Nov 07 2008
Tough Economic Times May Equal Short Lines at Walt Disney World
The tough economic times are having an impact on the Disney Corporation:
The global economic downturn hit Walt Disney Co’s quarterly results harder and faster than Wall Street expected, with the company on Thursday reporting a sharp decline in hotel bookings and softness in advertising revenue at its networks.
Disney’s shares slid 9 percent in extended trade but recovered a bit after executives announced plans to discount stays at Walt Disney World to stimulate bookings in the first half of 2009.
“Consumer confidence is the lowest we’ve seen in over three decades, and even the best product out there is feeling the effect,” Disney Chief Executive Robert Iger told analysts on a conference call.
The entertainment industry better take notice, times are getting tough. What about the Disney parks?
Disney reported parks and resorts profit of $412 million, down from $430 million a year earlier. Sales at the unit rose 6.5 percent to $2.97 billion.
Reservations are off 10 percent for parks visits this quarter and next quarter compared with the year-earlier periods, Iger said. Holiday bookings at Walt Disney World near Orlando, Florida, are down 1 percent, he said. Visitors who book four nights will receive an additional three for free, plus a $200 credit to spend on food or merchandise.
“People want to take vacations in 2009 but they are much more value-focused,” Iger said. “That’s why we have seen bookings fall off somewhat.”
The strengthening U.S. dollar is making the trip to Disney World less affordable for foreign tourists, who have bolstered Disney’s parks this year. Resort profit may decline 12 percent this fiscal year as the U.S. economy shrinks, said Barclays Capital analyst Anthony DiClemente before yesterday’s report.
By 4 get 3 free. That sounds like a good deal, but getting there and being able to take 7 days off in a trying job market may be a completely different issue. I think Disney is being short-sited here. I believe people are more likely to spend fewer days in the parks. Why not add incentives for shorter stays then 7 days? I know it is more cost-effective to have longer visits, but realistically, your customer’s needs have changed.
Does this signal really problems for Disney in the future? Forbes doesn’t think so:
Long-term, however, Spring said Disney still has solid brands and a strong balance sheet.
It’s good to know there will still be some magic in the Magic Kingdom for years to come. Maybe this just reduces the size of the crowds at Disney World for a while and prevents the need for the Fast Pass.
