Possible Disney profit trend woes?

[pilferk]

I wish we all had such "woes".

 

[zulemara]

No to go "off topic"...which is in this case kinda back "on topic"

But Disney released its quarterlies...and they're raking...

Revenues up 31% over the previous on the whole - and theme park PROFITS up 21%...630 million bucks free and clear

So whatever they're doing...it's not gonna change.
It makes further capital investment look like a fools errand as well.

It's also important to note that revenues were up...but "sales" are down - aka they're making more by selling less.
Which means that while they may not be driving Chinese manufacturing...the suits were lining their pockets

It also makes there "no discount" strategy the right one - which we all pretty much knew to be true...
Less crowds, more affluent crowds, more comfort, more spending per person, less overhead

All "W s"

And of course iger gave the "uniquely positioned for longterm success" line of crap...
Shut up, CMB

bolded - that's where I think things are going, especially with the rumor of DL prices going over 100 dollars within a year, WDW will follow and be higher. They are trying to price themselves out of the casual market it seems.

 

[pilferk]

bolded - that's where I think things are going, especially with the rumor of DL prices going over 100 dollars within a year, WDW will follow and be higher. They are trying to price themselves out of the casual market it seems.

IF that's their plan...they have some work to do.

Because those affluent crowds expect certain things that Disney does not provide.

Right now..they're walking that fine line. The middle to upper middle income earners are able to afford the WDW trip...and bring with them the middle and upper middle income earners levels of expectations (with some "forgiveness" granted for it being Disney...for example, the expectations at a Disney Deluxe resort). If they start to price themselves into an upper-middle, lower-upper income earner demographic...the expectations are going to go up AND the "forgiveness" level is going to drop.

It'll be interesting to see how they manage that. I'm not sure they'll be as successful as they think they will be.

Again, I hold up the (apparent) backlash/outrage over the pricing at the new AOA resort. That pricing seems in line with the "plan" being outlined. I'm just not sure it will work out the way Disney thinks it will.

 

[Peter Pirate 2]

bolded - that's where I think things are going, especially with the rumor of DL prices going over 100 dollars within a year, WDW will follow and be higher. They are trying to price themselves out of the casual market it seems.

I usually agree with your take but on this don't. I think Disney is still following simple supply and demand philosophy. Raise prices, reduce expense to the point of discontent and at this point they aren't close. People are even willing to pay monthly for Disney vacations and look at the resort capacities and pricing. The guests they're seeing are not the well heeled, more like the entitled.

They can make that huge price increase at DL because they can. They will ultimately lose very few pass holders and with the increase be way ahead.

Pilferk, imagineers created all of IoA and everything since, so the Disney typen quality at USF is unquestionable.

 

[zulemara]

I usually agree with your take but on this don't. I think Disney is still following simple supply and demand philosophy. Raise prices, reduce expense to the point of discontent and at this point they aren't close. People are even willing to pay monthly for Disney vacations and look at the resort capacities and pricing. The guests they're seeing are not the well heeled, more like the entitled.

They can make that huge price increase at DL because they can. They will ultimately lose very few pass holders and with the increase be way ahead.

Pilferk, imagineers created all of IoA and everything since, so the Disney typen quality at USF is unquestionable.

You may very well be right, but I see a separation of the classes growing in Disney's future through ticket price changes and changes in what is offered at Deluxe vs value resorts in terms of perks for the parks. I don't know exactly what they have up their sleeve, but I think it's very possible they are going to create a level of additional perks for Deluxe guests vs value. Right now, once you get in the park, everyone staying on property is equal. I don't think that will be the case in the future.

I also see declining attendance at Disney hotels in favor of offsite and 3rd party hotels. I also think this relates to the large international tourism that's holding WDW up based on my observations. The international tourism market is what holds WDW up and is the reason they keep increasing prices and cutting things at the resort. If they had to rely on domestic travelers, they would be screwed IMO.

It's all part of the Rizzo factor. They're Tourists, what do they know?

 

[pilferk]

Pilferk, imagineers created all of IoA and everything since, so the Disney typen quality at USF is unquestionable.

I'm not debating there is "Disney-type" quality at IOA.

My point (since that's what was written) specifically concerned WWOHP and it's attractions. Along with all the Potter love, there has been sort of a blind eye turned to the reality of the attraction design, there. It's a pet peeve.

 

[kbelle8995]

I'm not debating there is "Disney-type" quality at IOA.

My point (since that's what was written) specifically concerned WWOHP and it's attractions. Along with all the Potter love, there has been sort of a blind eye turned to the reality of the attraction design, there. It's a pet peeve.

I agree with you that design on this area wasn't perfect. The shops were too small and why didn't they knock down the rest of the Previous land. The books are great because they got children to read and step away from the video games at least for awhile.

As for Disney if they are shooting for a more affluent crowd, they are going to have to up their game. You can only charge so much for mediocre food and attractions. Those off the shelf attractions just won't do. Disney does some things right and then they do some things wrong. At some point quality will have to improve or people won't ever come back. In WDW they already have a large group who do the parks once and never come back again

 

[lockedoutlogic]

Couple things:

1. I do agree that URO has gotten WAY too much credit for the HP expansion. After seeing it - i thought it was great, but not earth shattering. There really isn't that much substance to the praise.

But...it just goes to show you how low our standards have sunk in the orlando market. I think the traveler has gotten use to sparse expsansions/ improvements that have characterized the two large draws to orlando over the last 12-15 years. There isn't alot being done on an annual basis - which is contrary to what most of your local/regional amusement parks still operate based on. The exception has been Sea World - which has added some quality attractions, a one of a kind in discovery cove, a new waterpark, and has embarked on a very ambitious expansion that is now underway. Relative to size...their efforts have been far more impressive to me than anything done over the same period at WDW or Universal - regardless of Harry Potter.

2. The whole luxury/ not luxury, middle class/ upper class, affluent/ not affluent issues raised brings up alot of room for debate and theory...

And so far i agree with almost everyone here:

I think disney would be happy to position itself as a more luxury spot...but they are on a fine line/ catch-22 because of how they operate/ what they are willing to spend.

The reality is that disney is comparitively expensive...but it is not luxury nor really has been. Four Seasons verifies that. But in the case of seasons and "golden oak"...they are preparing for the reality that they may have to try or at least maintain the illusion of high class.
The "middle" class...really no longer exists - as has been talked about for decades if you have a brain and don't listen to talking head pundits. The new "middle class" is already what just 20 years ago was considered "upper" - people with fairly flexible funds for spending and means who are well into the 6 figures in annuals and invest/ speculate in a variety of areas.
My upbringing - the parents who made "middle class" wages but were not business owners, investors, or finance related indiviuals - and who could afford new spikes for little league, two cars, a house, a swimming pool, presents under the tree, and a week or two of vacation to somewhere interesting each year WITHOUT four post graduate degrees or a rich uncle in the household...have been for all intents and purposes eliminated.
It's been in the news...if you can still find the fact-based news. It was eliminated from at least the US due to decisions based on diverging economic theories. So its realistic to think that disney is preparing for "high end"...its their only shot if things continue to progress or there is another big financial crisis (that's a given too...by the way)

But i agree that they have alot of way to go/ potential for failure if that is the case.

 

[larry_poppins]

You are 100% correct. When I was a child there was a strong middle class.
Everyone knew this. Everyone could define what it meant to be middle class.


Now politicians still talk about the middle class, but I don't understand what they are talking about because the families that I remember from the 60s and 70s don't exist anymore. I bet if you asked a group of people to define what middle class is they would all have different answers. Then there is the reality of the cost of living in a major metropolitan area versus a small town!

I suspect the new middle class are now middle of the road attorneys who are married to middle of the road accountants. As opposed to the superstar attorneys and accountants who would definitely be beyond the new middle class.

Just my two cents.

Larry

 

[lockedoutlogic]

There are only two types of Americans: The millionaires...and the FUTURE millionaires

My point(s) are:

1. The populace is delusional and high on snake oil

2. Disney is greedy...but not stupid.
They have to move toward the "high end"...because in the longterm that is the only while they'll survive - the "upper crust" will have to show...because the massively increasing "lower crust" will never be able to pay the prices Disney would need them to to be profitable

 

[pilferk]

First off....to be clear in my original post...I'm talking about middle and upper middle INCOME EARNERS. I meant that based on average annual household income brackets That's a little different than the traditional definitions of "middle class". I agree, that's a rapidly shrinking demographic (and that's what it was, with a combination of income, true demos, and socio-economic factors), which is why I shy away from it.

That being said, my family would fall squarely into what I think the traditional definition is. I earn low 6 figures, have one degree (Comp Sci with a minor in Business), my wife is a stay at home mom, we own our own home, and we're not buried under a mountain of debt.

That being said, getting there has required both careful planning and some "keeping up with the Jones'" type trade offs. For instance, I travel 120 miles, round trip, to work 3 days a week (because property values are lower in our suburban/almost rural area vs where I work in an urban/high income earner populated sub-urban area)....and the costs I incur in maintenance and gas still are (much) less than the difference I'd pay in our mortgage were I closer to work. All in all, we're relatively comfortable, and I'm somewhat confident in our ability to pay for our 3 kids to go to college or trade school.

We do Disney 2 out of 3 years...and only because every third year I have to help us go through a hellish regulatory review process at work. Again, there is/was discipline and financial planning that goes into that, though. I'm not sure, from what I've seen, read, and hear anecdotally from our peers, that goes on in a lot of households.

 

[lockedoutlogic]

First off....to be clear in my original post...I'm talking about middle and upper middle INCOME EARNERS. I meant that based on average annual household income brackets That's a little different than the traditional definitions of "middle class". I agree, that's a rapidly shrinking demographic (and that's what it was, with a combination of income, true demos, and socio-economic factors), which is why I shy away from it.

That being said, my family would fall squarely into what I think the traditional definition is. I earn low 6 figures, have one degree (Comp Sci with a minor in Business), my wife is a stay at home mom, we own our own home, and we're not buried under a mountain of debt.

That being said, getting there has required both careful planning and some "keeping up with the Jones'" type trade offs. For instance, I travel 120 miles, round trip, to work 3 days a week (because property values are lower in our suburban/almost rural area vs where I work in an urban/high income earner populated sub-urban area)....and the costs I incur in maintenance and gas still are (much) less than the difference I'd pay in our mortgage were I closer to work. All in all, we're relatively comfortable, and I'm somewhat confident in our ability to pay for our 3 kids to go to college or trade school.

We do Disney 2 out of 3 years...and only because every third year I have to help us go through a hellish regulatory review process at work. Again, there is/was discipline and financial planning that goes into that, though. I'm not sure, from what I've seen, read, and hear anecdotally from our peers, that goes on in a lot of households.

you and i sound pretty similar...all in all. We are very privileged to go to wdw as we do...but i don't think its simply a matter of making "choices" - there is and has always been a chasm between those that "can" afford the place and those that have no shot...and my hunch is that the thing is going to split wide open like the grand canyon over the next 10-20 years.

but not to get into socio-politico-economic talk...but i can't shake one thing when it comes to your point...

the term "middle earners"...is just as deceiving as "middle class"...because that term implies that the "middle"...say 30-70% are like the modern version of the "suburban family unit" that most of us either grew up as or at least can correlate to...

But that is misleading...because the "middle" earner bracket is heavily behind the "upper" and realistically can't afford disney other than toys in walmart and at AMC...

The quite shocking number that i haven't been able to shake since i heard it is that in 2010, the top 1% of earners made more than the bottom 51% combined....
that is a number comparison of 2.1 million to a staggering 109 million...
and in this case...the top number is simply gravy for the elite, the bottom is scraping for every penny to survive and buy and large not having enough.

So that "Middle Earner" number...which i could probably take a reasonable guess at if i had the time and figures...probably is still out of the range of disney travel.

Which means that they have to do one of three things longterm:
A. Move towards the elite to protect their revenues
B. Lower their prices to bring the lower earners back into the fold because their wages and means do not (as in haven't since 1970) increase relative to inflation and cost of goods
C. Selloff the parks/ put a lock on the gates.

Out of those choices...i'll go ahead and reveal the secret that "B" is NEVER gonna happen.

I hate to make it about these kinds of things....but this is the US and this is the reality...

I just wish people (not everyone...but the majority) would stop waving their flags and singing Lee Greenwood songs and snap the hell out of it and start to try to comprehend where we are and what that means...

yeah...i know...not "magical"

 

[Peter Pirate 2]

you and i sound pretty similar...all in all. We are very privileged to go to wdw as we do...but i don't think its simply a matter of making "choices" - there is and has always been a chasm between those that "can" afford the place and those that have no shot...and my hunch is that the thing is going to split wide open like the grand canyon over the next 10-20 years.

but not to get into socio-politico-economic talk...but i can't shake one thing when it comes to your point...

the term "middle earners"...is just as deceiving as "middle class"...because that term implies that the "middle"...say 30-70% are like the modern version of the "suburban family unit" that most of us either grew up as or at least can correlate to...

But that is misleading...because the "middle" earner bracket is heavily behind the "upper" and realistically can't afford disney other than toys in walmart and at AMC...

The quite shocking number that i haven't been able to shake since i heard it is that in 2010, the top 1% of earners made more than the bottom 51% combined....
that is a number comparison of 2.1 million to a staggering 109 million...
and in this case...the top number is simply gravy for the elite, the bottom is scraping for every penny to survive and buy and large not having enough.

So that "Middle Earner" number...which i could probably take a reasonable guess at if i had the time and figures...probably is still out of the range of disney travel.

Which means that they have to do one of three things longterm:
A. Move towards the elite to protect their revenues
B. Lower their prices to bring the lower earners back into the fold because their wages and means do not (as in haven't since 1970) increase relative to inflation and cost of goods
C. Selloff the parks/ put a lock on the gates.

Out of those choices...i'll go ahead and reveal the secret that "B" is NEVER gonna happen.

I hate to make it about these kinds of things....but this is the US and this is the reality...

I just wish people (not everyone...but the majority) would stop waving their flags and singing Lee Greenwood songs and snap the hell out of it and start to try to comprehend where we are and what that means...

yeah...i know...not "magical"

Great post.

 

[pilferk]

you and i sound pretty similar...all in all. We are very privileged to go to wdw as we do...but i don't think its simply a matter of making "choices" - there is and has always been a chasm between those that "can" afford the place and those that have no shot...and my hunch is that the thing is going to split wide open like the grand canyon over the next 10-20 years.

I suspect it's a bit of both.

There are certainly those who are in a position where they can't afford WDW. That's for sure.

There are folks who can, with little financial disipline, afford WDW.

But there is at least a decent sized portion of America who are in love with their credit cards (and maxing them out) who could, under different circumstances, afford WDW.

I'm not trying to point fingers, here, or question anyone's lifestyle choices. Your life, your money, your decisions/priorities.

but not to get into socio-politico-economic talk...but i can't shake one thing when it comes to your point...

the term "middle earners"...is just as deceiving as "middle class"...because that term implies that the "middle"...say 30-70% are like the modern version of the "suburban family unit" that most of us either grew up as or at least can correlate to...

It's not meant to imply it, though. It's why I use the verbage I do. There is still, most decidedly, a "middle income bracket". Folks earning a household income of 50-ish to 100k-ish a year (simplistic approximations, obviously). They're still out there.

The "middle class", as we know it, is pretty much gone. At least for now. Whether it ever reappears again...that's another question/discussion.

But that is misleading...because the "middle" earner bracket is heavily behind the "upper" and realistically can't afford disney other than toys in walmart and at AMC...

Yes to the first...questionable on the second. Depends on where in the "middle" they fall and what they're carrying for a debt load.

At 50k, household, it's a tough ticket....no matter what their financial situation is.

At 100k, household, it's doable.\

Edit: In re-reading, I should have added there is also a geographic component. If you're making a household income of 100k-ish...and you're living in Manhattan, INSIDE the Beltway, or in portions of LA (and some other major metro areas)....it might not be so doable, either.

The quite shocking number that i haven't been able to shake since i heard it is that in 2010, the top 1% of earners made more than the bottom 51% combined....
that is a number comparison of 2.1 million to a staggering 109 million...
and in this case...the top number is simply gravy for the elite, the bottom is scraping for every penny to survive and buy and large not having enough.

Not surprising. At least not to me. That's the environment that's been created...corporate "run amok-edness". I'm not going to push this into the realm of the political, though.

So that "Middle Earner" number...which i could probably take a reasonable guess at if i had the time and figures...probably is still out of the range of disney travel.

See earlier figures.

Which means that they have to do one of three things longterm:
A. Move towards the elite to protect their revenues
B. Lower their prices to bring the lower earners back into the fold because their wages and means do not (as in haven't since 1970) increase relative to inflation and cost of goods
C. Selloff the parks/ put a lock on the gates.

Out of those choices...i'll go ahead and reveal the secret that "B" is NEVER gonna happen.

A means some obvious work on their offerings to appeal to that market.

B would be a flat out, choke on your cheerios shocker. Never say never...but I'd say never. They could freeze price increases, I suppose, and do the same thing over time. But it would mean major budget cuts at the parks..which has already been cut to the bone.

I doubt we'll ever see "C"...not because Disney wouldn't consider it, but because there's just nobody out there that could swing the price tag AND the obvious yearly licensing fees. Apple and MS might be able to do it...but even they'd have a hard time raising that much liquid capital. I don't think Disney would take a stock swap.

 

[npcougar]

Which means that they have to do one of three things longterm:
A. Move towards the elite to protect their revenues
B. Lower their prices to bring the lower earners back into the fold because their wages and means do not (as in haven't since 1970) increase relative to inflation and cost of goods
C. Selloff the parks/ put a lock on the gates.

I would add a D. Continue to target foreign visitors who can take advantage of the weak dollar to replace the lower income American visitor.

 

[lockedoutlogic]

I would add a D. Continue to target foreign visitors who can take advantage of the weak dollar to replace the lower income American visitor.

That has been the case to a certain...but it's vastly overstated ...

The "foreigners invading WDW" is kinda a red herring

 

[tubtruck]

Hi,
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