Walt Disney World fans have sky-high expectations for the changes Bob Iger will make now that he’s back in the CEO seat. Already, he has plans for an upcoming town hall with Cast Members that lays out his vision for the future and given his restructuring plans in a way that “honors and respects creativity as the heart and soul” of Disney.
As we’ve cautioned, Walt Disney World fans should not overestimate what a change in the Walt Disney Company’s CEO is going to accomplish in the near-term. Bob Iger is not going to come in this holiday season and give the gift of Disney’s Magical Express, free FastPass, unlimited Park Hopping, Annual Pass sales, reservation-free visits, lower prices, or the Disney Dining Plan.
Nevertheless, fans have high hopes for big changes following the Firing of Bob Chapek and Rehiring Bob Iger as CEO. This alone is significant, but the leaks and announcements since have given even more cause for optimism. As explained in this post, Bob Iger was “alarmed” by price increases at Walt Disney World and concerned that Chapek was “killing the soul” of Disney.
We already know that Iger has some plans to undo Chapek’s changes, with a focus on building on the company’s rich history and legacy of “creativity, innovation, and inspiration.“ Suffice to say, there is reason to be optimistic about CEO Bob Iger undoing the damage wrought by Chapek. However, we’d caution against expecting too much, and too soon. With that in mind, let’s begin with a few caveats.
First, there’s the reality that every change that is on the horizon will be implemented more slowly than you expect or hope. As we’ve said before, Walt Disney World is like an ocean liner: you turn the wheel slowly, and the big ship pivots gradually. (There still is no meaningful Encanto presence in the parks, despite that smash success now being a full year old!) Suffice to say, everything takes time from evaluation to decision to implementation. Now take that up a level from Walt Disney World to the company as a whole. Change is going to happen even slower.
Disney is the epitome of a bloated bureaucracy–the opposite of lean and efficient. Even the most inconsequential decisions “require” dozens of meetings and just as many layers of approval. Even things that seem sloppy and half-baked, like Genie+ and Lightning Lanes, are obsessed over (if anything, Disney has a problem with too many cooks in the kitchen).
Unless Iger expedites initiatives and cuts through the red tape, it’s likely that the first fruits of his new regime will be felt in the parks around Spring 2023. Big changes might take until late in the year or 2024.
Second, there’s the reality that Bob Iger was not brought back to “fix” the theme parks division. While there were undoubtedly a number of reasons for his return, if the Walt Disney Company were solely composed of parks, Chapek would likely still be around. More than anything else, Chapek’s downfall directly stems from streaming.
In the most recent earnings results, the streaming segment posted $1.47 billion in fourth-quarter operating losses (you read that correctly—a loss of almost $1.5 BILLION in a single quarter), roughly 134% more than the $630 million it reported in the prior-year quarter. This was a big reason why Disney’s revenue of $20.1 billion missed on average analyst estimates by nearly $1 billion.
During that call, Chapek said Disney expects the losses to narrow going forward and for Disney+ to still become profitable in fiscal 2024. However, that was “assuming we do not see a meaningful shift in the economic climate,” which is a bold assumption given consensus forecasts for a recession.
These results from the streaming segment, Chapek’s “delusional” delivery of them, and Disney’s forward-looking forecast for fiscal 2023 segment earnings growth of high single-digits–which was far below Wall Street’s consensus of 25%–are the main reasons Iger was brought back. Not to mention Iger’s knack for dealmaking and Chapek’s bungling of past challenges.
In short, Iger is CEO for a number of reasons, but the big one is to put Disney+ on a path to profitability and figure out the future for the media side of the Walt Disney Company. None of Chapek’s unpopular (among fans) parks decisions would’ve resulted in this change.
To be sure, Iger will be tackling other problems. However, there’s a possibility that the highly-profitable Disney’s Parks, Experiences, and Products division–which now accounts for the overwhelming majority of the company’s operating income and has seen strong growth in the last two years–will be set to autopilot while more urgent issues are addressed.
The outlook from a financial perspective might be: don’t fix what isn’t broken. That’s doubly true when that segment is subsidizing massive losses from the streaming services. Of course, whether the theme parks are “broken” in non-financial terms is more subjective, and many readers would argue that they are. Given his leaked statements, Iger is undoubtedly aware of what has been happening, and dislikes at least some of it. (And he’ll become more fully aware of issues once he sees guest satisfaction metrics.)
To that point, there’s also the reality that it’s very difficult to put the genie back in the bottle–both literally and figuratively–once the company gets a taste of that sweet upcharge revenue. Many of the highly-touted 40% increases to per guest spending have been driven by ticket and resort price increases, and further fueled by monetizing FastPass.
Given that he was brought it to stem the bleeding and improve Disney’s financials, I have a difficult time believing that Iger is going to take the immediate hit on Genie+ and the other upcharges just to improve goodwill among Walt Disney World fans. It’s very difficult to envision a way that he does that in the near-term given the uphill battle that Disney+ and Hulu face.
Now that I’ve thoroughly done my debbie downer spiel (hey, I’m just trying to keep expectations reasonable and not have you get carried away with hopes and dreams that’ll be dashed!), let’s dig into the 7 things Bob Iger could do to extend an olive branch to Walt Disney World fans and help “fix” the parks. Fortunately, there are some fairly consequential changes on the table that Iger could fast-track as easy wins!
After the holiday season, it stands to reason that restaurant demand will drop off. Already, resort discounts for Winter and Spring 2023 are out early and are better than the last two years, and there’s every reason to believe dining spending will ‘suffer’ a similar fate. Of course, we thought the very same thing at this time last year, so perhaps we’re still not quite at the point of pent-up demand exhausting itself.
In other words, the restoration of the Disney Dining Plan has a card the company has been waiting to play (or a “lever to pull” in the wise words of Chapek) as soon as a slowdown occurred. It doesn’t really have anything to do with Iger, but he certainly could make a move here and take credit. It would be easy low hanging fruit, and Iger is a savvy marketer.
Eliminate Park Pass for Regular Tickets
Many Walt Disney World fans have the perception that reservations are being used to cap capacity, reduce staffing levels, or as an important source of data for resource allocation. None of those things are particularly true. You might be surprised at how little Walt Disney World uses data it collects (and this data is also available via other channels), staffing shortages are not on purpose, and capacity is no longer capped in a meaningful way.
At this point, the only parks that are regularly running out of reservations are Magic Kingdom and Hollywood Studios. This has been occurring on many days regardless of wait times, with both parks unavailable on occasion with 5/10 or lower crowd levels. This means that Walt Disney World is now using reservations to redistribute attendance on those days.
They’re doing this by capping reservations at Magic Kingdom and pushing people towards Animal Kingdom and EPCOT to increase the utilization of those parks and normalize numbers across all four parks–this is an instance of the infamous “yield management” being discussed by executives on earnings calls and in interviews. To be fair, there actually are benefits to this approach, including making for a more pleasant guest experience and easing staffing shortages.
However, there are also downsides for Disney in this approach. If you’re taking a Florida trip and want your kids to experience Walt Disney World, you’re probably not going to be satisfied if only EPCOT or Animal Kingdom are available. Rather than make reservations to those two parks, some guests will choose not to buy tickets at all and simply not visit Disney if they cannot do Magic Kingdom. (Keep in mind that for many causal visitors, Magic Kingdom is synonymous with Disney; EPCOT and the rest are not a comparable substitute.)
This is precisely why Walt Disney World eliminated reservations for single-day tickets last holiday season. It’s also why there’s a good chance the same will happen for multi-day tickets sooner rather than later. At some point, the opportunity cost of trying to manipulate attendance will be too great to maintain the current approach–the people who simply opt against buying tickets due to reservations will outweigh the advantages of normalizing numbers across all parks.
As with the Disney Dining Plan above, this has less to do with Bob Iger’s return and more to do with underlying circumstances and demand v. available capacity, per guest spending, and other factors. Nevertheless, it would be savvy of Iger to come aboard and accelerate plans already in motion to take the easy win.
The important caveat here is that this applies to single and multi-day tickets and not Annual Passes. At least in the near-term, it’s difficult to envision a scenario where Walt Disney World sees it as advantageous to drop reservations on APs. Perhaps they’ll create a new highest tier without reservations when Annual Pass sales resume, but there will almost certainly be tiers with reservations for the foreseeable future. This was an inevitability even pre-closure, and something Disneyland actually tested with the Flex Pass.
Reduce or End Park Hopping Rules for Most Guests
As long as the Disney Park Pass system is in place, Park Hopping rules will remain in place for that ticket type. It’s a pretty simple logic exercise, as getting rid of all Park Hopping restrictions would make it easy to game the system.
For example, if Disney’s Hollywood Studios were out of Park Passes but EPCOT had availability (a common scenario), I could make a Park Pass for EPCOT, tap into the International Gateway entrance, immediately exit, and take the Skyliner to DHS. The whole process would take under 30 minutes and circumvent the reservations system.
However, as we’ve discussed above, Walt Disney World has already announced the end of reservations for single-day tickets and it’s likely that the same will happen for multi-day tickets sooner rather than later. Once that does happen, that could serve as the precursor for ending all Park Hopper rules for those ticket types.
In the meantime, switching over to the Disneyland system would make complete sense. There, Park Hopping is allowed starting at 1 pm, and there’s no need to enter your first park if arriving after the Park Hopping time. It wouldn’t surprise me if both coasts inch that forward further, moving the start time to noon.
As with the reservations system, this is another change that’s already being evaluated that Iger could fast-track in order to win over jaded Walt Disney World fans.
Bring Back FastPass (…And Fix Genie+)
This is not what you think it is. While I do have a sliver of hope that Iger will bring back free FastPass down the road, I doubt that’ll happen in 2023 unless there is a sharp and significant economic downturn and major steps are necessary to buoy resort occupancy and attendance.
Even if the United States enters a recession, it’s hard to imagine going from current levels of demand to those seen in 2008-10. That would be a long way to fall, and is unlikely. On top of that, Iger is going to be too hard-pressed to maintain current revenue streams in light of what’s happening with the streaming services.
With that said, I think it would be a savvy move for Iger to mandate an overhaul of the Genie+ system to a greater degree than the half-measures we’ve seen in recent months. Even while maintaining a paid FastPass system, there are a number of different directions that Walt Disney World could take.
Although the adoption rate has been high (for lack of better alternatives), Iger may see the hit that guest satisfaction has taken due to Genie or complaints about screen time (etc.) and want to take a less guest-unfriendly approach. Walt Disney World could switch to systems that are already in use at the international parks, or even an approach more like Universal’s Express Pass with higher prices but lower utilization (thereby impacting standby less). There are a lot of possibilities.
As noted above, Bob Iger is a savvy marketer and is exceptional at brand management. While the Genie “app” was in its infancy under Iger, what it would be was only loosely defined. I cannot imagine that it entailed eliminating the highly-recognizable FastPass name–a brand so iconic that “FastPass” was used in real world settings as shorthand for skipping a line–and replacing it with a clumsy set of names borrowed from Cars and Aladdin, two franchises that go together like peanut butter and grapefruit. One way or another, I don’t think we’ve seen the last of FastPass at Walt Disney World.
Invest in Cast Members
Anyone who has Cast Member friends can tell you that there has already been an improvement in morale just with Chapek’s firing. Nothing with Disney is as easy as flipping a switch…except this, apparently. A huge number of frontline Cast Members and other employees have expressed their elation that Chapek is gone and Iger is back. It has been significant and it has been sudden.
Part of this is likely a reflection of how bad things have been for Cast Members in the last two-plus years, and a belief that any change cannot conceivably make things worse for them. For long-tenured Cast Members, there’s likely nostalgia for a bygone time when things were better. That was before Iger left and the closure happened. Some of that damage is not unique to Disney–it’s societal–and Iger cannot undo it. Accordingly, this is likely a honeymoon phase to some degree.
However, Iger has already scheduled a town hall with Cast Members and employees, during which he will discuss his vision for the future of the Walt Disney Company and field questions. He’s expected to use the discussion as an opportunity to further boost Cast Member morale, and he’ll undoubtedly accomplish exactly that given that he’s a much more charismatic and inspiring speaker than Chapek.
It would also have immensely positive cascading effects. One increasingly common complaint from readers we’ve heard in the last few months is that Cast Members are not as “magical” as they used to be. There are several reasons for this, from taking abuse by disgruntled guests to turnover to low morale.
Fixing low morale alone will help remedy this, but improved morale also reduces turnover. Less turnover means less pressure on other Cast Members, which further improves morale. It also reduces staffing shortages, as hiring initiatives are no longer about simply treading water. All of this indirectly results in a better guest experience, which improves attitudes of visitors. It’s a not-so-vicious cycle of improving morale for everyone.
Restore Disney’s Magical Express
Look, this is a longshot and I don’t want to give a false sense of hope. It’s unlikely that Disney’s Magical Express is coming back. However, I would’ve said there’s a 0% chance of this happening in the next couple of years if you asked me two weeks ago, and I’d say there’s a non-zero chance now. It might even be in the double-digits.
Since the decision to end Disney’s Magical Express was made, we’ve been saying it makes no sense even from a business perspective–that there must be more to the story. This is because, unlike other on-site guest perks, the “free” service was incredibly valuable to Walt Disney World. It made tourists a captive audience who were less likely to go and spend money elsewhere.
Long ago, Walt Disney World determined that the increase in average per guest spending with Disney’s Magical Express plus the perceived convenience and goodwill obtained from offering the service outweighs the average per guest cost of offering the service. It’s unlikely that calculus has changed, especially as on-site food prices have increased and Central Florida theme park competition has become more fierce.
In recent years, Universal has expanded its hotel footprint and is now offering a compelling product with great perks at competitive prices. Disney should already be worried about that. Universal has already grown market share in the Central Florida theme parks according to its parent company, which Disney should take seriously.
A few short years from now, Epic Universe will open. That has the potential to be a game changer for both park operators. Even if it only pulls away 10% of Walt Disney World’s on-site guests, that would be hugely consequential to Disney’s bottom line.
Bob Iger understands the importance of strategic partnerships really well. He is, above all else, an exceptional dealmaker. If there was a falling out between Mears and Disney, he could easily repair it. Equally as important, he could see why this is so important. Unlike so many high-level leaders at Walt Disney World and the company as a whole, Iger has been around the block.
Iger helped successfully navigate Walt Disney World through the last recession, and understands competition more than anyone else. By contrast, so many newer leaders have only experienced times of growth and success (minus the closure, but that’s not exactly the same as a real recession) at Walt Disney World. More than anyone else, Iger knows that it’s important not to become complacent or rest on laurels, and will want to maintain competitive advantages. He’s not satisfied with winning–he wants to run up the score.
That certainly does not mean he’ll snap his fingers and immediately restore Disney’s Magical Express, but it’s undoubtedly the type of perplexing past short-sighted decision made by the prior regime that Iger and his team will be revisiting.
Restore the Disney Magic
In Bob Chapek Did Not “Get” Disney, our core ‘thesis’ was this: “Chapek didn’t believe in the Magic of Disney, and that made it impossible for him to make others believe. To the contrary, his words actively eroded the Magic of Disney for many who once believed.”
By contrast, Iger gets it and truly does care. To be sure, he will make business decisions that are unpopular with fans. The first time that happens, some will claim it’s more of the same–that he’s no different from Chapek. In reality, it’s the nature of the beast. Not every decision will make everyone happy–especially so long as demand remains high and streaming continues to lose money.
At the end of the day, Iger has a passion for all things Disney. He cares about his legacy and the history of the company that Walt Disney founded. He is not a bean counter and he will not actively antagonize fans. This counts for a lot, and will immediately change the culture and calculus on certain decisions.
In other words, there will be a top-down tone change that will empower and emolden executives, division leaders, managers, and so forth to do things differently. People in the company who care will be allowed to do so again.
How this will manifest itself is less certain. It might mean less of a focus on squeezing every last dollar out of visitors, it could create more emphasis on improving guest satisfaction scores, offering more value for money, enhancing the in-park experience, improving maintenance, or being fixated less on yield management.
While “magic” is a nebulous term that means different things to different fans, the ultimate consequence of these changes should be undoing the at least some of the erosion of Disney’s goodwill we’ve seen in the last few years.
On a related note, it’s fair to point out that a lot of the aforementioned (and other) changes are below the CEO’s pay grade and not within their personal purview. When previously defending some of the poor decisions made under Chapek, we remarked that he wasn’t going around dictating that Premium Mickey Bars or Dole Whips cost 29 cents more. That’s not how this works. That’s not how any of this works!
However, how it does work is that decisions are debated internally and there are often competing ‘camps’ each pushing for their own projects or lobbying for certain initiatives. For example, it’s possible that there were multiple different versions of Genie in development, and one was chosen by the Chapek regime due to the influence of its backers and their allies. It’s also possible that those same people have lost influence under Iger, or that he would’ve decided differently when presented with the menu planning choices.
This is typical internal corporate politics, and Disney is not immune from it. In other words, this may not even be a matter of Iger v. Chapek, but their respective lieutenants and those who have curried favor with each. A lot of the coming changes won’t be specifically dictated by Iger, but will be pursuant to overarching mandates, priorities, and visions for the future. Decisions will be made that interpret Iger and his goals for taking Walt Disney World in a new direction. Based on his statements thus far and what we know from the past several years, that should mean a brighter future for Walt Disney World in the next few years.
Do you expect Bob Iger’s return as CEO to result in improvements at Walt Disney World? Have high, low, or no expectations? Think Iger will bring back Disney’s Magical Express, free FastPass, unlimited Park Hopping, Annual Pass sales, reservation-free visits, lower prices, or the Disney Dining Plan? Think things will get better or worse throughout 2023? Do you agree or disagree with our assessment? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!