Attendance Down, Revenue Up

[JimmyV]

This seems odd. As others have stated, the days the parks actually close to capacity can be counted on one hand. Secondly, if Disney themselves are confirming what some of us have been speculating all along, that attendance is down, the only reason crowds are an issue is because of FP+ and lowered capacity; two things that Disney has thrust upon guests.

The more I think about this, the more I am drawn to the conclusion that it is not "attendance" that Disney is concerned about, but "crowding". While the latter is certainly a function of the former, it is also a function of ride allocation strategies and attraction closures. Disney is not about to do anything about its (multi)billion dollar baby in terms of ride allocation. And it is working on closures and expansion. So the only thing it can do in the meantime to take the pressure off of "crowding" is to try to redistribute crowds through tiered pricing (which it already did), and to try to convince fewer people to come for a while until construction walls come down. So perhaps the imagineer who professes to know that price increases were designed to decrease attendance was revealing a very short term (and in my view, stupid) strategy to keep the parks "liveable" until DHS becomes the next big thing in theme park history.

As an aside, remember when we were told that FP+ was going to be revolutionary in that it would allow guests to get "surprise" FPs sent to their phones, and that this would be an ingenious way for Disney to redistribute crowds? Too many people in Fantasyland? Blast a bunch of them with extra FPs at BTMRR or Splash and get them to move over to Frontierland. How is that working out? Kind of hard to do that when all the FPs are gone by the time you get into the park that day.

 

[mom2rtk]

The more I think about this, the more I am drawn to the conclusion that it is not "attendance" that Disney is concerned about, but "crowding". While the latter is certainly a function of the former, it is also a function of ride allocation strategies and attraction closures. Disney is not about to do anything about its (multi)billion dollar baby in terms of ride allocation. And it is working on closures and expansion. So the only thing it can do in the meantime to take the pressure off of "crowding" is to try to redistribute crowds through tiered pricing (which it already did), and to try to convince fewer people to come for a while until construction walls come down. So perhaps the imagineer who professes to know that price increases were designed to decrease attendance was revealing a very short term (and in my view, stupid) strategy to keep the parks "liveable" until DHS becomes the next big thing in theme park history.

As an aside, remember when we were told that FP+ was going to be revolutionary in that it would allow guests to get "surprise" FPs sent to their phones, and that this would be an ingenious way for Disney to redistribute crowds? To many people in Fantasyland? Blast a bunch of them with extra FPs at BTMRR or Splash and get them to move over to Frontierland. How is that working out? Kind of hard to do that when all the FPs are gone by the time you get into the park that day.

You mean by like..... unblocking certain APs over a busy holiday weekend, then contacting guests and asking them to choose a park other than the MK?

And yes, I recall those "surprise and delight" discussions. I guess they figured out they didn't have enough capacity to work with after all.

 

[jade1]

The more I think about this, the more I am drawn to the conclusion that it is not "attendance" that Disney is concerned about, but "crowding". While the latter is certainly a function of the former, it is also a function of ride allocation strategies and attraction closures. Disney is not about to do anything about its (multi)billion dollar baby in terms of ride allocation. And it is working on closures and expansion. So the only thing it can do in the meantime to take the pressure off of "crowding" is to try to redistribute crowds through tiered pricing (which it already did), and to try to convince fewer people to come for a while until construction walls come down. So perhaps the imagineer who professes to know that price increases were designed to decrease attendance was revealing a very short term (and in my view, stupid) strategy to keep the parks "liveable"

I agree, crowding is probably the correct term.

until DHS becomes the next big thing in theme park history.

Should be awesome, AK might be surprisingly good as well.

Kind of hard to do that when all the FPs are gone by the time you get into the park that day.

I just got shivers after reading that, from the old days.

 

[HopperFan]

Well ................ we all know that corporations can work the math and since Disney never releases attendance records ........ we don't know what is really true.

The official report is very very vague and really gives no basis or info as to how they determined this:

"Attendance at our domestic theme parks was relatively flat, as an increase at Disneyland Resort was offset by a modest decrease at Walt Disney World Resort."

I travel to WDW this time of year, I don't believe them. I feel it's an announcement to encourage those looking for slow times to travel, and some creative math for accounting purposes. I'm almost on the side of RoL being delayed for the same reasons.

 

[cdnSpinalTap]

I guess it depends on your perspective. From their point of view, the plan is working - revenues and EPS are up.

Note that this is not a comment on whether I like the changes or not - I'm just saying that if their goal was to increase revenue and profits, they have succeeded (at least in the time sample that the report would cover). Disney will take note if/when attendance is down enough that it adversely affects revenue and EPS.

I am a business owner and we have always said that you get 80% of your revenue from your reoccurring or existing customers. As a matter of fact, we have built entire models and ways of doing business to understand what our existing customers want and build custom solutions for them. This is way less costly and more effective than trying to get a net new customer. I suspect Disney is doing some of the same.

 

[whiporee]

I believe it is Brazil.

 

[Mikie]

Oh, and for anyone who thought they'd see the reversal of cutbacks in park operations at the end of the quarter? Stop snorting the pixie dust.

Is that the prediction? I was thinking people were predicting the cutbacks to lighten up (I have NO expectation of any prices going back down) when Shanghai opens and starts to bring in its own revenue - isn't that June, so another quarter to go? I certainly have no prediction one way or the other, but I'd be happy to hold on to that as a glimmer of hope for a bit (before I get smacked in the face with a reality that this is just the new business model)

 

[Mikie]

I guess it depends on your perspective. From their point of view, the plan is working - revenues and EPS are up.

Note that this is not a comment on whether I like the changes or not - I'm just saying that if their goal was to increase revenue and profits, they have succeeded (at least in the time sample that the report would cover). Disney will take note if/when attendance is down enough that it adversely affects revenue and EPS.

I am a business owner and we have always said that you get 80% of your revenue from your reoccurring or existing customers. As a matter of fact, we have built entire models and ways of doing business to understand what our existing customers want and build custom solutions for them. This is way less costly and more effective than trying to get a net new customer. I suspect Disney is doing some of the same.

Well, it didn't reduce revenue or EPS, but both missed analyst expectations, which I always think is a bit goofy but is actually more important to stock prices than the numbers themselves.
I completely agree with your analysis and approach regarding retaining customers, but what about the prices/attendance do you think fits this mold?

 

[BeerMe]

I believe it is Brazil.

I wonder about that too.

 

[mom2rtk]

Well ................ we all know that corporations can work the math and since Disney never releases attendance records ........ we don't know what is really true.

The official report is very very vague and really gives no basis or info as to how they determined this:

"Attendance at our domestic theme parks was relatively flat, as an increase at Disneyland Resort was offset by a modest decrease at Walt Disney World Resort."

I travel to WDW this time of year, I don't believe them. I feel it's an announcement to encourage those looking for slow times to travel, and some creative math for accounting purposes. I'm almost on the side of RoL being delayed for the same reasons.

Aren't there rules about honesty in reports like this? Vague is one thing. Misleading information is another.

 

[DougEMG]

Disney just announced it's quarterly earnings report, and it shows that theme park attendance is down but revenue is up. This is a result of higher prices.

“The parks and resorts division's revenues increased 4 percent but that was because of higher per-guest spending - pricier tickets, higher spending on merchandise and higher hotel room rates”

http://www.orlandosentinel.com/business/tourism/os-disney-earnings-20160510-story.html

parks seem awful crowded with current attendance.

 

[connie1042]

I hope it is people getting sick of Disney charging more for less.

 

[Mikie]

Aren't there rules about honesty in reports like this? Vague is one thing. Misleading information is another.

They do have auditors who verify the numbers and compare the verbiage to numeric results to make sure it's accurate. I won't say there isn't room for some fuzzy language, though. I.e. They could have a bit of leeway in what they call "relatively" or "moderately", but they wouldn't get away with claiming flat if it had notably increased, or claiming decrease if it was actually flat or up.

 

[DougEMG]

I think if there is any one factor that is really keeping more of the general public away than before, it isn't lack of investment, firing American employees, or even somewhat higher prices: it's the increasingly relentless crowds. Read the one-star and two-star reviews of WDW on Trip Advisor (that's where the general public shares their opinions of Disney online). The negative reviews focus overwhelmingly on how bad the crowds are and the line waits are, and therefore just not getting to do half of what was available. WDW is going to have to get a handle on the crowd situation, one way or another, to keep their parks attractive long term. Maybe this news is an indication that they've found one way to do it, even if it's not the way we'd prefer.

I just responded to a survey from Disney last week and there were a bunch of questions around if you would recommend WDW to friends. I said I would not recommend to others to visit WDW because of the crowds.

 

[kyomagi]

yet revenues up

"Parks and Resorts revenues for the quarter increased 4% to $3.9 billion and segment operating
income increased 10% to $624 million."

 

[DLgal]

I have a very good friend whose dad is an imagineer and was talking to her a couple days ago about all the price increases. She told me her dad says the main reason is to try to lessen crowds...that they do not like reaching capacity and having to close gates. People who spend tons of time and money on a big WDW vacation are of course not pleased to go to the parks and be told they can't go in. She said Disney does see that as a major problem...would maybe explain why they were calling people over Easter to ask them to go to a park other than MK?

I just wonder how high prices would have to go for people to actually stop going (paying).

I told my friend that as long as they keep selling multi day tickets and annual passes, the crowds will continue to be a problem. I really think that if EVERYONE had to buy a 1 day ticket, every time, that is the ONLY way you will see lower crowds.

 

[cdnSpinalTap]

I completely agree with your analysis and approach regarding retaining customers, but what about the prices/attendance do you think fits this mold?

It's hard to say really because we have no way of knowing if the reduced attendance number was a reduction in repeat customers or a reduction in first time customers. In my businesses it's easier to raise prices with existing customers as long as they continue to see value in what you provide - we strive to get all of our customer to this "Customer for Life" point. I suspect a lot of repeat Disney customers would fall into this category (granted, by reading DIS, some of that perceived value is eroding). It's a lot harder to bring in a new customer if your prices are high, as they have no allegiance and will shop around for other alternatives. Existing customers that you have built a trusted relationship with will have a harder time moving to alternatives. I know, Economics 101 but just mentioning it here to emphasize my point.

Again - just let me caveat all of this - I am not saying that I like or agree with everything Disney is doing. I'm just looking at it from a another perspective. Like I have said in other threads - I am a definite repeat customer and a Customer for Life with Disney. They have a lot more leeway with me in terms of price increases, than say Universal Studios.

 

[DLgal]

I'm sorry but I'm not buying that storyline. Either that or they are a major company in conflict. Or maybe the right hand just doesn't know what the left hand is doing.

A company trying to reduce crowds does not lift blackout dates on some local annual passes leading up to Easter, one of the peak seasons of the year.

If they're trying to lessen crowds, why offer all the discounts this summer? Why offer free dining? Why continue to invest in prime time advertising?

There might be factions of the company that want to lessen crowds. Perhaps they feel it lessens the product they put out there. I could definitely see that being a desire of an Imagineer. But the people making the big decisions are going a different direction with it.

My friend is in a different segment of the company, but they are ALL being told the same thing re: price increases are a crowd control attempt, from higher up. In fact, the department my friend works in is VERY much interested in lowering crowds....and they have a LOT of influence to make other departments generate ideas to do so.

 

[mom2rtk]

My friend is in a different segment of the company, but they are ALL being told the same thing re: price increases are a crowd control attempt, from higher up. In fact, the department my friend works in is VERY much interested in lowering crowds....and they have a LOT of influence to make other departments generate ideas to do so.

Someone should tell the marketing department.

Seriously though, if you're talking about DLR, I can imagine that's another creature. I imagine they have been trying hard to reduce AP crowds. But I would also suspect that would be so that they could make room for selling more day passes.

 

[wisblue]

They do have auditors who verify the numbers and compare the verbiage to numeric results to make sure it's accurate. I won't say there isn't room for some fuzzy language, though. I.e. They could have a bit of leeway in what they call "relatively" or "moderately", but they wouldn't get away with claiming flat if it had notably increased, or claiming decrease if it was actually flat or up.

Agreed.

The thing I would like to know (but never will) is how any recent decrease in attendance breaks down by park. It is possible that the "modest" overall decrease results from lower attendance at some parks and less of a decrease (or even an increase) at MK.