Iger: Disney will Dial Back on Park Discounts in Latter Part of 2010

[WDWKOOK]

FEATURED, JASON GARCIA, NEWS — BY JASON GARCIA ON DECEMBER 9, 2009 AT 10:52 AM

The top executive at the Walt Disney Co. said this morning that he expects his company’s theme parks will scale back discounting during the second half of 2010, though he acknowledged that “we don’t know when we will essentially be able to turn it off.”

Disney Chief Executive Officer Bob Iger noted that the promotions Disney’s parks are currently offering – including another buy-four-get-seven hotel-night offer at Walt Disney World – are slightly smaller than deals they offered earlier this year, when the global recession was at its worst.

“We’ll be able to continue to dial that back over the latter part of 2010,” Iger told financial analysts at the UBC Media and Telecommunications Conference in New York.

Since the beginning of this year, Disney has been using a series of deep discounts at its theme-park resorts – on hotel rooms, food, tickets and more – to keep attendance afloat amid an overall slump in travel and tourism.

While the company has relied on promotions to prop up attendance during previous downturns, it has not before used them for such an extended period of time.

The strategy has kept Disney World and Disneyland in Anaheim, Calif., full, which Disney executives say helps ensure continued word-of-mouth marketing and leads to return trips. But it has eroded margins: Operating profit at Walt Disney Parks and Resorts sank 25 percent during the company’s 2009 fiscal year, which concluded Oct. 3.

Some analysts have expressed concern that the strategy may lead to a permanent expectation of discounts among Disney customers, which would make it difficult to return to full prices without harming attendance. Some also worry that the promotions have simply cannibalized future attendance by luring people who were planning to take trips later.

Iger, as he has before, dismissed both concerns. He said, for example, the promotions have attracted new customers who would not otherwise have visited a Disney park.

“We’re not concerned about weaning ourselves and the marketplace of the discounts,” Iger said.

Still, Iger declined to predict when Disney might be able to stop discounting entirely. Tourism-industry experts have been watching for indications that Disney is preparing to pull back its promotions as a likely sign of improvement in the broader travel market.

Iger said it is difficult to make long-term predictions right now because travelers are not planning trips far in advance. “Visibility well into the year is very limited,” he said.

“It’s just not a market that lends itself to long-term commitments or early buying,” Iger said.

 

[melancholywings]

Some analysts have expressed concern that the strategy may lead to a permanent expectation of discounts among Disney customers, which would make it difficult to return to full prices without harming attendance. Some also worry that the promotions have simply cannibalized future attendance by luring people who were planning to take trips later.

Iger, as he has before, dismissed both concerns. He said, for example, the promotions have attracted new customers who would not otherwise have visited a Disney park.

I think they are both right. I know for my family we couldn't afford to go to Disneyland until they did the Kids fly, Play, Stay free deal. But after that we were hooked, and went to land once more and world twice in a very short time. We're also planning on other Land/World trips in the future.

But I also expect a promotion. When spending so much for a packaged deal I want it to be fun, with a theme and a feeling that i'm being rewarded. The theme really drives us to want to go back over and over again - to experience something new.

 

[eliza61]

FEATURED, JASON GARCIA, NEWS — BY JASON GARCIA ON DECEMBER 9, 2009 AT 10:52 AM

The top executive at the Walt Disney Co. said this morning that he expects his company’s theme parks will scale back discounting during the second half of 2010, though he acknowledged that “we don’t know when we will essentially be able to turn it off.”

Disney Chief Executive Officer Bob Iger noted that the promotions Disney’s parks are currently offering – including another buy-four-get-seven hotel-night offer at Walt Disney World – are slightly smaller than deals they offered earlier this year, when the global recession was at its worst.

“We’ll be able to continue to dial that back over the latter part of 2010,” Iger told financial analysts at the UBC Media and Telecommunications Conference in New York.

Since the beginning of this year, Disney has been using a series of deep discounts at its theme-park resorts – on hotel rooms, food, tickets and more – to keep attendance afloat amid an overall slump in travel and tourism.

While the company has relied on promotions to prop up attendance during previous downturns, it has not before used them for such an extended period of time.

The strategy has kept Disney World and Disneyland in Anaheim, Calif., full, which Disney executives say helps ensure continued word-of-mouth marketing and leads to return trips. But it has eroded margins: Operating profit at Walt Disney Parks and Resorts sank 25 percent during the company’s 2009 fiscal year, which concluded Oct. 3.

Some analysts have expressed concern that the strategy may lead to a permanent expectation of discounts among Disney customers, which would make it difficult to return to full prices without harming attendance. Some also worry that the promotions have simply cannibalized future attendance by luring people who were planning to take trips later.
Iger, as he has before, dismissed both concerns. He said, for example, the promotions have attracted new customers who would not otherwise have visited a Disney park.

“We’re not concerned about weaning ourselves and the marketplace of the discounts,” Iger said.

Still, Iger declined to predict when Disney might be able to stop discounting entirely. Tourism-industry experts have been watching for indications that Disney is preparing to pull back its promotions as a likely sign of improvement in the broader travel market.

Iger said it is difficult to make long-term predictions right now because travelers are not planning trips far in advance. “Visibility well into the year is very limited,” he said.

“It’s just not a market that lends itself to long-term commitments or early buying,” Iger said.

Of course it will. That's the problem Department stores are running into now. Every week the stores were running sales until now people don't shop unless their is one.

My concern is that Disney has also cut back on quality. Any one who knows me, knows this has been a sore spot with me for the last year.
Food is mediocre
cuts in entertainment (remember when you would get a live preshow like 4 for a dollar)
cuts in Fantasmic
Cuts in mousekeepers

Would I pay full price for Disney quality as it stands today. No way, Jose.

 

[WDWKOOK]

My concern is that Disney has also cut back on quality. Any one who knows me, knows this has been a sore spot with me for the last year.
Food is mediocre
cuts in entertainment (remember when you would get a live preshow like 4 for a dollar)
cuts in Fantasmic
Cuts in mousekeepers

I share your sore spot.

Even with the discounts, you are paying more even if your actually OOP expense is the same:

WDW has cut the quality of its meals. Most notable to us on our last visit was the meat at Le Cellier and the even lower quality of meat at what used to be a must-do dinner for us, San Angel Inn (we won't be returning).

Meal portions have steadily been reduced.

Menu choices have been reduced. The menus just aren't what they used to be.

Remember those chocolates after dinner at Epcot? Gone.

Iger is not facing reality if he thinks WDW can recover from a 25% reduction in operating profits by cutting or eliminating discounts. If he admits that the
promos encouraged more first-timers and it obviously did the same for repeat guests, then how can cutting the promos possibly encourage more first-timers to visit and entice repeat guests? If the quality has gone down, as it has, and you cut the discounts, then what is left to push those reluctant repeat guests into booking?

 

[WDWKOOK]

This article (which is also on the News and Rumors thread) juxtaposes nicely with the Iger article:

Analyst predicts Disney’s U.S. attendance will fall 3 percent in ‘10
FEATURED, JASON GARCIA, NEWS — BY JASON GARCIA ON DECEMBER 11, 2009 AT 10:34 AM

Combined attendance at Walt Disney World and Disneyland will fall 3 percent over the next year, according to a new estimate by a Wall Street investment firm, as the resorts cut back on the discounts they have been using to lure travelers in a difficult economy.

“We expect the company to eliminate some of its promotional pricing in 2010, resulting in a 3 percent decline in total U.S. attendance,” Michael Morris, an analyst with UBS Investment Research, wrote in a note to investors issued this morning.

The forecast comes two days after Walt Disney Co. Chief Executive Officer Bob Iger, speaking at a media conference organized by UBS, said he expects Disney’s parks to scale back promotions during the latter part of next year.

Discounting drove combined attendance at Disney World and Disneyland up 2 percent during the company’s 2009 fiscal year, which ended Oct. 3, despite the deep global recession. Attendance was flat in Orlando but up 7 percent in Anaheim, Calif.

But the promotions eroded profit margins, and per capita guest spending sank 6 percent for the year on lower average hotel rates, ticket prices and merchandise spending. With lighter discounts in fiscal 2010, Morris projects per capita spending to slip just 1 percent.

The analyst is upbeat about the future of Disney’s parks-and-resorts division as it will soon begin reaping returns from a number of big-ticket investments. The most significant: Two new 4,000-passenger cruise ships, which are estimated to cost about $1 billion each and will begin sailing — and making money — in early 2011 and 2012, respectively.


Can someone help me to understand this.

Are they implying that they have a threshold at which they can come out ahead next year by charging more, but having fewer guests? If so, then I predict that they'll have to REALLY cut those discounts (hello, rack rate) in order to exceed '09 parks and resorts revenue with much lower attendance levels, which were flat this year at WDW.

 

[eliza61]

Can someone help me to understand this.

Are they implying that they have a threshold at which they can come out ahead next year by charging more, but having fewer guests? If so, then I predict that they'll have to REALLY cut those discounts (hello, rack rate) in order to exceed '09 parks and resorts revenue with much lower attendance levels, which were flat this year at WDW.

Actually it's not that farfetched. Generally if you have a family that really need the discounts to go, they don't spend money on the stuff where you have the highest mark up. For example, I've read some threads where people are really calculating the cost of the trip down to the last ice cream cone (not pass judgement) generally that guest will not buy the disney ears for the kids, or the light saber or the extra snack.

Food is always an area where you have a high mark up but with the ddp each meal is already pre price. Restaurants get reimbursed only so much no matter what guest ordered. That's why you saw restaurants removing high end items. Restaurants were only getting paid say 25.00 but people were ordering lobsters
Now a family of 4 who have the disposable income and plan to go any way will budget in souveniers (sp?) extra food, etc, etc. Those of the items that have the big market.

They are going to have to do this very carefully. If people are going to pay for meals, the quality is definitely going to have to increase.

Remember when the DDP first came out, you got the apps plus they paid the gratuties. Now they've got rid of the gratuties.
Same with entertainment. You can't raise room rates and ticket prices and then still have people not being able to see Fantasmic

The other issue is that air fare is predicted to go very low this summer. We've got a 6 night trip to Paris for May. The air fare and hotel (3 star) is costing us just about the same as 4 7 day park hopper water park option tickets.

Cruising is also expected to be very affordable. This is going to be interesting.

 

[lovemickeyshouse]

So dam sad but guess what at Ohana my time there was September and the food was wonderful and at Lecell 3 times and noticed no major change so time will tell.