FYI: More Cuts Coming

[starjazz]

The expansion will be nothing but a construction project for years. Some things have been closed for months already and I don't think there's much construction even under way yet.

Those construction projects take workers and money. I'm not sure what's been done physically, but I can tell you there are a lot of expenses leading up to ground breaking. Obviously even more once that happens.

 

[mom2rtk]

Those construction projects take workers and money. I'm not sure what's been done physically, but I can tell you there are a lot of expenses leading up to ground breaking. Obviously even more once that happens.

Not an expert here, but I'm guessing those are totally separate budgets.

 

[mom2rtk]

You'd think that maybe they'd slow down some of the expansions like River of Lights, Norway, Star Wars Land, Toy Story Land, and Pandora since the immediate impact to guests wouldn't be there. I mean, long term they're spending a ton of money for these expansions. Short term, they're cutting back on painters. Seems odd.

Slow down? EEK.

 

[Enjoying Life]

The reason it takes Disney 5 years to change a light bulb is so the associated costs can be spread out over many earnings reports, keeping the bottom line up, and keeping those hefty dividend checks rolling in. Their projects take years, when they should take months. This is by design.

 

[starjazz]

Slow down? EEK.

I know, I know...right. They take long enough as it is. But I guess I'm just saying I'd rather they stop spending on what I can't see, than stop spending on what I can see. Especially if its only temporary until Shanghai gets going.

 

[rteetz]

The expansion will be nothing but a construction project for years. Some things have been closed for months already and I don't think there's much construction even under way yet.

You don't think there needs to be some "give back" in the parks for the years so many things are under construction? Remember WDW specializes in once in a lifetime guests. Many of them will never be back to see the expansion. Disney didn't lower admission prices. They needed to be adding some things for current guests.

Nope nothing much happening in terms of construction except for the demolition of catastrophe canyon in the backlot. They are clearing warehouses as well back there but that is it.

 

[rteetz]

You'd think that maybe they'd slow down some of the expansions like River of Lights, Norway, Star Wars Land, Toy Story Land, and Pandora since the immediate impact to guests wouldn't be there. I mean, long term they're spending a ton of money for these expansions. Short term, they're cutting back on painters. Seems odd.

Well if you look at how Disney does construction projects they spread them out over multiple fiscal years so they don't pay for them all right away. This saves them money as well in the long run. They are also cutting back on more than painters, WDI has been given some stern warnings and the former head of imagineering was let go. WDI has big budget problems.

 

[mshanson3121]

Even Wall Street is commenting on how bad a move this is. Considering they recently announced their previous quarterly earnings report. The report wasn't good. It was great. In fact, the earnings for last quarter broke all company records. They earned more money in the last three months than any time in the company's 93 year history. The theme park division did exceptionally well with operating profits jumping by 22%. Wall Street is calling it a big mistake to raise ticket prices and cut services in the midst of record profits and soaring attendance.

From a recent financial article:
“You don't normally see a company scramble to cut costs when margins are widening, especially in a consumer-facing industry where the measures can result in a reduction in guest satisfaction.”

And:
“If guest satisfaction suffers as a result of understaffed service or shortened attraction times of availability it could make people less likely to visit Disney World.”

Remember the old Wall Street saying: Pigs get slaughtered.

http://www.msn.com/en-us/money/tops...g-costs-at-the-worst-possible-time/ar-BBpFB9H

Ah. This was released yesterday. So, today's announcement of the SW stuff makes sense - when Wall Street starts publicly criticizing you... time to do some PR damage control.

 

[rteetz]

Those construction projects take workers and money. I'm not sure what's been done physically, but I can tell you there are a lot of expenses leading up to ground breaking. Obviously even more once that happens.

Construction and operational budgets are separate. Construction projects are also all contracted out Disney doesn't do actual construction they only do design work.

 

[starjazz]

Ah. This was released yesterday. So, today's announcement of the SW stuff makes sense - when Wall Street starts publicly criticizing you... time to do some PR damage control.

I suppose they just keep nice announcements like this in their back pockets until some bad press comes out, and then BAM! There goes a squirrel!!

 

[JimmyV]

Me:

It is a mistake for a company to be tone deaf to the chatter or blind to the optics, known or not. It is simply a very, very bad idea for a company to announce record profits on a Monday and layoffs on a Tuesday (followed soon by price increases). A good business leader has to figure out a better way to attack the problem, assuming that there is one. Optics do matter. You are correct that we don't know everything, or even much. And yes, we have our educated guesses. But it is shortsighted to not take those into account. The WDW cuts coming so soon after the quarterly earnings report was simply dense...

Will these changes impact the overall enjoyment of the visit? Since the day it opened, people have trumpeted the "little things" that set WDW apart. And it is exactly these little things that are being cut without replacement.

Motley Fool:

It's a move that is "out of sync" according to the rep, and it may seem odd at a time when the parks are presumably expanding to accommodate growing attendance levels...

You don't normally see a company scramble to cut costs when margins are widening, especially in a consumer-facing industry where the measures can result in a reduction in guest satisfaction...

In a grim scenario that isn't entirely farfetched we could see the reported cost cuts at Disney World -- and Disneyland -- make matters even worse. If guest satisfaction suffers as a result of understaffed service or shortened attraction times of availability it could make people less likely to visit Disney World...

There's never a good time to issue layoffs and turn trim the hours of existing works, but it certainly looks bad at a time when margins are increasing and ticket prices are likely to follow suit.

It would have been nice to receive credit in the article, but I'll still take it as vindication.

 

[sachilles]

I hope to H E double hockey sticks the article isn't referring to the threads on this board for the hard hitting info. I hope nobody is making financial decisions based on it.

 

[Robo]

There is change a-comin'.

 

[alvernon90]

I can't help but think this is an issue of the parks being loved to death. Disney knows that people are crazy loyal to these parks -- that's why they keep expanding DVC. There is a hardcore customer base out there that will keep coming back every year no matter how much they increase prices and no matter how much they cut the experience.

My fear is that this is a permanent death spiral for WDW. Disney makes cuts when times are good and makes deep cuts when times are bad. I do not foresee a day when Disney decides that they need to start improving the customer experience to win back their customers. Restaurants will remain closed. Bathrooms will remain filthy. Rides will remain closed. Park expansions will remain underwhelming. The Sixflagsification of WDW, like global climate change, is already so far underway that it cannot be stopped anymore.

 

[Budshark]

It makes for good click bait (which Motley is known for).

The only people who know the full picture wouldn't be the ones talking. By the time you reach the folks who will/do talk, you have people who only see one side of the equation and don't have the whole picture. When you only have partial information - you get outlandish rumors and theories that make no sense at all. And then people run with them - including "trusted" sources like news organizations. But we have all seen where those turn out to be false.

So what am I saying (since its twilight zone day):
- I believe Disney cut labor budgets.
- I believe those will be seen by guests in some way shape or form.
- I don't believe this is the ONLY plan as is being implied.

Why don't I believe this is the only plan?
As we all agree, it would be astronomically stupid for a multi-billion dollar company to take a profitable division that is public facing, cut its funding by 20% (just cut, flat out, no redistribution), pocket a handful of coins (Millions in labor savings is a handful in Disney profit speak). So, lines get longer, rides become run down, magic fades, and reliable customers leave - all for a small bump in earnings. That doesn't even make logical sense.
Therefore;
I conclude Disney is not run by a bunch of bumbling idiots bent on demoting the brand. I suspect (MY THEORY, NO FACTS BECAUSE I'M NOT ON DISNEY'S BOARD) that this is one visible side of a multi-faceted plan that is designed to... gasp....
Increase the perceived value, brand image, and overall desirability of Disney Theme Parks. And it doesn't come without change. And without knowing the whole plan until it plays out its illogical to judge.

Will restrooms get dirtier? Will more paint chip/fade? Is it possible lines might get longer? Maybe. I've personally seen some of those things myself and been frustrated by them. Do I believe Disney cut labor in non-revenue areas by 20% in order to pocket the couple million as pure profit? No. I think its part of a larger redistribution of funds in the parks. Some things go down, some things go up. I'm willing to guess (GUESS) the overall budget for WDW goes up in 2016... despite these changes.

 

[hopemax]

I wouldn't get too excited about any Motley Fool articles and claiming "Wall Street sees." Rick Munarriz has been writing articles about Disney's bad habits for as long as I've been around the Disney sites around the internet, so back to late 1990's. We've seen what little good that has accomplished. He's likely as frustrated as the rest of us, of how much stays limited to the echo chamber and not the bigger financial world. But it's hard to argue against the #1 Most Powerful Brand, who just reported record earnings. Your head will be the one chopped off, not any harder looks at Disney's actual operations. "Disney knows what they're doing" is a simple thought that allows people to move onto other things. And then someday everyone wails about how "nobody saw this coming" when industry leaders find themselves...not.

 

[eliza61]

I hope to H E double hockey sticks the article isn't referring to the threads on this board for the hard hitting info. I hope nobody is making financial decisions based on it.

Depends on what you call "financial". I made the decision (reaffirmed by this announcement) to skip Disney until they start offering a better product. considering I generally spend between 2K-4K annually on a vacation, that's a big savings, that's pretty financial

 

[rteetz]

I hope to H E double hockey sticks the article isn't referring to the threads on this board for the hard hitting info. I hope nobody is making financial decisions based on it.

No the fool does use wdwmagic though.

 

[alvernon90]

I conclude Disney is not run by a bunch of bumbling idiots bent on demoting the brand.

I am not at all certain this is a safe conclusion. They may not be intentionally destroying the brand, but they make intentional actions which are indifferent to the brand, until the pain is so bad that they have no choice but to pony up and fix things. Exhibit A: Disney California Adventure.

 

[Budshark]

I am not at all certain this is a safe conclusion. They may not be intentionally destroying the brand, but they make intentional actions which are indifferent to the brand, until the pain is so bad that they have no choice but to pony up and fix things. Exhibit A: Disney California Adventure.

In a public company there is a balance between the finances and brand management. They will certainly as you say "push the limits", and cash will win out over "brand building" more times than not. That is the pitfall of the public company in today's world.

However, the Board and Executives are tied to successful brand building and profit growth. There are very few exceptions to this, and even those (over time) lose the "we're here for the brand". The biggest problem today is the unreasonable demands on growth is causing negative brand impacts to be more acceptable - its not just a Disney problem. But its not as one sided as it seems. The negative gets the press... the positive? Meh... not so much. Record profits? Record revenue? A thing of the past. Why? Because clearly by slashing payroll from the parks these folks don't know what they are doing. Evidence would say otherwise if you measure by business/company success. If you measure by individual Disney fans feeling less pixie dust? Well you might have a different opinion (and these boards would indicate you likely have one).

By the way... that includes me after my recent trip. I have a different opinion of Disney than I did 5 years ago.