Theme Parks Drive Solid Disney Earnings

| November 8, 2013 | 1 Reply

The Walt Disney Company released its annual earnings report for fiscal year 2013 today.  Analysts expected growth and they were not disappointed.  Overall, Disney’s revenue grew (compared to last year) by seven (7) percent and its operating income (essentially profit) grew by eight (8) percent.  The Parks and Resorts Segment (which includes the Disney Cruise Line, Disney Vacation Club and Adventures by Disney) produced solid numbers, which Disney attributed to higher attendance (more than Disney seems to have expected) due to the New Fantasyland Expansion and increased guest spending.


Domestic Parks and Resorts (Disneyland and Walt Disney World, of course) had a good year.  Compared to 2012, the Parks and Resorts Segment (which includes all parks, not just domestic ones) was up nine (9) percent in revenue and 17 percent in operating income.  In terms of annual revenue, Parks and Resorts brought in over $14 billion.  Its operating income was over $2.2 billion.


Remember, Disney’s earnings reports compare the current fiscal year only to the previous fiscal year. I’ve always thought that, to get an accurate picture of any company’s financial footing, you need to look at the company’s earnings over several years.  From 2008 to 2010, Disney’s revenue and operating income declined dramatically.  It rebounded in 2011 and by 2012, the earnings recovered, even surpassing (slightly) Disney’s pre-2008 earnings.

As I have said, I look for trends over several years.  This isn’t investment advice but simply my way of putting Disney’s financial picture into perspective.   Let’s look at the Parks and Resorts Segment revenue and operating income from 2007 to the present.


  • 2007 – $10.627 billion
  • 2008 – $11.504 billion
  • 2009 – $10.667 billion
  • 2010 – $10.761 billion
  • 2011 – $11.797 billion
  • 2012 – $12.920 billion
  • 2013 – $14.087 billion

Operating Income:

  • 2007 – $1.710 billion
  • 2008 – $1.897 billion
  • 2009 – $1.418 billion
  • 2010 – $1.318 billion
  • 2011 – $1.553 billion
  • 2012 – $1.902 billion
  • 2013 – $2.220 billion

Disney’s earnings report explained that several factors led to the 2012 increase in Parks and Resorts.  Focusing on the domestic parks, Disney reported, “Increased guest spending was due to higher average ticket prices, food, beverage and merchandise spending and average daily hotel room rates.”  Disney Vacation Club saw an increase “primarily driven by sales of The Villas at Disney’s Grand Floridian Resort & Spa, which is a higher margin property.”


Capital spending dropped by half for the domestic parks from roughly $2.2 billion (in 2012) to $1.1 billion (in 2013). This isn’t necessarily bad news, given that Disney’s capital spending in 2012 consisted of “the final progress payment for the Disney Fantasy cruise ship, the expansion of Disney California Adventure, the construction of Disney’s Art of Animation Resort and development of MyMagic+.”  International capital spending also increased, by about a third, from $641 million to $970 million, mostly attributable to Shanghai Disney.

After Disney released its written earnings report for 2013, Bob Iger, Disney Chairman and CEO, and Jay Rasulo, Senior Executive VP and CFO, presented a webcast.  These webcasts are sometimes uninteresting from a Parks and Resorts point of view.  Not so today, for the big news from the webcast, not directly park related, was that the official release date for Star Wars Episode VII will be December 18, 2015. While there have been rumors that this will coincide with a Star Wars park expansion at Disneyland, neither Iger nor Rasulo gave any hint along these lines.

Rasulo explained that domestic park attendance at both Walt Disney World and Disneyland was “comparable” to the prior year.  Compared to 2012, Walt Disney World attendance increased while Disneyland Resort attendance decreased.  Rasulo attributed the falloff at Disneyland to California Adventure driving higher attendance numbers in 2012.


Other figures confirm the theme parks are continuing to grow.  Average per room guest spending (hotel, food, beverage and merchandise purchased) was up 4% over last year.  Occupancy and Reservation rates are comparable to prior years, this even though Disney increased the number of available room nights at its domestic parks.  Booking rates are up 5% over last year.  As long as Average per room guest spending continues to increase, the reservation rates are not going to concern Disney.


The first three questions from investment managers included questions about capital spending at the Parks.  Several questions focused on the status of MyMagic+ and when investors would see some benefit from this investment.  Rasulo explained that Disney is “continuing to roll forward” to make MyMagic+ available to more and more guests. Presently, any guest staying in a Walt Disney World hotel can take advantage of MyMagic+.

Financially, MyMagic+ will benefit Disney’s bottom line because “first, as it greatly improves the experience at Walt Disney World, we expect that . . . to have an underlying increase in business, whether that is more individuals coming to the resort every year or those individuals who come down to Orlando spending more time with us and having a better time.  That tends to reverberate throughout our business in a very positive way.  And then, sort of easing some of the, let’s say, logistics of getting around the Property; paying for things, entering the parks, getting in and out of the resort hotels.  When you make that easier, people tend to spend more time on entertainment and more time on consumables, be that food and beverage, merchandise etc.”  (Remember,  Disney closely monitors Average Per Room Guest spending.) Rasulo also cautioned that with MyMagic+ still being in “the early days of roll out,” they have not been characterizing the impact from MyMagic+, but it expects MyMagic+ to be “net positive” and “growingly positive” in the years to come.


In responding to a question about capital spending in the parks, Rasulo brought up (without being asked a direct question about it) capital spending on Avatar Land.   Rasulo said something pretty remarkable, telling investors that, “for purposes of thinking about the economic benefit” of Avatar Land, “you really have to think of Avatar Land, the way we discussed Cars Land” at Disney’s California Adventure.  Cars Land was part of an “overall reconcepting and redelivery of Disney’s California Adventure which had park-wide benefit in terms of volume and length of stay etc..  Avatar Land is playing similar role in Disney’s Animal Kingdom as we are converting that park into a full-day experience that goes into the evening and expect to have impacts on the overall volume and length of stay at that park as well.”  Whether Animal Kingdom fans will appreciate the comparison remains to be seen.

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Category: Disney, Disney Cruise Line, Disney World, News

  • Nicole L. Mancini

    I love the fact that you used a picture of Gaston’s statue. :)