Disney’s investment in theme parks
Walt Disney’s (DIS) theme parks and resorts are the driving force of the company’s top-line growth. In the fiscal third quarter, Disney’s Parks and Resorts segment reported revenues of $5.2 billion.
The segment significantly increased on a YoY (year-over-year) basis by 6.0% from revenues of $4.9 billion in the fiscal third quarter of 2017. Park and entertainment peers Comcast (CMCSA) and SeaWorld Entertainment (SEAS) also have been investing in theme parks to attract more crowds.
Driving factors of Parks and Resorts segment
There are 11 Disney-owned and -operated parks worldwide, but only five are Disneyland properties. The other six parks are Tokyo DisneySea, Disney California Adventure, Magic Kingdom, Animal Kingdom, EPCOT, and Disney Hollywood Studios. Disney’s resorts include Disneyland Resort, Walt Disney World, Tokyo Disney Resort, Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort.
The timing of the Easter holiday reduced the segment’s gain in the current quarter. In the second quarter of 2017, the company benefited from two weeks surrounding the Easter holiday. In the current quarter, the company gained from just one week surrounding the Easter holiday.
The segment’s operating income also gained 15.0% to $1.4 billion, due to an increase in guest spending. This trend was led by increases in average ticket prices, food, beverages, and merchandise spending, as well as higher average daily hotel room rates. However, increased costs due to labor and other cost inflation partially offset the growth in its operating income.
Increased spending for new guest offerings also adds to the costs. In fiscal 2017, Disney spent more than 60.0% of its total investments in domestic parks. Disney’s cruise line growth was driven by higher passenger cruise days.
The company also witnessed increased operating income at its international parks and resorts, led by improved growth at Shanghai Disney Resort and Hong Kong Disneyland Resort. Higher operating income at Shanghai Disney Resort was due to lower costs and attendance growth, though the resort had reduced guest spending.
The increase in operating income at the Hong Kong Disneyland Resort was mainly due to higher attendance, increase in occupied room nights, and average ticket prices.
Apart from the successful opening of Toy Story Land in Shanghai, the company opened Toy Story Land in Orlando on June 30. The company has plans to open the Star Wars: Galaxy’s Edge attraction in both Disneyland and Disney World by the end of 2019.