Disney’s theme parks will generate an estimated $10 billion profit this year, up from $2.2 billion a decade ago. That’s not bad for a 68-year-old business, especially considering the devastation caused by the pandemic a few years ago.
But how much momentum is left?
Last month, when Disney Chief Executive Officer Robert A. Wall Street furrowed its eyebrows when Iger touted the parks division as “a major growth engine” in an earnings conference call. Disneyland in Anaheim, California has long been viewed as being at maximum capacity, with little room for expansion. Walt Disney World near Orlando, Florida, has become a question mark, given that Mr. Iger has said the company’s legal battle with Florida’s governor, Ron DeSantis, threatens a planned $17 billion expansion at the resort over the next decade. Can put it in. Disney’s overseas parks – except Tokyo Disney Resort, which it receives royalties from but does not own – have sometimes struggled to turn a profit.
On Tuesday, Disney painted a clear picture of the opportunity that can only be described as huge: The company revealed in a securities filing that it plans to expand its domestic and international parks and add about 60 over the next decade. Planned to spend billions of dollars. Disney Cruise Line continues to build. This amount is double what Disney spent on the parks and cruise line over the past decade, which was a period of huge investment in itself.
In the past decade, Disney has opened the Shanghai Disney Resort, more than doubled its cruise line capacity and expanded its portfolio of intellectual property rights such as “Star Wars,” “Guardians of the Galaxy,” “Tron,” Spider-Man, “Avatar.” based riding pair. ” and “Toy Story” in their home parks. Disney has also poured money into its Paris and Hong Kong parks, with themed expansions tied to “Frozen” and other Disney films scheduled to open soon. Three more cruises are on the way, bringing the Disney fleet to eight ships, and Disney is close to completing one new port On the Bahamian Islands. (Disney is already a private island port,
If this is what $30 billion can buy, imagine what $60 billion could bring.
“There are fewer limitations to our parks business than people think,” Mr. Iger said in an email.
He continued, referring to attractions and ships that have been announced but not yet operational, “The growth trajectory is very attractive if we do nothing beyond what is already committed. ” “By dramatically increasing our investment – building bigger, being ambitious, maintaining quality and high standards and using our most popular IP – this will be turbocharged.”
Disney is expanding investment after troubles in almost all of its divisions. Cable television, including ESPN, has become a shadow of its former self, a result of cord cutting, advertising weakness, and rising sports programming costs. Disney had a disappointing summer at the box office, with films like “Indiana Jones and the Dial of Destiny” and “Haunted Mansion” selling well below expectations. The company’s Disney+ streaming service continues to suffer losses; Mr. Iger has said it will be profitable by 2024, but some investors are skeptical.
Disney shares closed at $85 on Monday. Their price in 2021 was $197.
In contrast, Disney’s parks and cruises business has been a bright spot, driving the entire company forward in many ways. In the most recent quarter, Disney Parks, Experiences and Products earned $2.4 billion in operating income, an 11 percent increase from a year earlier. Disney Media & Entertainment Distribution’s operating profit was $1.1 billion, a decline of 18 percent.
Spending per guest at Disney parks has increased 42 percent since 2019, due to higher prices for tickets, food, merchandise and hotel rooms.
“The stock is cheap considering how good the parks are,” Michael Nathanson, an analyst at SVB MoffettNathanson, said Monday ahead of the expansion announcement.
Nevertheless, increased investment in theme parks increases risk. This is a business that will always be sensitive to factors beyond Disney’s control: fluctuations in the economy, gas prices, hurricanes, earthquakes, tensions between the United States and China. Disney has beefed up security, deploying undercover guards and installing metal detectors, but these packed resorts – Disney parks attracted an estimated 121 million visitors last year – could become ghost towns if something violent happened. Can become.
Josh D’Amaro, president of Disney Parks, Experiences and Products, said those who focused on such risks ignored the resiliency of theme park fans. He said customers came back in droves when Disney parks reopened during the pandemic.
“Whenever there has been a crisis or moment of concern, we have managed to bounce back much faster than anyone expected,” he said.
Mr. D’Amaro declined to say how the company planned to spend the $60 billion. But he pointed out that “Coco,” “Zootopia,” “Encanto” and other Disney movies have not yet been incorporated into the company’s parks in meaningful ways.
“Imagine bringing Wakanda to life,” he said, referring to the fictional “Black Panther” empire. “In terms of bringing the latest Disney-Marvel-Pixar intellectual property to the parks, we haven’t even come close to scratching the surface. And we’ve learned that incorporating Disney IP significantly increases the return on investment.”
Mr. D’Amaro said Disney has 1,000 undeveloped acres of land at its existing theme park resorts. (For comparison, he said, that’s the size of seven Disneylands.) One of the biggest areas of opportunity, he said, involves the original Disneyland, which opened in 1955. If the company can persuade the city of anaheim To replace a plan adopted in the 1990s that limited how many hotels, parking lots, and attractions could be built, Disney intended to redevelop the land adjacent to Disneyland, significantly expanding capacity. Happening. Disney also plans to convert a parking area south of the park into a themed shopping, dining and hotel district.
Disney released a 17,000 page version environmental impact study For the project last week. The Anaheim City Council is expected to vote on the changes in mid-to-late 2024.
How much Disney invests in Florida may depend on the courts, where the company is fighting Mr. DeSantis and his allies for control over development plans for Disney World. Angered by Disney’s criticism of the Florida education law, Mr. DeSantis in April ended the company’s long-standing ability to self-govern its 25,000-acre resort as if it were a county. However, Disney says prior contracts preserve its ability to control development.
“We want to continue to grow and invest in Florida and we have ambitious plans,” Mr. D’Amaro said. “For the benefit of our guests, our artists and the economy of Central Florida, we hope the conditions will be in place for us to do this.” He declined to comment further.
At this time, Disney does not plan to build parks in new countries or cities. (In the past, the company had considered building a park in India and expanding beyond Hong Kong and Shanghai in China, for example.) Rather, the company will focus on developing new ports for its ships.
A new cruise ship launching in 2025 – the largest ship in Disney’s fleet to date, will have space for more than 6,000 guests. located in singapore, Disney’s ships have become increasingly themed, with restaurants and entertainment areas incorporating characters and artwork from franchises like “Frozen,” “Star Wars” and Marvel’s Avengers.
“It’s like bringing a theme park to a new part of the world,” Mr. D’Amaro said of Disney Cruise Line, which recently booked at 98 percent capacity.