Seems like we’re talking a lot about coronavirus lately, no shock. If you’re interested in seeing more of what I’ve written lately, check these stories out:
- Should You Travel During the Coronavirus Crisis?
- Marriott Furloughs Two-Thirds of Their Corporate Employees
- How Many Airlines Have Stopped Flying Completely in the Coronavirus Crisis?
A friend of mine, Liz, asked me recently if I thought there would be a bunch of great discounts at Disney World when the parks started to reopen after the current crisis. The cop-out answer is “yes and no”. But, let’s talk about it in more detail. To do so, we need to understand just a bit about Disney as a whole.
Disney is a Whole Lot More Than Theme Parks
You probably knew this already, but Disney does a whole lot more than theme parks. And, they do the vast majority of it well. Whether it’s popular princess movies like Frozen or family favorites like Toy Story, Disney rocks the big screen. And, recent additions of Star Wars and Marvel to the mix mean they’re a motion picture juggernaut. I’m going to nerd out just a bit on Disney’s recent stock filings. We can learn quite a bit from their quarterly filings. If you want more info, you can find the webcast here and the transcript here. I’m also taking screen shots from their release. Look at the revenue breakdown:
Disney had gross revenue of over $20 billion in the most recent quarter, with profit of $4 billion. Most of the elements have synergy. Watch a hit movie, head to the parks and experience a themed ride tied to that movie. While you’re at it, buy a souvenir on the way out the door. But, the parks themselves represent a relatively small portion of the overall profit. The category “Parks, Experiences and Products” represented about half of their profit in this past quarter. That would have been a smaller percentage if not for the losses, which will go away soon. More on that in a minute. At any rate, “Parks” is only a portion of the $2 billion. And, while Products sales will be down without the parks open, there will still be plenty of Yoda accessories finding their way into happy homes.
Disney has been pouring cash into the launch of Disney+, their streaming service. That paid off in a big way, when they launched with 10 million new customers on day one and over 26 million by the end of the first quarter. And, lest you think there are a bunch of freebie subscriptions, the financials help us out here again:
I’ll translate here. Disney+ is averaging $5.56 per subscriber. That means at the end of the first quarter where Disney had Disney+ launched, they had a new revenue stream of about $150 million per month. That’s almost half a billion in extra revenue per quarter, or a 10% increase (and pretty much disconnected from whether the parks are open or not).
Will Mickey Throw Me a Discount?
Back to our original question. Will there be discounts to get into Disney World when the coronavirus crisis has resolved itself? When the first question was posed to me, my quick answer was “no”. But, the truth is probably more nuanced than this. During the Great Recession, Disney World didn’t really do much in the way of discounting. My kids weren’t old enough for me to keep an eye on parks overseas, but we were buying tickets to Disney World. Back then, they used to sell tickets with no expiration date. Sure enough, the prices went up every year during those soft economic times. I don’t see any evidence that points to a reduction in ticket prices. I also don’t see much evidence to support special deals to discount tickets.
However, Disney World does have a ton of hotel rooms, something like 30,000 in all. Heck, the 3 All-Star resorts have over 5,000 rooms between them. You can read some of the reviews of those properties I’ve written here and here. Right now, those rooms are sitting empty, not earning any revenue. Hotel rooms are one of the two levers I think they’ll pull when they start trying to fill the parks. Disney has generally served up a pretty good “bounce back” offer if you book your next Disney World hotel stay while you’re on your current vacation. There’s usually a card in your room that details the discounts. For the first time I can recall, I saw one of those offers in a recent mailer they sent me about my annual pass. It wouldn’t surprise me if they use their vast database to invite back guests with higher average spending by discounting a hotel room. Their costs per room are low. Housekeeping expenses to clean rooms are a known quantity. And, many of the resorts feature cafeteria or counter-service restaurants that they can easily scale up or down to meet demand.
And, because many Disney World guests use their magic bands to charge to their rooms, Disney World has excellent visibility into whether you’re a heavy spender or not. They’ve noted more than once in their public filings that increased revenue is due primarily to higher spending per guest, with increased attendance a lesser factor.
The other area I expect Disney to discount is meals. Disney Dining Plans are already very popular. They don’t fit our family’s vacation style, but many families sign up for these plans as a way to control costs on their Disney World vacations. Generally once per year, we see a sale where you can get a “free” dining plan when you book your vacation at a Disney hotel with theme park tickets. Look for this deal to make a reappearance when the coast is clear and parks reopen.
Incidentally, where I do see Disney making a sizable impact on profitability is operating hours. They noted in their most recent filings that they’ve seen cost increases due to higher union labor rates. Disney was already pretty good at controlling park hours during slower times of year. I fully expect that when parks reopen to the public it will be on a reduced schedule. As it is Universal Studios, closes their Florida parks as early as 8pm on many nights. Look for Disney to do similar. In this way, your ticket price will likely remain the same but Disney won’t have to spend as much to keep the park open late.
The Final Two Pennies
We still have no idea when it will be truly safe to travel, and when Disney World will reopen its gates. The official reopening date is coming up soon, but I highly suspect it will be postponed. While we wait, it’s on my mind whether that next Disney vacation will be a “deal”. All in all, I’m going to say that your next Disney vacation won’t be that much cheaper than your last one. You can get creative and use your hotel points to stay at one of the Good Neighbor hotels, one of my favorite money-saving tips. And, I’m sure flights will be cheap. But, the mouse is still going to want you to pay up. When I think of how awesome the new Mickey & Minnie’s Runaway Railway ride is, I can’t blame him. He’s a crafty mouse, and I’m sure he’ll get a few bucks from our pocket when it’s time to line up at those park gates again.
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