Disney’s Theme Park Plans Include Creative Pricing, Hotels and Movie Characters

It might be a small world, but Disney’s universe still has plenty of room to grow.

During an earnings call late Thursday, Walt Disney Co. chairman and CEO Robert Iger hinted at plans to grow the theme park empire by adding more hotels in the U.S. and incorporating intellectual property in resorts around the world.

Those comments followed an announcement Wednesday that the company’s latest park, Shanghai Disneyland, would add a new themed area based on Toy Story with three attractions and a character greeting area. Toy Story Land — versions of which are also being built in Orlando and California — is scheduled to open in 2018 in Shanghai.

Iger revealed during the earnings call that 4 million people visited the Shanghai park in its first four months.

“Some of you may infer from this early performance that we could achieve 10 million in attendance in the park’s first year, a number we would be thrilled with,” Iger said. “But we’re not providing any annual guidance at this point.”

Financial results for the first full quarter of operations at the $5.5 billion resort were ahead of expectations, chief financial officer Christine McCarthy said. Surprising some analysts, she said the Shanghai resort should be “closer to break-even” for the year in fiscal 2017.

“Around a break-even result is certainly something that we’re looking forward to,” McCarthy said.

Despite the positive trends in Shanghai, the fourth fiscal quarter missed analysts’ expectations. For the quarter that ended Oct. 1, revenue across the company fell 3 percent to $13.1 billion, though profits increased 10 percent to $1.7 billion. Theme parks and resorts saw revenue increase slightly to nearly $4.4 billion.

For the full fiscal year, the company reported that revenue increased 6 percent to $55.6 billion, with profits up 12 percent to $9.4 billion. Full-year revenues for parks and resorts reached nearly $17 billion, an increase of 5 percent.

Year-over-year attendance comparisons were thrown off slightly because fiscal 2015 had an additional week of operations.

During the quarter, Disneyland Paris and Hong Kong Disneyland both saw lower attendance. Attendance at Walt Disney World in Florida would have increased if the fiscal years were identical, but the company said a decline at Disneyland Resort in California was also due to higher numbers last year for the 60th anniversary celebration.

For the full year, attendance was lower at Disneyland Paris and Hong Kong Disneyland, the company said, while domestic parks attendance overall increased.

“Disneyland Paris continued to experience softness in the quarter due to the lingering effect of terrorism and economic and political uncertainty,” McCarthy said. “While we’re disappointed with Disneyland Paris’ results in the quarter, we expect to see near-term improvement in connection with the 25th Anniversary celebration which begins in spring 2017.”

One analyst asked Iger whether growth in the theme parks segment will be driven mostly by Shanghai results, and in response he offered several areas where he sees potential.

In pricing, Iger said the company can still make changes at its parks that will help growth, even after raising prices this year and introducing a tiered system that charges different amounts for one-day tickets depending on the date.

“We believe we still have pricing leverage and that’s not just from raising prices on your standard ticket, it’s from creating new packages. We certainly have seen that in the last year, which was designed to do a few things,” he said. “Obviously when we put in more demand-oriented pricing, we’re able to move some of the attendance away from the peak period and improve the guest satisfaction. But we believe that there are a number of tools we have available to us on the revenue yield management side, to create more revenue out of the attendance that we’re getting.”

Iger said other potential for expansion includes adding more hotels — though he had no specifics to disclose.

“Not only do we have the property, but we’ve seen such high occupancy rates in Orlando and in California that we believe that it would be smart for us to build more hotels out,” he said.

And Disney’s vast well of intellectual property, which now includes the Star Wars franchise, provides another opportunity to expand at theme parks. In addition to Toy Story, Disney is building Star Wars-themed areas — “two of the biggest lands we’ve ever built,” Iger said — in Florida and California.

“There’s so much more that we can do, and so much more we are doing,” he said. “Usually when we talk about the studio, we talk about the studio results as it relates to box office and the bottom-line for that business, but you also have to think about it in terms of how we mine these assets not just in the United States, but globally at our parks and in consumer products.”

While Iger told analysts he thought it was too early to speculate on what this week’s election results could mean to the business, he said the company has been urging elected officials to lower the corporate tax rate and close more loopholes.

One positive for the stock market and businesses, he said, was that the transition appeared, so far, to be progressing in a “cordial, effective, and polite way.” Iger also mentioned that Disney was working on its own plan for the Magic Kingdom’s presidential animatronics show.

“We’re going through a smooth transition as well,” he said. “We’ve already prepared a bust of President-elect Trump to go into the Hall of Presidents at Walt Disney World.”

When it comes to the plan for his own position, which Iger has said he will leave in mid-2018, there is less certainty. The company’s board is working to find a replacement.

“The process is ongoing, it’s robust, and we’re all confident it’s going to result in the board choosing not only the right candidate but the right candidate on a timely basis,” Iger said.