Big Disney Parks Insights from 2021’s 1st Quarterly Call

The Walt Disney Company held it’s quarterly call for the first quarter. We take an in-depth look at the announcements and references made for its theme parks and beyond. We look specifically at The Walt Disney World Resort, Disneyland Resort and all parks globally. We not only share what was stated during the quarterly call, but what has been shared by leaders elsewhere. More importantly we give further insight to those announcements, and then talk about what hasn’t been shared. It’s a full podcast with much insights as to how Disney is coping during this pandemic in the theme parks. All of it lends itself to the question, when do you want to go back to Disney?

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Walt Disney World Resort

What They Shared

“At Walt Disney World Resort, we’re hard at work on two brand new attractions at Epcot, Remy’s Ratatouille Adventure and the highly anticipated Marvel-themed rollercoaster, Guardians of the Galaxy: Cosmic Rewind. Work is also well under way on the all-new spectacular nighttime show, Harmonious.”

“This is all part of a much larger reimagining of Epcot to make it more Disney, more family friendly, more timeless and more magical. And I’m especially excited about the progress that’s been made on the new Star Wars Galactic Star Cruiser hotel at Walt Disney World. People are going to be blown away by the experience. It is truly unlike anything we’ve done before.”

“And I’m especially excited about the progress that’s been made on the new Star Wars Galactic Star Cruiser hotel at Walt Disney World. People are going to be blown away by the experience. It is truly unlike anything we’ve done before.”

“At Walt Disney World, as Bob mentioned earlier, average daily attendance grew significantly from Q4 into Q1, benefiting from typical seasonality factors, as well as solid underlying demand trends. At the same time, our operations team found innovative ways to responsibly increase capacity while still maintaining rigorous COVID protocols.”

“We expect that Walt Disney world attendance in the second quarter will be impacted by typical seasonality headwinds in addition to continued COVID-related headwinds and capacity constraints. 

“Per caps were also up double digits year over year. We continue to be pleased with the rate of reservation bookings we are seeing in the current quarter. And consumer sentiment around visiting our domestic theme parks over a longer period of time remains strong. 

“I’ll address your question about capacity at the parks. You’re absolutely right that there are days, especially holiday periods, where we have to shut our parks for additional entries. Those tend to be days that the park fills up quickly and we just can’t accommodate more people.

“But that being said, we are currently operating at 35% of that full capacity. And the teams in the park, especially at Walt Disney World, have really figured out a way to be as efficient as possible in operating the park that allows us to get up to that 35% and still maintain all of the protocols for social distancing, for COVID. I think you’ll remember, when we started opening, we started at a level less than 35%, but it was the — as Bob has already mentioned, industrial engineering that we utilize and just moving people around. The other thing I’d say is when you think about the parks, it’s a combination of attendance and per caps when you’re looking at revenue.

“As I said in my comments, and I think Bob’s alluded to it on the Q&A that we’ve had really nice growth in per caps. It was double digits, not only on a linked-quarter basis from fourth quarter to first quarter, but also double digits year over year. So when you think about per caps and the yield management, we want to have people have a great time when they’re in our parks. And when they have a good time, they tend to spend more money.

“So this is something that we’re refining as we go along.”

What They Didn’t Share

• Opening dates for mentioned attractions
• Tron is not moving forward on the interior, though temporary supports are being dismantled on the canopy
• Replacement to Sorcerers of the Magic Kingdom
• Attendance is really soft
• The potential for domestic travel restrictions to Florida from the White House
• No mention of dates or status for China film replacement and Play Pavilion and Space 220
• Anything on Princess & the Frog progress or on Jungle Cruise
• Lots of Technology in the Star Cruiser Hotel–Maintenance is Another Question
• Details of when and what Walt Disney World’s 50th will be like

Disneyland Resort

What They Shared

“At Disneyland Resort, the exciting new Marvel-themed land Avengers Campus is currently scheduled to open later this year at Disney California Adventure. And crews are hard at work on the highly anticipated state of the art attraction, Mickey & Minnie’s Runaway Railway coming to Disneyland in 2023.

Recently (but not in the quarterly call) President Ken Potrock shared to Disneyland Cast Members the following about the Avengers Campus:

“I’m pleased to report that Avengers Campus is making incredible progress. From the futuristic architecture, theatrical lighting, unique audio, creative food, beautiful costuming and innovative merchandise, the land will be an immersive experience that we know our Guests are going to love.”

“Our current expectation is that Disneyland Resort will be closed the remainder of the 2nd Quarter.

“…we’re pleased to be doing our part by providing space at Disneyland for one of Southern California’s major vaccine distribution sites. To date, more than 100,000 doses have been administered at our location.”

“I would characterize this last year as being not only a year of challenge, but also a year of learning in terms of what we can do, in terms of sustained margin growth in our parks. I say that because there’s nothing like a pandemic to challenge the status quo and make you be fairly introspective about a lot of things that you’ve maybe taken as fairly dogmatic. I think you’ve all seen several new announcements about things that we’ve done recently that may have been heresy prior to the pandemic, like recasting of our annual pass program at Disneyland and reconsidering the overwhelming demand we have relative to supply. Everything we do, the first lens we look at is to exceed guest expectations.

“And it’s very tough when your park has more demand than supply, we have to put limits on it. Well, as you know, we have a wide variety of margins depending on the nature of the guest and how they visit and when they visit. So with a lens toward maximizing the guest experience, we are now able to essentially reset many pieces of our business, both on the cost and revenue side of the business in order to say, if we had a blank piece of paper, how would we set up our parks business and be a little bit more aggressive than we typically might be able to be without the impetus of, unfortunately, a year-long closure. So we’ve had a lot of time to think, particularly at Disneyland, about what could be, and I think you’re about to see some of those strategies be born.

What They Didn’t Share:

• What the new annual pass system will look like
• Re-opening soon of Main Street, U.S.A. to shopping and dining.

Ken Potrock noted to Cast Members: “Currently planned to begin mid-March, we will debut an all-new, limited-time ticketed experience, focused on our world-famous food and beverage offerings from around the resort, the latest merchandise and unique, carefully crafted entertainment experiences…all to be offered multiple days a week…With limited capacity and enhanced health and safety measures in place, Guests once again will get to step into a magical Disney environment – an environment that will provide memorable and fun experiences our Guests are craving.

Disney Global Parks & Elsewhere

What They Shared

“We’re also moving forward on a number of new projects at our international parks. At Shanghai Disneyland, work continues on the first-ever Zootopia-themed land. This fully immersive area will seamlessly blend Disney storytelling with advanced technologies, creating a one-of-a-kind experience for our guests.”

“Disneyland Paris will be closed for the entirety of the second quarter, but we are hopeful we will be able to reopen Hong Kong Disneyland during the quarter.”

“Disneyland Paris was opened until the end of October or for about a third of the quarter, and Hong Kong Disneyland was open until the beginning of December or for about two-thirds of the quarter. Our parks and resorts that were opened during the quarter all operated at significantly reduced capacities, yet all achieved a net incremental positive contribution for the periods during which they were open, meaning that revenue exceeded the variable costs associated with opening.”

What They Didn’t Share:

• Political volatility in Hong Kong
• What Kind of Attraction will Zootopia Have?
• Opening Date of Cars Route 66 Road Trip though photos are being shared
• When will Disney Cruise Line re-open
• The impact of no cruises to Alaska
• Nothing about Tokyo Disneyland, as always

In General

“OK. In terms of the outlook for the parks for the rest of the year and the capacity, it’s really going to be determined by the rate of vaccination of the public. That to us seems like the biggest lever that we can have in order to either take the parks that are currently under limited capacity and increase it, or open up parks that are currently closed. So that is sort of the gating factor, if you will.”

“As Christine suggested, we have ample demand for our parks. Despite everything that’s happening with that pandemic, I think we’ve made a pretty big impression on our consumer base and prospective guests in terms of the safety measures that we’ve undertaken at our parks to give assurances to people that they should come in and bring their families. And we’re very, very pleased with what we’re seeing in terms of future bookings. In terms of the cost savings and the technical side of things, not only has our industrial engineering team at Walt Disney World and some of our parks like Shanghai across the world figured out ways to have increased capacity with the same safety measures that we’ve had in place, which has enabled us to increase our, if you will, our attendance.”

“But there, we have been able to substantially manage our cost side at the same time to rightsize, if you will, out — not only our fixed cost base, but also our variable cost base to match what’s happening. And I think that’s evidenced by what Christine said that all of our parks, regardless of what conditions they’re operating under, assuming they are operating, are in positive net contribution side. I would also add, you didn’t mention this, but I think it’s important to add that given those per caps that Christine referenced in terms of the double-digit increase in per caps, this is sort of the ultimate situation where demand has exceeded supply. We’ve had that — been fortunate enough to have that situation for the last couple of years, and we’ve learned how to yield this business.

“And I think this is the ultimate situation where we’ve got supply greater than demand. So not only working on the cost side, but we’re also working on the revenue side. And I think you see some of those results at play at Walt Disney World.”

“…I won’t specifically comment on whether we anticipate getting to ’19 revenues by 2022, but I will tell you what our expectations are in terms of the state of the world by then. We have no doubt that when we reopen up in parks that were closed, or increase the capacity, that we’ll have some level of social distancing and mask wearing for the remainder of this year. That’s our expectation.

“But I believe that Dr. Fauci said earlier today that he hopes that there’s vaccines for everyone who wants them by April this year. If that happens, that is a game changer. And that could accelerate our expectations and give people the confidence that they need to come back to the parks.

“Will there be some overlap until we know that we’ve hit herd immunity? Sure, there will. But do we also believe that we’ll be in the same state of six-foot social distancing and mask wearing in ’22? Absolutely not.”

Other

“Soul, which debuted on the service and in theaters on Christmas Day to create acclaim and has since taken in nearly $100 million at the global box office.”

“…if I can just jump in here as well. We believe that we’ve got a great price-value relationship. I mean, think about it from a Star Wars franchise, we moved from Mando 2 to Boba Fett later on this year to Mandalorian 3. And on a Marvel standpoint, we go from WandaVision to Falcon and the Winter Soldier and to Loki.

“So I think the best insulation we’ve got is to keep the price-value relationship very high, and there’s no better way to do it than powerhouse franchises cranking out regular new releases on a monthly basis.”

“So Doug, on engagement, as we said at the investor day, with Disney+ originals, along with the theatrical releases and the library titles, we’ll be adding something new to the service every week. And in general, I would say, we are very pleased with the engagement overall, especially when we put something like WandaVision on the service. So once again, these — any time we put a new piece of content on, the engagement for people who know what the schedule of releases is, it’s quite encouraging. So we believe we’re going to reach that cadence of getting content on the service every week within the next few years.

“We’ve also set that target for 100-plus new titles per year. And that’s across Disney Animation, Disney Live Action, Pixar, Marvel, Star Wars, Nat Geo. And of course, we’ll continue to add more to our library as we go through time as well.”

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