Good news: Disney theme parks are profitable again
Walt disney (NYSE: DIS) as a business and as a stock was hit hard at the start of the pandemic. Most of its businesses rely on bringing together thousands of people in person – a terrible situation with a deadly virus in circulation. Its theme parks were particularly affected, which had to close their doors entirely to guests. Some parks have closed for several months, others for longer.
The advent of several effective COVID-19 vaccines and the general administration of more than 7 billion such doses worldwide have allowed governments to relax restrictions, and all of Disney’s theme parks have been reopened. When Disney released its fourth quarter financial results after the market closed on Wednesday, it revealed that the fourth quarter was the first time since the start of the pandemic that all of its parks were open for the entire quarter.
Disney theme parks resume operations
Of course, the opening of all the parks is a great help in increasing profits. In total, Disney reported a modest operating income of $ 22 million from domestic and international theme parks in the fourth quarter. The number might seem small for a company the size of Disney, but remember that this is a significant improvement over last year when its theme parks lost more than 1.6 billion dollars. dollars of operating income in the same quarter.
Interestingly, Disney National Parks are making a big comeback this year after they reopen. The segment more than tripled revenues to $ 3.5 billion from $ 935 million in the same quarter last year. There is no doubt that visitors are thrilled to be able to return to a Disney park and spend on average 30% more for a visit than at the same time in 2019.
Management did not sit idly by last year when the parks were closed. They took the opportunity to make several improvements to the park’s operations to improve the customer experience and profitability.
One of those changes was the development of the full-service Disney Genie app. One of the features of the app is that it allows customers to pay for Genie +, which costs $ 15 per day per guest for Walt Disney World, and gives the privilege of skipping the queues to many. popular attractions.
The service is very cost effective. There is little additional cost to Disney when someone purchases Genie +. And it has the potential to improve the customer experience for the more impatient visitors willing to pay extra to skip the lines. Disney CEO Bob Chapek said the feature is popular and nearly 33% of Disney World visitors have purchased the add-on.
In addition, Disney has implemented mobile ordering in concessions and restaurants. People can now order their food or snacks in advance, pay for them on the app, and be notified when they’re ready to be picked up. I have used the service several times at Disneyland California and can attest to the convenience of this feature. As an added benefit, Disney saves on labor costs as fewer staff are needed to take orders and payments.
Disney theme parks could generate billions in profits
The return to profitability of theme parks is great news for Disney shareholders. The parks segment generated $ 6.8 billion and $ 6.1 billion in operating revenue in fiscal 2019 and 2018, respectively. To put these numbers into context, Disney globally achieved $ 14.9 billion and $ 15.7 billion in operating revenue in 2019 and 2018. As a result, parks accounted for 45% and 39% of revenue, respectively. operating during these years.
Speaking about the long-term outlook for theme parks on the fourth quarter earnings conference call, CFO Christine McCarthy said, “I’ve said it before, and I’ll say it again, I think we’ll get, not only go back to, but have a high probability of exceeding those previous margin levels in our parks because of some of the things that we have done. ”
While it may take some time to regain their full strength, Disney parks are poised to generate billions in profit for The House of Mouse.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.