Optimism abounds as Disney looks toward Galaxy's Edge

February 5, 2019, 6:07 PM · Attendance and other revenue continue to rise at The Walt Disney Company's theme parks, Disney CEO Bob Iger reported in conference call with investors today. Disney's first quarter fiscal year 2019 report noted that revenue in the division that includes the company's theme parks increased five percent to $6.8 billion for the three-month period, and that operating income increased 10 percent to $2.2 billion.

"Operating income growth at our domestic theme parks and resorts was due to increased guest spending and higher occupied room nights. Guest spending growth was due to higher average ticket prices, an increase in food, beverage and merchandise spending and higher average hotel room rates," Disney said in its report. (Here is the PDF summary of the quarterly report.)

"Attendance at our domestic parks was comparable to the first quarter last year, however per capita spending was up 7% on higher admissions, food and beverage and merchandise spending," Disney CFO Christine McCarthy said. "Per room spending at our domestic hotels was up 5% and occupancy was up three percentage points to 94%. So far this quarter, domestic resort reservations are pacing up 4% compared to prior year, while booked rates are up 1%. Results at our international operations were lower in the first quarter versus last year, as growth at Hong Kong Disneyland Resort was offset by lower results at Shanghai Disney Resort and Disneyland Paris."

There wasn't much else about theme parks in the investor call this time, but Iger did respond to a question about Disney's plans for promoting its upcoming Star Wars: Galaxy's Edge lands in Disneyland and Walt Disney World's Disney's Hollywood Studios.

"I would say on the marketing expense side, don't expect much," Iger said. "I am thinking that maybe I should just tweet, 'It's opening' and that will be enough. We are going to end up with incredibly popular and in-demand product with these two new lands. They're large. They are beautiful, and they are extremely innovative. And they obviously leverage the popularity of the Star Wars brand. And I think that we are going to have absolutely no problem gaining attention for them or to them. It's not going to take much marketing to do that."

"That's a signal I just sent to our Parks and Resorts people to keep that budget really low," he said with a laugh.

Iger also addresses Disney's pricing strategy on tickets and annual passes, which Disney is using to try to even out demand for the parks throughout the year.

"We know that crowding can be an issue and when our parks are at their most crowded, the guest experience is not what we would like it to be," Iger said. "So we are leveraging the popularity to increase pricing and to spread demand — to get much more strategic about how we are pricing, so that the parks are still accessible but in the highest peak periods we are trying to manage the attendance so that the guest experience isn't diminished."

Iger also noted "softness" in attendance at Shanghai Disneyland, though the park remains profitable though "less so" than the company thought it would be, However, Iger reiterated Disney's commitment to the market. Disney recently announced plans for a Zootopia-themed land at the park, following its expansion with a Toy Story Land last year.

Overall, Disney reported revenue of $15.3 billion, which was flat compared with the same period one year ago. Earnings per share were down 3 percent, as studio performance lagged as Disney did not have a new Star Wars movie or other major blockbuster during the Christmas season this year. (Sorry, Nutcracker and the Four Realms fans. Both of you.)

Much of the call was devoted to plans for Disney's new streaming service, Disney+, which will become the exclusive streaming home for Captain Marvel and other future Disney films after they complete their theatrical runs. Disney plans to forgo some $150 million this year in content licensing revenue it would have gotten by allowing other services, such as Netflix, to show those movies.

Iger said that Disney might sell Disney+ in a bundle with its ESPN+ and Hulu streaming services, as well as each separately. Iger said that Disney plans to have Fox develop more content for Hulu, which the company will position as a more adult-oriented alternative to Disney+. The Disney+ service will launch later this year, after a demonstration of the app in an investor event on April 11.

Replies (12)

February 5, 2019 at 6:40 PM

Iger: "I would say on the marketing expense side, don't expect much. I am thinking that maybe I should just tweet, 'It's opening' and that will be enough."

That's very funny.

February 5, 2019 at 7:01 PM

Considering Disney theme park destinations report higher revenue for that first quarter than their rivals at Universal's theme parks earned for their entire fiscal year- speaks volumes. Literally, more than a billion US $ difference and about six times as much comparing the same 3 month period. And way higher profits. Disney is that far ahead of Universal though both parent companies are budgeting similar amounts in expansion funds for the next few years- US$24 billion for Disney, US$23 billion at Universal.

February 5, 2019 at 7:42 PM

For perspective, Universal owns four parks and licenses one. Disney owns eight, licenses two, and co-owns two others. (Not counting water parks, just in case anyone feels like going there.)

February 5, 2019 at 8:20 PM

Yes, and the totals for Tokyo Disney Resort are not included in Disney's totals. Point is just how wide the existing gulf is between the two arch-rivals. Even with the additional billions both are investing, Disney still has a huge head start. Merlin Entertainments may be the world's number two operator in terms of attendance thanks to their Midway Attractions being included in that total but Comcast's Universal would be considered number two if the industry measured based on revenue instead. Either way, the theme park wars and their attractions arms race may be a battle of superpowers, though not one of equals.

February 6, 2019 at 1:50 AM

If Disney wants to make more money, they could start offering.. I don't know. Maybe a $12,000 VIP package that includes a tour of the Cinderella Castle suite?

Oh. Right.

February 6, 2019 at 3:04 AM

And still Disneyland Paris is leaking money. It'll never make a profit.

February 6, 2019 at 7:22 AM

"Attendance at our domestic parks was comparable to the first quarter last year,"

Big surprise (not) - So much for the effect of TSL and Pixar Pier (LOL). In other words, guests still need new innovative attractions to warrant spending gobs of money to visit Disney parks on a regular basis. Clearly Disney is achieving the desired results by continuing to increase prices to ridiculous levels, but you have to wonder if there's a breaking point somewhere in the not so distant future. Clearly Galaxy's Edge will sell itself as Iger eluded to, but will Disney be able to organically grow their fanbase or simply continue to increase prices to satisfy their stockholders' needs for steady revenue growth? Disney is sitting on a huge bubble that could burst at any time, yet they seem very unprepared to handle the consequences if the money dries up.

"So we are leveraging the popularity to increase pricing and to spread demand — to get much more strategic about how we are pricing, so that the parks are still accessible but in the highest peak periods we are trying to manage the attendance so that the guest experience isn't diminished."

Such double talk here. Fans were told that FP+ and other initiatives (like Project Stardust) were supposed to help manage the attendance. Also, managing attendance through pricing is such a backwards and antiquated concept, especially when you're dealing in the travel industry where visitors can only shift their trips so much based on the calendar. What happened to the grand designs of the original FP system that were supposed to make it a breeze for guests even on the busiest of days? Why did Disney spend over $1 billion for a bloated upgraded FP+ system that doesn't do what it's supposed to do? Are the price increases really just a tool to pay off the billion dollar mistake that FP+ has become?

February 6, 2019 at 11:23 AM

RM asks: "...but will Disney be able to organically grow their fanbase"?

I respond: It seems like people have mastered the process required to produce families with small children. I don't think you can get much more "organic" than that.

February 6, 2019 at 11:54 AM

But families with small children are growing increasingly poorer, while those with college degrees and higher incomes are waiting longer and having fewer children (or not having children at all). Also, those with small children are usually only visiting during peak seasons when schools are out with pricing having very little impact on when they visit. Disney's choice to "spread demand" through price increases is counter to their desire to target the family demographic.

February 6, 2019 at 1:20 PM

It's good they are making so much money. I was worried with the pay raises to $15 and hr that it would be too expensive to operate. I don't know how much it costs to employ a few hundred thousand people at $15/hr but hopefully averaging over 2 billion in revenue every month is enough to afford it.

February 6, 2019 at 11:29 PM

"Guest spending growth was due to higher average ticket prices, an increase in food, beverage and merchandise spending and higher average hotel room rates". At least they're honest.

I know someone who visited WDW during Christmas time and said that the upkeep was deplorable, dirty restrooms, few trash cans and no sweepers in sight. It seems Disney is cutting budgets for the theme parks because of the $71 billion spent for Fox.

I really hope that the Disney streaming service pays off, although I as an individual Disney fan, already have most of the Disney movies I want, as Blurays, DVDs, and digital. But I hope they offer Disney+ separately, because Disney fans are not necessarily ESPN or Hulu fans.

I had conversations with a couple of people inside Disney, one said that merchandise sales at the theme parks are up, but sales at other stores, like the Disney Stores, are down. When people are at the theme parks, the merchandise is thought to be special, where at say, the mall, it's not.

My other friend said that the new Disney Store is modeled after the Apple Store, plain white walls with huge screens. This was Iger's edict, implemented by Chapek. The reasoning is that Disney has so many IPs now that the new concept makes it easier to change out merchandise. Also the mantra is 'let the merchandise be the star'.

IMO this makes the store nothing special. I have the exact same feeling with the new World of Disney Stores at Downtown Disney/Disney Springs, they look like any store at the mall, definitely nothing special, and that doesn't inspire me to go there, much less buy anything.

My takeaway is that Disney has dumbed down the Disney Store experience so that it's an every day experience, not a special experience. When the Disney Stores first opened, they were the next best thing to being at Disneyland, now they're like any other mall store.

Higher merchandise sales at the theme parks proves my point that if you are in a special place, the merchandise will also feel special.

February 6, 2019 at 7:52 PM

The theme parks have always been Disney`s steadiest, most reliable cash cow, and that certainly hasn`t changed. With GE and the other juicy new goodies opening before or during the 50th anniversary of WDW, the resort will be irresitable to travellers worldwide. We can only hope that the added capacity will be able to absorb some of those mobs.

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Top 10 Attendance

  1. Magic Kingdom
  2. Disneyland
  3. Tokyo Disneyland
  4. Universal Studios Japan
  5. Tokyo DisneySea
  6. Disney's Animal Kingdom
  7. Epcot
  8. Shanghai Disneyland
  9. Disney's Hollywood Studios
  10. Universal Studios Florida