While waiting for some shareholder meeting scoop, decided to listen to Pressler's recent presentation at the "Leisure" conference. Some parts have been reported, but thought there was some interesting stuff not mentioned. Here is my summary. The bad news is at the end, as if we didnt already know it. It will be interesting to see what some of these new vacation businesses are.
Tokyo
Huge benefit from locals staying closer to home.
Last year generated $100 million in royalties. Expect this will be up 80% once stabilized.
Paris
Attendance flat, but believe reasonable given soft economic climate.
Studios should get >4 million visitors first year. WDC has an equity investment of only $90 million dollars.
HKong
Open late in 2005 or early 2006.
Enough land for 2 theme parks and several hotels (hint). WDC equity is $300 million.
WDW
Slow, steady improvement.
Flights into Florida are 10% less since 9-11 .
Current split of drive/fly is 65/35 versus historical 55/45.
Per cap spend at WDW surprisingly unchanged.
100 Years has been slightly more successful than the Mill. and 25th celebration.
International travel has not rebounded at all. Suspended a lot of int. marketing till things get better.
DL
Per cap spend at DL down 10% due to ticket discounting.
Cost Cutting
Paul said he likes to say we have an infinite capacity to cut costs.
Learned some cuts hurt the guest experience and were forced to reverse.
800 cost initiatives yielding $250 million, expect big part to be permanent.
Wide range from adjusting park hours, work hours, to big back office cuts.
Indicators They Watch
1. Consumer confidence 3 month consecutive trend up or down foretells park attendance (Dec and Jan both up).
2. Advance bookings On par with last year, but less rooms for the year booked as of today.
3. Considerations Ask people these two questions a) what places come to mind when you think about vacation b) what is next likely vacation destination.
Destination Disney Program
Making big investment in better tailoring guest vacations.
Examples:
- getting your favorite room with no check-in
- direct access to dining and entertainment reservations thru wireless technology
- special offers related to anniversary, etc.
Goal to shorten time between visits and improve the experience.
What if we could:
- increase domestic return rate by 1 month
- have greater purchase of tickets pre arrival
- get as little as $5 more per person per trip
Expect soon to have 20 million people in the system
DVC
Has been a terrific business for us.
Beach Club in 2002 and Disney Int. conversion by spring 2004.
75,000 members who visit more often than average person.
Disney gets 2-3 year payback on invested capital.
Internet Reservations
Want to participate in every possible outlet. Can save on commisions, but real interest is getting people into our hotel rooms.
New Businesses
Cruise business has shown us we can create new Disney vacation businesses. Will start exploring some of these this year and will say more about these in the future. Model is to share risk and capital. Believe we can build on our expertise in understanding vacations, knowledge of travel industry, and great customer service to be the largest and best run family vacation business.
Upcoming Attractions
Bugs and ToT coming to DCA. ToT has been a tremendous success story for us. It immediately added visitors when opened in WDW. In 2001 it had the same incremental attendance boost that it did in its first year (extra 1 million visitors). Reprogrammable ride system a real plus.
Space will be next great experience. Personally tested and it is awesome.
The Cash Flow Gremlin
Mandate is more than $1 billion of after tax free cash flow from this division. Had to cancel, postpone, or reduce capital investment this year to compensate for lost revenue. When asked about domestic investment beyond Space here is excerpt of his reply
Tokyo
Huge benefit from locals staying closer to home.
Last year generated $100 million in royalties. Expect this will be up 80% once stabilized.
Paris
Attendance flat, but believe reasonable given soft economic climate.
Studios should get >4 million visitors first year. WDC has an equity investment of only $90 million dollars.
HKong
Open late in 2005 or early 2006.
Enough land for 2 theme parks and several hotels (hint). WDC equity is $300 million.
WDW
Slow, steady improvement.
Flights into Florida are 10% less since 9-11 .
Current split of drive/fly is 65/35 versus historical 55/45.
Per cap spend at WDW surprisingly unchanged.
100 Years has been slightly more successful than the Mill. and 25th celebration.
International travel has not rebounded at all. Suspended a lot of int. marketing till things get better.
DL
Per cap spend at DL down 10% due to ticket discounting.
Cost Cutting
Paul said he likes to say we have an infinite capacity to cut costs.
Learned some cuts hurt the guest experience and were forced to reverse.
800 cost initiatives yielding $250 million, expect big part to be permanent.
Wide range from adjusting park hours, work hours, to big back office cuts.
Indicators They Watch
1. Consumer confidence 3 month consecutive trend up or down foretells park attendance (Dec and Jan both up).
2. Advance bookings On par with last year, but less rooms for the year booked as of today.
3. Considerations Ask people these two questions a) what places come to mind when you think about vacation b) what is next likely vacation destination.
Destination Disney Program
Making big investment in better tailoring guest vacations.
Examples:
- getting your favorite room with no check-in
- direct access to dining and entertainment reservations thru wireless technology
- special offers related to anniversary, etc.
Goal to shorten time between visits and improve the experience.
What if we could:
- increase domestic return rate by 1 month
- have greater purchase of tickets pre arrival
- get as little as $5 more per person per trip
Expect soon to have 20 million people in the system
DVC
Has been a terrific business for us.
Beach Club in 2002 and Disney Int. conversion by spring 2004.
75,000 members who visit more often than average person.
Disney gets 2-3 year payback on invested capital.
Internet Reservations
Want to participate in every possible outlet. Can save on commisions, but real interest is getting people into our hotel rooms.
New Businesses
Cruise business has shown us we can create new Disney vacation businesses. Will start exploring some of these this year and will say more about these in the future. Model is to share risk and capital. Believe we can build on our expertise in understanding vacations, knowledge of travel industry, and great customer service to be the largest and best run family vacation business.
Upcoming Attractions
Bugs and ToT coming to DCA. ToT has been a tremendous success story for us. It immediately added visitors when opened in WDW. In 2001 it had the same incremental attendance boost that it did in its first year (extra 1 million visitors). Reprogrammable ride system a real plus.
Space will be next great experience. Personally tested and it is awesome.
The Cash Flow Gremlin
Mandate is more than $1 billion of after tax free cash flow from this division. Had to cancel, postpone, or reduce capital investment this year to compensate for lost revenue. When asked about domestic investment beyond Space here is excerpt of his reply
Massively rigourous process. NPV projections with hurdle rates well above cost of capital. As stated, we have a goal of delivering over a $1 billion of after tax free cash flow.
Needless to say there is a significant amount of re-occurring capital in our business. But the number of attractions we need to add over the next couple of years is significantly less than the number of attractions weve added in the past. So you are going to see a lot less investment in these areas.
Big attraction at WDW is Space sponsored by Compaq. Which helps us...we mutually invest in the project. You can think about WDW as probably adding one new attraction each year on property. Some will be of the scope and size of Mission:Space, others will be like our Dino-Rama which we are adding at the AK which takes significantly less capital. We have slowed down our hotel development. We have put on hold the second phase of our Pop Century hotel. You will see a continued slowing of our capital as we move forward