Report Overview

Disney is by far the largest entertainment conglomerate in the world, with its parks and resorts unit representing its travel footprint. This segment generated more revenue than industry powerhouses like Priceline, Expedia, Marriott, and Hilton. Parks and resorts may represent less than a third of Disney’s sales directly, but it’s a crucial consumer touchpoint facilitating Disney’s cross-monetization of content. This report takes a deep dive into Disney’s entire travel business, spanning theme parks, hotels, the Disney Vacation Club, cruises, Adventures by Disney, conventions, and athletic events. We provide strategic and financial analysis for each unit along with the segment as a whole. The Walt Disney Company serves as a case study on how a travel company can use technology and data, best practices in customer service, and storytelling to gain competitive advantage. While the Walt Disney Company as a whole has been analyzed by media analysts and a number of well-respected equity research analysts covering the traditional media sector, Skift’s expertise and sole focus on the travel industry uniquely positions us to provide a comprehensive and independent view of the travel business housed within Walt Disney. At close to 30,000 words, we offer our readers a complete analysis of the parks and resorts segment while addressing the interplay with the studio and consumer products businesses.

What You'll Learn From This Report

  • How Disney has been able to maintain pricing power at its U.S. parks, raising admission prices above the cost of inflation, while still generating steady attendance gains.
  • Attendance, spending, and revenue trends across all of Disney’s theme parks individually and in aggregate.
  • What the new expansion projects are at the theme parks.
  • The likely steady-state financial impact from Shanghai Disneyland and how the ownership contract is structured.
  • How the recent debt recapitalization and increased Disney stake in Disneyland Paris will help alleviate the paradox of high attendance, but limited economic benefits.
  • In what way Walt Disney is expanding and improving Hong Kong Disneyland to combat the impact from slowing tourism to the island from mainland China.
  • An understanding of how the owners of the Tokyo Disneyland Resort (Oriental Land Company) have positioned its Disney-themed assets and the economic and strategic impact to the Walt Disney Company under the fee agreements.
  • How the company uses behind-the-scenes tours and special events to enhance revenue via high-margin add-ons at the parks.
  • The competitive advantage of Disney’s immersive hotel portfolio.
  • Why the cruise business is different, and more profitable, than pure-play competitors.
  • The impact of the Pixar, Lucasfilm, and Marvel acquisitions on the company’s cross monetization of content.
  • How the MyMagic+ technology improves the guest experience while providing Walt Disney with crucial data.
  • The impact of the Imagineering team.
  • That theme parks attendance is less cyclical than many believe.
  • Relationships with third party distributors.
  • Insights from retired executives.
  • Airline booking trends and forward outlook for Disney’s key markets in partnership with ForwardKeys.

Executives Interviewed

  • Randy Garfield - Retired President of Walt Disney Travel Co. & EVP of Worldwide Sales & Travel Operations for Disney Destinations
  • Professor Duncan Dickson - Professor at the Rosen College of Hospitality Management, former Director of Casting at Walt Disney World

List of Figures

  • Walt Disney Segment Breakdown
  • Disney Park Attendance Numbers
  • Admission Price Increses Outpace Inflation
  • Disney Competition in Florida
  • Domestic Travel to Orlando
  • International Travel to Orlando
  • Domestic Travel to Los Angeles
  • International Travel to Los Angeles
  • Travel Trends Paris
  • Japanese Economic Overview
  • Hong Kong's Gross Domestic Product
  • Domestic Travel to Hong Kong


In the following report, we provide a deep analysis of each individual theme park, peering into the specific economic contributions and ownership structures. We discuss attendance trends, pricing power, new expansion projects, and competition. In the U.S., the new Star Wars, Toy Story, and Avatar lands will be crucial to future growth given large capital investments and increased competition from Universal’s Harry Potter-themed lands. Disney’s unique product offering has helped it maintain incredible pricing power, consistently raising prices above the rate of inflation. That pricing combined with steady gains in attendance has been a powerful recipe for the company. To keep this going into the next decade, the new lands will need to be well received.

While Disney owns its domestic parks entirely, the international parks’ ownership stakes vary greatly with different structures and fee arrangements. We provide a lengthy study of the new Shanghai park and what the steady-state financial contribution could be to Disney. In Japan, Disney does not own the park, but receives fees from the owner, Oriental Land Company (OLC). Here we jump into OLC’s Japanese filings to show how the company has positioned itself and how that will impact the Walt Disney Company. In Hong Kong, we discuss traffic trends, potential cannibalization from Shanghai, the impact of slowing tourism to the island from mainland China, and how Disney is expanding and improving the park to combat those headwinds. Finally, we analyze the Disneyland Paris resort, which is somewhat a paradox. It is the most visited tourist attraction in Europe, but has struggled financially under a large debt burden. We address the park’s performance, recent debt recapitalization, increased Disney ownership stake, and what it all means for the Walt Disney Company.

The report discusses the hotel business with a focus on the trends in occupancy, spending, and revenue along with the all-encompassing nature and brand reinforcement qualities of the properties. The report also dives into the smaller, but lucrative, cruise business, the high-end Adventures by Disney travel packages, conventions, and athletic events. In each case, we discuss the strategic and financial implications.

We look at Disney’s relationships with third-party distributors, both online and offline, how the Imagineering group drives innovation behind the scenes at the company, and how Disney’s recent acquisitions are not only driving record results at the studios, but also will be key drivers at the theme parks going forward. While the report focuses on travel, we provide a detailed account of the movie business, as that helps drive company-wide cross-monetization at the parks and consumer products units. Lastly, in the harsh reality of today’s world, we address how the Walt Disney Company keeps its guests safe from terrorism while maintaining the innocent, escape-from-reality feeling that guests want.


Company Overview

Walt Disney in its entirety generated $55.6 billion in revenue with a 28.3 percent operating margin in 2016 (Fiscal Year September). The parks and resorts segment generated just under $17 billion in revenue, representing approximately 31 percent of revenue and 21 percent of operating income. Operating margin for the capital-intensive business is just under 20 percent versus the company as a whole at 28 percent. While the unit has the lowest operating margin of any segment, given the required hard assets and associated investments, the segment serves as a crucial consumer touchpoint that builds brand loyalty and feeds into demand for the high-margin consumer products business and excitement for future and current films at the studio.

The largest segment is media networks, which accounts for 43 percent of revenue, 49 percent of operating income, and has close to a 33 percent operating margin. The key driver of this unit is ESPN. As the cable industry has matured, ESPN’s growth path will be more modest going forward. While we do not cover the segment in this report, it is worth noting that even with modest (low-single-digits annual percentage) subscriber declines to flat subscriptions, steady affiliate fees and advertising spend on live sports content should still make this segment a modest grower. If new monetization streams from over-the-top or direct-to-consumer kick-in, ESPN could see growth accelerate once again. The concerns in the industry remain around the future of ESPN in a world of cord cutting and shaving (where consumers leave cable or decrease the size of packages). We will leave this debate to traditional media analysts as we focus solely on our specialty, travel.

The diversity of Disney’s assets is unique in the media industry. While ESPN has led the charge in the past, the key growth drivers in the near future will be the movies, products, and parks and resorts segments, with the three businesses all feeding into each other via cross-monetization of content.

The studio business is primarily the movies. The initial release of a movie would be lower margin, but Disney makes up for this later in the life cycle through television distribution and licensing content to companies like Netflix. Additionally, part of products licensing revenue hits the movie business and is very high-margin. In 2016, studios contributed $9.4 billion in revenue, $2.7 billion in operating income, and had a 29 percent operating margin. Movies and the intellectual property derived from them are also a key competitive advantage for the theme parks. The Disney movie business is far and away the most valuable franchise in the industry. Disney has grown its movie business through very smart acquisitions of Pixar, Marvel, and most recently Lucasfilm (Star Wars). The typical annual slate includes two to three animated films from Pixar or Disney Animation, two to three Marvel films, two to three large-scale Disney Live Action movies, two to three smaller releases, and one Star Wars film. Newer franchises are already getting monetized in the parks with vast Star Wars lands being built along with touchpoints seen from Frozen, Zootopia, and other films.

Products consist of retail stores, merchandise, and the very high-margin licensing business. Again, cross-monetization is key. A film gets released that may only have a 10 percent margin at the box office. From there, the content is then monetized in consumer products merchandise and licensing sales. This builds the consumer relationship with characters. Eventually, the theme parks then create lands, add rides and shows, and place the characters in the parks (and on cruise ships and in hotels). This brings more guests to the parks, increases spend on products while there and after visiting, and increases franchise loyalty. Disney’s movies follow a tentpole franchise model, where things like the Avengers have multiple sequels and character spin-offs. With built-in audience loyalty, critically acclaimed franchise sequels tend to surpass their predecessors in financial performance as well.

Source: Company Filings

Source: Company Filings


With $16 billion in revenue in 2015, the parks and resorts segment generated more revenue than most leading pure travel companies.

Source: Company Filings

To give context to the size of the company as a whole, only Comcast is larger. Comcast’s television business (distribution and content) makes up 65 percent of revenue with theme parks only at 12 percent. Disney’s comparable segment is almost three times the relative contribution to the parent company. The massive sizes of Disney and Comcast explain why they dominate the theme park industry where capital spending, advertising, and intellectual property are crucial to success.
Source: Google Finance

Based on Disney’s filings and Skift’s estimates, we believe revenue is split in the parks and resorts segment as follows:
Source: Company Filings, Skift Estimates


The Walt Disney Company has continued to lead the industry in using technology to improve the guest experience. In the following section, we discuss the implementation of MyMagic+, the Imagineering group, and broader technological advances benefitting guests at the parks, hotels, cruises, and other venues.


Walt Disney implemented the MyMagic+ program at Walt Disney World in 2015. The company spent over $1 billion to roll out the program and to create the technology behind it [1].
The key tools are FastPass+, the My Disney Experience App, and MagicBands.

Guests Benefit From a Better Experience…

MyMagic+ lets guests pre-plan their trips by reserving rides, dining, entertainment, and character greetings in advance. Guests can navigate the parks more efficiently, with reduced wait times, and get a more optimized and personalized experience.

…While Walt Disney Improves Park Efficiency, Improves the Consumer
Relationship, and Obtains Massive Amounts of Data

Walt Disney is able to gain massive amounts of data on the guests. From a pooled perspective, group data helps the company figure out things like how to best staff certain attractions and restaurants, which meals to offer, which shows are best attended, where to place the characters, and how to reduce lines through the parks. A more satisfied guest is not only more likely to return, but also more likely to stay longer at the park and spend more per visit. Additionally, having individual-level data lets Disney better market to its consumers. For privacy concerns, guests can opt out of marketing. Additionally, Disney will not “use information collected in connection with MyMagic+ to personalize or target advertising to children under age 13.” [2]


FastPass was first implemented in 1999. In its simplest form, a guest would go to a popular ride and see there is a long wait, but instead of standing in line, she could print out a ticket from a kiosk with a specified return-time window. At that time, she would wait on a much shorter line with only others who also reserved that return-time window. This model is still used at most parks, but Walt Disney World updated this to FastPass+ as part of MyMagic+.

Under the new FastPass+ model, guests can reserve attractions, entertainment, or character greetings far in advance. Ticketholders can do this 30 days ahead and guests at a Walt Disney-owned hotel can reserve 60 days ahead. Guests can reserve three attractions in advance and once those are used or expire, they can add more one at a time.


These are colorful, waterproof bands that look almost like a watch; cards can also be used for the same effect and would resemble a driver’s license. The bands are used for FastPass+ reservations, park admission, room entrance at a Disney-owned hotel, and to purchase food and merchandise. Essentially, the bracelets act as a digital wallet, reservation hub, and room key where guests could choose to leave their actual wallets and paper tickets at home. Bands also link to Disney’s PhotoPass Service where guests can see action photos that they can purchase later. This is more convenient than the typical process of checking out a stand after a ride. The bands are included with a stay at a Disney hotel or cost $20 to $30 online, though are often cheaper if bought at or near the parks.

The Technology Behind the Bands

The bands use radio frequency (RF) technology. Each band is uniquely identified and authenticated. They contain a high frequency (HF) radio device and transmitter that send and receive RF signals through a small antenna inside the band. Short-range readers serve as touchpoints through the parks and hotels. The bands can also be read by long-range readers placed in select locations throughout the resort. These long-range readers are key for gathering data for Disney. Guests who want more privacy can use cards instead, which cannot be read by the long-range readers. Both the bands and cards are not GPS-based so Disney is not continuously tracking guests. It is more of a point-to-point process. This gives Disney the data it needs without guests worrying about constant monitoring of location. Similar to what would happen with Apple Pay, the device is not storing sensitive information in an accessible way. Disney uses a randomly assigned code that securely links to encrypted data.

My Disney Experience App

The app integrates with FastPass+ and the bands. It has functionality to buy tickets, merchandise, and photos. Additionally, it has current park hours, wait times for rides and other attractions, a GPS-enabled interactive map, character and greeting locations, and restaurant menus and reservations. Guests can also use the app to buy theme park tickets, organize reservations and plans, share plans with family and friends, and manage reservations. The app lets users select and modify FastPass+ choices. It also links to the pure shopping app (Shop Disney Parks).

Potential Usage at Other Parks

The traditional FastPass program remains outside of the immense Disney World Resort, which had 54 million visitors in 2015 across the Magic Kingdom, Epcot, Animal Kingdom, and Hollywood Studios. The first inclination was that the MyMagic+ technology could be rolled out at all parks, but a few things preclude this. In the U.S., the Disneyland Resort is much smaller and has only a fraction of the hotels, making the need for a new program less important. In Asia, Shanghai will use mobile phones for similar features. This could be the model for other parks if successful. CEO Bob Iger has stated, “What you’ll see in Shanghai is a park that, from a technological perspective, is more advanced than anything we’ve ever built. The consumer will be able to buy their tickets, use their mobile devices in far more advanced, compelling ways than any other place from a theme park perspective than we are today.”

Outside of Walt Disney World, the other parks do have useful apps that have similar features to the My Disney Experience app mentioned above.


After twenty years at Disney, Randy Garfield retired in 2014 as President of Walt Disney Travel Co. & EVP of Worldwide Sales & Travel Operations for Disney Destinations. He led one of the U.S.’ largest travel wholesalers and sales/distribution marketing for Disneyland, Walt Disney World Resort, Disneyland Paris, Hong Kong Disneyland, Disney Cruise Line, Disney Vacation Club, and was responsible for The Disney Institute & Disney Event Group. He also managed central reservations and catering for special event/group sales and services at Disney resort destinations, and provided strategic direction to Disney’s Sports Enterprises.

Skift: What were the biggest changes in how technology has been used from a customer service perspective?

Garfield: There’s a lot of people in the travel industry who may use technology very effectively, but I think at Disney, they use it so that it is an enhancement to a high-touch experience. For me, one of the best examples was Disney’s Magical Express, that you may not think of as technology. When you book a Disney resort and you leave your home in Chicago and you check your luggage and you get off the plane in Orlando, you get on a motor coach and go straight to the hotel. Your bags are delivered in a very timely fashion, which is something else you don’t have to worry about. Even as you’re departing, it’s the same thing. You don’t have to worry about getting to the airport hours and hours in advance — that’s technology.
The expansion of FastPass to Walt Disney World’s huge technology initiative of MyMagicPlus was great. It helps guests customize their experience; it’s helpful in getting from point A to point B, making dining reservations, and developing an itinerary that is customized to their own preferences. Things like that are examples of utilizing technology in a way that really enhances the guest experience and lets the cast members focus more on the individual preferences of our guests.


Headquartered in Glendale, California, Walt Disney Imagineering or WDI (combines engineering with imagination) blends storytelling, art, science, and technology to imagine, design, and build all of Disney’s theme parks, resorts, attractions, and cruises. The group was created in 1952 to build the Disneyland park and now has over 1,700 people globally with diverse creative and technical specialties across 100 disciplines.
Competitive Advantage Versus Peers

Outside  of Comcast-owned Universal, most competitors lack the budget needed to build massive theme parks. Additionally, the Disney brand attracts top talent as science and engineering are put to use in exciting and fun ways. Disney’s Imagineers have continued to help keep Disney at the forefront of innovation.
Imagineering holds over 100 patents in special effects, ride systems, interactive technology, live entertainment, fiber optics, and advanced audio systems. Some notable creations include:

  • The first daily operating monorail system in the U.S. (Disneyland Park)
  • The first computer-controlled thrill ride (Space Mountain, Magic Kingdom Park)
  • Trackless ride vehicle system (Pooh’s Hunny Hunt, Tokyo Disneyland Park; Luigi’s Rollickin’ Roadsters, Disney California Adventure Park)
  • “Scenic Sandbox” projection technology for theatrical surfaces to add richer detail and movement to static sets (Snow White’s Scary Adventures, Disneyland Park)
  • Advanced audio-animatronics where characters can roam freely and interact with guests with more lifelike qualities. Disney is now creating new robotic systems to reproduce motion qualities of animated characters.

The group built its Digital Immersive Showroom (DISH) to help plan and visualize projects. It also uses Building Information Modeling (BIM) to create intelligent 3D models for planning, design, and construction.

Current Projects

The largest recent project was the opening of Shanghai Disney. Below we look at some unique innovations happening at the parks. We address the massive land creations and expansions later in the report. Below are just a few examples of how Imagineering leads to new attractions.

1) The Iron Man Experience at Hong Kong Disneyland will open in 2017 and is Disney’s first Marvel-themed ride. It uses a motion-simulator and new 3D effects.

2) Once the Avatar land opens at Animal Kingdom in 2017, guests will see floating mountains, bioluminescent plans, and the Flight of Passage that lets guests experience what it’s like to fly on the back of a banshee.

3) The Star Wars lands coming to Disneyland Park in California and Hollywood Studios in Florida will be on 14 acres that give guests a feeling of being on a new planet and even has a Millennium Falcon ride.

Disney Research

WDI houses Walt Disney’s research team, Disney Research. This unit delivers scientific and technological innovation to the entire company. Disney Research combines the best of academia and industry with basic and application-driven research. It utilizes publication as a principal mechanism for quality control and encourages engagement with the global research community. The group has researchers in 40 countries working in wide-ranging fields including consumer graphics, robotics, video processing, and consumer vision. Disney Research partners with ETH Zürich in Switzerland and Carnegie Mellon University in Pittsburgh. Disney Research also has a facility in Los Angeles and works closely with the Pixar and ILM research groups in the San Francisco Bay area.

Mickey’s 10 Commandments

Marty Sklar spent 50 years at Walt Disney and was a former vice chairman and principal creative executive of Walt Disney Imagineering. He created Mickey’s 10 Commandments [9], which still serve as guiding principles for Imagineering today [3]. These principles give us insight into the broader thought process at the parks and resorts. The advice is intuitive in some ways, but its brilliance is in its simplicity. The far more difficult part is execution, and that is where Disney excels.

1. Know your audience. Don’t bore people, talk down to them, or lose them by assuming that they know what you know.

2. Wear your guest’s shoes. Insist that designers, staff, and your board members experience your facility as visitors as often as possible.

3. Organize the flow of people and ideas. Use good storytelling techniques, tell good stories (not lectures), lay out your exhibit with a clear logic.

4. Create a weenie. Lead visitors from one area to another by creating visual magnets and giving visitors rewards for making the journey.

5. Communicate with visual literacy. Make good use of all the non-verbal ways of communication: color, shape, form, texture.

6. Avoid overload. Resist the temptation to tell too much or have too many objects; don’t force people to swallow more than they can digest; and try to stimulate and provide guidance to those who want more.

7. Tell one story at a time. If you have a lot of information, divide it into distinct, logical, organized stories that people can absorb, and retain information more clearly if the path to the next concept is clear and logical.

8. Avoid contradiction. Clear institutional identity helps give you the competitive edge. The public needs to know who you are and what differentiates you from other institutions they may have seen.

9. For every ounce of treatment, provide a ton of fun. How do you woo people from all other temptations? Give people plenty of opportunity to enjoy themselves by emphasizing ways that let people participate in the experience and by making your environment rich and appealing to all senses.

10. Keep it up. Never underestimate the importance of cleanliness and routine maintenance; people expect to get a good show every time, and people will comment more on broken and dirty stuff.


Though technology is crucial for creating the actual products and aids in customer service, Disney has consistently relied on human interactions and storytelling to drive the guest experience. For many families, the character interactions are the most exciting part of going to the theme parks, staying at Disney-owned hotel, or boarding one the cruise ships. Additionally, given the high cost of most product and service offerings, guests expect top-notch customer service from employees.

We spoke to two past executives about a wide range of topics. Those interviews are included later in the report, but below is the portion of the conversation discussing management strategy, casting, and the guest experience.


Skift: Can you discuss the Disney Institute (Disney’s consulting business that focuses on leadership, employee engagement, and service)? I think that would give a helpful look into how the company is different culturally than a lot of large companies.

Garfield: I’ve worked in a few different companies. To me, it is about finding great people, training them, and making sure they’re passionate about guest service. It doesn’t really matter whether you’re hired in the sales team or you’re hired in a guest contact position, or you’re hired in security or landscaping. You want to hire people that like people and that really understand their role in the show, which is to create a magical experience that people will cherish for a lifetime. It’s a little more challenging when you’re hiring people who may not have grown up with Disney products or you go into a new business where a significant portion of your team is sourced from outside the U.S., or you’re opening in Asia.

At the end of the day, we hired people for attitude and hired people who like people and like smiling and just understand it. If you train them right and you create a constant feedback loop, the communication isn’t one direction from leadership to the cast. It’s also constant feedback from the cast to leadership; you have a symbiotic relationship where you have the ability to constantly fine tune things.


Dr. Duncan Dickson has been a professor at the Rosen College of Hospitality Management at the University of Central Florida since 1997. Prior to joining UCF, Dickson served almost 20 years with Walt Disney World, where as director of casting he was very active in the creation, development, and teaching of numerous training programs. Among these programs were Casting for a Role in the Show, View from a Disney Leader, Management Disney Style, The Disney Approach to People Management, and The Disney Keys to Quality Service. He created the latter as a program to deliver the Disney quality message to individuals unable to visit Central Florida.

Skift: Disney is unique with its all-encompassing experience. What was the process on casting the right people?

Dickson: Our theory was that we cast for a role in the show. All of us in casting came from the parks or the resorts, so we all had an operational background before we went into human resources. We could really represent the jobs and take a look at the people and understand the roles that they were going to so that we could select the right talent fit for the jobs. The most important thing that we did was make sure that we had the right fit talent going to the jobs so that the operators in the area had the staff they needed to operate the parks. It was important that we be selective. We used metrics. The interview-to-hire ratio was very important for us to make sure we were seeing enough people so that we could be selective in our hiring practices. We created programs that would supplement our regular staffing so we had enough part-time people to create a flexible workforce and fill the hours that we needed for when we had spikes in attendance at Christmas, Easter, and summer, that sort of thing. So, a very dynamic core organization.

Skift: You teach courses in service management in theme parks. What would be your advice on the best practices?

Duncan: It all starts with the cast member, the employee. From a leadership standpoint, the better you take care of your employees, the better they’re going to take care of your guests. As a leader, I have very little impact on the guests. My impact is always on the employees and if I take care of my employees, my employees will take care of my guests. The focus really needs to be on making sure you take care of your employees, you develop them and work with them to provide the skills necessary to take care of your guests.

The Disney success formula is if you have a positive employee experience or a positive cast experience, that will lead to a positive guest experience, which will lead to financial success.


The Walt Disney Company’s character and movie intellectual property is immense, distinguishing it from peers, and acts as very large competitive moat. Disney has evergreen properties like Mickey and Minnie Mouse, Winnie the Pooh, Snow White, Cinderella, and many more. These historical characters remain relevant, because each year a new generation of children discovers them. Families visit the parks and interact with the characters, see themed shows, buy merchandise, and re-watch the films either digitally or by purchasing DVDs. DVD viewing is in secular decline, but children’s titles tends to be a bit different as parents like having access to certain classic films whenever they want; the purchases are only cost effective when the movies are re-watched many times. As a parent of a three-year-old, I can attest to a child’s demand to watch the same movie over and over and over again.

The steady cross-monetization of its historic IP is akin to an annuity stream, where there will not be much growth from that content, but the company consistently generates steady cash flow to reinvest back in the company. The key to accelerating growth in the future is monetizing new franchises that are commercially successful with critical acclaim and create a loyal fan base with dynamic characters.

Disney has been extremely successful over the past several years in its movie business. Part of this was organic with films like Frozen and Zootopia reigniting the Disney film slate. Other massive successes were the result of its acquisitions of Pixar, Marvel, and Lucas Films.


After great success in the 1990s with Beauty and the Beast, Aladdin, The Lion King, and Pocahontas, the next decade was a bit of a down period for the studio. However, over the past five years, Walt Disney Animation Studios has been quite successful. It started first with Wreck-It Ralph, but the key inflection point was the Frozen franchise.

Frozen was important for a few reasons. First, it was a new franchise, so there was more risk than with a tentpole sequel film. Second, it used the Disney princess model of storytelling, but rather than a damsel in distress type story, where the prince saves the day, the film portrayed the princesses as powerful, independent heroes. There is a love story, but the focus on the relationship between the sisters created a new dynamic that all children, but especially young girls, fell in love with. With critical success and close to $1.3 billion in box office revenue, Frozen became the highest grossing animated film of all time. This led to an incredible opportunity to sell high-margin Frozen merchandise through the products division as well as at the theme parks. Disney has created rides and shows at its parks along with character interactions. The experience at the park feeds excitement into the franchise and will aid the sequel when it comes out in the next few years. The positive feedback loop will happen again at that point. We see Frozen becoming an evergreen type franchise at the parks.

Zootopia was unique in that nobody really knew what to expect from the previews in terms of success. Fortunately, Disney made a critically acclaimed movie that surpassed most people’s wildest expectations for a box office haul at over $1 billion. The characters are already at the theme parks and we would expect more rides and shows in the future.

Moana is Disney’s newest film where they completely broke the princess mold and created a coming-of-age hero story with another strong female lead and utilized a soundtrack featuring Hamilton’s Lin-Manuel Miranda. The film has only been out a few weeks at the time of writing and is on pace to approach $1 billion. Character greetings have already started and we envision more shows and rides in the future.

Upcoming films include Wreck-It Ralph 2, Gigantic (based on the Jack and the Beanstalk story), and Frozen 3. Again, we expect much more Frozen themed content at the parks in the years to come.

Source: BoxOffice Mojo, Rotten Tomatoes

Note: Disney shares as much as half of its box office revenue with the theaters. The totals in all charts are the entire box office receipts by the movie. A typical split is 50 percent, but Disney likely negotiates a 60 percent take for some of its proven franchises.


Walt Disney bought Pixar back in 2006 for $7.4 billion [4]. Part of the reasoning behind the deal was that, as we previously mentioned, the animation studio struggled after the mid-1990s to find much commercial success. Meanwhile, Pixar had proven franchise films including Toy Story, Finding Nemo, and Monsters Inc. Bringing in the powerhouse in animation not only reinvigorated the film business, but also provided a new breadth of characters to be monetized in products and the parks.

While the Cars sequel was not considered a successful film critically, the franchise remains popular and lends itself very well to toys and theme park rides. Cars Land became a massive land expansion at the California Adventure park and helped boost attendance 20 percent in its first year. The Toy Story franchise is monetized across the parks and large lands already exist in Paris and Hong Kong with new ones being put in Florida and Shanghai. Toy Story has become an evergreen type franchise after being acquired by Disney. Other key franchises with rides and shows include Finding Dory (sequel to Finding Nemo) and Monsters University (sequel to Monsters Inc.).

With Cars 3 and Toy Story 4 set to open in 2017 and 2018, we expect to see the lucrative cross-monetization cycle continue for those key franchises.


Source: BoxOffice Mojo, Rotten Tomatoes


Disney further accelerated growth and its success at the studios by acquiring the Marvel franchise for $4 billion in 2009, giving the company a library of 5,000 characters to use [5].
Disney continued its cross-monetization push, selling comic-related merchandise. However, Marvel had an exclusive arrangement for theme park content with Universal for IP usage east of the Mississippi River in the U.S. and in Japan. This is why there remains a Marvel Super Hero Island at Universal Studios Florida and there has been little monetization of the franchise at the parks (so far).

Source: BoxOffice Mojo, Rotten Tomatoes

Marvel Contract Terms

Back in 1994, Marvel Entertainment entered into a contract with MCA, which became Universal in 1996. While ownership of Universal has changed hands over the years with it now owned by Comcast, the contract terms remain valid and explain why Disney has not monetized Marvel characters as rapidly as other IP — despite a $10 billion box office haul, critically acclaimed films averaging an 82 percent Rotten Tomatoes score (100% being the best), and a loyal fan base. Below are a few key clauses [6]:

Once THE MARVEL UNIVERSE opens within the above time period, the term of this agreement shall continue for so long as a THE MARVEL UNIVERSE shall remain open (and operated consistent with the standards of the next paragraph below) at any Universal Theme Park (allowing for temporary closures for force majeure events or refurbishment/maintenance provided they are being diligently pursued), except for termination for material breach (with written notice and a reasonable opportunity to cure). At such time as any THE MARVEL UNIVERSE is no longer open at a particular Universal Theme Park, all exclusivity and marketing rights acquired by MCA as a result of the opening of such THE MARVEL UNIVERSE at such Universal Theme Park, as set forth in Section IV below, shall terminate and this Agreement shall thereafter be construed as if the notice of intent to open THE MARVEL UNIVERSE had not been given by MCA.

Skift Take: The contract states that the terms extend in perpetuity so long as Universal maintains the Marvel Universe section of its Florida park up to proper standards.

MCA (or an MCA “Corporately Related Company” (defined below)), shall have an option to utilize the Marvel characters in THE SECOND GATE of the Universal Theme Park (Orlando) and an exclusive world-wide option to utilize the Marvel characters in additional THE MARVEL UNIVERSES in any other Universal Theme Parks, which initial option must be exercised during the two year period beginning on the date of the opening of THE MARVEL UNIVERSE in the Universal Theme Park (Orlando). The present inventory of the Marvel characters is set forth in the schedule to be attached or provided by Marvel promptly after execution hereof, plus any characters developed or acquired or licensed in the future by Marvel which (x) are marketed under the Marvel “Banner” or (y) were previously marketed under the Marvel “Banner” during the term hereof and are subsequently marketed under the “Banner” of a Marvel Related Company (defined below). Any characters which are licensed to Marvel by third parties subject to terms which require Marvel to pay a license fee based on revenues or which do not permit sublicensing may be excluded, at Marvel’s option, in the foregoing grant.

After such 2 year period, MCA’s exclusive rights will be subject to “shrinkage” or “expansion” as follows:


  1. If no action is taken by MCA, such exclusivity shall be limited as follows:


  i. East of The Mississippi – any other theme park is limited to using characters not currently being used by MCA at the time such other license is granted. [For purpose of this subsection and subsection iv, a character is “being used by MCA” if (x) it or another character of the same “family” (e.g., any member of THE FANTASTIC FOUR, THE AVENGERS or villains associated with a hero being used) is more than an incidental element of an attraction, is presented as a costumed character, or is more than an incidental element of the theming of a retail store or food facility; and, (y) in addition, if such character or another character from the same “family” is an element in any MCA marketing during the previous year. Any character who is only used as a costume character will not be considered to be “being used by MCA” unless it appears as more than an incidental element in MCA’s marketing.

West of The Mississippi – any other theme park may use any Marvel characters whether or not used by MCA.

Skift Take: Disney is able to use the Marvel franchises in California.

Restrictions as to elements of The Marvel Action Universe in areas where MCA has exclusive rights hereunder.


  i. Within 300 miles of any Universal Theme Park with a THE MARVEL UNIVERSE, no The Marvel Action Universe shall contain more than one simulator, nor shall such simulator hold more than 20 people. Motion based or virtual reality attractions which are coin operated and hold no more than 4 people shall not be deemed a “simulator” subject to the above restriction. Any such rides which are interconnected so as to create a simultaneous experience among multiple units exceeding an aggregate of 4 people shall be deemed simulator rides and the number of people in such interconnected rides shall be counted toward the 20 person limit above.

Skift Take: This restricts the type of rides allowed at any park where no more than one simulator (rides with movies and moving seats) is allowed.

Upon the opening of THE SECOND GATE, and on an annual basis thereafter, MCA will pay a fee of $***.


Skift Take:
The fee is not disclosed, but Universal is paying Disney for rights. This leaves the door open for a deal to be reached. Given the success of the Harry Potter lands, we believe at some point, Universal may repurpose the Marvel Land with content from its own library or from the DreamWorks Animation studio it acquired for $3.8 billion this year, and sell the Marvel parks rights to Disney. This has been speculated for some time, but given Universal’s success recently, and the size of the DreamWorks deal, an agreement seems more likely than in the past. However, we would not expect any action in the near-term.

Prediction for Marvel Monetization

At San Diego Comic-Con, Disney’s senior vice president creative and 36-year Imagineering veteran, Joe Rhode stated that the new Guardians of the Galaxy attraction is “the first in what is going to become a whole new universe in Disney California Adventure.” He went on to say that “all of this is happening as we speak, as things emerge and as things develop, I’ll be back to tell you more about all the stuff that’s going to happen as we go forward as we make this really real cool and really wonderful addition to Disney California Adventure.”

We believe that his comments and basic logic suggest that Disney is moving ahead with plans behind the scenes to push more Marvel content in California. With Star Wars, Avatar, and Toy Story lands coming soon, and Shanghai already opened, we believe a Marvel expansion will be the next step. As we look out into the next decade, we can easily envision a Marvel-themed land at one of Disney’s California parks.

With Iron Man opening in Hong Kong, and Chinese consumers loving big budget superhero movies (Disney’s 2016 Captain America: Civil War generated $190 million in box office revenue in China and was the fourth highest grossing film ever in the country), [7] we expect Marvel monetization at Shanghai Disneyland to follow. Current Marvel interactions in Shanghai include a behind the scenes look at the Marvel universe, trying on the Iron Man suit virtually, character meetings with Captain America and Spiderman, and the Marvel comic drawing academy.


Disney acquired Lucasfilm in October 2012 [8] for $4.05 billion. Unlike other acquisitions, this is all about one franchise, Star Wars. There were some fears after the prequels to the original films were widely viewed as sub-par. However, The Force Awakens was critically acclaimed and took in $2.1 billion at the box office. This was the third-highest total ever behind Avatar’s massive $2.8 billion and just slightly behind Titanic. In the U.S., The Force Awakens was by far the highest grossing film ever at $937 million versus Avatar at $761 million and Titanic and Jurassic World at around $650 million.

Disney wasted no time flooding the marketplace with merchandise on Force Friday months ahead of the release. This includes traditional characters, but also things like the Mickey Mouse franchise reimagined for Star Wars.

Star Wars characters hit the parks and two of the largest-ever park expansions are underway with 14-acre Star Wars lands in Disneyland and Hollywood Studios. The franchise is less known in Asia, so a full-fledged land in Shanghai would be something much further out depending on how much traction the franchise gains there.

We see a massive monetization cycle continuing as each new film in the franchise creates tremendous excitement, fueling merchandise purchases, and park visits. The park visits are an extremely effectively brand marketing tool and we expect the passionate fan base to arrive at the new themed lands in droves.

Source: BoxOffice Mojo, Rotten Tomatoes

Cross-Monetization Evident in Revenue Trends

Intuitively, it makes sense that Disney’s movies, consumer products, and parks business trend together. There is a bit of a lag as a massive movie hit takes time to run its way through the products and parks ecosystems. As an example, Frozen’s huge success in 2013 led to a 20 percent spike in products that year. This was followed by more modest segment gains at eight and seven percent before declining around 2.5 percent in 2016. In 2016, Star Wars’ contribution to merchandise growth was less than Frozen’s decline, as Frozen was a more child-friendly movie. Parks and resorts is a much steadier growth path driven by pricing power, increased ticket prices above the inflation rate, and modest attendance growth. New movies and eventual new lands create a spike in attendance initially and then add to the steady state growth path of the parks with increased land and attractions.
Source: Company Filings

Theme Parks

Disney dominates the amusement park industry. Its parks had more than double the attendance of its next largest competitor last year.

Source: Themed Entertainment Association/ AECOM, Thousands of Visitors per Year

Disney also has nine of the top 11 parks globally.

Source: Themed Entertainment Association/ AECOM, Thousands of Visitors per Year


Historical Annual Ticket Price Increases Have Outpaced U.S. Inflation

Disney has very strong pricing power on its admission tickets. Looking at the average one-day adult ticket at Disney World’s Magic Kingdom going back to 1990 shows how the company has consistently been able to raise ticket prices above the U.S. inflation rate. The power of compounding has led to a price increase of over 70 percent in the last 10 years alone. With attendance at its domestic parks averaging a low- to mid-single-digit growth rate, pricing power is crucial to drive further economic growth at the parks (along with in-park spending). With continued new expansions at the parks and better technology improving customer service, we fully expect price increases to surpass the rate of inflation going forward in the key U.S. market, which accounts for the vast majority of parks revenue.


Walt Disney World is located 22 miles southwest of Orlando, Florida on 25,000 acres of land. It includes the Magic Kingdom, Epcot, Hollywood Studios, and Animal Kingdom. Additionally, the acreage includes hotels; vacation club properties; a retail, dining, and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities.


The Magic Kingdom was Disney’s first park at Walt Disney World in Florida. It opened in 1971, 16 years after Disneyland opened in Anaheim, California. It is divided into six themed lands across 142 acres.

Main Street, U.S.A.

City Hall, Main Street Vehicles, Main Street Chamber of Commerce, Harmony Barber Shop, Town Square Theater, Main Street Bakery, Plaza Ice Cream Parlor, Walt Disney World Railroad, shops and emporiums.


Pirates of the Caribbean, Jungle Cruise, Swiss Family Treehouse, Walt Disney’s Enchanted Tiki Room and The Magic Carpets of Aladdin, The Pirates League, A Pirate’s Adventure — Treasures of the Seven Seas.


Big Thunder Mountain Railroad, Splash Mountain, Country Bear Jamboree, Tom Sawyer Island, Walt Disney World Railroad.

Liberty Square

Haunted Mansion, Liberty Square Riverboat, The Hall of Presidents.


Cinderella Castle, it’s a small world, Peter Pan’s Flight, Mad Tea Party, Prince Charming Regal Carrousel, Fairytale Garden, The Many Adventures of Winnie the Pooh, Mickey’s PhilharMagic 3D movie experience, Walt Disney World Railroad, Dumbo the Flying Elephant in Storybook Circus, Barnstormer Coaster, the Casey Jr. Splash ‘N’ Soak Station water play area, Fantasyland Train Station, Under the Sea — Journey of The Little Mermaid, Ariel’s Grotto, Enchanted Tales with Belle, Princess Fairytale Hall, and Seven Dwarfs Mine Train.


Buzz Lightyear’s Space Ranger Spin; Monsters, Inc.; Laugh Floor; Space Mountain; Tomorrowland Speedway; Astro Orbiter; Tomorrowland Transit Authority PeopleMover; Stitch’s Great Escape; Walt Disney’s Carousel of Progress.


The Magic Kingdom has continued to lead the industry in attendance and surpassed the 20 million mark in 2015. Over the past three years, attendance growth has averaged around five percent per year.
Source: Themed Entertainment Association/ AECOM

Estimated Financial Contribution

Disney does not break out revenue for the individual parks, but we can back into a rough estimate. Attendance to Magic Kingdom accounted for 25 percent of domestic attendance volume. Domestic revenue was 84 percent of the segment total; this includes hotels, cruises, and other ventures as well. Total global parks admission revenue was $5.9 billion. As an estimate, we assume 75 percent of admission revenue is from the U.S. parks; ticket volume was just under 60 percent of the total in 2015, but Japan’s revenue is not consolidated and U.S. prices are higher.

That leaves U.S. ticket revenue at $4.4 billion and Magic Kingdom at $1.1 billion in ticket revenue. In-park spending has typically been 10 percent higher, so we estimate that would be $1.2 billion. Total revenue from Magic Kingdom could be $2.3 billion or 14 percent of 2016 segment revenue.

Simply taking the average one-day adult price on admissions would get to $2.1 billion in ticket sales, but multi-day tickets, children’s prices, group discounts, season passes, and off-peak tickets would make the per-day effective admission price much lower than a one-day adult ticket.


In 1982, Epcot was the second park at Walt Disney World to open. It operates on 305 acres with two themed lands.

Future World focuses on science and technology innovations, communication, energy, transportation, use of imagination, nature and food production, the ocean environment and space.

World Showcase has pavilions based on the cultures and traditions of countries including Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom, and the United States.


11.8 million people visited Epcot in 2015. Over the past three years, attendance has increased two to three percent per year.
Source: Themed Entertainment Association/ AECOM

Estimated Financial Contribution

Using the same process as the Magic Kingdom example, we estimate that Epcot contributed roughly $1.3 billion in revenue. This equates to eight percent of segment revenue and 14 percent of U.S. parks revenue.


Opened in May 1989, the 135-acre park features seven themed lands with key expansion ahead with Star Wars and Toy Story areas (more details on all capital projects later in the report).

Below are the lands and key attractions:

Hollywood Boulevard

The Great Movie Ride lets guests travel through classic film scenes and Hollywood moments.

Echo Lake

This features the Indiana Jones Epic Stunt Spectacular and Star Tours — The Adventures Continue: a new 3D adventure with more than 50 ride scenarios.

Pixar Place

Toy Story Midway Mania is another a 3D ride-game in which guests aim for animated targets using their own onboard spring-action shooter.

Mickey Avenue

Walt Disney: One Man’s Dream features an interactive gallery showcasing each era of Walt Disney’s life with rare and historic Disney artifacts on display.

Animation Courtyard

Star Wars Launch Bay celebrates all things Star Wars. There is special concept artwork and guests can interact with characters. Tour galleries feature memorabilia and replicas of large-scale Star Wars artifacts. The Voyage of The Little Mermaid theater attraction features special effects, puppets, audio-animatronics figures, live performers, and animated clips. Disney Junior — Live on Stage! presents stars from Mickey Mouse Clubhouse, including newer intellectual property in Doc McStuffins and Captain Jake.

Sunset Boulevard

Rock ‘n’ Roller Coaster is an Aerosmith themed indoor roller coaster. Sunset Showcase is an entertainment showplace hosting a variety of different experiences over time, which currently hosts Club Disney, a dance party with Disney Characters during the day, and Club Villain, a special ticket dance-and-dine event at night. The Twilight Zone Tower of Terror takes guests through a haunted house type Hollywood Tower Hotel and ends with the guests plummeting 13 stories.


10.8 million people attended Hollywood Studios in 2015. 2015’s five percent increase was the largest year/year jump since 2007. In the three years prior, growth was two percent per year. The Star Wars land will likely be a catalyst for a large attendance increase in the coming years.

Source: Themed Entertainment Association/ AECOM

Estimated Financial Contribution

We estimate that the park contributed $1.2 billion in 2016 accounting for seven percent of segment revenue and 13 percent of domestic parks revenue.


On 400 acres, Animal Kingdom opened in 1998. It is part safari — with 2,000 animals across 300 species — and part amusement park. On the safari, guests can feel like they are in Africa, but with added safety features that make the lions seem close, but protected by a camouflaged pit area. There is also DinoLand U.S.A. with dinosaur-themed rides and shows. Discovery Island is the park hub with 3D shows, restaurants, and gift shops. Asia has Expedition Everest, which is a runaway train ride with yeti; Kali River Rapids, which is a white-water adventure through a rainforest; and Maharajah Jungle Trek, a walking journey past Asian ruins and live exotic animals including tigers.


10.9 million people visited the park in 2015. This was a five percent increase, the highest since 2008. In the three previous years, growth was two percent per year. The 14-acre Avatar land will likely drive a meaningful jump in traffic to the park in the coming years.
Source: Themed Entertainment Association/ AECOM

Estimated Financial Contribution

We estimate that the park contributed $1.2 billion in 2016 accounting for seven percent of segment revenue and 13 percent of domestic parks revenue.


Disney also owns two water parks in Florida, Blizzard Beach and Typhoon Lagoon. They had 2.3 and 2.1 million visitors respectively in 2015.


Florida and California dominate the U.S. theme park industry, accounting for every top 10 park in the U.S. Disney owns six of the parks, Universal owns three, and SeaWorld one. In Florida, Disney has the top four parks with Magic Kingdom, Epcot, Animal Kingdom, and Hollywood Studios. Universal has done very well since being acquired by Comcast and posted the strongest growth in attendance of all U.S. parks at its Universal Studios park last year.

Source: Themed Entertainment Association/ AECOM

Universal Studios’ Impressive Growth in Florida

Comcast acquired 51 percent of NBCUniversal from General Electric back in January 2011, and then purchased the entire entity in March 2013. Since that time, Comcast has been investing to expand the parks and seeing strong attendance gains.

Universal has followed in the Disney model of monetizing strong intellectual property. However, the most recent and largest success was in partnership with Warner Brothers, who owns the Harry Potter franchise. Universal created one land in Universal Studios and one at Islands of Adventure.

Comcast opened The Wizarding World of Harry Potter — Diagon Alley at Universal Studios Florida in July 2014 after a large expansion of The Wizarding World of Harry Potter — Hogsmeade at Islands of Adventure. Both parks feature different Harry Potter themed rides, restaurants, shops, and even the Hogwarts Express. The Hogwarts Express takes guests between Islands of Adventure and Universal Studios on a train, an adventure meant to recreate Harry Potter’s journey in the movie. This attraction is unique in that it’s both a high-demand ride and requires a park-to-park admission ticket. A one-day single park ticket is $105 for adults, while the park-to-park pass is $155. Comcast is incentivizing higher consumer spend per day and increasing attendance at both of its Florida parks.

The Wizarding World of Harry Potter – Diagon Alley at Universal Orlando Resort.

Attendance at Universal Studios has increased 14, 17, and 16 percent the past three years with the aid of Harry Potter. Islands of Adventure was flat in 2014, but jumped eight percent when that park added Harry Potter-themed attractions. The results show that while new expansions are capital intensive, they increase demand for visitation and justify higher ticket prices.
Source: Themed Entertainment Association/ AECOM

Source: Themed Entertainment Association/ AECOM

Universal has been growing faster than Disney of late and taking relative share. However, strength at one park tends to aid growth at the other, as guests spending a week or more in Orlando may attend multiple parks across the brands. The reason for the outsized growth at Universal is largely from the Harry Potter brands and a simple law of large numbers where Disney has three times as many guests as Universal. For the Walt Disney Company, slower growth than Universal is nothing be alarmed about. The combination of four percent average volume growth over the past three years plus mid-single-digit price increases has been a recipe for steady growth.

Source: Themed Entertainment Association/ AECOM

Source: Themed Entertainment Association/ AECOM

Booking Trends

Skift partnered with ForwardKeys, which predicts future travel patterns by crunching and analyzing 14 million booking transactions per day. The database is fed daily with air reservation information (GDS) processed by 180,000 online and offline travel agencies worldwide, for a total of around 25 billion reservations. The data excludes direct bookings with airlines, charter flights, and some online reservations. We believe the data is useful in showing past and future booking trends in Disney’s key markets.

According to ForwardKeys, “Orlando has been heavily dependent on international tourists for growth, particularly from the Latin American market. The negative year/year performance for 2015 vs. 2014 was due to the weak demand from Latin America. The domestic market is twice the size of the international one for Orlando and is more sensitive to violent incidents such as the shooting in June and the Zika alert in August of 2016. Year-to-date domestic performance has been affected while the forward-looking one isn’t bright so far.”

The two charts below show the forward-looking forecast for Orlando with domestic travel tracking down 1.6 percent through May 2017 and international recovering to positive 4.6 percent.

Source: ForwardKeys

Source: ForwardKeys

While the macro issues are certainly a headwind, this makes Disney’s Florida attendance pattern even more impressive. In 2015, despite international and domestic bookings being down, park attendance increased six percent at the Magic Kingdom, three percent at Epcot, five percent at Animal Kingdom, and five percent at Hollywood Studios.


Disney opened Disneyland as its first park in 1955. Disneyland Resort has since added Disney California Adventure Park in 2001. Disneyland Resort is on 486 acres and has rights for an additional 55 acres in Anaheim, California. The acreage includes the parks along with three resorts and Downtown Disney.


The park is much smaller than its Florida counterpart at 85 acres. This is mainly a function of Disneyland being in a much more developed area at the time of building versus Disney World essentially being built on undeveloped swampland.

The park is composed of eight themed areas: Main Street, U.S.A.; Adventureland; New Orleans Square; Critter Country; Frontierland; Fantasyland; Mickey’s Toontown; and Tomorrowland. Some of the key attractions are Autopia, Big Thunder Mountain Railroad, Buzz Lightyear Astro Blasters, Disneyland Monorail, Finding Nemo Submarine Voyage, Haunted Mansion, Indiana Jones Adventure, it’s a small world, Jungle Cruise, Matterhorn Bobsleds, Pirates of the Caribbean, Roger Rabbit’s Car Toon Spin, Space Mountain, Splash Mountain, Star Tours — The Adventures Continue.

The Star Wars land will be 14 acres and be a key driver of traffic growth to the park in the coming years.


2015 attendance jumped nine percent to reach 18.3 million people on strength related to the 60th anniversary celebrations. In the prior five years, attendance was growing one to two percent per year. We expect low-single-digit growth until we see another jump, when the Star Wars land opens. It seems likely that a five to 10 percent increase is quite possible given the popularity of the films and loyal fan base.
Source: Themed Entertainment Association/ AECOM

Estimated Financial Contribution

We estimate that the park contributed $2.1 billion in 2016 accounting for 12 percent of segment revenue and 22 percent of domestic parks revenue.


Disney California Adventure is next to Disneyland on 67 acres. It has seven themed areas including: Buena Vista Street, Cars Land, Grizzly Peak, Hollywood Land, Pacific Wharf, Paradise Pier, and A Bug’s Land.

The 2012 addition of Cars Land proved to be an important event for the park, with attendance jumping almost 23 percent that year. Cars Land is on 12 acres and is essentially a real-life version of the Cars movies with the feature ride being the Radiator Springs Racers.


Attendance has steadily climbed and hit 9.3 million people in 2015. Even after the 23 percent jump in 2012, the following years were strong at a seven percent average growth rate. The addition of Cars Land shows how a key land can amplify traffic, especially at the newer and smaller parks (by attendance vs. Magic Kingdom and Disneyland). This is likely to occur at Hollywood Studios with Star Wars and Animal Kingdom with AVATAR.

Source: Themed Entertainment Association/ AECOM


Similar to Florida, the story tends to be Disney, then Universal, then everyone else. Disney had 28 million guests last year in California, followed by Universal at 7.1 million. After that, Knott’s Berry Farm had 3.9 million guests, SeaWorld 3.5 million, and Six Flags Magic Mountain at 3.1 million. The Harry Potter-themed attractions opened in 2016 at Universal in California, so that should push 2016 growth up. Once Star Wars land opens, Disney should receive a nice boost at Disneyland.

Source: Themed Entertainment Association/ AECOM

Source: Themed Entertainment Association/ AECOM


As we did in the Florida market, we partnered with ForwardKeys on booking data. They see Los Angeles as having the best outlook among the four destinations (Florida, California, Hong Kong, Paris) that they could comment on (the data for domestic China is not in their database and we exclude Tokyo, which is driven by local tourism). The broader Los Angeles market has had positive trends for both domestic and international inbound travel. According to ForwardKeys, “The negative performance for 2016YTD is due to the decline of Brazil and Mexico as well as France. Asia-Pacific destinations are on the rise for French travelers while Southern Europe and North America are losing attraction.” Looking ahead, ForwardKeys forecasts 1.7 percent growth for domestic travel and 2.3 percent for international into Los Angeles through May 2017.

Source: ForwardKeys

Source: ForwardKeys

For Disney, domestic declines in travel to the region could not offset the positive impact from Disneyland’s anniversary celebrations, which led to Disneyland attendance jumping nine percent in 2015; California Adventure also increased seven percent.


Disney’s first international operation was in Tokyo on a pure licensing and fee relationship with no ownership. This was quite successful, so they eventually tried opening in Paris on a joint ownership basis. Attendance has been strong, but the debt burden caused financial issues. Hong Kong was its first park in Asia. It’s small, but has done well. Its success was a stepping stone to the new Shanghai park, which will have the largest economic impact on Walt Disney in the future.

The Planning Process

Randy Garfield was involved in the opening of the Animal Kingdom, Paris, Tokyo, and Hong Kong Disney. We asked him to walk us through the process of moving into a new market.

Garfield:I would say obviously, from a strategic planning perspective, it starts with a comprehensive look at the market and demand studies. From there, there’s a lot of other factors that are taken into account. Ultimately, once a decision is made to go into a market, the process of pre-launch, launch, and sustain is where I think of the three time periods.

You need to have a vigilant focus on feedback, consumer insights, and who are the key players that influence tourism in those markets. Where are those people coming from? Are they all locals, are they distant? If you think about it, you have a local market, then you have a distant, resident market. Then you have a national market within that country, and then you have an international market. Then, of course, you also have school groups and sports groups, conventions and meetings.

It’s really taking a focus on each one of those and trying to determine how prevalent each of those will be. Naturally, the primary market will always be leisure and vacationing guests. There are big segments of the attendance who are coming from school groups, sports groups, and business. Most of the resorts have convention and meeting facilities. I’ve always said that Disney is probably one of the largest niche operators in the world, but people have a tendency to focus almost solely, when they think of the company, on leisure, which certainly is its bread and butter, so don’t misunderstand me.

For many years, I hosted business groups. Once in a while, if I was lucky enough to convince them to come to Florida or California as they rotated through a variety of domestic destination spots, a lot of the CMOs, CEOs, and the chief sales officers weren’t aware of what a great job we did on the convention and meeting side of the business, because that’s not something that’s advertised broadly on television or in newspaper. The kind of remarketing is going after vacationers or residents, people going there for fun and recreation, not necessarily going there to do business in a unique setting, where everything will be handled well. The wedding market is another good market for Disney, and honeymoons.

There’s lots of different issues, but if you look at the international parks, really, once the business decision is made, the company spends a lot of time on strategic insight. Then really it comes down to marketing and sales and doing the demand studies along with figuring out how best to communicate to people what the timelines are for planning and decisionmaking. Then the Walt Disney engineering people as well as the marketing and sales and operations people decide what the product portfolio is going to look like.


Disneyland Paris opened in April 1992, 20 miles east of Paris, France in Marne-la-Vallée. It sits on 990 acres and includes two theme parks, seven hotels, a 27-hole golf course, an entertainment center, and Europe’s largest corporate events venue. Despite financial challenges, the resort is still Europe’s number one tourist destination and has been visited over 300 million times.


After peaking at 16 million in 2012, combined attendance at the two parks gradually declined to 14.8 million in 2015. Economic weakness in Europe and a string of terrible macro events caused 2016 attendance to fall 10 percent to 13.4 million.
Source: Themed Entertainment Association/ AECOM, 2016 10% decline from Paris filings

The events leading to 10 percent decline were as follows [9]:

November 13, 2015 Paris attacks
December 29, 2015 Spain inconclusive election
March 22, 2016 Brussels attacks
March–June, 2016 Strikes and protests against France labor law
May 15–June 2, 2016 Uninterrupted heavy rains
May 19–30, 2016 Gas shortages
May 19, 2016 Crash of Paris to Cairo flight
May 31–June 7, 2016 Paris floods
June 2016 Air and train strikes
June 6, 2016 Ukraine terrorist arrest
June 23, 2016 Brexit vote
June 26, 2016 Spain inconclusive election again
July 14, 2016 Nice attacks
July 15, 2016 Turkey coup attempt
July 18–August 14, 2016 Germany attacks
July 21, 2106 French state of emergency extended
July 26, 2016 France church attack
July 27–August 2, 2016 Air France strikes


This is the main park that opened in 1992 and is in the mold of Disneyland in the U.S. Across 124 acres, the five themed lands include Main Street, U.S.A.; Frontierland; Adventureland; Fantasyland; and Discoveryland.


As the key driver of the total parks business in Paris, Disneyland Paris faced the trends mentioned previously.

Source: Themed Entertainment Association/ AECOM, 2016 10% decline from Paris filings


This was the latest addition to the resort and opened in March 2002. It has four themed areas: Backlot, Front Lot, Production Courtyard, and Toon Studio. These areas each include themed attractions, shows, restaurants, merchandise shops, and refreshment stands.

Source: Themed Entertainment Association/ AECOM, 2016 10% decline from Paris filings

Financials and Impact to Disney

Walt Disney Company had owned 51 percent of Disneyland Paris until a recapitalization in November 2015 that led to it becoming an 81 percent ownership position; results are consolidated into Walt Disney’s results. The company was getting six percent of revenue in royalty and management fees until agreeing to waive those payments from the fourth quarter of fiscal 2016 through the third quarter of fiscal 2018.

Prior to 2016, we estimate that Walt Disney Company’s economic impact from the parks and hotels was near neutral, as the net result from consolidating the small losses each year based on its stake offset most of the royalty fees. In 2016, we believe the resort was roughly a $400 million headwind for Disney (less than one percent of company revenue).

Disneyland Paris as an entity has lost money every year since 2009 and the same held true in most periods prior. The biggest issue has been the large debt burden where interest paid each year wiped out most, if not all, operating income. Without the large debt burden, the unit could have been profitable and perhaps, could have invested more in the park and employees. Walt Disney essentially bailed Disneyland Paris out with the debt recapitalization and fee waivers. Walt Disney utilizes the park as a consumer touchpoint in Europe to help promote the brand. Even at near neutral economics, it’s in Walt Disney’s best interest to keep the park running.

Source: Company Filings


The key aspect of the recapitalization was reducing Disneyland Paris’ (Euro Disney S.C.A. group) debt. The recap reduced debt from 1.75 billion euros to one billion; the cash injection effectively reduces debt by one billion euros on a net basis.

Source: Disneyland Paris Filings

Below is an overview of the steps taken that took Walt Disney’s stake to 81 percent.Source: Walt Disney Company Filings
Note: Percentages are rounded for the incremental steps.


The recap was a necessary step to keep the park running over the long term. Macro issues are not likely to abate, but should not be worse than what Paris saw in 2016 (barring further attacks). We believe the combination of lower interest payments and no management or royalty fees for two years could finally lead to positive net income for the park, if the macro headwinds abate. As the most visited tourist attraction in Europe, Disneyland Paris remains a key marketing touchpoint in Europe. It’s unlikely that the resort contributes meaningfully, positively or negatively, to Walt Disney’s bottom line, but the role it plays in promoting the brand in Europe is important for the studios and lucrative consumer products business.


ForwardKeys data supports our view that the Paris market has been under intense stress from macro events. They found that “more than a year after the attack, Paris suffered a serious loss of -8.2% in international arrivals for 2016YTD. Previous top spenders (China, Brazil, and Japan), declined the most. Russia’s crisis since 2Q’2014 is still taking its toll on European results, but arrivals are showing signs of recovery. With bookings issued as of end of November, ForwardKeys figures have considered the vast cancellations that happened right after the violence in 2015, therefore are comparing this year’s booking situation with the disastrous one last year, which results in +4.5%.”

The charts below show that 2016 YTD travel trends have been down almost 10 percent across the pool of bookings. This is consistent with Disneyland Paris total attendance being down 9.5 percent in fiscal 2016. There is some stabilization in international travel with that expected to recover to near flat for total international and up 4.5 percent for long-haul. European travel is forecasted to remain down 8.3 percent through May 2017. We see gradual stabilization in the region in the coming years, but minimal growth overall until the macro landscape stabilizes.

Source: ForwardKeys


Walt Disney has no ownership of the Tokyo parks. Instead, Oriental Land Company (OLC) owns and operates them and pays royalty and licensing fees to Walt Disney. While Paris has had financial issues, Tokyo Disney has been a resounding success, both in the fees it brings Disney and for the owners of the park itself. Both of the parks are in the top five in worldwide attendance.

Tokyo Disney Resort is on 494 acres with two parks, four hotels, and is just 12 kilometers east of Central Tokyo. There are 30 million people that live within a 30-mile radius. The parks are only 15 minutes from Tokyo Station, 30 minutes from Haneda Airport, and 60 minutes from Narita International Airport. The hotels are a small part of the business with 80 percent of revenue coming from the two parks.


Combined attendance for the two parks has hovered at around 30 million for the past few years. It dominates Japan with 50 percent market share. The jump in 2013 was associated with the 30th anniversary of the first park. The dip in 2010 to 2012 was caused by lingering tourism impacts from the earthquake.

Source: Company Filings

The park is heavily domestic with 65 percent of guests coming from the Tokyo Metropolitan area, and only six percent come from overseas.

The demographics, like Japan in general, skew older with approximately 70 percent of guests older than 18 years old.
Source: Company Filings

The average length of stay has been consistent since 2006 at between eight and nine hours.

Unlike in the U.S., where ticket prices have increased consistently each year, Japanese price increases come sporadically, though the company hints in its filings that price increases are likely as the value to customers will increase with new expansion projects.

Source: Company Filings


This was Disney’s first international park and was modeled after Disneyland in California. It is 115 acres with lands including Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland, and World Bazaar.


Source: Themed Entertainment Association/ AECOM


The park is family friendly, but targets adults more than a traditional Disney park. It’s ocean-themed with seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island, and Port Discovery.


Source: Themed Entertainment Association/ AECOM

Oriental Land Company (OLC) Analysis

While Walt Disney does not have an ownership stake here, the financial results and strategy from OLC directly impact the fees Disney will receive and how the brand is marketed in Japan.

Operating income was in the ¥30 billion range from 2006 until 2008. After that, increased revenues combined with better fixed cost controls and a decrease in depreciation and amortization related to Tokyo DisneySea led to a substantial increase in margin and operating income. Operating income and margin have stabilized in the ¥110 billion and 23 percent range.

Source: Company Filings

The company is continuing to invest for growth and will take capital spending up from ¥40 billion to ¥50 billion per year for the next five years. For context, this is roughly $445 million or 11 percent of revenue. Walt Disney’s parks and resorts capital intensity has been in the 25 percent range recently as they are in the midst of meaningful park expansions (Shanghai opening, Star Wars lands, Avatar, etc). The Japan percentage suggests steady and conservative expansion.

The expansion plans include:

  • ¥75 billion over five years at Tokyo Disneyland for a Beauty and the Beast area, live entertainment theater, a Big Hero 6 attraction by 2020, and a new character greeting facility.
  • ¥25 billion over five years at Tokyo DisneySea for Out of Shadowland at Hangar Stage, Nemo & Friends SeaRider, and new attractions at Mediterranean Harbor including a major attraction tentatively called Soarin set to open by Fiscal Year 2020.
  • ¥30 billion per year for renewal of attractions and entertainment programs, development of special events, development of shops and restaurants, development of other facilities, such as restrooms, and investment for update improvement. They are also adding more hotel rooms.

Other things being pursued through R&D investments include a new
Frozen-themed port at DisneySea.

Unlike in Paris, OLC has a conservative capital structure with debt/equity at 0.09 last year. This means that company has less than 10 percent of its capital in debt.

Source: Company Filings

Meanwhile, return on equity, or how much OLC earns on its equity capital, has been over 12 percent for the past four years. With low interest rates in Japan and OLCs operational strength, their cost of equity should be well below the 12 percent mark. Simplistically, this means that OLC has continued to create value for shareholders. For Walt Disney, the impact is subtle. They do not share in profits, but if the Japanese parks struggled to earn profits, they would not invest back in the business, and revenues (and thus, fees) to Walt Disney would drop. The more successful OLC is, the more likely Walt Disney will see its steady royalty fees, which are essentially pure profits.

Source: Company Filings

Estimated Financial Impact to Walt Disney

The effective royalty rate (based on parks and hotels) to Walt Disney has averaged 6.1 percent over the last eleven years. In Fiscal Year 2016, the fee equates to $242 million or seven percent of Disney’s parks and resorts segment of operating income.

To have generated that amount of operating profit, Disney would have needed to own a park that generated $1.2 billion in revenue, assuming 19.4 percent margin equal to the broader parks. By having a licensing agreement in Japan, they are not responsible for capital spending or running the park, so this is a very nice source of incremental profits to Disney. The risk with a licensing agreement is that the operator may not operate well and damage the brand. Fortunately for Disney, Oriental Land Company has done a great job with the parks.

Source: OLC and Disney Filings


Interestingly, Universal is also a key competitor in Japan for the Disney parks with a very similar dynamic, with Harry Potter driving very strong growth in 2014 and 2015. Universal is in Osaka, which is 330 miles from Tokyo. The parks compete in the sense that they are the dominant parks, but the reality is that given the distance between the parks, there is not much cannibalization of the guests. The next leading park with six million guests is Nagashima Spa Land in Kuwana, which is 230 miles from Tokyo and 100 miles from Osaka. With two-thirds of the guests to Tokyo Disney coming from the Tokyo region, we expect it to continue to put up steady attendance in the 30 million plus range. Modest volume growth, expense discipline, and ticket price increases should boost the fees that Walt Disney receives going forward.

Source: Themed Entertainment Association/ AECOM

Source: Themed Entertainment Association/ AECOM

Japanese Economic Overview

Japan’s fertility rates have continued to decline with the average family having one child.

Source: Organisation for Economic Co-operation and Development (OECD)

The population is aging as well, with only 13 percent of people below the age of 15. The smaller family unit size and older population is a key reason why the DisneySea park tends to focus on older demographics. The percentage of the population older than 65 years old has ballooned from seven percent in 1970 to over 25 percent today.

Source: Organisation for Economic Co-operation and Development (OECD)

Japan’s GDP has been fairly stagnant in the zero to sub-two percent range. The OECD forecasts a sub-one percent path through 2018. For the parks business, this means there is little economic tailwind or headwind from a broader country perspective.

Despite Japan’s Stagnation, Tokyo Has Key Tailwinds for Tokyo Disney

Tokyo’s population, like Japan, is not growing much. However, even with minimal growth, by 2030 it will still be the largest metro area globally. This massive pool of potential guests is why two-thirds of guests are from the Tokyo area. Additionally, in terms of wealth, the Brookings Institution estimates that in 2014, Tokyo was the richest city in the world by GDP at $1.6 trillion, ahead of New York at $1.4 trillion and Los Angeles at $860 billion.

Source: United Nations “World Urbanization Prospects, the 2014 Revision
Note: 2030 Forecast and Tokyo includes surrounding metropolitan areas outside of “Tokyo Proper”


The Japanese parks should continue to churn out healthy fees for Walt Disney. The park expansions and Tokyo’s massive population should lead to continued 30 million plus attendance per year. It looks like we will also see some more price increases. Oriental Land Company is financially sound, so there is no reason to expect any need for fee cancellations. The branding in Japan will continue to be helped by these touchpoints.


Disney owns 47 percent of the Hong Kong Disneyland Resort through Hong Kong International Theme Parks Limited, an entity in which the government of the Hong Kong Special Administrative Region (HKSAR) owns a 53 percent majority interest. The resort is located on 310 acres on Lantau Island, which is 10 minutes from Hong Kong International Airport and 30 minutes from the city. The resort includes one theme park and two themed resort hotels with 1,000 rooms; a third hotel with 750 rooms is under construction and should open in 2017.

A separate Hong Kong subsidiary of Walt Disney (100 percent owned) is responsible for managing Hong Kong Disneyland Resort where Walt Disney receives royalties and management fees based on the operating performance of Hong Kong Disneyland Resort.

Opened in September 2005, the park feels like a smaller version of Disneyland or the Magic Kingdom. It has seven themed areas including Adventureland; Fantasyland; Grizzly Gulch; Main Street, U.S.A.; Mystic Point; Tomorrowland; and Toy Story Land. Toy Story Land, Grizzly Gulch, and Mystic Point were expansion projects after the opening. Like its sister properties across the world, shows, dining, and shopping exist throughout the park. Having visited the park last year, I noticed that due to the weather being incredibly hot at times, the shows seem to drive as much traffic as popular rides, as guests enjoy themselves while taking a break from the heat. The shows tended to be both in English and Chinese, reflecting the fact that many of Hong Kong’s residents speak English; five percent of the population are expats as well.


Hong Kong attendance dipped 20 percent in 2007 after the initial pop on the first full year of opening. Since then, attendance steadily rose almost nine percent per year until declining nine percent in 2015 as the economy weakened. The decline resulted from a slowdown in the broader Hong Kong travel and leisure market from factors like societal sentiment affecting destination selection and the increased competitiveness of other Asian destinations as a result of exchange rates and Chinese travel policies. The key reason for the decline overall was a drop in visitors from mainland China.

Source: Themed Entertainment Association/ AECOM

The breakdown of visitors by region was as follows:

2015 2014

Mainland China 41% 48%

Local Hong Kong 39% 32%

International 20% 20%


Below are the historic financials for Hong Kong Disneyland. We converted from Hong Kong dollars to USD at a 0.13 exchange rate across all time periods.

Revenue had been growing at a 16 percent average rate from 2010 through 2014 before slowing in 2015.

EBITDA margin jumped to the 20 percent level before dipping back to 16 percent last year. Depreciation weighed on net income and operating income.
One thing that also jumps out is that the capital structure has become much more conservative. Back in 2008, long-term debt to equity stood at 1.5. By 2015, it fell to 0.09. The first step was a 2009 share conversion. From there, long-term debt continued to be reduced while shareholder equity increased. Over that time period, interest expense dropped meaningfully. As we have seen in Paris, having too much debt can be very damaging to the theme park business in terms of profitability.

Source: Hong Kong Disneyland Filings

Estimated Economic Impact to Walt Disney

According to publicly available documents from Hong Kong’s Legislative
Council Secretariat, Walt Disney receives:

  1. Base management fee at 2 percent of revenue
  2. Variable management fee at 2 to 8 percent of EBITDA
  3. Undisclosed royalty stream as a percentage of revenue.

Additionally, Walt Disney would consolidate its ownership stake,
economically being entitled to 47 percent of net income (or losses).

We believe that the net impact from the park and two hotels has been total fees equating to approximately five percent of revenue. Over the past four years, this likely provided the Walt Disney Company with an average of $32 million in income; if we add potential back taxes, this would amount to one to two percent of segment operating income. While not a large amount, this helped push the brand into China and was the gateway for the much larger Shanghai opportunity. Adding in the share of net income would take the impact to just under three percent in 2014 peak year and at one percent in 2015, when net income turned to a loss.

Source: Hong Kong Disneyland Filings

Park Expansion

Hong Kong Disneyland will take on a $1.4 billion expansion project. The six-year project will start in 2018 and will include two attractions based on the animated film Frozen and a related dining area, new rides tied to Marvel’s superheroes, as well as entertainment additions to the existing Sleeping Beauty Castle [10].
Economic Overview

Hong Kong has a comparable GDP per capita to the U.S. at $57,000. Total GDP in 2015 was $415 billion. GDP growth was 2.4, 2.6, and 3.1 percent in 2015, 2014, and 2013 respectively. Unemployment is low at 3.3 percent [11].

Hong Kong Economy Growth Has Slowed

Hong Kong GDP growth has stalled in 2016. Third quarter real GDP growth was 1.9 percent and that follows 1.7 percent in the prior quarter. The government forecasts one to two percent growth for 2016.

According to Hong Kong’s government economist Helen Chen:

“Looking ahead, the global economy, having stabilised from the acute start of the year, is expected to remain on a modest growth track in the near term. The US economy has gathered pace in recent quarters and the Mainland economy is firmly on track to achieve solid growth in the rest of the year. The relative stabilisation in global demand should render some support to Asia’s trade and our exports. Services exports would also benefit in tandem. Should the recent relative improvement in inbound tourism gain more traction, the recovery in services exports would hopefully be on an even firmer footing. Yet, given the looming interest rate hike in the US, monetary policy divergence among major central banks, possible policy changes in the US after the election, and with the Brexit event unfolding and geopolitical tensions still elevated in various regions, the external environment still faces considerable uncertainties in the period ahead. We need to stay alert to these risks for their possible repercussions on the global financial and economic situation.” [12]


Economic Situation in the Third Quarter of 2016 and Latest GDP and Price Forecasts for 2016

For Disney, the slowing economy has not really impacted Hong Kong resident usage, given the ease of location and very high wealth of the region. However, China inbound travel has been hurt and could remain a headwind.

Potential Shanghai Cannibalization

There is some fear of Shanghai taking traffic away from Hong Kong. We believe the impact should be minimal. The pool of potential guests impacted is 40 percent (guests from mainland China); Hong Kong is a two-hour flight from Shanghai. Hong Kong Disney is a nice park, but it’s not like visiting the Walt Disney World, where one could spend a week visiting several different parks. Visitors to the Hong Kong parks are likely not coming to Hong Kong solely for a trip to Disney. Instead, it’s more about traveling to Hong Kong itself and visiting Disneyland while on the island. There will definitely be some people who visit Shanghai and then no longer wish to attend the Hong Kong park, but the likely percentage would not be large. For Walt Disney, the economic impact would be minimal overall.


The Chinese inbound traveler will continue to be a headwind for the Hong Kong park. Expansion is a smart and necessary move, and consistent with what Disney has done at other parks where they open small and then build up the park. With the popularity of the Frozen franchise and a potential 2018 release date, the park should get a nice bump in attendance when the attractions are completed. Until such time, we believe local visitation will be stable and Walt Disney will continue to benefit from its steady fees. Net income-related economics could be muted until the economy improves, but Hong Kong remains a key strategic asset in Asia for Walt Disney.


ForwardKeys data show that bookings were down 15 percent in 2015 from mainland China into Hong Kong. With China mainland visitors accounting for 48 percent of 2014 visitors to Hong Kong Disneyland, that 15 percent drop would account for close to 80 percent of the total 9.3 percent attendance decline in 2015.

ForwardKeys highlighted that with more destination options, visa relaxations, better connectivity, and a more favorable exchange rate, Chinese travelers were less willing to travel to Hong Kong since the Umbrella protest. Their outlook for Hong Kong is still negative, however the decline will be fairly small compared to 2015. We continue to expect stable trends from the local and international market with the Mainland China headwind gradually fading.

Source: ForwardKeys


Shanghai Disneyland is located in the Pudong New District on 963 acres with 225 acres of actual theme park, leaving plenty of room for expansion. CEO Bob Iger has emphasized that the park is “authentically Disney and distinctly Chinese.” By this, he means that the park stays true to the Disney brand and characters, but uniquely incorporates Chinese culture. This is incredibly important, as the Disney brand is building awareness in China and was not as well-known as it was in other international markets prior to new park openings.

The park has six themed lands including Adventure Isle, Gardens of Imagination, Mickey Avenue, Tomorrowland, Treasure Cove, and Fantasyland. Mickey Avenue is the main entry where guests take pictures with the characters and features various shops. Within the Gardens of Imagination is the Fantasia Carousel, Dumbo the Flying Elephant, and multiple shows and parades. Fantasyland is the largest area with many rides and is inspired by the animated franchises. This is where the castle is as well; the castle is Disney’s first to house all the Disney princesses. Adventure Isle is more targeted to older kids and adults with rapids and climbing attractions. Treasure Cove is the first pirate-themed land in a Disney park. Tomorrowland includes the Buzz LightYear attraction, roller coasters, and the chance to use jetpacks. Near Tomorrowland is Star Wars Launch Bay and Marvel Universe. Guests will meet the characters from the movies and be fully immersed in both franchises through visiting sets and seeing memorabilia.

The two hotels are Shanghai Disneyland Hotel, which is more traditional, and the Toy Story Hotel.

Disneytown is a shopping, dining, and entertainment district adjacent to Shanghai Disneyland that includes the Walt Disney Grand Theatre. This is home to the first-ever Mandarin production of The Lion King. With Chinese visitors tending to have smaller immediate families, but traveling with grandparents and other adults, the Disneyland park features Wishing Star Park, which has large gardens, a path, and a lake. This is the size of 56 football fields.

Walking Through the Joint Venture Economics

Shanghai Disney Resort is owned through two joint venture companies (Shanghai International Theme Park Company Limited and Shanghai International Theme Park Associated Facilities Company Limited) in which Walt Disney owns a 43 percent stake and Shanghai Shendi Group the remaining 57 percent. We refer to this as the “ownership JV.” Partnering with local companies and emphasizing Chinese culture will help garner favorability with the Chinese government. In fact, in November of 2015, the Chinese government put out a release specifically looking to protect Disney IP. The translated statement was as follows:

“Shanghai Disney Parks and Resorts will open in 2016 in the spring, in order to strengthen the protection of the Disney trademark, and create a good IP protection of the environment, protection of Shanghai Disney Parks and Resorts smooth opening of the park and sustained development, SAIC decided in October 2015 to October 2016, a nationwide Disney registered trademark protection special action.” [13]

Walt Disney then owns a 70 percent stake in a separate management company (Shanghai International Theme Park and Resort Management Company Limited) that handles design, construction, and operations — Shendi partners here as well with a 30 percent stake. The JV earns management fees based on operating performance of the park. We refer to this as the “management JV.”

Disney also receives royalties based on the park’s revenues; this fee is solely to Disney.

Note: The chart above is Skift’s estimate of how the economics are split.

How Profitable Can Shanghai Be Over Time?

Shanghai is in its early days, but management stated that it will be near break-even by next year. It’s on pace for roughly 10 million guests this year, though the company cautioned that it could be less, depending on how traffic patterns progress through the year. The chart below lays out what the economics may look like once the park matures, as well as the impact on Disney. We then walk through our logic on the key assumptions.

Source: Skift Estimates


With 330 million people within a three-hour drive or train ride, and Disney on pace to reach 10 million visitors in 2016 or 2017, it seems reasonable that as we look out into the next decade, the park could have comparable visitation to Disney’s other parks. The company dominates the industry with eight of the top 10 parks by attendance globally. Our base case is a 20 million attendance figure. Again, this is mature state and could be five to 10 years out. We believe the capital-intensive nature of the parks makes any investment truly a long-term strategic one where the results could take five to 10 years to fully be realized.

Source: Themed Entertainment Association/ AECOM, Thousands of Visitors per Year

Ticket Prices

The park has a two-tiered ticket system with peak adult pricing at $70 (assumes a 0.14 exchange rate) and off-peak at $52. For children and senior citizens, there is a 25 percent discount [14].
We assume a 2:2:1 ratio for the typical family with two parents, two grandparents, and one child, and equal peak and off-peak attendance. All in, this takes the average ticket price to $52.

In-Park Spending

We assume the broad segment’s historic pattern of 51 percent admissions and 49 percent ticketing holds to calculate non-admission revenue.

Park Operating Margin

Disney’s parks and resorts segment has improved its operating margin from 15 to approximately 20 percent on 2016. It will take time, but the mid-point at 17.5 percent looks achievable and we use that as our margin assumption.


Walt Disney owns the hotels by itself with 420 rooms at Shanghai Disneyland Hotel and 800 at the themed Toy Story Hotel. In 2017, a 750-room hotel is scheduled to open. We assume average per-night spend at $300, which is comparable to Disney’s other international hotels. We assume an 80 percent occupancy rate to be conservative, as the international level has been in the 80 to 90 percent range. Finally, we assume a margin profile equal to the broader parks segment.

Royalty and Management Fees

The exact fee structure is not disclosed, but the published minutes from a special meeting held on July 4, 2009 by Hong Kong’s Panel on Economic Development [15] gives some details about the Tokyo, Paris, and Hong Kong parks’ fee structure.
In Tokyo, Walt Disney’s initial 1979 contract called for a management fee of “five percent of the gross revenue on all food and merchandise, 10% of the gross revenue on admissions, and 10% of any corporate sponsorship agreement.” As seen previously, the Tokyo parks have averaged around a six percent rate for the past 11 years. Paris had a six percent fee before being lowered due to profitability issues, and Hong Kong called for a two percent base fee and a performance fee at two to eight percent of EBITDA. The effective result was a five percent fee. Royalty fees were not disclosed.
Based on this data, we assume that the management fee is five percent. Disney would receive 70 percent of this fee through the “Management JV.”
We then use a two percent royalty rate where Disney would get the entire royalty fee.

Financial Impact to the Parks and Resorts Segment and Disney as a Whole

Our math suggests that when the park matures, it could add seven percent to 2016 operating income levels for the segment and two percent for the company.

This is just the direct impact from the parks and hotels. The indirect impact to consumer products and movies is important to note. By building brand awareness, Disney can improve the success of the film business in China and use that and older brands to license content for consumer products at very high margins.

Chinese Economic Overview

Shanghai is the most populated city in China with approximately 23 million people, five million more than number two: Beijing. To put this in context, in Disney’s key U.S. market, New York City comes in at around eight million and Los Angeles at under four million. In Japan, Tokyo has just under 14 million.

McKinsey produced an economic study that was publicly available on China, which we found especially useful [16].
Some of their key findings applicable to Disney are:

  1. Over the past three decades, investment has powered the Chinese economy.
  2. It created infrastructure to meet the demand from rapid urbanization, and it helped companies build a manufacturing sector that produces goods for customers in China and the world while creating jobs.
  3. Since 1980, GDP has risen 25-fold and more than 600 million people have moved out of poverty.
  4. There are now 116 million middle-class and affluent households (with annual disposable income of at least $21,000 per year) compared with just two million in 2000.
  5. China has moved beyond being the world’s greatest source of low-cost manufacturing capacity. In 2015, the services sector grew by 8.3 percent, 2.3 percentage points faster than manufacturing, and services now account for 50 percent of GDP

Turning to Shanghai specifically, McKinsey sees the fastest growth to be in 10 key large city clusters, including those around Shanghai and Beijing, which will account for about 70 percent of consumption growth. China has 22 major city clusters with the Beijing and Shanghai regions accounting for 18 percent of China’s population and 23 percent of consumption growth. Between 2015 and 2030, McKinsey sees 22 percent of urban population growth coming from these two city clusters and estimates that Shanghai and Beijing clusters together with Shandong could generate as much as one-third of China’s consumption growth, or about two trillion dollars.

For Disney, Shanghai specifically — and China as a whole — represent a tremendous opportunity, both at the parks and to monetize content in consumer products and movies. The economic growth will provide a tailwind, but success will come down to Disney building brand awareness and maintaining its operational excellence while tailoring its products to the Chinese consumer. The profitability path will take time, but the long-term growth potential is exciting and, we believe, an important part of future growth for Disney as we look out into the next decade.
Competition in China

Source: Themed Entertainment Association/ AECOM, Thousands of Visitors per Year

Chimelong Ocean Kingdom has the largest attendance in mainland China at 7.5 million people followed by Hangzhou Songcheng Park at 7.3.

Chimelong Ocean Kingdom is close to Hong Kong in southern China and 1,000 miles away from Shanghai (a two-hour flight). The park opened in 2014 and saw attendance jump 36 percent in 2015. It has the world’s largest aquarium and is essentially an aquatic-themed park with rides and shows [17].
The strength in attendance growth bodes well for Disney as an example of the interest in attending parks in China. It’s far enough away from Shanghai that it’s not really a direct competitor.

Hangzhou Songcheng Park opened in 1996 and is closer to Shanghai with it being 130 miles away or a 2.5-hour drive from Shanghai Disney. This is a much different type of park than Disney’s, being themed after the Song Dynasty. The focus here is more about the shows than the rides.

Future Competition from Dalian Wanda Group and Comcast’s Universal

Chinese billionaire Wang Jianlin and his Dalian Wanda Group are building 15 multibillion-dollar theme parks across China by 2020 [18].
He has emphasized that one Disney park is no match for his proverbial “pack of wolves” and that “the frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed.” [19]
He also stated that Disney should not have entered China. Two of the 15 parks have opened so far. The parks thus far compete more on price as a local alternative to the more expensive Disney parks. The Chinese market seems large enough where both can do well in their own markets and niches. For Disney, all of their parks have been, and will continue to be, as much about the characters and family experience as the rides. Disney’s unique intellectual property is a strength that should not be discounted by the Wanda Group.

Universal is planning its largest park ever in Beijing for what some have estimated could be an eight billion-dollar investment. It should open by 2020 [20].
Construction only recently began in early November. Since being acquired by Comcast, Universal’s parks have been quite successful. Universal will likely do very well here, but that does not have to cannibalize Disney. Shanghai is 750 miles from Beijing. Both Disney and Universal will have massive local populations near their parks to support attendance volumes for both companies.

Insider Perspectives with Randy Garfield and Professor Duncan Dickson

We asked Randy Garfield and Duncan Dickson about the challenges entering the Chinese market.

Garfield: I think the primary challenge was going into a market where the Disney brand and all the different products in the Disney portfolio, films and television and consumer products, weren’t as well-known as in markets where they’ve been more active for many years. In some respects, the park has to work harder to create awareness because there’s lots of people there who didn’t grow up with the world of Disney, or didn’t grow up with Mickey Mouse or Star Wars or Marvel or any of the other products in the portfolio. This means your marketing has to work a lot harder because you’re not building on that strong base of awareness and the emotional connection that people who have experienced Disney have developed over the years.

That, to me, is by far the most significant challenge and I think the company’s done incredibly well with the concept of authentically Disney and distinctly Chinese, really putting together a balanced portfolio of products that are unique to Shanghai, as well as some that are presented differently than other Disney parks, where they are taking successful, iconic product that has already proven to be very popular in other locales, and deciding how best to present it there.

Skift: Which other big players in the region who operate theme parks, or who could in the future, does Disney think about?

Garfield: I really don’t think they focus as much, honestly, on the players in the theme park industry, as they do on what people are doing with their discretionary income.

I think there’s a lot of well-respected players, whether it’s China or the U.S. or Europe. They each have their own strengths and weaknesses, but at the end of the day, in many cases, they are allies in driving demand. It’s one thing if you’re in a local market, you’re competing very aggressively with them, but the further people travel to go to a destination, the greater the likelihood that competitive product provides a broad portfolio of offerings that influences an individual to go to that destination versus another one.

I always looked at the other players in the marketplace as of kind of a dual perspective. Yeah, they’re definitely competitors when someone gets into the market, but they’re also allies in terms of driving demand into the marketplace and making Orlando or Anaheim a more appealing destination for people who were considering different alternatives.

Dickson: When we went to Japan, the Japanese culture had a long history and following with Mickey. The brand was well placed within the Japanese culture for a long, long time. People had grown up with Mickey. They understood that the Disney brand was very popular there.

China does not have the same embedding in the culture prior to the park coming. There was some knowledge of Mickey, but the Disney Channel, all of that sort of thing had not been in front of the Chinese market for that long, so people hadn’t grown up with Mickey like they had in Japan or in Europe, or here in the U.S. Getting the product known, getting Mickey known, getting the other characters known is an issue and something the brand has to work on.

Special Events and Tours

Disney enhances its parks revenue with high-margin special events like Mickey’s Not-So-Scary Halloween Party, Mickey’s Very Merry Christmas Party, and a family scavenger hunt. These events could cost as much as an admission ticket to the park by itself. Disney also offers premium VIP tours where guests are guaranteed best seats to any show they want, FastPass access to all rides, and car service to special entry points. These perks do not come cheap, with a seven-hour VIP tour costing between $2,800 to $4,200 with extended hourly rates at $360 to $500 per hour. We believe these added services have much higher margins than the parks segment as a whole. Letting people move ahead of lines, pick seats, and have special access has nearly no costs to Disney. Meanwhile, special events with characters should have a much lower cost structure than operating parks as a whole.


Walt Disney’s hotels range from budget to ultra-high-end with everything in between. They maintain the immersive storytelling focus of the parks, where many hotels use character appearances or intellectual property-themed items to enhance the guest experience. Walt Disney has maintained high occupancy rates, especially in the U.S., as guests at the parks tend to prefer having an entire Disney experience. Retired Disney executive Randy Garfield summed up the hotels quite well:

“The one thing I would say is that the intellectual properties, theming, and the quality of service in the Disney-owned and -operated resorts provides a unique advantage. If you look at Walt Disney World, you’ve got Disney’s Magical Express, the extra Magic Hour, and there are certain benefits that come with an onsite resort guest stay. At the end of the day, it’s a completely immersive Disney experience, from check-in to check-out, and that can’t be duplicated in a non-Disney-owned and -operated lodging.

There’s lots of great [non-Disney-owned] lodging opportunities in every market where we operate and we’re dependent on guests, to a large degree, who stay in those lodging facilities as well. We can’t accommodate all the guests who visit Disney theme parks in the Disney-owned and -operated hotels. There’s plenty of people staying in Disney hotels, but there’s also plenty of people staying in independently-owned hotels, in timeshares, and with friends and family. The Disney hotels do very well because of the immersive experience, the attention to detail, and great cast members.”


We estimate that domestic hotels contributed $2.8 billion in revenue in 2016, accounting for just under 17 percent of segment revenue. Occupancy rates have continued to improve and hit 89 percent last year. Available room nights have averaged just around one percent in growth since 2006. However, pricing power has been strong with four percent spending growth; this includes the occupancy fees plus spending on food, merchandise, etc. With improving occupancy and higher spend per guest, implied domestic hotel revenue growth has averaged five percent per year since 2006 and eight percent since 2011.

Source: Company Filings, Skift Estimates

Walt Disney World

The company has 18 resort hotels with 23,000 rooms and 3,000 vacation club units. Additionally, nine independent hotels lease property and have another 6,000 rooms.

Below is an overview of the Disney-owned properties.

Disney Contemporary Resort

This high-end property is classified as deluxe by Disney. It costs $785 for a standard room per night; we searched mid-week in March for all properties. This is walking distance to Magic Kingdom and has a Monorail stop at the hotel for easy access to Epcot. There are two pools, a waterslide, and water playground in addition to a wide array of dining options.

TripAdvisor ranked this property at four out of five stars and the resort has a certificate of excellence.

Disney’s Wilderness Lodge

This high-end property is classified as deluxe by Disney. It costs $373 for a standard room.

Its theme is based on U.S. National Park lodges in the early 1900s in the Pacific Northwest, and is located near the Magic Kingdom. The pool is situated between pine trees and boulders to keep the theme consistent.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Polynesian Village Resort

This high-end island-themed property in the Magic Kingdom area is classified as deluxe by Disney. It costs $760 for a standard room. Like the Contemporary, it has its own monorail stop. It has pools, Lilo’s Playhouse, Movies Under the Stars, boat rentals, shows, campfire activities, and the usual things you would find at higher-end Disney resorts, like a wide range of dining options.

TripAdvisor reviews have this property ranked at four out of five stars and the resort has a certificate of excellence.

Disney’s Grand Floridian Resort & Spa

This Victorian inspired property in the Magic Kingdom area is classified as deluxe by Disney. It costs $781 for a standard room. The feeling is that of a super-high-end European hotel on the water, as opposed to a themed experience. It can appeal to families, but perhaps may be more suitable to couples and families without young children.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Boardwalk Inn

This early 1900s Atlantic City-themed property is classified as deluxe by Disney. It costs $467 for a standard room and is located in the Epcot area.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Yacht Club

This New England Yacht Club-themed property is classified as deluxe by Disney. It costs $467 for a standard room and is located in the Epcot area. There is a sand-bottomed pool and lazy river with 750,000 gallons of water on three acres of land.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Beach Club Resort

This New England-themed resort and the property are classified as deluxe. It costs $492 for a standard room and is located in the Epcot area. There are pools, mini golf, a pirate adventure cruise, and sandcastle club along with campfire activities, movies, and fishing.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Animal Kingdom Lodge

This resort is classified as deluxe. It costs $519 for a standard room and is located in the Animal Kingdom area. Aside from pools and children’s activities, the resort is unique with 30 species of animals including zebras and giraffes wandering on a 43-acre nature preserve.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

The Cabins at Fort Wilderness Resort

This resort is classified as moderate. It costs $287 for a standard room and is located in the Magic Kingdom area. Disney describes this as roughing it in comfort, where it’s sort of like camping, but with a private cabin with living room, bedroom, full bathroom, private patio, charcoal grill, and modern kitchen complete with a refrigerator, dishwasher, convection/microwave oven, and two countertop burners.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and the resort has a certificate of excellence.

Disney’s Caribbean Beach Resort

This resort is classified as moderate. It costs $215 for a standard room and is located in the Epcot area. It’s comprised of six villages: Trinidad North, Trinidad South, Martinique, Barbados, Aruba, and Jamaica.

TripAdvisor reviews have this property ranked at four out of five stars, but does not have a certificate of excellence.

Disney’s Port Orleans Resort — Riverside

This resort is classified as moderate and is themed as a New Orleans-style resort on the river. It costs $248 for a standard room and is located in the Disney Springs area, a bit further from the parks.

TripAdvisor reviews have this property ranked at four out of five stars and it has a certificate of excellence.

Disney’s Port Orleans Resort — French Quarter

This resort is classified as moderate and is themed as a New Orleans French Quarter-style hotel on cobblestone streets with gas lamps, with the resort sitting on the river. It costs $252 for a standard room and is located in the Disney Springs area, a bit further from the parks.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and it has a certificate of excellence.

Disney’s Coronado Springs

This resort is classified as moderate and is themed after Spanish Colonial Mexico. It costs $232 for a standard room and is located in the Animal Kingdom area.

TripAdvisor reviews have this property ranked at 3.5 out of five stars and it does not have a certificate of excellence.

Disney’s All-Star Movies Resort

This resort is classified as value and its theme is based on different Disney characters. It costs $140 for a standard room and is located in the Animal Kingdom area.

TripAdvisor reviews have this property ranked at four out of five stars and it does not have a certificate of excellence.

Disney’s All-Star Sports Resort

This resort is classified as value and its theme is based on sports with different Disney characters. It costs $156 for a standard room and is located in the Animal Kingdom area.

TripAdvisor reviews have this property ranked at four out of five stars and it does not have a certificate of excellence.

Disney’s All-Star Music Resort

This resort is classified as value and its theme is based on music combined with different Disney characters. It costs $277 for a standard room and is located in the Animal Kingdom area.

TripAdvisor reviews have this property ranked at four out of five stars and it has a certificate of excellence.

Disney’s Art of Animation

This resort is classified as value and highlights art from the films. It costs $367 for a standard room and is located in the Wide World of Sports area.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and it has a certificate of excellence and a Traveler’s Choice award for family.

Disney’s Pop Century Resort

This resort is classified as value and highlights fads from the 1950s through 1990s in pop culture. It costs $146 for a standard room and is located in the Wide World of Sports area.

TripAdvisor reviews have this property ranked at four out of five stars and it does not have a certificate of excellence.

Disneyland Resort

Disneyland has three Disney-owned hotels with 2,400 rooms and 50 vacation club units.

Disney’s Grand Californian Hotel & Spa

This resort is on park property and costs $477 for a standard room. It actually has its own entrance to California Adventure Park. This is a luxury hotel with pools, vast dining options, a spa, and children’s activity center.

TripAdvisor reviews have this property ranked at four out of five stars and it has a certificate of excellence.

Disneyland Hotel

The resort is on park property and costs $352 for a standard room. It has three towers, each theme based on lands at Disney including Adventure, Fantasy, and Frontier. It has pools, fine dining, themed dining with characters, character greetings, pools, build-a-bear workshops, and a spa.

TripAdvisor reviews have this property ranked at 4.5 out of five stars and it has a certificate of excellence.

Disney’s Paradise Pier Hotel

This resort is on park property and costs $295 for a standard room. Its theme is based on an old-fashioned California beach resort. It has movie nights, an arcade, children’s activity center, pools, and trivia challenges along with many other amenities.

TripAdvisor reviews have this property ranked at four out of five stars, but it does not have a certificate of excellence.


Opened in 2011 in Oahu, Hawaii, Disney owns a 351-room luxury hotel on 21 acres of oceanfront property. There are also 481 vacation club units. A standard room runs at around $470 mid-week per night. Much like the Shanghai park stayed authentic to local culture, Disney did the same with Aulani. It has some traditional Disney character appearances for the kids, but this is very much a high-end authentic Hawaii hotel. The hotel incorporates a local flavor into its storytelling through things like a lū‘au and fireside mo‘olelo, where families gather around a fire pit and hear Hawaiian legends. At its core, this is a very upscale, family-friendly beach resort in a beautiful setting in Hawaii.

TripAdvisor reviews have this property ranked at 4.5 out of five stars with a certificate of excellence.

Disney’s Hilton Head Island Resort

The resort opened in 1996 and is five hours north of Walt Disney World in southern Carolina. Its style was based on 1940s hunting and fishing lodges. The villas are around $200 for a one-bedroom and $260 for a two-bedroom in off-peak seasons, and $500 and $600 during the summer beach season. While the hotel is on the water, it’s not on the ocean. Instead, guests take a quick free shuttle to Disney’s Beach House where they can use the beach and a pool. Like Hilton Head as a whole, the resort is very family-friendly with activity programs, sing-along campfires, mini golf, basketball, volleyball, bingo, scavenger hunts, and bike rentals.

TripAdvisor reviews have this property ranked at 4.5 out of five stars with a certificate of excellence.

Disney’s Vero Beach Resort

The resort opened in 1995 and is two hours southeast of Walt Disney World. It’s an old-fashioned, family-friendly beach resort with a Mickey Mouse-shaped pool, a water playground, a sing-along around the campfire, mini golf, a spa, and a surf school. Studios in March start at $350 while one-bedrooms hit $500.

TripAdvisor reviews have this property ranked at 4.5 out of five stars with
a certificate of excellence.


International hotels are a much smaller contributor, accounting for just over three percent of segment revenue. For international, the per-room guest spend data is impacted by currency movements. The macro issues in Europe and recent inbound travel to Hong Kong from China that we discussed in the parks section apply here as well.

Source: Company Filings, Skift Estimates

Disneyland Paris

Walt Disney has an 18% stake in Euro Disney Associés S.C.A. Disneyland Paris, which controls seven hotels with 5,800 rooms. Several onsite hotels lease property as well with 2,700 rooms.

Disneyland Hotel

This is a five-minute walk to the park. It’s a five-star luxury hotel with fine dining and a pool.

Disney’s Hotel New York

This is a four-star hotel with a New York theme. It has pools and is even equipped with an ice rink modeled after the one at Rockefeller Center. It’s a ten-minute walk to the park.

Disney’s Newport Bay Club

This hotel is meant to feel like a coastal mansion. It’s a short shuttle ride or 15-minute walk to the park.

Disney’s Sequoia Lodge

This mountain-themed hotel is 15 minutes from the park. It’s a three-star hotel.

Disney’s Hotel Cheyenne

This is a budget hotel whose theme is based on the old American West, located 20 minutes from the park.

Disney’s Hotel Santa Fe

The Santa Fe is a budget hotel located 20 minutes away from the park and it has a Route 66 theme.

Disney’s Davy Crockett Ranch

A 15-minute drive from the parks, this hotel is rustic and located in the woods. Guests stay in log cabins and can go on nature walks.

Hong Kong

There are two hotels with 1,000 rooms and a third being built with 750 rooms that should open in 2017.

Hong Kong Disneyland Hotel

This property is walking distance to the park entrance and is a luxury waterfront hotel. It costs around $330 per night.

Disney’s Hollywood Hotel

Also walking distance to the park, this Hollywood-themed hotel is a bit more affordable and costs around $250 per night for a standard room.


This resort has two hotels with 1,220 rooms. We discussed these earlier in the Shanghai parks section.


While not owned by Disney, Oriental Land Company has four Disney-branded hotels and there are six independent operators in the park resort area. Occupancy rates here have consistently been in the 90 percent range.
Tokyo Disneyland Hotel

This luxury hotel has 706 guest rooms and each has a Disney character motif. It’s right next to the Disneyland park.

Tokyo DisneySea Hotel MiraCosta

This hotel is high-end and actually located inside the DisneySea park. It has 502 guest rooms.

Disney Ambassador Hotel

This hotel is a shuttle bus away from the parks and located near a mall. It has character-themed rooms including Mickey, Minnie, and Donald Duck. There is character dining as well.

Tokyo Disney Celebration

This is a budget hotel that has multiple beds per room with colorful designs and is a 15-minute shuttle from the parks.

Disney Vacation Clubs

Disney Vacation Clubs (DVCs) are included in the hotel revenue bucket and include 13 resorts located at the Walt Disney World Resort in Florida; Disneyland Resort in California; Aulani in Hawaii; Vero Beach, Florida; and Hilton Head Island, South Carolina. Units are sold under a vacation ownership plan and operated as hotel rooms when they are not occupied by vacation club members. The sizes range from studios to three-bedroom villas. As of October 1, 2016, DVC had approximately 3,800 vacation club units based on a two-bedroom equivalent count.

How It Works

A member first buys a real estate interest at one DVC, which will be the owner’s “home resort.” The ownership stake is represented by an annual number of vacation points, which can be used at the home resort or thousands of other locations globally. The points are based on the type of resort, time of year, and length of stay.

Walt Disney provides the following example for a sample of points [21]:

  • 120 Points: 6 nights in a Savanna View Deluxe Studio at Disney’s Animal Kingdom Villas in mid-June 2017
  • 189 Points: A week at Aulani, Disney Vacation Club Villas, Ko Olina Hawai’i, in an Island Gardens View Deluxe Studio during July 2017
  • 200 Points: A week in Europe in a 2-bedroom accommodation during Low Season through the World Collection
  • 232 Points: 6 nights at The Villas at Disney’s Grand Floridian Resort & Spa in a 1-Bedroom Villa with a Standard View in October 2017

Owners can also roll over points or borrow from the next year for added flexibility.

Disney has added DVC units at several of its more traditional hotels including at Aulani, Animal Kingdom Lodge, the Polynesian, the Grand Floridian, and the Grand Californian.

From a consumer standpoint, the benefit is effectively discounting hotel rates, access to exclusive events (many of which are complimentary), and discounts at the parks.

Purchase Example

Each point is equivalent to $171. If we wanted to buy a studio share at Disney’s Polynesian Villas & Bungalows in Florida, our cost would be $34,200 with (10 nights * 171 per point * 20 points per night). Monthly dues add $1,380 per year as well.

What Are the Economic Implications for Disney?

Walt Disney builds the units and likely sells them for a nice profit above its costs. Whether financed or paid out of pocket, Disney gets an upfront cash injection on the sale. This is nice, but given Disney’s size, it’s not very impactful to the company as a whole. We believe the monthly costs help cover maintenance at hotel properties, benefitting the entire hotel and not just the DVC owners. In return, the owners get the previous benefits we mentioned. Perhaps most importantly, once a family purchases a unit, they are more likely to become repeat customers at the parks, spend more on merchandise, and be more brand-loyal in general.

We believe that Disney is monetizing these properties with at least as favorable effective economics as it would on hotels. As a very rough estimate, if we assume an 85 percent occupancy rate a $300 per-night room rate and 3,000 effective units based on Disney’s filings, the hotel-equivalent monetization would be around $280 million per year or under two percent of segment revenue, and roughly eight percent of hotel revenue.


Walt Disney does not provide specific revenue or profit data for the cruise lines, but we can estimate the contribution.

Cruise Market Watch provides industry data on market share. Carnival, Royal Caribbean, and Norwegian dominate the cruise industry with 48, 23, and 10 percent share respectively. Disney has 2.8 percent share. On revenue, Disney has 2.4 percent share. Taking the share data and using company filings, we estimate the cruise industry generated $37.2 billion in revenue in 2015. As a secondary check, Statista estimates $39.6 billion in industry revenue. We take the average of both, which implies $922 million in revenue for Disney from its four ships. This would have cruises contributing five percent of 2015 segment revenue.

Given that most customers are coming for a Disney cruise specifically rather than searching all cruises, they are more likely to book on Disney’s website rather than going through a travel agent. We assume that Disney generates far more bookings without a 10 to 15 percent agent commission versus the large traditional cruise players. Additionally, we believe families will spend more on high-margin excursions and other extras on the ships for the Disney character experience. Given the total parks segment has just over 20 percent operating margin, we believe the cruises operate at a premium to that in the mid-20s. We use 25 percent to calculate cruises accounting for just under eight percent of segment operating income.

Source: Company Filings, Skift Estimates, Cruise Market Watch

As a further check on our numbers, we attempt to calculate a return on investment (ROI). The cruises should be at over 10 percent if our numbers are in the ballpark. We estimate that the four ships costs $2.8 billion to build; the newest ones at $900 million each. For depreciation, this is 10 percent of revenue for Carnival, Royal Caribbean, and Norwegian, so we assume the same percentage for Disney. Adding back that expense to arrive at EBITDA takes us to an 11.5 percent ROI.

Source: Skift Estimates

Ship Overview

The company has four ships. Two have capacity at 2,713 people and two at 4,000. For sailings, we searched all cruises for 2017 to estimate sailings per year. For occupancy, we assume a 95 percent rate given that cruises typically sail full and Disney hotels in the U.S. are close to 90 percent full. This gets us to an estimated 890,000 passengers per year.

It All Comes Down to Customer Service and Storytelling

Disney cruises to the Bahamas, the Caribbean, northern Europe, the Norwegian fjords, the Mediterranean, the British Isles, Alaska, and Canada. Disney uses its intellectual property to differentiate the cruising experience from peers. This creates more demand, better loyalty and customer experiences, and higher spend per family on the room itself and on other items.

The cruises offer Broadway-style musicals, parties with Disney characters, and immersive kids clubs. Disney uses a unique rotational dining experience where each guest and their families get to rotate between three themed restaurants on board. The wait staff and tablemates rotate together so that the staff gets to know consumer preferences better.

Disney even owns its own private island in the Bahamas called Cataway Cay. Guests will typically have a buffet barbeque while spending the day on the beach, which has chairs, umbrellas, towels, entertainment, hiking trails, beach sports, a waterslide, and even yoga classes.

Character experiences include things like Marvel Day at Sea, a Royal Tea Party, Pirate Night, Character Greetings, Star Wars Day at Sea, a Frozen-themed deck party, and others. The staff emphasizes the guest experience and is available 24 hours per day.

New Ships

Disney is building two new ships. Both will have 1,250 staterooms (same as the two most recent ships). They are expected to be delivered in 2021 and 2023. There isn’t much detail yet, but given past projects, it seems likely they could cost around $1 billion per ship.


The cruises should be a steady contributor to profits with modest growth from here until the new ships come along. Growth in the coming years is likely to come primarily from pricing power on ticket costs and further guest spending increases versus higher occupancy rates; we believe the ships sail close to fully occupied. A successful cruise experience for a family reinforces the Disney brand and helps bring them to the parks and hotels, leads to more spending on consumer products, and helps with the movie business.


While Disney is known for family leisure vacations, the company offers convention capabilities as well.

Walt Disney World offers 700,000 square feet of ballroom, meeting, and function space at Disney’s Coronado Springs, Contemporary Resort, Yacht and Beach Club Resorts, Boardwalk Resort, and the Grand Floridian.

Disneyland Resort has 180,000 square feet of space at the Disneyland Hotel, Grand Californian, and Paradise Pier.

Aulani in Hawaii has 50,000 square feet of indoor and outdoor space.

Internationally, Hong Kong Disneyland’s two hotels have 1,500 square meters of space with 16 meeting rooms. Disneyland Paris has 252,000 square feet of meeting space including two convention centers.

Conventions are a nice incremental piece of business where Disney can sell large blocks of rooms, meeting space rentals, and theme park tickets. Additionally, because of Disney’s parks and family focus, it is likely a decent proportion of convention guests extend their stays and bring family with them.

Adventures by Disney

Adventures by Disney are all-inclusive guided vacation packages, mainly at non-Disney sites around the world. Disney had 33 of these packages in 2016. These packages are definitely at the luxury end of the travel spectrum, with an eight-day trip to Italy costing $5,000 to $6,000 per person and a South African safari costing approximately $8,000 per person. The prices exclude airfare to and from the destination, but include travel during the trip. These trips are marketed as once-in-a-lifetime travel with two adventure guides planning and leading every part of the trip.
Other features include:

  • Private events and privately guided tours
  • Backstage access
  • Bypassing lines at popular museums and attractions
  • Unique cultural experiences with local experts
  • Special activities just for Junior Adventurers
  • Special programs with the local community
  • Costumed historical characters who bring stories to life

Lodging is typically in the luxury class, ranging from traditional properties like the Ritz Carlton to the unique Dromoland Castle in Ireland.

Below is a list of 2017 travel packages. Most tours have 25–45 people. For potential revenue, we assume the mid-point at 30 people per tour and 150 people on the river cruises that are new to Disney Adventures. We estimate that the adventures contribute less than one percent to segment revenue, but believe margins on luxury guided travel are quite high. We assume a 50 percent margin and that the adventures account for one percent of segment operating income. While not a huge source of income, the business is quite scalable and more limited by the number of people willing to pay luxury prices for these packages. We expect this unit to continue to grow in importance over time, but pricing makes it likely that it will always be a small, but highly profitable part of the travel business.

Source: Skift Estimates,

Athletics and Travel

The ESPN Wide World of Sports Complex in Florida has events for 60 sports including football, baseball, basketball, golf, gymnastics, track and field, soccer, softball, and volleyball. With over 200 events per year, the events are a nice revenue generator themselves, but more importantly they bring guests to the parks and hotels. Athletic competitions include events for children through minor league baseball.

There are also marathon and half marathon events. Walt Disney World’s marathon weekend brings in over 50,000 runners, which is comparable to the New York City marathon. With marathon and half marathon fees at $180, revenue would be at around $9 million. The much bigger impact would be attracting 50,000 people and their families to the parks and hotels and turning the event into a full vacation. If we assume each runner comes with one guest on average (some by themselves, some with family), they stay for five nights at $350 per night split two ways, and spend $100 per day on admission to parks and total in park spending, derivative revenue from the event could be $118 million. Adding in smaller events through the year like the Princess and Star Wars Half Marathons and events abroad could make the net impact of these events (including increased park admissions and hotel stays) at one to two percent of segment revenue.

Segment Financials

Steady Revenue Growth

With the exception of the financial crisis, segment revenue has put up consistent five to 10 percent growth for the past decade. Some believe that the parks are very economically cyclical, but the data suggest that Disney can weather economic slowdowns quite well. The worst economic crisis in a generation still only led to a 7.3 percent decline in revenue for the segment and 4.5 percent for the company as a whole.

Source: Company Filings

To test the relationship between economic variables and revenue growth, we ran a multiple regression for segment revenue yearly growth versus annual changes in personal consumption expenditure (PCE), real GDP, private real GDP (excludes government spending), personal income, and unemployment since 2006. We found that there is little statistical evidence of impact from any variable outside of the employment rate. With a 0.06 P-value, even that would be moderate at best. The P-value determines if the null hypothesis can be rejected; the null is that there is no relationship. Here, the null hypothesis is that there is no relationship between revenue change and the economic variables. The high P-values simply mean that there is little statistical impact to revenue from the data. This supports our intuitive viewpoint given an economic crisis only leads to modest revenue declines. For unemployment, it implies a one percent increase in revenue growth is associated with a 0.30 percent decrease in the unemployment rate, but even that does not have much significance.

The broader conclusion is that Disney will of course benefit or be hurt by macro trends to some extent, but the long-term driver of revenue growth is much more company-specific, especially in the mature U.S. market.

Source: Company Filings, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis

Operating Margin Continues to Improve

Operating margin reached 16.5 percent before the financial crisis. In 2009, revenue decreased approximately seven percent and the company saw margins come down. Disney continued to invest for future growth as the economy weakened and then slowly recovered. By 2014, margin surpassed the pre-crisis level. Many skeptics in the parks and resorts segment have declared that we have reached peak margin, but this has happened like clockwork every year for the past three years.

To determine where we go from here, it’s important to look at each line item individually. Operating expenses are the largest expense item at 59 percent of sales and include labor, infrastructure, cost of sales on things like food, beverage, and merchandise, and supplies, entertainment, and commission expenses. Despite Shanghai opening costs, inflation, and higher operating costs at the parks, efficiency initiatives led to total operating expenses as a percent of sales to decrease 90 basis points year/year. As Shanghai’s initial costs fade and costs become more operational, Disney could see operating expenses decline further from here as a percent of sales and lead to operating margin moving above 20 percent in 2017.

Over the past four years, selling, general, and administrative costs (SG&A) have been declining at a 40 to 50 basis points annual pace as a percent of sales and were 11.3 percent of sales in 2016. The bulk of these costs are marketing-related. This suggests that Disney continues to be more efficient with their advertising, driving more revenue per marketing dollar spent each year. This line item should continue to help improve margin anywhere from 25 to 50 basis points in the next few years.

Depreciation and amortization (D&A) has consistently been in the 10 percent range. With the parks requiring long-term assets and capital spending, D&A is a real cost, so EBIT margin versus EBITDA, which excludes D&A, is more useful here.


Source: Company Filings

Capital Spending Has Accelerated With New Park Expansions

The parks and resorts business certainly is capital-intensive and lately, spending has accelerated. These investments are necessary for Disney to maintain its industry leadership and attract guests to the parks. The ability to deploy massive amounts of money into the parks versus much smaller peers is a large competitive advantage. Theme park expansion projects in general could be viewed as risky with large upfront costs, but Disney has proven that it is able to generate strong returns on these projects and has continued to dominate the industry.
Source: Company Filings

Walt Disney World, Orlando, Florida

In 2016, the company began construction on two new themed areas based on Star Wars and Toy Story at Disney’s Hollywood Studios. Star Wars is expected to be 14 acres and Toy Story 11 acres.

At Animal Kingdom, Disney plans to open Pandora — The World of Avatar in summer 2017. The 12-acre land is inspired by James Cameron’s film.

Disney plans to build an 8,000-seat indoor sports venue that will host cheer, dance, basketball, and volleyball competitions at its ESPN Wide World of Sports Complex.

Disneyland Resort, Anaheim, California

At Disneyland, the company began construction on a new Star Wars-themed land in 2016 and is building a new 6,800-space parking garage for its hotels. The Star Wars project will be 14 acres and the largest-ever single themed expansion in the park’s history.

Hong Kong Disneyland Resort

A new themed area based on Marvel’s Iron Man franchise and a third hotel with 750 rooms is scheduled to open in 2017. Additionally, a new Frozen-themed area has been proposed to the Hong Kong government. The company is already monetizing the Moana film and is planning a Village Festival daytime show.

Shanghai Disneyland

Now that the park is open, the next expansion is a Toy Story-themed area set to open in 2018.

Disney Vacation Club

The company is currently constructing its 14th vacation club property, Copper Creek Villas & Cabins at Disney’s Wilderness Lodge at the Walt Disney World Resort in Orlando, Florida.

Disney Cruise Line

Disney is adding two more ships to bring the fleet count to six. The ships are set for 2021 and 2023, weighing 135,000 tons with 1,250 staterooms.

Source: Company Filings

Relationship with Distributors

Walt Disney uses all channels to bring guests to the parks. Given that most guests staying at Disney-owned hotels are also visiting the parks, it seems likely that the majority of bookings come through Disney directly as package bookings. Unlike large hotel chains, the relationship with online travel companies is not contentious (at least publicly).

Authorized Disney Vacation Planners

A unique aspect here is that the vast hotel and park options have facilitated the rise of specialized travel agents or authorized Disney vacation planners. These agents are usually extremely passionate about Disney and have met specific sales goals and criteria established by the Walt Disney Travel Company. These entities receive sales and marketing training from Disney. The customer does not typically pay for these services. Instead, Disney would pay a commission, likely in the 10 percent range, for the booking.

Traditional Travel Agents

Other customers go through traditional travel agents. Most of the fee is charged to Disney, but some agents add additional fees for the consumer.

Online Travel Agencies

Despite its massive size, Walt Disney has remained far removed from the hotel and online travel agency proverbial booking wars. We believe one reason is that Disney uses all acquisition channels to get guests to its hotels and parks where additional spending on merchandise, food and beverage, and added guest experiences are lucrative and would not count in a fee arrangement. Additionally, the company does not want to focus on price, but rather the Disney experience to attract bookings.

In our conversations with Expedia’s Melissa Maher, senior vice president, Global Partner Group, she stated that “Disney is a great partner of ours. We’ve worked with them for years. Their experience is certainly different, where we are focusing our efforts on hotel bookings and really making sure that we can market their product on our site and looking at how can we drive more experiences in the theme parks. We have an incredibly important activities business. We think that’s very complementary to Disney. We look at how we can increase the visitors that go to their theme parks all around the world, and making sure that we can offer our consumers that experience because it is so unique.”

Counterterrorism Measures

With almost 138 million people visiting its theme parks in 2015, the parks are clearly exposed to the sad reality of terrorist threats. The company is active in counterterrorism measures while looking to maintain the innocent feeling of the parks. This is difficult to do, but the company has increased security since the September 11 attacks back in 2001. While much of the what they do is not shared publicly, we found a 2006 job listing for an intelligence analyst on the website that sheds some light on the measures the company takes [22]:
THE SITUATION: Basic Purpose and Objective of the Position: The Intelligence Analyst anticipates and assesses threats that could harm, or make vulnerable, The Walt Disney Company (TWDC), its employees, guests, or assets.

THE POSITION: The analyst thoroughly reviews information from open/public sources, official sources, and professional contacts, and conducts regular assessments of world events, regional/national security climates, and suspect individuals and groups. The analyst produces a range of written and verbal analyses for employees and management of the Company and provides tactical intelligence support to the Company’s security and crisis management operators…

% of Total Duties and Responsibilities

45 [%] Monitors open source media, homeland security and law enforcement bulletins, and information from professional contacts, for international, national, and local news and intelligence that may affect the security and safety of TWDC. Maintains comprehensive files of intelligence on key issues and parts of the world; maintains record of threats received, assessments, and their disposition. Plays key information processing role in the Corporate-level Emergency Operations Center, when activated.

35 [%] Anticipates scenarios, analyzes information, and produces written or verbal assessments and warning forecasts for Global Security management and other appropriate TWDC consumers. Assessments will be assigned or self-initiated. Recommends strategies to mitigate security risks as appropriate or required.

10 [%] Develops and maintains regular liaison with local, national, and international law enforcement and intelligence community partners. Maintains and broadens professional skills and contacts through external training and attendance at conferences.

5 [%] Becomes subject matter expert on issues such as counterterrorism, travel security, and international affairs.

5 [%] Finds and coordinates training opportunities and intelligence production of analytic cadre throughout TWDC…

In a more recent 2015 posting [23], we are provided with a description of the global intelligence and threat analysis unit.

“It is an enterprise-wide ‘Counter Threat’ intelligence support team that provides strategic intelligence, threat assessments, vulnerability mitigation strategies and in-depth analytical products covering existing and developing threats that include counter terrorism, physical threats, cyber-attacks and all reputational risks to TWDC, its affiliated business units, facilities, guests and employees. The team provides timely and relevant intelligence that is critical to supporting and informing corporate executives, key business leaders, and security and safety personnel at all levels of TWDC — worldwide.”

Additionally, looking at the biography of Senior Vice President, Global Security Robert Iden, we see the high level of expertise at the top. He has served as head of global security since 2014. Prior to that, he spent 25 years at the FBI and led the Los Angeles Field Office as assistant director.

Reaction to the Orlando Attacks

In the aftermath of the June 2016 Orlando attacks, the company put out the following statement [24].

“Unfortunately, we’ve all been living in a world of uncertainty… during this time we have increased our security measures across our properties, adding such visible safeguards as magnetometers, additional canine units, and law enforcement officers on site, as well as less visible systems that employ state-of-the-art security technologies.”


Below is additional material from our interviews. Both former Disney executives provided wonderful insights into the company that we felt were important to share with our readers. We thank both for participating.


After twenty years at Disney, Randy Garfield retired in 2014 as president of Walt Disney Travel Co. and EVP of worldwide sales and travel operations for Disney destinations. He led one of the U.S.’ largest travel wholesalers and sales/distribution marketing for Disneyland, Walt Disney World Resort, Disneyland Paris, Hong Kong Disneyland, Disney Cruise Line, Disney Vacation Club, and was responsible for The Disney Institute & Disney Event Group. He also managed central reservations and catering special event/group sales and services at Disney resort destinations and provided strategic direction to Disney’s sports enterprises.

Skift: Can you walk us through your background?

Garfield: I retired after 43 years. I spent 11 years at TWA, three years as a vice president of Royal Viking Line Cruises, and then went to work at Universal Studios. I was first at Hollywood, where I was vice president of sales as the theme park went through a massive expansion starting back in 1986. Then, I came down to Florida while I was still at Hollywood to do the pre-opening sales and marketing plans for Universal Florida. I ultimately moved to Orlando in early summer of 1989 to be the executive vice president of marketing and sales and their chief marketing officer. I was there not only for the pre-launch and launch of Universal Studios Florida, but also was intimately involved in the product and everything else for the expansion for the full resort.
I left in the fall of 1993 and joined Disney as president of Walt Disney Travel Company. Initially, I was a senior vice president of travel operations, but I was there for less than two months before they put the sales organization under me as well.

I spent a little over 20 years at Disney and had global responsibility for sales and travel operations throughout the entire portfolio of the theme parks, the resorts, the cruise line, and everything else that was part of Walt Disney Parks Resort portfolio, and also had some unique responsibilities like the Disney Institute. A good portion of my time, I was the senior operating executive at Disney Vacation Club during a period of its massive expansion. Then I retired in 2014 just because I really wanted to play. I’d worked 43 years full-time and it would be nice to enjoy the fruits of my labor while I was still unencumbered by any physical limitations or any kind of health issues that usually comes as you get older.

Since then, I’ve actually sat on the board of Brand USA. Disney was one of the early organizations that supported the passage of the Travel Promotion Act. I’ve had a couple terms on the board of Brand USA. I think I’m the longest serving executive committee member of the U.S. Travel Association. I’ve chaired that organization in the late 90s and have stayed very involved in that as well.

Skift: You’ve done a lot over the last 40 years. Can you highlight the things for yourself and the company that you’re most proud of?

Garfield: I was always very impressed with the company’s historic legacy of innovation, creativity, and delivering great guest service that has spanned decades. You have to remember, this end of the company launched in July of 1955 at Disneyland. I feel pretty good about the fact that the foundation of providing great family entertainment has been able to expand not only into different geographic venues, but also into different businesses as well.
Another innovation was when we launched the Disney Cruise Line. We put full-blown, Broadway-style theatrical entertainment in the theaters, whereas at the time that we started, most of the other cruise lines had cabaret acts. We built theaters with fly lofts and with elevators and all the things you’d find on Broadway.

Rotational dining was a unique concept that I was very proud of, because again, most cruise lines had lots of dining alternatives, but your main dining room used to get themed. To tell the guests that they could rotate through different dining rooms with their same tablemates and the same waiters, that was very unique. Also, at the cruise line, the Castaway Cay may still be the only island where you dock instead of anchor and ferry in. That was also, besides the fact that the island itself is really just everything that people would think of in a dream of a tropical island. The fact that you’re not really dependent on weather to the degree most cruise lines are by anchoring offshore and then getting on a ferry to go back and forth was distinct. A lot of the things that Disney introduced in Disney Cruise Line were unique and I’m very proud of them.

Also, what we started as Disney’s Wide World of Sports, which is now ESPN Wide World of Sports, became a first-class sports facility at Walt Disney World. We then the expanded with the Walt Disney World Marathon, which I believe, is in the top 10 marathons in the U.S. Additional half marathons and other endurance products have been introduced at Walt Disney World and recently started to be introduced at Disneyland and even Disneyland Paris. I think that was a unique crossover of taking athletes and giving them a unique, inspirational venue to perform in. The introduction of Adventures by Disney, which is really a family-oriented travel product, took the Disney legacy of storytelling and realized that you don’t have to tell Disney stories, you can tell the stories of unique cultures and destinations and do it in a way that really brings it to life.

I was there over 20 years, so when you ask me to talk about what am I most proud of, it’s like asking which of my children am I most proud of.

I was also very proud of the expansion of the Disneyland Resort, with the second gate and finally the introduction of the hotel that we built, which is the Grand Californian. Up until that point, the Disneyland hotel, which is a great hotel, wasn’t necessarily built by Disney, it was built by someone else. Paradise Pier was the same situation, but the transformation of Disneyland into a multi-day destination with retail, dining, and entertainment, two theme parks, has really been tremendous. I’m proud of that as well as the introduction of Disney into Hong Kong and Shanghai. Being able to deliver a great guest experience that transcends culture and geography is really unique.

Skift: I was actually in Hong Kong last year and my wife and I took my daughter to Hong Kong Disney. It was amazing just seeing, regardless of the language, how the kids are just as excited there as they are in Orlando or California.

Garfield: Yeah, it’s amazing and it’s a gorgeous setting against the mountains. When you do the fireworks at night, it’s probably one of the most picturesque venues that you’d ever encounter. It’s interesting to me because when that park opened, some of the critics talked about the size of it. They were really comparing it to Walt Disney World or Disneyland as it existed in 2005 when Hong Kong opened, instead of how big Disneyland was in 1955 or how big Walt Disney World was in 1971.
You don’t build a church for Easter Sunday. If you’re going to introduce a unique and creative product in a part of the world that hasn’t yet experienced it, you need to size it right and then as time goes by, expand it when the demand is there. If anybody looks at Disneyland or Walt Disney World on opening day, and then thinks about that in the context of what was the size and scope of Hong Kong, it puts it into a different perspective.

Skift: How does Disney maintain that consistency but still localize the experience outside the U.S.?

Garfield: I think Shanghai is an epitome of it. Bob Iger said at the onset that it was going to be authentically Disney but distinctly Chinese.
It provides great guest service and delivers experiences that surprise and delight, which is the common thread. Some products translate well into different cultures, but you also have to look at the marketplace. Take as an example, Japan. The people in Japan were very familiar with the Disney brand before Tokyo Disneyland opened. Contrary to that, the recognition and awareness and emotional connection to the brand in Hong Kong or China wasn’t nearly as cemented as it was in locales where people had been accustomed to growing up with Disney on TV and in the movies.

You ultimately look at historical, cultural stories that have been passed down through heritage in those markets for a long time and see if there’s ways that you can tell the story more effectively.

I always had an interesting thing, because the meetings and conventions business reported to me as well. When we first got into Adventures by Disney, people thought that the trips to Europe and South America and everything else was just going to be characters and iconic Disney product. I think they soon learned that Disney is a master at storytelling. They certainly do a great job of telling their own stories, but they’re very effective at telling stories that they didn’t create. I think anybody who’s ever been on an Adventures by Disney trip sees that come to life.

Even if you go to Aulani, which is a Disney resort and spa in Hawaii, before it opened, some of the critics may have thought it was going to be like some of the other brands that opened in Hawaii or Polynesia, and that was about tiki torches and hula dancers and everything else. Disney went to great lengths to tell the story of Polynesian culture at Aulani, and did it in a way where the locals and even their harshest critics were very impressed.

Skift: Japan has done extraordinarily well, while Disney Europe in Paris has struggled through the years. What’s the biggest difference there and the lesson that Disney has taken from their European experience in Paris?

Garfield: It’s interesting to me, because Disneyland Paris is by far the most popular tourist attraction in Europe. The assumption that it’s struggling isn’t necessarily accurate. It has a different financial structure, but each market is different and requires unique, customized approaches to drive demand.
It’s the most successful visitor attraction in Europe. I wasn’t at Disney at the time they decided to build there, but I certainly sense the company has been flexible and resilient in taking their experiences and learning from them, really. One of the things that I think of is that when Disneyland Paris first opened, historically, I remember, they didn’t serve wine.

That is 20/20 hindsight. The interesting thing about having a portfolio as broad and diverse as Disney’s is that you have the ability to leverage best practices and resources globally. If you’re smart, and they are smart, you never let uniformity trump local culture and business practices.

Skift: Disney has moved to demand-based ticket pricing. Do you think this has changed the usage patterns through the years, or is it still very early in the process?

Garfield: My only comment would be that hotels have done this for years. You can look at the room rate pricing in Las Vegas for weekend versus weekday or when there’s big events, whether it’s the Superbowl or whatever. This isn’t a new concept, it was just a new application. The same is true if you look again at professional athletics, and I also believe in the theatrical area like Broadway shows. Certain performances are priced differently, weekday versus weekend, matinee versus evening.
In sports, a game ticket used to be the same no matter who you were playing. Today there are some teams, and I think this is a growing number, who, with the exception of season ticket holders, they may price the games differently, depending on who’s competing. If you have a rivalry that’s always sold out, you may charge a premium for that game. To me, while I can’t comment on whether it is working or not, I just think it’s an application of an approach. While it may have been unique to the theme park industry, it certainly wasn’t unique to ticketed events in sports or entertainment or to hotel pricing.

Skift: What else should people know about Disney? It seems like ESPN subscriptions have become a media and Wall Street obsession these days.

Garfield: I think it’s a very diversified company which has stuck to its foundational principle of being the number-one brand in family entertainment. The acquisitions that the company has made over time, I think for the most part, have been brilliant and have significantly enhanced its product portfolio. Similar to your own personal investment portfolio or mine, you’ve got a balanced portfolio. A balanced portfolio means that most of the time, the cumulative total of your business is very positive, but you may have one that’s a star and one that’s not growing at the same pace. Disney is a very strategic company. Despite the fact that it’s coming up on, in the next seven years, 100 years in business, I think that the innovation and the creativity that have defined it are applied very effectively no matter what business they’re in. When people have a tendency to focus on one element of the company, they need to understand how big the company really is and what’s the impact of that one element, positively or negatively. Sometimes something gets disproportionate focus beyond its actual revenue or operating income contribution.


Dr. Dickson has been a professor at the Rosen College of Hospitality Management at the University of Central Florida since 1997. Prior to joining UCF, Dr. Dickson served almost 20 years with Walt Disney World, where as director of casting he was very active in the creation, development, and teaching of numerous training programs. Among these programs were Casting for a Role in the Show, View from a Disney Leader, Management Disney Style, The Disney Approach to People Management, and The Disney Keys to Quality Service. He created the latter as a program to deliver the Disney quality message to individuals unable to visit Central Florida.

Skift: Can you walk us through your role when you were at Disney?

Dickson: I started at Disney after I finished my master’s degree at Cornell. I started in food and beverage and was a restaurant manager for a couple of years. Then just before Epcot opened, I moved over to human resources in the staffing realm and was responsible for hiring all of the engineers and people that built Epcot. After Epcot opened, I stayed in the staffing area and helped create some of the more innovative staffing programs like the Walt Disney World College Program and the International Staffing Program for Epcot. I was responsible for international recruiting and was the chief visa officer for the company where I lobbied Congress for the visa, which allowed us to keep the Epcot pavilions staffed with individuals from those countries. I spent a year helping open Euro Disney, Disney Hollywood Studios, a whole bunch of hotels, and the last six years I was there, I was director of casting.

Skift: The Disney brands resonate globally. Part of this is the universality of the characters. How does the company maintain the consistency by localizing the experience? I know that Bob Iger talks about authentically Disney, but distinctly Chinese for the Shanghai experience. How are they able to do that?

Dickson: You have to integrate the culture where you’re operating into your operation. You’re not just creating the Disney brand, but you are creating a brand that the individuals there will respect and enjoy and really appreciate. We did make a few stumbles along the way. In Tokyo when we tried to create an attraction called Japan Meets the World, where we wanted to tell the story of Japanese history, but the Japanese hated it because they wanted a Disneyland. They wanted the American experience. So, we had to redo that attraction because they really wanted the Disneyland experience. You have to learn as you go and create new things that will help. In Paris, we didn’t want to have alcohol at the park because we’d never done that. We didn’t think it was something that would fit, but in the French culture and the European culture, most people are not going to have a lunch without a glass of wine or a beer. So, we had to go back in and retrofit things like that. You learn as you go and you have to be sensitive to the culture you are in.

Skift: On the technology side, Disney has done a lot through the years to improve the guest experience, whether it’s FastPass or other innovations. What do you think the biggest changes have been and what would you hope to see going forward on the technology side to improve customer experience?

Dickson: The biggest change… when I started there, we had A, B, C, D coupons and each attraction you had to have a coupon or a ticket. We had ticket takers at each attraction. Space Mountain was an E attraction. Mickey Mouse was an A attraction. The guests sort of decided the value of the attraction based on what we had told them in terms of whether it was an A ticket ride. In 1982, when we opened Epcot, we realized that we weren’t going to be able to do that, so we had to change the whole Disney culture and go to the one pass option, which changed how we did things.
After that, it was just a matter of integrating technology as it came along, understanding how technology could help us and what the new guest was looking for in terms of technology. The FastPass option, virtual queuing was an interesting thing. We’re waiting in line, but we’re not waiting in line and how does this work? Adopting some of that technology. It’s all about making sure your guests know how the new technology is going to make their visit better.

Skift: Outside of Disney, which companies do you think get it right on the theme park side, in terms of the guest experience?

Dickson: There are a couple. Certainly, Universal is coming along ever since Comcast took them over. They understand what’s going on. The head of theme parks at Comcast is a former Disney employee that led the rollout of the Disney stores, and he gets it and understands it. Since Harry Potter came to Universal Orlando Islands of Adventure, Comcast has been on a roll and had really upped their game and improved what they’re doing.
There are some smaller parks throughout the world that are doing a good job. Europa-Park in Germany does a great job of theming. You’ve got other parks that really aren’t theme parks, but they’re good ride parks.

I would say right now it’s Disney and Universal at the top and then everybody else kind of lagging behind.

Skift: As we look out at the next five to 10 years, what do you think the biggest changes will be in the theme park industry?

Dickson: I think the biggest changes are going to be in the adaption of technology. What can we adapt? How can we utilize technology to make the employee experience better, to make the guest experience better?
I don’t know whether you saw it in the news or not, but Disney is going to experiment with a nighttime drone attraction this Christmas. So, utilizing drone technology in entertainment. How do we harness technology? How do we make it work and utilize it to our guests’ wonderment?

Skift: As a professor, what are the best resources you use to follow the industry?

Dickson: At the Rosen College, we have a theme park advisory board to help us maintain our classes. We utilize our theme park advisory board members very, very heavily to stay current. They’re active in the industry. They’re all senior leaders in the industry. We use those contacts to stay current. We attend meetings. IAAPA is coming to town next week. We’ll be present there to meet all the people and participate in the seminars. It’s all about your network.

Endnotes and Further Reading

  1. At Disney Parks, a Bracelet Meant to Build Loyalty (and Sales), The New York Times, January 2013
  2. Disney’s $1 Billion Bet on a Magical Wristband, Wired, March 2015
  3. Martin Sklar, Walt Disney Imagineering, Education vs. Entertainment: Competing for audiences, AAM Annual meeting, On File with the Smithsonian National Air and Space Museum, 1987
  4. Disney buys Pixar, CNNMoney, January 2006
  5. Disney Swoops Into Action, Buying Marvel for $4 Billion, The New York Times, August 2009
  7. Disney to Acquire Lucasfilm Ltd., Walt Disney Press Release, October 2012
  8. Euro Disney S.C.A., Annual Results Presentation, November 2016
  9. Hong Kong Disneyland Is Adding ‘Frozen’ and Marvel Lands in a $1.4 Billion Expansion, Skift, November 2016
  10. The World Factbook, Hong Kong, Central Intelligence Agency
  11. Economic Situation in the Third Quarter of 2016 and Latest GDP and Price Forecasts for 2016,, November 2016
  12. Financial arrangements relating to Tokyo Disneyland, Disneyland Paris and Hong Kong Disneyland, Legislative Concil Secretariat, Hong Kong, July 2009
  14. Themed Entertainment Association/ AECOM Theme Index, 2006-2015
  15. Chimelong Ocean Kingdom, World’s Largest Aquarium, Opens In China, The Huffington Post, April 2014
  16. Wanda Seeks to Overrun Disney in Theme Park Battle in China, Bloomberg, September 2016
  17. China’s Disney-Bashing Billionaire Is Transforming His Company Again, Fortune, July 2016
  18. Universal Theme Parks Are Bound for a Long Stretch of Rapid Growth, CEO Says, Skift, September 2016
  19. U.S. Bureau of Labor Statistics
  20. U.S. Bureau of Economic Analysis
  21. Be Mickey Mouse’s Spy, Defensetech.Org, February 2006
  22. Disney Takes Added Security Measures in ‘World of Uncertainty’, Bloomberg, June 2016