WDW Theme Park attendance declines

[jcb]

Disney released 3rd quarter earnings today. Earnings were quite good overall, including for the parks and resorts business segment (which includes theme parks). Nevertheless, consistent with the recent rumors, the OS is reporting that Disney has acknowledged that theme park attendance has declined. http://www.orlandosentinel.com/business/tourism/os-disney-attendance-earnings-20160809-story.html

I tried listening to the earnings conference call but my browser crashed mid-way through it.

I'll try to post a link to the call when I can locate it.

 

[jcb]

From the quarterly report:

Parks and Resorts revenues for the quarter increased 6% to $4.4 billion and segment operating
income increased 8% to $994 million. Operating income growth for the quarter was due to an increase at
our domestic operations, partially offset by a decrease at our international operations. Results were
adversely impacted by the absence of the Easter holiday, which occurred in the third quarter of the prior
year compared to the second quarter of the current year.
Higher operating income at our domestic operations was due to guest spending growth and lower
costs, partially offset by lower volumes. The increase in guest spending was driven by higher average
ticket prices at our theme parks and cruise line. Lower costs reflected decreases in labor and marketing
costs from efficiency initiatives. Costs also benefited from lower infrastructure costs due to timing and a
decrease in fuel costs. These decreases were partially offset by higher depreciation, labor and other cost
inflation and costs associated with new attractions. The decrease in volumes was due to lower attendance,
partially offset by higher occupied room nights.

 

[TheMaxRebo]

Thanks for posting. Didn't highlight extra revenue from things like extra paid evening/morning park hours and the like - was their any mention on the call?

Interesting that they said increased room occupancy when they are now having so many specials

 

[Princess Jes]

I do love your earnings call updates Jack!
Have missed you around these parts recently.

 

[SorcererHeidi]

Yes, always miss Jack when he ain't here, and appreciate so much when he is!

 

[disneysteve]

I, for one, would welcome a decline in park attendance.

Over the past year or two especially, attendance has been insane. I've said numerous times that most of what everyone complains about can be traced back to increased crowds. I've also said that if anything would make me and my family stop visiting, it wouldn't be magic bands, it wouldn't be rising prices, it wouldn't be smaller food portions. It would be ridiculous crowd levels. We just can't and don't enjoy the parks when they are mobbed with people.

We were there 7/16-7/27 and except for one day in MK, we definitely noticed a lighter crowd level. And guess what? We really enjoyed wandering through the parks. We weren't shoulder to shoulder with people all day every day. It was actually a pleasant experience that we haven't had on the last 2-3 trips.

Don't tell Disney I said this but I'm happy to pay a higher ticket price if it comes with smaller crowds.

 

[NuttyDisneyDad]

Stop nickle and diming people Disney and the horde shall return!!!! Ok Im calm now lol

 

[jcb]

The updated OS story recounts Disney attributing the decline to the fact that the Easter holiday fell in the second quarter. But if since Disney acknowledged (in the 2Q report) that "Attendance at our domestic theme parks was relatively flat, as an increase at Disneyland Resort was offset by a modest decrease at Walt Disney World Resort," relying on this for an explanation for a decline in the 3Q seems rather silly.

Here is a link to the earnings call replay: http://edge.media-server.com/m/p/c7ig2msa

 

[rteetz]

Couple interesting notes from the call.

Domestic Attendance down
Domestic Hotel occupancy up

Shanghai has already started "expansion"...

Hong Kong was up very minimally but Paris is still having issues.

My take on Shanghai... That expansion isn't an expansion it's toy story land that didn't get finished on time for opening. Part of the toy story land has already been built as seen in photos from the park.

 

[jcb]

Couple interesting notes from the call.

Domestic Attendance down
Domestic Hotel occupancy up

Shanghai has already started "expansion"...

Hong Kong was up very minimally but Paris is still having issues.

My take on Shanghai... That expansion isn't an expansion it's toy story land that didn't get finished on time for opening. Part of the toy story land has already been built as seen in photos from the park.

I wasn't quite sure how to take Bob Iger's comments at the beginning of the call where he said social media posts about Shanghai were helping visitors know how to behave. With posts on social media, "guests are now coming to the park with a better understanding of what to expect and how to have the most fun while they are there." Perhaps I'm reading too much into this. . . .

 

[rteetz]

I wasn't quite sure how to take Bob Iger's comments at the beginning of the call where he said social media posts about Shanghai were helping visitors know how to behave. With posts on social media, "guests are now coming to the park with a better understanding of what to expect and how to have the most fun while they are there." Perhaps I'm reading too much into this. . . .

Yeah Shanghai comments were weird.

From what I've heard the new park has been doing well but rides are still having major problems breaking down and closing early.

 

[rteetz]

Another note I forgot to add.

Disney admitted to cost cutting at domestic parks but wouldn't specify what those cuts were exactly...

 

[KingLlama]

Flying Fish opening back up should help.

 

[Princess Jes]

Flying Fish opening back up should help.

Stop banging on about it will you?! Sheesh!

 

[Princess Jes]

I recall maybe 2 or 3 earnings calls ago, we were discussing numbers here and there was a smaller increase to attendance and/or in park spending than there was to ticket sales and resort occupancy and I was saying then that its a trend that Disney should watch closely, but was told by quite a few people that I was wrong and that an increase is an increase and its all good.

Well, now we are starting to see the repercussions of those differing increase rates and now we're looking at increases to revenue (due to increased ticket prices) and resort occupancy (resort discounts where there weren't in past years over summer for example) but a further decrease in attendance.
In my humble opinion, that's not a model that will last and I think in the next earnings call, those increases to occupancy and revenue may be much smaller again, if not flat.
As Pete has said, watch out in the near future for heavy discounting and offers to bring back those who perhaps have deemed it too expensive to do annually (or more) or at all!
Increasing ticket prices will only float revenue for so long before it will alienate people and then eventually, there will be a decrease to revenue also.
I think Disney has the power to turn that trend around pretty quickly, given their sheer size, but the question is: Will they?

 

[rteetz]

Will they?

Probably not

 

[CampbellzSoup]

Spending is up though? So fewer guests in the park, however the ones in the park are spending cash...

I'll agree wth Steve - I have no vested interest in Disney stocks I want the crowds to be lowered.

 

[rteetz]

Spending is up though? So fewer guests in the park, however the ones in the park are spending cash...

I'll agree wth Steve - I have no vested interest in Disney stocks I want the crowds to be lowered.

Spending is up because prices are higher. Higher prices make up for the lost attendance.

 

[rteetz]

Reminder...

ESPN is a major money maker for Disney, like a huge money maker.

Cable subscriptions are ever falling and eventually (not soon) will die like Kodak and film.

Disney is trying to find ways to make up for the losses of ESPN and raising park prices and cutting costs will help with that.

 

[Princess Jes]

Spending is up because prices are higher. Higher prices make up for the lost attendance.

That was the point I was trying to make.
While spending is up, it's more than likely due to prices increasing across the board. At some point, that will slow also