Expectations were high. Walt Disney (NYSE: DIS ) Investors heading into the earnings call on Wednesday afternoon. The company delivered better-than-expected results on both ends of its earnings statement. The shining star in the report was again the entertainment behemoth’s indoor theme parks business.
Disneyland and Disney World combined generated $5.4 billion in revenue for Disney’s fiscal third quarter, more than double — 104% — what the resorts reported a year earlier. Operating income of $1.7 billion continued the record pace of high-margin recovery at Disney’s gated attractions.
That’s good news for Disney shareholders, but the same can’t be said for annual pass holders returning to the parks they grew up in. The Rathouse is killing it right now, and it’s making it happen with park reservation requirements, premium-priced expedited line access, high prices on everything, and a dearth of new annual passes for sale.
If you’re expecting reservation-free park-hopper tours, instant Fastpass access, low price points and annual admissions with no blackout dates or skips, you’re living in the past. The Disney ride is going on without you.
Streaming costs: Disney+ goes from $3 to $10.99 ad-free, while Hulu prices also increase.
You can’t go back.
Disney has mouse-eared guests everywhere. Forget stellar growth over the year because Disneyland wasn’t open for the third quarter of the previous year’s fiscal year. The real-time capsule is for the third quarter of fiscal 2019. Disney parks are making more money than they were before the pandemic.
Even with turnkeys below pre-pandemic levels, the company is doing more with less. Per capita income is up 10% from last year, but compared to how much guests spent three years ago, it’s up a whopping 40%. Do you really think Disney is going to go back?
Disneyland no longer sells annual passes to new fans, and if anything, the world’s leading theme park operator seems to have seller’s remorse for the people it sold to late last year. Disney cited a “bad attendance mix” weighing on Disneyland’s performance. When it reopened a third of the way into the third quarter of the fiscal year ago, it had no annual pass holders. Everyone had to pay for a day ticket. The company resumed annual pass sales in August, but suspended it a few months later.
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The situation at Disney World is a little different. A Florida resort is selling its cheapest annual pass exclusively to new buyers who are state residents. Pixie Pass is limited to non-peak weekday visits. Disneyland and Disney World are allowing current passholders to renew their passes year-round, but it’s clear that Disney prefers to fill the parks with more paying guests.
Comments made during Wednesday’s earnings call did not indicate that Disney will expand its annual pass sales efforts anytime soon. It seeks a “convenient” mix of attendance that relies on guests paying for one-day tickets and on-site resort hotel stays. The company feels that the park’s reservation system — as disappointing as it is for those planning trips to the parks — is a tool to help ease demand. When the need is easy, more places can be released. It’s also another lever the district could use if Pixie Pass attendance trends start to deteriorate, he said, because it frees up certain blocked dates.
Oh my. Disney World, Disneyland wants reservations, but what if they forget?
Disney said on earnings calls that up to half of its guests are paying $15 for the Genie+ system, which offers fast-moving lines at select attractions. The system only works if there are bodies to fill the waiting lines, and this is where the savings pass holders come into play.
Everything can change, of course. The economy could be much worse, so Disney needs to be more aggressive in recruiting annual passholders and ramping up its promotions. However, this doesn’t seem to be in the entertainment stock bell’s immediate plans. Disney is now getting a lot of money to fix what it didn’t think was broken.
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Rick Munariz has positions at Walt Disney. He has spots in the Motley Fool and recommends Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt DC.
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