Disney’s most ambitious expansion in recent years hit a bit of a speed bump.
During a call to discuss financial results for the fourth fiscal quarter, Walt Disney Company CEO Bob Iger said the company took action to offset the effects of “softness in the tourism market” at Shanghai Disney Resort.
“We basically put in place some discounting, some lower pricing to continue to drive attendance during what we saw as somewhat of a downturn,” he said in response to an analyst’s question. “But we didn’t necessarily think it was permanent.”
He said the company subsequently scaled back on discounts, to good results.
“I think what we’re seeing in China is maybe a slight reduction in consumer confidence, and that’s having an impact on the business somewhat,” Iger said. “But we still believe very, very, very bullishly in not only the business that we built, but the business that we can continue to invest in.”
The company already added a new Toy Story Land earlier this year at the Shanghai park, which opened in mid-2016. Iger said there are plans for additional attractions and hotels eventually.
“We still feel great about that market for our theme park business,” Iger said.
Shanghai Disney appeared to be a weak link in an otherwise strong quarter. Disney’s parks and resorts segment saw revenue increase 9 percent to more than $5 billion. Operating income for the segment rose 11 percent to $829 million. The results, along with studio entertainment, fueled the company’s overall performance: Revenue jumped 12 percent to $14.3 billion, with net income up 33 percent to $2.3 billion.
For the full fiscal year, which ended Sept. 29 for Disney, revenue in the parks and resorts division was up 10 percent to $20.3 billion. Operating income jumped 18 percent to more than $4.4 billion. Company-wide, revenue jumped 8 percent to end at $59 billion and net income soared 40 percent to $12.6 billion.
At domestic parks, attendance for the quarter was up 4 percent and per-person spending rose 9 percent as guests handed over more cash for tickets, food, and merchandise. Costs also rose, including for a $55 million employee bonus.
Internationally, the company said both Disneyland Paris and Hong Kong Disneyland Resort drove increases thanks to higher guest spending and volumes.
Capital expenditures for the fiscal year rose to $4.5 billion from $3.6 billion last year due in large part to new attractions at domestic parks. Toy Story Land opened earlier this year at Disney’s Hollywood Studios in Orlando, and construction Star Wars lands is ongoing in California and Florida. Both are set to open next year.
He said the new land will be the biggest addition the company has made to Disneyland in California since it opened in 1955.
“We think it’s going to drive huge increase in demand, and we think we’re going to have some interesting challenges on our hands to manage that demand, but that’s a good problem to have,” he said.
In Florida, Iger said, the Star Wars expansion is meant to provide another boost to Disney’s Hollywood Studios, where Toy Story Land opened this summer.
“We’ve aimed to actually grow the attendance to that park, which has lagged a bit over the last number of years because we haven’t invested anything that is even this close to size or scale or compelling nature of it,” he said. “So we think in both cases, they will have a dramatic impact positively on both businesses.”