Theme Park of the Day: Disney's Animal Kingdom

Disney attendance down, but future bookings up, thanks to discount deal

February 3, 2009, 8:47 PM · Disney reported today that attendance was down - by 5 percent - at its U.S. theme parks in the first quarter of its fiscal year (Oct.- Dec.) That's the bad news. The good news (for Disney, if not for fans looking for short lines in the parks) is that attendance is up this month over last year at the the Disney parks, as are advance bookings through June.

Disney's extending its "buy four nights, get three free" promotion at Walt Disney World, allowing trips to be booked with the offer until March 29, good for travel dates through Aug. 15. The company credited the deal, and its promotion, with the relatively strong showing at the parks.

The bottom line across the company, however, is carnage, with a 32% drop in first-quarter net income. The parks out-preformed the rest of the company, though... only dropping 24% in net income during the first quarter.

The message for theme parks in 2009 is clear: Discount or die, folks.

Replies (10)

February 3, 2009 at 9:17 PM · They made a profit and I think that is important…
We are going to take advantage of the three free nights offer in May. Usually we stay at a Sheraton Resort and visit Universal, Sea World, Disney, DC and whatnot… This is a great way to save some cash and will keep us at one company instead of several places.
February 4, 2009 at 8:32 AM · Is that Disney's attendance figures for both US sites combined? It would be interesting to see the difference in attendance between DLR and WDW. I'd wager the latter is dropping much harder.
February 4, 2009 at 9:54 AM · Iger said that the attendance drop was even between the two properties.
February 4, 2009 at 5:20 PM · Disney is attacking the situation perfectly. I mean, that deal is exceptional, especially when combined with the on-par deal for Canadians (where our dollar is equivalent to the American dollar). We could potentially save thousands.

Universal's strategy is pretty good, too, but not without its flaws. The new coaster and HP lands should draw fans, but will they be worth traveling from afar?

When it comes to discounts, the ones we watch for are usually hotel-related.

February 4, 2009 at 7:46 PM · Future bookings up....but what exactly is a booking, and will they actually make the trip? This isn't the regional amusement park, it's an expensive destination vacation. Even with the hotel discounts, costs inside the park and the tickets themselves are high. The economy is still in the pits, and unemployment continues to rise. In these conditions, what makes them so confident in a future bookings statistic? Disney is doing well to fight the down times by trying to boost attendance with discounts, but those discounts will cost them if they work to begin with. Once again, this isn't the regional amusement park. Disney's operating costs are without a doubt gigantic. They need robust attendance and big revenue to keep that magic going, and if trends continue, it will get tougher and tougher to maintain the pace, let alone build anything new. Disney and the Orlando parks are venturing into survival mode, somewhere they haven't really gone in a long time. Time will tell how well they handle it.

Perhaps they could learn a few things from some amusement parks, many of whom saw increases last year despite high fuel costs and sagging economic conditions. They did so because they don't have the luxury of deep pockets, and had to learn how to manage the money they had, while still being competitive.

February 4, 2009 at 11:03 PM · I dunno, Derek, I think Disney will be fine. Movies, theme parks, tv shows, music, toys, etc, etc...they are so diversified, they will surely survive. I mean, if Disney falls, our way of life will pretty much be over, so a theme park trip will be irrelevant anyway.

So then, what does all this bad news mean? Well, it means Disney will have to continue to toe the line, cut costs, stream-line operations, and focus on the things they do best: provide unmatched hospitality and exceptional customer service. In fact, the quality of a visitor's theme park experience may actually improve in a down economy. With unemployment on the rise, Disney has an over-abundance of quality cast members who are staying put because better opportunities are few and far between right now. So, for those who do make it to WDW in '09, I think they will have maybe their best visit in years.

And the discounts ARE good enough right now that people are more likely to go ahead and take a trip. I for one debated furiously over spending a week in Orlando later this year, before finally deciding next year will be better after the Space Mt refurb is complete. My point is that I was dead set against travel until the 4 for 7 deal was announced and extended (now through mid August, btw). I may yet change my mind if the 4 for 7 gets extended further into the fall. We'll have to see...

So I tend to agree with Josh, I think Disney (and Universal) are really taking the bull by the horns in this market, and doing everything they can to weather the storm (that's a lot of cliches for one sentence!). And as you wrote about the regional amusment parks: in the long run, WDW (and Universal) will offer an even better theme park experience because of the belt tightening lessons they are learning today.

And one last note: it is not all rosey for the regional theme parks right now either. While attendance is up at some regional parks, per visitor spending is having more people is not really translating into increased revenues. In fact, my local park is selling their annual passes at their lowest prices in years, despite the fact that they are adding a new coaster. Regional parks may be used to operating within a tight budget, but they can't be happy about the way things are looking economically. No one is escaping unscathed in this devastating market (except Wal-mart and McDonald's, unfortunately).

February 5, 2009 at 9:22 AM · I'm not saying that Disney will necessarily sink. They have a lot of money..(although the phrase "It's too big to fail" is a load of crap and has been recently said about a few choice things.). I'm saying that they will at the very least be stagnant when it comes to growth and expansion. We all saw the numbers, 5 percent decrease in attendance, 24 percent net income drop. Some of that will be remedied with job cutting, but per visitor spending will surely be down as well. Couple that with the discounts they are giving and their operating costs, and the bottom line will take a hit. Amusement parks deal with this kind of stuff all the time. They have to fight roller coaster attendance numbers, operating costs, guest spending, and balancing the budget, all while having to remain competitive and building new rides annually. The major chains saw modest increases in the face of the economy, while Disney took a big hit. That alone tells me that many amusement parks are prepared to deal with this economy because they have learned to watch their pennies. Some the hard way (Six Flags), and some the smart way (Cedar Fair). It's the Orlando parks I wonder about.

In this situation, I think of Disney as the rich guy who used to have all this money to spend and doesn't now, but still has a mansion and a lot of bills to pay. I think of amusement parks as the middle class who have to watch their spending, and have to spend wisely when they actually do it...thus making them experienced in handling the lean times. I suspect that we will see what some of these companies are made of in the next year or two.

February 5, 2009 at 5:54 PM · So, because the smaller amusement companies never had any money, they can better handle a down economy? You may be right. Heck, Six Flags has been operating in the red for so long, I am beginning to think companies do not need to make money to stay in business!

Seriously, while I don't argue with your points on the surface, I do argue with your notion that Disney just throws money away like a chronic gambler in a Vegas casino. I think Disney, while bloated with excess profits over the years, is fiscally responsible for the most part. Sure there is fat to be trimmed, but the the giant of the industry has a very long way to fall before they are truly hurting (honestly, if they fall that far, then all the other parks will already have gone under completely). And just because Disney has farther to fall than Six Flags does not mean that fall will actually occur. There are some pretty smart business folks working at Disney, and they are adjusting quickly to the new economy. Things will stabilize eventually and while you may not see any expensive additions like Everest or Toy Story Mania for a few years at WDW (DLR on the other hand is getting a flood of expansion of the next few years), the Florida parks will still be top notch and the experience will still be worth a week of your vacation time. Not to mention that spillover from Manta and Rip, Ride, Rockit in 2009 as well as Harry Potter in 2010 will ensure a steady stream of business for WDW without spending a single cent on expansion.

And we can't let Cedar Fair off the hook completely, can we? What are they adding to their flagship property this year or next? I haven't heard a single official announcement. Perhaps GCI has visited the park, perhaps not, but it is doubtful there will be anything new in 2009 except maybe a few rehabs and show changes. So while some of the peripheral CF parks are getting economical additions, Cedar Point is just as stagnate as WDW right now.

Regardless of prior earnings expectations, ALL the theme park companies are feeling the pain of this recession.

February 5, 2009 at 7:26 PM · You usually see a big add to Cedar Point every three years. This is year number two. They've wisely been improving their other parks the past couple of years, with Kings Island getting the biggest investment this year in Diamondback. 2010 will likely bring something.

The recession is here, and you are right...all of the parks are being affected. What I'm saying is that the big theme parks will be affected more than the amusement parks. Disney may not be wasting money, but their "magical experience", which is the product that draws so many visitors...costs them a lot of money. By comparison, the average amusement park's operating costs are much less. They have been discounting tickets for a long time, and for many it's pretty much built into their budget to do so. Disney is used to people forking over thousands for a few days on their property, and the word discount has never been part of their vocabulary. For now, those spending days are over. Disney faces the challenge of maintaining their product while trying to maintain their bottom line. It isn't going to be easy.

February 5, 2009 at 9:12 PM · Derek, I mostly agree. Disney, and to a certain extent all the Orlando parks, will face a very tough challenge this year as their ability to draw out of state visitors is going to be severely tested. However, for those travelers that do make the trip, I think the "magical experience" of the parks will be unaltered. Rides may open later, parks may close earlier, shows may have fewer performances, but the "patented" visitor experience will be the last thing Disney will allow to be impacted. It is their bread and butter. Things will have to get a lot worse before Disney lets that aspect of their business model go by the wayside.

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