottom line. Disney parks still increased their profits despite lower attendance. So we still haven’t seen the end of rising ticket prices as long as doing so continues to increase profits.
increasing profits is not the same as maximizing profits. so just because profits went up doesn't mean they are at the ideal price point.
Abolish the cheap annual passes - and force locals to pay a flat fee to enter the park just like other tourists.
All that's happening, is Disney are building huge attractions, and cheap locals are not going until blackout dates are finished. In essence, it means Disney is not profiteering from these set of guests. All they do is contribute to crowd levels and disatisfaction from those who pay high prices.
Sadly this is exactly what Disney wants, fewer people but more profits. While most of us want less people in the parks, but most of us don’t want to be price gouged for the privilege of slightly less people. Universal has fewer people attending their parks and they are building another park. Its time for Disney to do the same. As someone mentioned on the forums, bring DisneySea to the US!
@AndrewMciveR .... and what makes you so pissed with “us cheap locals” and passholders ??
Jealousy maybe ??
Is it just Disney though? Because been hearing of attendance down not just in U.S. but Europe as well. I get Disney gets attention but might be an overall issue too.
@MikeW ... Seaworld just posted higher earnings and increased attendance, so it looks more of a Disney issue.
It’s going to be very interesting to see how busy DHS will be during those first few weeks after SWGE opening.
Had heard some places abroad so wasn't sure. Of course, a certain camp still pushing the "because REAL Star Wars fans hate Disney movies" and such but the ticket price increase seems the real issue. After all, it's not like folks are packing the rest of the park and just ignoring Galaxy's Edge, it's attendance overall that's lowered.
DHS will have Rise of the Resistance up and that will be a change for sure. Again, I'm amazed how people are declaring GE a total flop when it hasn't even been open a few months.
September after labor day usually is the slowest month of the year in Florida so any extra burst due to Star Wars Galaxy's Edge opening would mean an attendance increase and boost the fourth quarter. Overall though, the industry as a whole is either flat or seeing modest attendance increases. As for Europe, their record heatwave has been specifically blamed for any downturn there. Meanwhile, on site hotel occupancies and guest per caps are up everywhere and several new theme parks opening in China boasted huge opening weekends.
Thanks, Dave, I had heard heat wave was affecting Europe attendance. And likewise have heard Six Flags lower than expected this last quarter as well. Sea World posting gains is good but as you point out, the industry itself seems a bit flatter this year for various factors so not like Disney is a massive anomaly.
SeaWorld Entertainment's kept their comeback momentum going with new attractions, plenty of events and most of all, free beer, which is good news- but that attendance increase is literally 0.8%, so fits in with the industry big picture. Meanwhile, Disney's second quarter may have been a mixed bag but they also achieved record revenue, US$20.25 billion- Scrooge McDuck is going to suffer carpal tunnel counting that!
British tourists to Orlando will be down big down with the economy of the UK going to the toilet with Brexit - the UK currency has been destroyed.
Once you've maxed out those post-recession era credit cards and home equity lines, how are you supposed to pay for a Disney vacation now???
Disney needs to be honest with themselves and their guests in explaining what they are doing and why. It's clear that the one of biggest complaints about visiting Disney parks over the past 5-8 years has been intense crowds and long lines that have extended even into the slowest parts of the operational calendar and portions of days that were a theme park visitor's nirvana at the very beginning and end of days where top attractions were "walk on". The problem though is that with the near failure of FP+ and other techniques to limit lines and crowds, Disney has only pricing and AP controls to impact the biggest deterrent to a Disney vacation.
It's interesting that Disney has chosen to report and frame their declining attendance in such a negative way, because it's obvious that the decisions they have made since last fall were deliberately made to manage and control crowds this summer leading up until the debut of Galaxy's Edge. We've personally never visited Disneyland in the summer, but felt that both DCA and DL were pretty crowded over the 3 days we were there last week. While they may not be the shoulder to shoulder crowds one might have predicted after the debut of such a landmark opening, but there were plenty of long lines and heavy crowds around both parks.
Now, some of the crowds are clearly staying away from DL because of the delays in RotR and AP blackouts, but with revenue still reaching record levels, it's hard to blame those decisions to better control the influx of guests yet still maintaining profits with another likely surge coming from Galaxy's Edge coming when RotR finally takes its bow, completing the new land.
The ongoing question will then be, will the price controls Disney has chosen to utilize for crowd management ultimately alienate the lower-middle class guests that had been the core audience that inundated the parks over the past 2 decades, or will Disney be satisfied in being sustained by a smaller core that is willing to spend and visit more. The one thing that they do need to work on is that if they are going to cater more to big-spending guests, they need to make sure their merchandise and accessibility to high-end experiences can meet demand. While I don't consider myself anywhere near a "big spender", I did pony up my $200 for a custom Lightsaber, and would have spent another $50-80 on Kyber Crystals and other accessories for it had they actually been in stock.
Seems like their projections were really high and they didn't meet them, but are still very profitable.
I'm personally concerned the pricing is getting above what many families can afford, but that doesn't mean it's a bad thing. Maybe Disney is more of a luxury brand experience that isn't meant for everyone. The merch certainly seems to be that way (and I'm totally fine with it!)
I have no plans on ever going back to Disney but Galaxy's Edge is not a failure. I'm 100% sure the decline is simply due to the fact that a lot of people are waiting for the entire land to be fully opened. I think that had they opened both rides at the same time the crowds would have been Harry Potter like. I can't wait to see what happens in Orlando when it actually opens. I'm sure the crowds there will be huge!! Once both rides are opened in Anaheim that park will be super busy again no matter what the ticket prices are.
If they ever want to increase profits by a huge margin they should get rid of fastpass all together and setup a paid fastpass like Universal. That will get me through the door again!
Cedar Fair reporting record revenue for year to date though they also saw a 1% attendance increase, sticking to the overall industry trend for 2019 so far of mostly flat visitor numbers with those guests spending way more.
Sadly, for companies (not just Disney), they won't mind any attendance drops as long as they make more money.
In my estimation this is the result of a perfect storm for Disney...Between the never ending price hikes, AP blackouts, poor reception to the new Star Wars movies by a good portion of their fan base...Well yeah...Most people just said forget about it...
Bob was clearly overly confident that Galaxy’s Edge would be a massive success as his comments about not needing to advertise were well reported on prior to opening...Thing is they failed to see that they’d either out priced, blocked out, or alienated all the people who were excited about Galaxy’s Edge when it was first announced...
All this isn’t to say that’s Galaxy's Edge is a failure...Way too soon to make those types of statements...That being said though, whoever thought they could design the new land to essentially be a highly themed shopping mall should be fired...Never mind the fact that they decided to anchor it without the use of any original trilogy characters...Their approach to Star Wars fans in general has been very obtuse...It bit them in the butt with their planned movies franchise and now it’s certainly playing a part in the less than stellar reception for their park additions...Disney is losing touch with their consumer and its starting to show...
Mysteriously, the D23 Expo schedule now shows a new addition for Saturday, August 24 for "Secret Walt Disney Company Project" and a notation that this "secret project" will be unveiled August 22. Since the schedule addition was made on August 1 shortly after Universal Orlando Resort's event about their Universal's Epic Universe expansion- and due to wishful thinking among many theme park fans- speculation raging on whether this is about a fifth theme park gate for Walt Disney World. Orlando Weekly picked up on this and the story has spread in the industry trade media. Of course, the "secret project " may be about something entirely unrelated to theme parks, though the mystery panel discussion story for D23 Expo certainly is raising eyebrows right after Disney's Q3 results call...
We will hear & discuss all this on the oncoming EAS/IAAPA Europe seminars (september)....
@Sneakertinker - I think you're blowing things a bit out of proportion. While Galaxy's Edge has not brought the crowds that some feared (is that really such a bad thing?), it's not anywhere near the "ghost town" people seem to be reporting. I think part of it is due to the physical design of the land that has far more open space and wider pathways than anywhere else in Disneyland. What "feels" like a land that's not packed to capacity compared to adjacent Critter Country, Fantasyland, and Frontierland, still has plenty of people filling the land at all hours of the day.
Your complaint about the lack of OT characters is completely unfounded. Chewbacca, R2-D2, and Yoda all make appearances in the land (and if you agree with Disney's assertion that the Falcon is a character, it's another entry from the OT in the land). There are also plenty of nods to the OT throughout Galaxy's Edge if you're willing to look for them (like Gonk Droids in the Resistance Camp, a Dianoga near the bottle filling water fountain, a baby Rancor in the creature stall, 2 Worrts in Oga's, and many more).
I do think the one thing Disney miscalculated was opening virtual clones of Galaxy's Edge on both coasts within 3 months of each other. I know Disney wanted to create efficiency and cost savings by giving both DL and WDW the same lands. However, I think there are a lot of Disney/Star Wars fans that more regularly visit WDW, and were willing to wait for WDW's version to open instead of traveling to DL. Add to that the AP restrictions placed on DL, which draws a much higher percentage of its daily visitors from the local area than WDW, and Disney essentially undercut California's version of Galaxy's Edge. However, it's clear from the earnings call that while DL's version of Galaxy's Edge may not set attendance records, people are gobbling up merchandise at light speed. It's so bad that Disney has set purchase limits on items sold in Galaxy's Edge, and are constantly out of stock of certain items like droid parts/backpacks, Kyber Crystals, and even gift cards (that require $100 of value to be loaded on them).
I would anticipate WDW's version of Galaxy's Edge to be extremely crowded when it debuts at the end of the month compared to DL, but once SoCal AP blackouts subside and RotR opens, the West Coast's version will soon see bigger crowds as well.
Smuggler's Run doesn't look like much of a ride. It looks like a motion simulator with buttons that may or may not change the simulation. It would be great if you could ride over and over again to understand how it works, but the lines are too long to make it anymore than one and done.
@Quokka - MFSR lines have been running between 30-75 minutes (occasionally going up to 90 minutes on weekends), which is among the longest attraction lines at DL. If you were to re-ride through the standby line, it certainly would take a few hours to have multiple experiences. However, the attraction also has a single rider line, which can reduce waits to about 10-20 minutes depending upon how CMs are loading it. You could easily get a half dozen rides on the attraction in a few hours time this way, and get a much better feel for the controls. There are also FP machines already installed at the head of the queue that could go live at any time (most likely not until RotR opens in January though), and offer an even faster avenue to ride the attraction.
There is quite a bit of variability in the experience that is totally based on what the rest of the guests in the cockpit are doing. I think it would take dozens of rides with lots of different people to get a real gauge for variability of the attraction. It's by no means a "one and done" unless you have ZERO patience.
This article has been archived and is no longer accepting comments.
I love this quote: “Iger also blamed higher prices being charged by Anaheim-area hotels for discouraging attendance, as well as the fact that Disney opened the land with just one ride instead of its originally expected two.”
Yeah, it was the hotel prices that drove them off. Not the multiple price increases to Disney tickets and annual passes.
I was a WDW passholder from 2000 until 2017 (let it expire because my wife wouldn’t be able to go due to traveling for work). I don’t know if I’ll renew because it’s just not the same any more. Too expensive and everything just feels like a money grab. I’m in the vacation club and will still go, but I’ll probably go every other year and buy tickets and not a pass.