Hey, Chicken Littles!

[DanG]

Or is that Chickens Little? Let's take a deep breath everyone.

We are all concerned with the series of cuts Disney has imposed on the themeparks. Many of us are concerned that current management is no longer up to the task of leading this company forward. Some of us fear that the non-themepark related businesses are rotting the company from the core. An acquisition is possible (incidentally, consider a foreign buyer who would be compelled to spin off the broadcast businesses).

Whether Disney is or isn't acquired will likely be irrelevant to the themeparks and their ongoing viability. Despite all the cuts in hours, attractions and benefits, the theme park business remains Disney's most reliable and profitable business. The events of September 11 were anomolous and have not yet proven to be finanacially devastating to the themepark business.

Disney's most recent quarterly results for the 3 and 9 month periods ending June 30, 2001 reflect that the themepark business with revenue of $1.9 billion (3 mos period) and $5.3 billion (9 mos period) and operating income of $560 million (3 mos period) and $1.27 billion (9 month period). Thirty percent gross margins ain't bad; that's a lot of spinners and kiddie coasters!

The themepark business is comprised of the themeparks, resort hotels, Disney Cruise Line and Downtown Disney. This is a healthy business that throws off a ton of cash that will be temporarily impacted by the events of September 11. Interestingly, there were only 19 days in the last fiscal quarter of 2001 which ends on September 11. Given that the themeparks were immensely profitable in a declining economy before September 11, the very real possibility exists that the themepark businesses will suffer no loss during any fiscal quarter. Any loss incurred would likely be only for the first quarter of 2002.

All of these cutbacks and layoffs at the themeparks are not because the themepark business is losing money, but because the themeparks are subsidizing other failures throughout the company so that Disney as an overall entity can meet cumulative goals across its businesses for return on investment. Another Voice has pointed this out repeatedly with little success.

So feel free to defend the company, but nothing suggests that the themepark business will fold or even experience losses for more than a very short time.

Just my opinion.

DanG

 

[larworth]

All of these cutbacks and layoffs at the themeparks are not because the themepark business is losing money, but because the themeparks are subsidizing other failures throughout the company so that Disney as an overall entity can meet cumulative goals across its businesses for return on investment. Another Voice has pointed this out repeatedly with little success

.

 

[lodgelady]

Thank you for the voice of reason

 

[CarolMN]

All of these cutbacks and layoffs at the themeparks are not because the themepark business is losing money, but because the themeparks are subsidizing other failures throughout the company so that Disney as an overall entity can meet cumulative goals across its businesses for return on investment.

Yes, but don't you think they should be very careful "lest they kill the goose that lays the golden eggs?" IMHO, eliminating Surprise Mornings wounded the goose enough to require hospitalization!

 

[KidDurango]

I am so tired of everyone screaming about the loss of EE mornings. They are really not that great of a benefit. Anyone who watches the parks knows that EE days are invariably the busiest days in their respective parks. Having worked in the parks, I can tell you that the difference in attendance and length of lines throughout the day on EE days very often out weighs any time advantage the Early Entry provides. When you think about it, there are probably over 50,000 people eligible for EE even on slow attendance days. If all of them took advantage of this benefit, they could swamp a park to capacity (or above depending on the park) even before other guests are allowed in.
In addition, with attendance levels that are in the parks right now, in most cases you won't wait in much of a line for anything anyway. Weekends have been busier, but attendance is still extremely light.

 

[CarolMN]

Kid -

I don't doubt anything you say (and I also happen to agree). However, IMHO, the EE controversy is not about "reality", but perception and emotion. To many guests, EE is PERCEIVED to be a very important benefit. That's why so many people are complaining and writing letters. It may not be logical, but nevertheless, it is a fact that many people FEEL the elimination of EE will negatively impact their vacation. Again, it's JMHO, but I think Disney will have to find a way to deal with the perception or risk losing customers.

Carol

 

[livsea2]

Wether you use EE or not, its importance lies in the fact that the people who do use it will reduce the crowds later in the day when you and I want to be at the park. Why is it such a difficult concept for some people to understand? The shorter the hours the more crowded the parks are when they're open! THAT"S why the elimination of EE is as important as the shortening of the hours, and all these cutbacks by a commercial enterprise that is making HUGH profits is disgusting. Disney is reacting to a drop in profits not a LACK of profits!

 

[All Aboard]

Durango, it depends on your perspective and use. You make the assumption that guests using EE are required to stay in that park the rest of the day. The saavy traveller knows about the mounting crowds and strategizes accordingly.

Our Saturday approach has been: get to MK for EE, enjoy every attraction in the park by lunch, have lunch and then hop to Epcot for the remainder of the day. There's real serious value in being able to do that! We've done it a dozen times this year, even more in previous years. Now, it's gone.

You reference weekends being light right now ("heavier than during the week, but light" is how you put it.) I would like to offer a differing opinion. We've been up to WDW 3 of the past 5 weekends and it was far from "light." The loss of Saturday MK EE is a big hit to making a high value weekend trip.

And right now, WDW needs alot more of that. Shortly after the events of the 11th, Florida residents began flocking to WDW on weekends. Many stayed at the All Stars. Most knew about EE and used it in order to get alot of value out of a weekend stay. I suspect that WDW hurt themselves with respect to these travellers by eliminating EE and cutting operating hours.

Right now, these travellers are WDW's "bread and butter". They can't really afford to lose them.

 

[YoHo]

Maybe I've been listening to bicker too much today, but as he points out, the people that run Disney are professionals. These cuts were made on a park level, NOT at the corporate level (although they likely demanded it) If the people running the world are at all compitent at their jobs, then they already new that cutting EE and E-nights despite the uproar here will increase profitability which means they don't expect a dieoff. Further since their goal si to make more money, Its a safe assumption that if they're wrong, things will be chnged quickly.

 

[All Aboard]

Trouble is, those things are so hard to calculate. I don't ever recall CRO asking me "can I ask why you are cancelling?" We make so many bookings and changes a year, so I end up cancelling at least a dozen reservations each year. Not sure why they don't collect this info.

Assigning a $ loss that is the result of the elimination of EE is a tough one to do. Sort of like having me estimate the number of subscriptions we'd lose if we dropped, say, 6 pages of Sports coverage each week. Even after the fact, it's only a guess since there are so many factors and variables all happening at the same time.

Let's say that post-cut bookings fall below expectations. Does management respond by trying to determine if the reduced value (ie, EE, shorter hours, fewer shows) is the cause, or do they respond by making more cuts. I fear the latter.

Hey Mike, do you notice the snowball that seems to be developing in Central Florida?

 

[DanG]

My initial point was that the themepark business is a profitable, successful one. You all have raised additional, interesting points.

I agree with Carol that deleting early entry is shortsighted, though not particularly relevant to me or much of a value given the number of people who can stay on site. EE is a perceived benefit and taking it away diminishes the value of the on-site experience. The majority of people will never notice that Disney decided to eliminate a planned attraction or new land (i.e. Beastly Kingdom), but take away a perceived benefit and everyone can understand the diminished value proposition. The reactions of those on these boards are representative of Disney's best and most loyal customers.

FWIW, I believe that the diminished value applies less to the themepark experience than ito staying on-site. Disney has greatly expanded its resort hotel capacity and needs to maintain a certain occupancy level to reach its profit objectives for the themepark segment. People will continue to go to the parks in greater or lesser numbers all profitable to Disney. But why anyone would now stay in the All Star Resorts as opposed to the Holiday Inn Family Suites or comparable off-site hotel is a mystery to me. This elimination of EE will drag down the themepark segment's overall performance.

I still stand by my point though that these cost cuts are unnecessary and shortsighted in the scheme of the overall themepark business. Disney's current challenges will not be solved through cuts that impact the visitor experience.

DanG

 

[All Aboard]

But why anyone would now stay in the All Star Resorts as opposed to the Holiday Inn Family Suites... is a mystery to me.

For me, that's an easy question to answer.

1) To us it's not "Disney" if we are not staying on-site, it's just a trip to Central Florida
2) At $49 a night, ASMo is half the price of HIFS
3) Direct (and extremely frequent) bus service to MK
4) Free parking when I drive to parks

So, despite all my grumbling over the loss of EE, I'm not changing my plans to stay at ASMo 14 more nights between now and mid-January. I'm the guy WDW is banking on, the one that let's them take and take and yet still keeps coming back. I have a breaking point, let's just hope Disney doesn't reach it.

 

[DanG]

gcurling, I am glad you will stay at All-Stars and I couldn't agree with you more that everyone has their own breaking point on the issue of cost cutting going to far. Many would elect to stay at the HIFS for the larger, kid friendly rooms, free breakfast, proximity to the parks, better pool complex and proximity to off-site food and entertainment options. Other off-site locations offer a different set of advantages. Others may not value the "magic" as much as you or I do. That is why each on-site perk taken away will push away more people.

Despite the negativity of my recent posts, I want Disney to succeed. I am just skeptical of many of the recent management decisions. They are not listening to their customers.

DanG

 

[Snowgod]

Maybe they are listening to their customers. If 80 percent of the reservations are canceled at WDW resorts and all of the room deposits are refunded for those vacations, what kind of message does that send management.