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Disney, challenged elsewhere, plans to spend $60 billion on parks and cruises


Disney theme parks will generate about $10 billion in profits this year, up from $2.2 billion a decade ago. Not bad for a 68-year-old company, especially considering the devastation wrought by the pandemic just a few years ago.

But how much boom is left?

Last month, when Disney CEO Robert A. Iger named the parks division “a key growth engine” during an earnings conference call, Wall Street frowned. Disneyland in Anaheim, California, has long been considered maxed out, with little room for expansion. Walt Disney World, near Orlando, Fla., has become a question mark as Mr. Iger said the company’s legal battle with Florida Gov. Ron DeSantis could jeopardize the The complex’s planned $17 billion expansion over the next decade. Overseas Disney parks — with the exception of Tokyo Disney Resort, which it collects royalties from but does not own — have sometimes struggled to turn a profit.

On Tuesday, Disney gave a clearer picture of the opportunity it sees, which can only be described as colossal: The company revealed in a security filing that it plans to spend about $60 billion over the course of the next decade to expand its domestic and international parks and to continue building Disney Cruise Line. That amount is double what Disney spent on the parks and cruise line over the past decade, which itself was a period of significantly increased investment.

Over the past decade, Disney has opened the Shanghai Disney Resort, more than doubled its cruise line’s capacity and added rides based on intellectual properties like “Star Wars,” “Guardians of the Galaxy,” Tron”, Spider-Man, “Avatar”. » and “Toy Story” in its national parks. Disney has also invested money in its parks in Paris and Hong Kong, with themed expansions tied to “Frozen” and other Disney films scheduled to open soon. Three more liners are on the way, bringing the Disney fleet to eight ships, and Disney is close to completing a new port on an island in the Bahamas. (Disney already has a private island port.)

If that’s what $30 billion can buy, imagine what $60 billion could bring.

“There are far fewer limits to our park-related activities than one might think,” Mr. Iger said in an email.

“The growth trajectory is very interesting if we don’t do anything beyond what we’ve already committed to,” he continued, referring to attractions and ships that have been announced but are not yet operational. “By significantly increasing our investment – ​​building at scale, being ambitious, keeping quality and standards high and using our most popular intellectual property – we will become a turbocharger. »

Disney is expanding its investments after a series of difficulties in almost all its divisions. Cable television, including ESPN, has become a shadow of its former self, the result of cord-cutting, weak advertising and the rising costs of sports programming. Disney had a disappointing summer at the box office, with films like “Indiana Jones and the Clock of Destiny” and “Haunted Mansion” selling significantly fewer tickets than expected. Company’s Disney+ streaming service continues to lose money; Mr. Iger said the company would be profitable by fall 2024, but some investors are skeptical.

Disney shares closed Monday at $85. Their price was $197 in 2021.

On the other hand, Disney Parks and Cruises have been a bright spot, in many ways supporting the entire business. During the most recent quarter, Disney Parks, Experiences and Products generated operating income of $2.4 billion, an increase of 11% from the previous year. Disney Media and Entertainment Distribution reported operating income of $1.1 billion, a decline of 18 percent.

Spending per guest at Disney parks has increased 42% since 2019, driven in part by rising prices for tickets, food, merchandise and hotel rooms.

“The stock is cheap given the quality of the parks,” Michael Nathanson, an analyst at SVB MoffettNathanson, said Monday before the expansion was announced.

Yet with increased investment in theme parks comes increased risk. It’s a business that will always be sensitive to factors beyond Disney’s control: fluctuations in the economy, gas prices, hurricanes, earthquakes, tensions between the United States and China. Disney has significantly increased security, deploying undercover guards and installing metal detectors, but these teeming resorts — Disney parks attracted an estimated 121 million visitors last year — could become ghost towns if a violent event was happening.

Josh D’Amaro, president of Disney Parks, Experiences and Products, said people who focused on these risks neglected the resilience of theme park fans. He noted that guests returned in droves when Disney parks reopened during the pandemic.

“Every time there has been a moment of crisis or concern, we have managed to bounce back faster than expected,” he said.

Mr. D’Amaro declined to say how the company plans to spend the $60 billion. But he offered some hints, noting that Disney films like “Coco,” “Zootopia,” “Encanto” and others had yet to be integrated into the company’s parks in any meaningful way.

“Imagine bringing Wakanda to life,” he said, referring to the fictional kingdom in “Black Panther.” “When it comes to bringing the latest Disney-Marvel-Pixar intellectual properties to the parks, we’re far from scratching the surface. And we learned that integrating Disney IP significantly increases ROI.

Disney owns 1,000 undeveloped acres in its existing theme parks, Mr. D’Amaro noted. (For comparison, he said, that’s the size of seven Disneylands.) One of the biggest areas of opportunity, he said, involves the original Disneyland, which opened in 1955. If the company can persuade the city of Anaheim to change its plan, adopted in the 1990s, which limits where hotels, parking lots and attractions can be built, Disney intends to redevelop lands adjacent to Disneyland, thereby significantly increasing its capacity. Disney also plans to transform a parking area south of the park into a themed district of shops, restaurants and hotels.

Disney released a 17,000-page environmental impact study for the project last week. The Anaheim City Council is expected to vote on the changes in mid-to-late 2024.

How much Disney invests in Florida could depend on the courts, where the company is battling Mr. DeSantis and his allies for control of Disney World’s growth plan. Angered by Disney’s criticism of a Florida education law, Mr. DeSantis in April ended the company’s long-standing ability to run its 25,000-acre resort itself as if it were a county. Disney maintains, however, that previous contracts preserve its ability to control development.

“We want to continue to grow and invest and have ambitious plans in Florida,” Mr. D’Amaro said. “For the benefit of our guests, our stakeholders and the Central Florida economy, we hope that the conditions will be right for us to do so.” He declined to comment further.

At this time, Disney has no plans to build parks in new countries or cities. (In the past, the company considered building a park in India, for example, and expanding beyond Hong Kong and Shanghai in China.) The company will instead focus on developing new ports for its ships .

Starting in 2025, a new cruise ship – the largest in the Disney fleet to date, accommodating more than 6,000 guests – will be based in Singapore. Disney’s ships have become increasingly themed, with characters and artwork from franchises like “Frozen,” “Star Wars” and Marvel’s Avengers incorporated into restaurants and entertainment areas.

“It’s like bringing a theme park to a new part of the world,” Mr. D’Amaro said of Disney Cruise Line, which was recently booked at 98 percent capacity.