Attendance Up / Investment Down

[Braque]

In a Reuters article today, Jay Rasulo states that though park attendance is up, investment in the parks will be limited:

LOS ANGELES, Feb 12 (Reuters) - Attendance at Walt Disney Co.'s (DIS) theme parks is improving and the company intends to limit investment in the destinations to improve profitability, the president of its parks and resorts division said on Thursday.

In a presentation to financial analysts at a company conference in Orlando, Florida, Jay Rasulo said travel trends were working in the company's favor.

Doesn't sound good to me.

 

[Luv2Roam]

No point in investing any more $ than you have to if you you soon won't be the owner.

 

[ddank]

yet we still want these people running the parks...??

 

[meowthew2]

It's good news in that it keeps the stock price going up, and thus makes the chances of Comcast buying Disney smaller.

 

[YoHo]

Assuming you think Comcast buying Disney is a bad thing.

 

[Chuck S]

1. We don't know if the trend for park attendance will continue...we can HOPE it will, but why increase reinvestment immediately...it is good to wait a few months to see if the overall tourism continues to climb.

2. Spending trends can't begin and end at the drop of a hat. It took a period of time for the parks to wind down and cut spending after 9-11, it will take awhile for the spending to again climb back up to "normal" levels...some of the losses from the costs of 9-11 must be recouped prior to increasing spending. Remember that security is already taking a bigger chunk of cash than prior to 9-11.

3. One of Roy's complaints was the depressed stock price, he should be THRILLED that the price of stock will go up, unless he happens to be the instigator behind the Comcast bid.

 

[Goofyposter]

yet we still want these people running the parks...??

no...some of us don't....but most of us would rather have an independent company, rather than to have it managed as a subsidiary of comcast - or anyother company.


Save Disney - VOTE NO

 

[Braque]

Originally posted by Chuck S
1. but why increase reinvestment immediately...it is good to wait a few months to see if the overall tourism continues to climb.

It was my understanding from reading the article that the reinvestment into the parks wasn't going to increase but decrease from the 'annual' investment planned.

I'll try to link to the article:
Reuters Article

 

[vernon]

No point in investing any more $ than you have to if you you soon won't be the owner

Jay Rasulo wouldn't have had all those figures ready if this was a reaction to Comcast's bid. IMHO this was the plan before Comcast came onto the scene, although I fully expect Eisner to try and spin it that way soon.

 

[raidermatt]

We don't know if the trend for park attendance will continue...we can HOPE it will, but why increase reinvestment immediately...it is good to wait a few months to see if the overall tourism continues to climb.

A little more detail from the article:

"We fundamentally believe that we can continue to drive and grow the business to our existing properties, which still (have) substantial growth opportunities ... with significantly below $1 billion a year in capital investment," he said. "We expect to keep capital spending in our domestic parks meaningfully below $1 billion a year for the foreseeable future."

Maybe its just me, but it doesn't sound like they are merely waiting for "things to get better".

This IS now the normal level.

One of Roy's complaints was the depressed stock price, he should be THRILLED that the price of stock will go up, unless he happens to be the instigator behind the Comcast bid.

The stock is up because the company is a takeover target... and it's only a takeover target because the stock has underperformed for years... (Please, nothing about it being up 20 some-odd percent last year... part of that was riding the crest of the market in general, part was due to an inevitable upturn when the economy improved, and the rest is nothing but a drop in the bucket compared to the lost opportunities of the last 10 years... hence the bullseye on Disney's back.)

 

[KMovies]

Part of the reason the stock was down for the past few years was the entire market was down as well. Even Coke hit a 7-year low, like many other companies.

 

[Chuck S]

"We expect to keep capital spending in our domestic parks meaningfully below $1 billion a year for the foreseeable future."

OK, so there's 6 parks - 4 WDW and 2 at DL...that an average of $166 Million per park in capital improvements per year - over 10 times the initial construction costs of Disneyland. When Walt was alive I don't remember Disneyland receiving "fantastic" improvements every year, either. The biggest change was the Tomorrowland redo in the 1960s following the world's fair. Prior to that we had such "stunning" attractions as Monsanto's House of the Future, movie props from 20K Leagues and the "flying saucers". Oh, and don't forget the Viewliner. Fortunately that was replaced by the monorail in 1959.

 

[raidermatt]

That would also include the two water parks, and maybe even the DTD's.

Even if each park got one new major attraction every year, that would be one very 6 years, without factoring in the water parks.

Hey, if you don't think the parks need new "stuff" with greater frequency in order to remain successful, you're entitled to that opinion. You could be right.

I think that in order to achieve growth, it will require more than that, particularly when you consider the issues with DCA, Epcot, and AK.

Also, remember that capital spending is not just new rides, it also includes benches, trees, restaurants, and many other things.

What we can say for sure is that this was NOT a decrease done as a temporary measure in response to the economy...something they will reverse as things improve.

 

[Braque]

"Capital Improvements" as a construction term, most often includes maintenance and repair projects. With an operation like Disney, I can see how you can spend 150 mil annually per park.

I think the key here is that they have been spending a billion/yr on improvements - now they are not going to be spending that much. So . . . if you thought 'peeling paint' and poor maintenance of attractions was bad show while they were spending a cool bil - what's gonna happen now?

 

[wtg2000]

"Capital Improvements" as a construction term, most often includes maintenance and repair projects.

According to the annual report regular maintenance and repair are listed under expenses and not capital improvements.

 

[Another Voice]

It's actually both. Items such as paint and the labor costs of the guys to sweep up the place are expensed, but any equipment repairs, fixes to track, replacing a roof - essentially anything that's permanent - become a capital expense.

Also included in the park's capital budget are things like office chairs, a new laptop for a guy in accounting, the company car for some misc. VP, the potted palms in the executive bathroom and all the stuff that the quests never see.

The vast majority (if not all of this spending) goes to what already exists or what you never see. That "...an average of $166 Million per park in capital improvements per year - over 10 times the initial construction costs of Disneyland"!!! is completely misleading.