Now that Cars Land opens, Disney announces cutbacks in domestic spending

[Mouseaholic!!!]

Pop on over to the Orlando paper to read the full story.

One quote which bothered me...,Tom Staggs said parks profit between 2010 and 2011 was up 18 percent bringing profits back to pre-recession levels. But that wasn't good enough apparently.

Disney announced a scaleback in $$ for the domestic parks division.


Can you imagine the managers at parks and resorts. They work hard, lay off people, cheep down the food and service. Everyone breaks their back for a successful year. They managing 18 percent increases and then told that wasn't good enough.

Apparently not good enough for stockholders who expect more $$$$$$.

 

[lockedoutlogic]

In case you're interested...this has already poped up on the "avatarland scaleback" thread

 

[tjkraz]

Here's a link to the full story so folks don't have to go digging:

http://www.orlandosentinel.com/the-...rks-capital-spending-20120614,0,7260737.story

I'd say the paragraph which more accurately describes the situation is this one:

With some of the biggest bills coming due, Disney's domestic capital spending swelled to $2.3 billion in 2011 — equal to 24.7 percent of the revenue generated by its U.S.-based resort businesses. The 2012 tally should be even higher.

25% of the revenues were spent on park enhancements in 2011. And the number will be higher in 2012.

Basically what they are saying is that they plan to spend less in 2013 (and the near future). All other things being equal, when they reduce capital spending they increase profits.

The article also states that the two DCL cruise ships are included in the figures. The two cruise ships reportedly cost $1.8 billion. So Disney could effectively continue spending on the theme parks and still see its capital expenditures decline dramatically.

And let's not forget the recent ticket price increases which will boost revenues.

The story isn't an indictment of the hard work folks did to improve profitability in recent months--it's an acknowledgment that spending simply won't continue at levels which saw them spend nearly $2B on two cruise ships, $1B+ on DCA and $750M+ on WDW MK in about a 2 year span.

I won't pretend that some of Disney's recent moves don't leave a bad taste in my mouth. But if you really understand what is being said, it isn't necessarily a death knell for the Disney parks. We won't get anything on the scale of Fantasyland (which is still 18 months from completion!) or Carsland in the near term but some level of reinvestment will continue.

 

[Mouseaholic!!!]

Death Knell, hardly.

It will be tough to cutback budgets more after the last few years. Heck, look at how they are now operating the monorail with tired cars already 2 years overdue for replacement. We have been stuck on dead monorails a few times on recent trips. We take the ferry now..........fresh air if you know what I mean.

It will make the boards a little boring. No more discussions of a 5th park or when they will extend the monorail.

 

[lockedoutlogic]

Here's a link to the full story so folks don't have to go digging:

http://www.orlandosentinel.com/the-...rks-capital-spending-20120614,0,7260737.story

I'd say the paragraph which more accurately describes the situation is this one:



25% of the revenues were spent on park enhancements in 2011. And the number will be higher in 2012.

Basically what they are saying is that they plan to spend less in 2013 (and the near future). All other things being equal, when they reduce capital spending they increase profits.

The article also states that the two DCL cruise ships are included in the figures. The two cruise ships reportedly cost $1.8 billion. So Disney could effectively continue spending on the theme parks and still see its capital expenditures decline dramatically.

And let's not forget the recent ticket price increases which will boost revenues.

The story isn't an indictment of the hard work folks did to improve profitability in recent months--it's an acknowledgment that spending simply won't continue at levels which saw them spend nearly $2B on two cruise ships, $1B+ on DCA and $750M+ on WDW MK in about a 2 year span.

I won't pretend that some of Disney's recent moves don't leave a bad taste in my mouth. But if you really understand what is being said, it isn't necessarily a death knell for the Disney parks. We won't get anything on the scale of Fantasyland (which is still 18 months from completion!) or Carsland in the near term but some level of reinvestment will continue.

it's not a death knell...it stagnation and no desire to continue to enhance the experience for the purpose of profit/revenue/stockprice.

That IS what they're saying...with or without cream and sugar.

And i know its not 1955...but even through hard times the disney company continued to push forward and do new things consistently...that is how they wanted it to be and how they wanted their image to look.

Am i wrong to want the same? maybe...but it wasn't me who built it that way. five years of sitting on laurels is not how the parks were operated until recently...and if that brings mocking, complaints, or criticism...that is fair.

my take

the cruise ship question you brought up is a valid point though...and that means that disney could look alot better over next few years if your interpretation is correct. I am apalled that reporters include the cruiseline figures lumped in with WDW and Disneyland. those ships have nothing to do with the parks and never will...no matter how management tries to spin them.

If disney is saying that they have paid the cruise ship tab as part of their figures in the 2010-2013 time period...and therefore that isn't going to be part of the capital budget...then i agree that they can still be planning on some good things in the next few years. If this is wall street accounting to twist the figures...and the proposed numbers moving forward basically represent no additon or reimagineering...then shame on them.

 

[lockedoutlogic]

And another thing...

As far as Carsland goes...how am i not supposed to have a bad taste in my mouth when they tie that into disney "reducing expenditures".

Actually... there are three problems i see alone:
1. Carsland is a repair job to a park that they cheapskated and ruined horribly from their design mistakes...which means they should get no capital expenditure credit for it...if you screw up my plumbing and have to come back to fix it...i'm not paying you again.
2. Carsland is based on a movie franchise in which they reduced a HORRIBLE sequel last year...so they kinda tainted the product while it was under construction. Perhaps Toy Story Land or Nemoville would have been the way to go.
3. My capital expenditures are definitely going up...as my daughter who will turn 3 in september has now been deemed an "adult" by revenue at team disney and will have to pay 10.5% more as an "adult" this year than she would have last year. Guess that's what you get when you don't wear diapers anymore, huh?

just a bad taste in your mouth...what can you say?
thanks for shanghai - maybe theiy'll stop putting pvc and lead in the toys that i see in walmart now? bet that cruiseship looks great? finally california adventure doesn't look like crap - can i have my money back from my tickets in 2004?

 

[tjkraz]

It will be tough to cutback budgets more after the last few years.

And the article doesn't address operating budget issues in any way, shape or form.

All it's saying is that they will spend less on capital improvements in coming years to boost profits. Assuming they spent $1.8 billion on the two ships in the 2010-2012 timeframe, in 2013 forward they could earn the same revenues and show a profit of $1.8B more.

I am apalled that reporters include the cruiseline figures lumped in with WDW and Disneyland. those ships have nothing to do with the parks and never will...no matter how management tries to spin them.

I agree...it does muddy the waters. But since Disney combines the figures in their financial statements, I don't think the reporter has any valid means to try and extricate the numbers for DCL and Aulani. We really don't know exactly how the accounting was performed, the final totals for those projects, etc.

But according to this story, the DCL construction costs were some part of the 2011 & 2012 budget for Parks & Resorts. Not having those dollars in 2013 forward will immediately help the bottom line, as will the profits generated by both ships now that they are fully operational.

My personal take is that this story is largely a non-issue. With Aulani finished, the DC resort cancelled and the two cruise ships complete, total spending will obviously drop. I don't think a commitment to spend less foreshadows any issues with Avatar. I suspect that come the D23 Expo in August '13 we'll hear of new plans for WDW. They won't be enough to satisfy many die-hards but I don't believe they will allow the parks to stagnate either.

Disneyland has the Carnation Gardens rebuild pending and I suspect they will get some other major addition in the near term as Universal Hollywood starts prepping its Harry Potter expansion.

 

[lockedoutlogic]

Disneyland has the Carnation Gardens rebuild pending and I suspect they will get some other major addition in the near term as Universal Hollywood starts prepping its Harry Potter expansion.

There's your avengers add-in to California Adventure right there...

And if any of the beaners have one ounce of gumption...they are really going into overdrive to get the thing off the ground NOW...as opposed to waiting forever to see if little girls will buy enough dolls at the disney store based on it...

the sequel movie is probably a 2014-2016 target at this point...they have sequels to the "component" movies coming up (Iron man 3...thor 2...a hulk movie)...they have a new spiderman reboot coming now that will do great business...

The time to strike is NOW...not the standard disney 5-8 years later. And if they take the avengers and get the shovels moving now...it defangs alot of potter buzz.

That is a no brainer...but they'll sit on it.

 

[Mouseaholic!!!]

Sorry TJKRAZ. I appreciate your viewpoint and explanations here. However, bottom line is bottom line in Burbank and that's profits. The last 5 years all Disney cost centers have been expected to do more with FAR less operating budgets. That means layoffs, cutbacks, service times extended. There is precious little left to cutback unless they expect us to load ourselves on space mountain without castmembers! (crazy example).

When 18 percent profit isn't good enough the wil reach it by sucking more $$$$$ out of us andpushing castmembers and equipment beyond reason.

It's all part of the same profit pie no matter how you slice it.

 

[Figment632]

No Avatarland!!!!!!!!!

Good build BK or redo TL!

 

[DizCaptain]

It bothers me they no longer see Americans as their prime customer and see this country as their heritage, just money signs outlining profit projection. They've already turned park food and merch into homogenized crap, and that same thing is already being seen in park attractions, sending clones around the now "minor" parks rather than good attractions, and not fixing the nice ones they have built. I mean someone, I guarantee it, will say "they're a business first", but another good point of business is customer satisfaction/appreciation, and quite honestly I feel shafted every time I read something like this.

 

[lockedoutlogic]

It bothers me they no longer see Americans as their prime customer and see this country as their heritage, just money signs outlining profit projection. They've already turned park food and merch into homogenized crap, and that same thing is already being seen in park attractions, sending clones around the now "minor" parks rather than good attractions, and not fixing the nice ones they have built. I mean someone, I guarantee it, will say "they're a business first", but another good point of business is customer satisfaction/appreciation, and quite honestly I feel shafted every time I read something like this.

...pick me for your team on the playground

 

[eeyorepixie]

When I first went to Disney I stayed on site, no I am off site- Why? cost and the quality.

When I first went to Disney I bought souvies at DW, now I buy stuff on ebay or on clearance at the Disney Store. Why? The cost and the quality.

Between Disney adults and souvies that are fall apart within a week of being home, a new value resort for families that is more expensive than POR, value resorts that do not have pool slides...the rose colored glasses are off.

I once was happy to be Disney cattle herded onto ME and never leaving...now I do not go every year, but every other year, now other destinations are looking attractive and now I congratulate myself that I never fell for the lure of DVC.

Don't get me wrong, I love Disney but improvements could be made.

and every business should reinvest in themselves in capital projects if they wish to stay relevant. JMHO

 

[Mouseaholic!!!]

When I first went to Disney I stayed on site, no I am off site- Why? cost and the quality.

When I first went to Disney I bought souvies at DW, now I buy stuff on ebay or on clearance at the Disney Store. Why? The cost and the quality.

Between Disney adults and souvies that are fall apart within a week of being home, a new value resort for families that is more expensive than POR, value resorts that do not have pool slides...the rose colored glasses are off.

I once was happy to be Disney cattle herded onto ME and never leaving...now I do not go every year, but every other year, now other destinations are looking attractive and now I congratulate myself that I never fell for the lure of DVC.

Don't get me wrong, I love Disney but improvements could be made.

and every business should reinvest in themselves in capital projects if they wish to stay relevant. JMHO

I could have written the same words. We HAVE discovered travel outside Disney. Now we generally remark "this is how Disney was in the past".

Yesterday our dearest Wdw buddy - owner of acres of DVC points told me he is not renewing his annual pass. That is the same as Mt. Rushmore crumbling! He dropped his DL annual pass a few years ago.

He now only goes with us and DH can just take him in on his pass.

That's alot of DVC to have lying around!

That was always our DVC fear. What if things change and we no longer go 3 or 4 times a year. Well, things changed.

 

[coloneldebugger]

Death Knell, hardly.

It will be tough to cutback budgets more after the last few years. Heck, look at how they are now operating the monorail with tired cars already 2 years overdue for replacement. We have been stuck on dead monorails a few times on recent trips. We take the ferry now..........fresh air if you know what I mean.

It will make the boards a little boring. No more discussions of a 5th park or when they will extend the monorail.

Guess it's time to drag out Aerosmith leaving the rock and roller coaster

 

[tjkraz]

Sorry TJKRAZ. I appreciate your viewpoint and explanations here. However, bottom line is bottom line in Burbank and that's profits. The last 5 years all Disney cost centers have been expected to do more with FAR less operating budgets. That means layoffs, cutbacks, service times extended. There is precious little left to cutback unless they expect us to load ourselves on space mountain without castmembers! (crazy example).

When 18 percent profit isn't good enough the wil reach it by sucking more $$$$$ out of us andpushing castmembers and equipment beyond reason.

It's all part of the same profit pie no matter how you slice it.

That's all well and good but it has ZERO relevance to the Sentinel article that you used as a platform for this discussion. The entire crux of that article is that Disney intends to increase profits via lower capital expenditures.

I'm not disagreeing with your comments about operating cutbacks and other changes in general. They just don't have any real bearing on the sentinel story. And as you yourself said, they are running out of ways to cut.

There are other ways to increase profits without making cuts. Increasing the revenue stream is one way (higher prices, lower discounts, more services, etc.) Reducing capital spending is another.

I'm sure Disney will continue to look at ways to cut where reasonable. Every business does that. And they will undoubtedly increase spending in certain areas as they have even in recent years (longer park hours, different entertainment offerings, free wifi, online services, even food improvements at many restaurants, etc.) Whether the impact on theme park guests is a net positive or negative remains to be seen.

 

[Mouseaholic!!!]

That's all well and good but it has ZERO relevance to the Sentinel article that you used as a platform for this discussion. The entire crux of that article is that Disney intends to increase profits via lower capital expenditures.

I'm not disagreeing with your comments about operating cutbacks and other changes in general. They just don't have any real bearing on the sentinel story. And as you yourself said, they are running out of ways to cut.

There are other ways to increase profits without making cuts. Increasing the revenue stream is one way (higher prices, lower discounts, more services, etc.) Reducing capital spending is another.

I'm sure Disney will continue to look at ways to cut where reasonable. Every business does that. And they will undoubtedly increase spending in certain areas as they have even in recent years (longer park hours, different entertainment offerings, free wifi, online services, even food improvements at many restaurants, etc.) Whether the impact on theme park guests is a net positive or negative remains to be seen.

Cut where reasonable? Obviously not a castmember. The Pixie Dust is a little tarnished when viewed from the inside. That viewpoint from a 33 year castmember/DH.

I respect your viewpoint even if I must disagree.

 

[CamoMama]

3. My capital expenditures are definitely going up...as my daughter who will turn 3 in september has now been deemed an "adult" by revenue at team disney and will have to pay 10.5% more as an "adult" this year than she would have last year. Guess that's what you get when you don't wear diapers anymore, huh?

Uh... no. She is now a "child" rather than an infant, that you have to purchase a ticket for, which has been the case at Disney for, well, forever.

Disney does not charge entry fees for children under 3, ticket prices are lower for children 3-9 and you must purchase an adult ticket for kids 10 and over. This is not new.

 

[Mouseaholic!!!]

Uh... no. She is now a "child" rather than an infant, that you have to purchase a ticket for, which has been the case at Disney for, well, forever.

Disney does not charge entry fees for children under 3, ticket prices are lower for children 3-9 and you must purchase an adult ticket for kids 10 and over. This is not new.

He may be talking about the new changes to Annual Passes. 10 percent increases and the elimination of a child Annual Pass. In this case now, you go from free directly to adult pricing at 3 years of age.


Hummm.....

I wonder if the long range plan is to eliminate children's passes for ALL ticket media....and this is just a giant trial to see how it goes?

 

[veritas]

After losing a bundle on the John Carter movie and finally fixing DCA along with Fantasy Land expansion it's to be expected the bean counters will call for spending cuts. They always do. What I would hope is that the cutback in big tickets spending doesn't also result in an upkeep spoending cutback too. letting things go to seed always costs more in the end.