Earning's Call - Destination Disney

[larworth]

I didn’t see anyone comment on last week’s earnings conference.

They still seem very bullish on their 25% earnings growth. While asked several times now, they provide little substance on what unit/factors will drive this growth. My guess as to what they are expecting:

They claim the 2003 slate of movies is solid. However, I can’t see them willing to “guarantee” much here. They must be a little gun shy about past predictions to go out to far on this limb. Consumer products are growing nicely, but still a small piece of the pie. (say combined these give 5% growth).

ABC is now around break-even. They believe “reality” programming (yes there will be more and more of it), and a better ad market will put them in the black. Cable profitability will improve later in the year given how costs are structured (these give 10% growth).

Park attendance returns to 2001 levels, with higher margins given all the cuts they have made (this adds the final 10%). ME even commented how maniacal Iger has been about securing cuts across the entire business.


Park Comments:

Last quarter’s attendance was very strong with a healthy return of international visitors. They did express some concern about this current quarter, which they believe is War related.

It’s MARKETING stupid.

They restated their focus will be on marketing for all their parks. Here was some interesting insight around Destination Disney. This was the case they presented to the analysts:

75% of WDW guests are repeaters. 30% of these guests arrive in Orlando with tickets already purchased. They believe that pre-purchasing of tickets results in people spending almost 2 more days at Disney than other Orlando tourist options! They expect Destination Disney will drive this pre-purchase of ticket percentage up to much higher levels; thereby getting an bigger share of the average visitors length of stay.

ADDENDUM:

Someone did ask what were they planning to put into the parks over the next couple of years. ME's answer:

"The Space Pavilion at Epcot center opens this Fall. We think this will be a big driver of and revitalization of Epcot....not the revitalization... the continuing strength".

In 2004 we have ToT, a strong element for us in Florida. When this opens with Aladdin, Bug's Land, and ToT, DCA will be.....really strong"

"Rest of the attractions are relatively small, not E level. I don't think I want to go into that right nowl"

That's cause there's not anything else to say.

 

[raidermatt]

I've listened now and will try to comment later...

One thing for now:

"The Space Pavilion at Epcot center opens this Fall. We think this will be a big driver of and revitalization of Epcot....not the revitalization... the continuing strength".

That's one reason why I like listening to these things, they usually let SOMETHING slip out that is not the official line...

 

[Luv2Roam]

Good thing he wasn't forced to list the empty buildings or closed attractions. He would have had more to say!

 

[larworth]

The "revitalization" slip was a good one. He cleary had no desire to admit there are any chinks in the armor. At least we know internally he knows there is a problem.

Now, if they would just start doing something about it. Sounds like the plan is to see if M:S gives them enough of a bump in attendence that they can push off starting on the fix for a couple more years. Of course, by that time the problem will just be that much bigger and take that much longer to resolve.


I was surprised to hear them say that getting people to buy tickets in advance has such a big impact on their itinerary - almost 2 extra Disney days!!

It always seemed like being able to buy tickets at the Disney Store was more a courtesy feature. If pre-purchase was that important, couldn't they have done more to use this outlet (discounts, advertising, etc)??

 

[d-r]

I always thought that the reason that they pushed so hard for buying tickets "before you leave home" was so that lines would be lower at wdw, lowering staff costs and upping guest satisfaction, but I guess the two extra days is part of it. I think this sounds more like correlation than causation though; I suspect that those guests who are so into disney that they will know to buy tickets, or think to, in advance, probably also happen to be those guests who will stay there longer. These are the guests who have a plan to "go to walt disney world" as opposed to the guests who have a plan to "go to Florida." It isn't clear to me how buying the tickets in advance would *cause* someone to stay longer; I guess that the tickets would be multiple day and require planning on going to wdw in advance so that could be causal, I suppose.

DR

 

[raidermatt]

It isn't clear to me how buying the tickets in advance would *cause* someone to stay longer; I guess that the tickets would be multiple day and require planning on going to wdw in advance so that could be causal, I suppose.

Probably a couple of things at work here. The main piece is probably that the first things people do is book their trip and get their airfare.

If they are booking for 7 nights, it follows that they would get a 7 day park ticket. Most have probably not done a lot of research with regard to other Orlando-area activities, so they go with the 7-day hopper, or UPH. Once they get to that point, any off-site activity becomes a case of "yeah, but we already have WDW tickets...", so they are more likely to balk at off-site activities. Those who wait to purchase tickets are more likely to find other things they want to do.

Last quarter’s attendance was very strong with a healthy return of international visitors. They did express some concern about this current quarter, which they believe is War related.

I think they are over-playing the war card, as I don't really think many people have been holding off on vacations over the last couple of months because of a possible war with Iraq.

They reported a 12% increase in DLR attendance, and a "modest" increase at WDW. International was up 17% at WDW, and by "more than that" at DLR. Occupancy and rates were up "single digits" at WDW, and "high single digits" at DLR.

Honestly though, I didn't think these numbers were reason to be overly optimistic, given the quarter they were being compared to, Oct-Dec '01. They economy and tourism maybe sluggish now, but it was worse then. They were quick to note the economy and 9/11 as causes for decreases in 1Q '02, However, I didn't note any comments on improvements in these outside areas being responsible for the 1Q '03 improvements.

If I interpreted right, they said that reservations on the books are down for the current quarter, and that the advance booking window remains short. They noted that this has been the case for the last year, but they have recently been getting very nice "fill-in" attendance and occupancies. They were careful to note that while this has been true recently, they could not extrapolate into the future.

Few other blurbs:

No mention was made of Philharmagic, despite being asked about new attractions.

Eisner said M:S had a "Fall '03" opening date.

DCA will be "strong" after ToT.

Encouraged relationship with Pixar can continue beyond the three yet to be released films, but not a slam dunk. Not in a hurry.

Pooh- Not much new to report, though they did hint at the motion that was filed later in the week with regard to "stolen" documents. Looking at settlement opportunities, but nothing promising.

Princess merchandise sales continue to rise. Power Rangers, Digimon, and Disney Classics also strong.

In 2002, ESPN had 18 of the top 20 rated cable broadcasts.

While reality shows continue to be strong, see scripted shows as key to long run success for ABC.

Said marketing campaigns would bring DLR into the public's consciousness as a multi-day resort.

Toon Disney had a 31% increase in subscribers, Soap Net 17%.

DVD sales continue to grow, and have higher margins than VHS.