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Domestic Parks & Resorts Business Key to Disney’s Revenue Growth

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Nov. 28 2017, Updated 9:00 a.m. ET

Performance of the Parks & Resorts segment

The Walt Disney Company’s (DIS) Parks & Resorts segment remains key to the company’s top-line growth. The domestic Parks & Resorts business, which contributes ~80% of the segment’s total revenue, grew nearly 12% YoY (year-over-year) in 4Q17.

In the last five quarters, the domestic segment has grown at a compound annual growth rate of 2.8%, whereas the company’s overall revenue growth has been = -2.7%, which indicates the importance of the segment. Moreover, in 4Q17, all segments but Parks & Resorts saw their revenue fall.

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However, the domestic Parks & Resorts business was hurt by Hurricane Irma. Walt Disney World closed for two days. The company was also forced to call off three cruise itineraries and reduced two others. Despite the impact of the hurricane, the Parks & Resorts segment managed operating income growth of 7% YoY.

Investments in the domestic Parks & Resorts business

The company continues to make the bulk of its investments in the domestic Parks & Resorts business. In fiscal 2017, it invested ~$2.4 billion, or 67% of its total investments, in the domestic Parks & Resorts unit, compared with $2.2 billion last year. The company also expects investments in domestic parks to increase its overall capital expenditure by $1 billion.

In the United States, Disney’s Avatar-themed land, Pandora, remains very popular among crowds, driven by the Flight of Passage attraction. Its success has encouraged the company to open Pandoras in other parks as well.

A Star Wars attraction is due for launch in 2019, and three cruise ships are set to sail in 2021, 2022, and 2023. The company also plans to expand Marvel in parks in California and Florida. Such investments may not only attract more crowds for Disney, but also combat competition from other park and entertainment players, such as Comcast (CMCSA) and SeaWorld Entertainment (SEAS).

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