Disney’s theme parks are expected to generate an estimated $10 billion in profits this year, up from $2.2 billion a decade ago. Not bad for a 68-year-old company, especially considering the devastation caused by the pandemic a few years ago.
But how much of the boom is left?
Last month, Wall Street raised eyebrows when Disney CEO Robert A. Iger singled out the parks division as a “key growth engine” on an earnings conference call. Disneyland in Anaheim, California, has long been thought to be at its limits, with little room for expansion. As for Walt Disney World near Orlando, Florida, Iger said a legal battle between the company and Florida Gov. Ron DeSantis jeopardizes $17 billion in the resort’s expansion plans over the next 10 years. Given what I said was a possibility, there is a question mark. Disney’s overseas parks can sometimes struggle to turn a profit, with the exception of Tokyo Disney Resort, where Disney receives royalties but does not own the park.
On Tuesday, Disney offered a clearer picture of the opportunity it sees, which can only be described as huge. Disney continues to expand its parks domestically and internationally and build the Disney Cruise Line. This amount is double what Disney has spent on its parks and cruise lines over the past decade, a decade that saw significant increases in investment.
Over the past decade, Disney has opened Shanghai Disney Resort, more than doubled its cruise ship capacity, and hosted “Star Wars,” “Guardians of the Galaxy,” “Tron,” Spider-Man and “Avatar.” Added vehicles based on intellectual property such as. ” and “Toy Story” to domestic parks. Disney is also pouring money into parks in Paris and Hong Kong, with themed expansions tied to “Frozen” and other Disney films scheduled to open soon. She also has three ocean liners on the way, bringing the Disney fleet to her eight ships, and Disney is nearing completion of the fleet. new port On an island in the Bahamas. (Disney has already 1 private island port. )
If that’s what $30 billion can buy, imagine what $60 billion can buy you.
“There are far fewer limits to our park operations than people think,” Iger said in an email.
“If we don’t do anything more than what we’ve already committed to, the growth trajectory is very compelling,” he continued, referring to attractions and ships that have been announced but not yet operational. “The more we invest, the more we build, the more ambitious we get, the more we maintain quality and high standards, the more we use our most popular IP, the more powerful we become.”
Disney is ramping up investment after troubles in nearly every department. Cable television, including ESPN, is no longer what it once was as a result of cord-cutting, weakened advertising and rising costs of producing sports programming. Disney has had a disappointing summer at the box office, with ticket sales for films such as “Indiana Jones and the Dial” and “The Haunted Mansion” falling far short of expectations. The company’s Disney+ streaming service continues to lose money. Mr. Iger has said the company will be profitable by the fall of 2024, but some investors are skeptical.
Disney stock closed at $85 on Monday. The 2021 price was $197.
By contrast, Disney’s parks and cruise businesses are a bright spot and in many ways support the company as a whole. In the most recent quarter, Disney’s Parks, Experiences and Products operating income was $2.4 billion, an 11% increase from the year-ago period. Disney Media and Entertainment Distribution’s operating income was $1.1 billion, a decrease of 18%.
Spending per guest at Disney parks has increased 42% since 2019, in part due to higher prices for tickets, food, merchandise and hotel rooms.
“The stock is cheap given the quality of the park,” SVB MoffettNathanson analyst Michael Nathanson said Monday before the expansion was announced.
Still, increased investment in theme parks brings with it increased risk. Disney is a business that is always sensitive to factors outside of Disney’s control, such as economic fluctuations, gas prices, hurricanes, earthquakes, and tensions between the United States and China. Disney has significantly beefed up security, deploying masked guards and installing metal detectors, but these crowded resorts (Disney Parks drew an estimated 121 million visitors last year) ) could become a ghost town if violent incidents occur.
Josh D’Amaro, chairman of Disney Parks, Experiences and Products, said those who focus on these risks are overlooking the resilience of theme park fans. He noted that when Disney parks reopened during the pandemic, guests returned in droves.
“Each time there was a moment of crisis or concern, we were able to bounce back faster than anyone expected,” he said.
D’Amaro declined to say how the company plans to spend the $60 billion. But he offered a hint, noting that Disney movies like “Coco,” “Zootopia” and “Encanto” have yet to be meaningfully integrated into the company’s parks.
“Imagine bringing Wakanda to life,” he said, referring to the fictional “Black Panther” kingdom. “We have not even scratched the surface when it comes to bringing the latest Disney, Marvel, and Pixar intellectual property to our parks, and we have found that incorporating Disney IP provides a significant return on investment. Ta.”
D’Amaro noted that Disney owns 1,000 acres of undeveloped land throughout its existing theme park resorts. (Incidentally, he said, this is the size of seven Disneylands.) One of the biggest areas of opportunity, he said, has to do with the original Disneyland, which opened in 1955. Ta. Convince the City of Anaheim Disney plans to redevelop land adjacent to Disneyland and significantly expand production capacity, changing plans adopted in the 1990s that restricted where hotels, parking lots and attractions could be built. . Disney also plans to transform the parking lot on the south side of the park into a themed shopping, dining and hotel district.
Disney released a 17,000 page book Environmental impact study For last week’s project. The Anaheim City Council is expected to vote on the changes in mid-to-late 2024.
How much Disney invests in Florida could depend on the courts, where the company is battling Mr. DeSantis and his allies for control of Disney World’s growth plans. Enraged by Disney’s criticism of Florida’s education law, DeSantis in April ended the company’s long-held ability to govern the 25,000-acre resort as if it were a county. But Disney maintains that its previous agreement maintains its ability to control development.
“We want to continue to grow and invest, and we have ambitious plans for Florida,” D’Amaro said. “We hope that the conditions are right for us to do so in the interest of our guests, cast members, and Central Florida’s economy.” He declined further comment.
At this time, Disney has no plans to build parks in new countries or cities. (The company has previously considered building parks in India, for example, and expanding beyond Hong Kong and Shanghai in China.) Rather, the company is focused on developing new ports for its ships. will do.
Starting in 2025, the new cruise ship will be the largest in Disney’s fleet to date, accommodating more than 6,000 guests. Based in Singapore. Disney ships are becoming increasingly themed, with characters and artwork from series such as “Frozen,” “Star Wars” and Marvel’s Avengers incorporated into restaurants and entertainment zones.
“It’s like bringing a theme park to a new part of the world,” D’Amaro said of Disney Cruise Line, which was recently booked to 98% capacity.