Disney Forecasts Demand Slowdown & Softness for Parks Into 2025
Disney reported its third quarter fiscal 2024 earnings, with the company’s Experiences reporting $8.4 billion in revenue. This covers the good & bad of these results as they relate to Walt Disney World, Disneyland and the international theme parks, and why despite the strong performance, CEO Bob Iger is warning investors of attendance softness and demand moderation through 2025.
The Walt Disney Company’s third quarter of fiscal year 2024 earnings beat analyst estimates, mainly as its combined streaming businesses turned a profit earlier than expected. Earnings per share were $1.39 versus $1.19 expected, and revenue was $23.16 billion versus $23.07 billion estimates.
Disney’s operating income increased a whopping 19% to $4.225 billion compared with the same period last year, led by the positive results for Disney’s entertainment division, again fueled by streaming. Despite this, Disney’s stock was down on the news, likely due at least in part to the “softness” for Parks & Resorts that’ll be discussed in this post…
To start on a positive note, Disney’s streaming business–Disney+, ESPN+ and Hulu–together turned a profit for the first time, and it happened a quarter earlier than the company had expected. The combined streaming business posted an operating profit of $47 million compared with a loss of $512 million in the same quarter last year.
This all comes before the password sharing crackdown has begun, which CEO Bob Iger indicated on the call would start “in earnest” in September. A similar crackdown by Netflix earlier this year caused profits to soar, although (editorializing a bit here) I would hazard a guess that differences in demographics would mean it’s not quite as fruitful for Disney as other streamers.
Remember, this was the same division that was losing over $1 billion per quarter at the end of the Chapek regime, and was a big reason why we got blue sky daydreaming for Parks & Resorts at the last D23 Expo. So while streaming is not the focus of this post or website, it absolutely is relevant to capital investments at Walt Disney World and Disneyland. Streaming has finally turned a corner, and now, so too should spending on major parks projects. A very, very bullish sign for the Horizons panel this weekend!
A perpetual bright spot amidst a sea of negative news for the last few years, the tables have turned and Parks & Resorts is now underperforming. Revenue for the overall Disney Experiences unit, which includes domestic and international parks and experiences, as well as consumer products, was up 2% to $8.386 billion. (This is as compared to the same quarter last year–encompassing summer through June 29, not this year’s previous quarter.)
Operating income for U.S. parks was down 6%, while international parks operating income was up 2%. Disney attributed the decrease in operating income at the domestic parks to higher costs driven by inflation, as well as increased technology spending and the lack of new guest offerings resulting in slowing consumer demand.
During the prepared executive remarks, Disney indicated that Parks & Resorts revenue growth was impacted by a “moderation of consumer demand towards the end of the third quarter that exceeded our previous expectations.” (Translation: a slower summer than they were initially projecting at Walt Disney World and Disneyland.)
All of this is consistent with what’s happening at Universal Orlando and Hollywood. Comcast recently held its quarterly earnings call, where the company revealed that revenue at Universal’s theme parks was down 11%.
Universal blamed the revenue drop on a few factors, including unfavorable comparisons to the pent-up demand period and an increase in other travel options, such as cruises and international tourism, given the strength of the dollar. They also attributed the decrease to a lack of new attractions in Orlando. In fact, two-thirds of the drop was tied to lower attendance at the company’s parks in Florida and California.
Executives further indicated that this downtrend was likely to continue until the opening of Epic Universe in 2025. Despite this, Comcast executives said they remained “bullish” on the business. (Easy attitude how awesome Epic Universe looks…but it does have pressure from investors to recoup the massive investment.)
Disney’s earnings call was more or less a repeat of that sentiment. Disney indicated that it expected the “demand moderation” at Walt Disney World to impact the next few quarters, meaning it would last into 2025. The company is “actively monitoring attendance and guest spending and aggressively managing [its] cost base” and expects next year’s operating income to decline by mid-single digits versus the prior year.
This will be due to ongoing demand decrease at Walt Disney World and Disneyland, plus negative impacts at Disneyland Paris from a reduction in normal consumer travel due to the Olympics, and cyclical softening in China. “The portfolio is working well,” Johnston said, while conceding there there was “softness in the domestic parks.” He also added that the lower income consumer is “feeling stress,” while higher income consumers are traveling internationally more.
Despite this demand dynamic, other parts of Disney’s portfolio delivered improved results versus the prior year, including Disney Cruise Line, Consumer Products, and some of the international parks. This was completely consistent to the previous earnings call, when Disney CFO Hugh Johnston indicated that it was basically the international parks overperforming, which makes sense due to lagged pent-up demand versus the domestic parks and more favorable comparisons in the prior-years. (Hong Kong Disneyland opened World of Frozen; Shanghai opened Zootopia.)
With regard to “turbocharged” investments in Parks & Resorts, Disney doubled-down on that during this earnings call. In the prepared remarks, the company indicated that “despite recent economic uncertainty that is impacting consumers, we remain confident about the long-term opportunities before us. Our Experiences portfolio is increasingly diversified, with more balanced contributions to segment operating income compared to pre-pandemic. We continue to significantly outperform pre-pandemic levels, with both segment revenue and operating income in Q3 FY24 exceeding Q3 FY19 levels by nearly 30%.”
“We continue to expand our U.S. and international offerings, both on land and at sea, with new experiences and attractions that will increase capacity. At Disneyland Resort, the Anaheim City Council recently gave final approval to our DisneylandForward initiative – the first step in our expansion plans at Walt’s original theme park.”
During the Q&A, Johnston added that Disney feels “very, very good” about the investments they’re making into Parks & Resorts, as it’s been a great business for a long time. He added that Disney “wouldn’t be making capital investments in an accelerated way if we didn’t expect accelerated growth as well…but obviously we’re investing because we’re looking to accelerated growth–hence the term ‘turbocharge.'”
In other words, don’t feel too badly for Disney during these trying times of normalizing attendance and demand. Walt Disney World and every other destination is still performing well above pre-COVID levels–with revenue, operating income, and per guest spending all up considerably at every destination as compared to fiscal year 2019.
This is starting to normalize, as Disney has had to pull more “levers” to entice guests to visit. In its presentation, Disney specifically said as much–that “promotional offers may be triggered at various times of the year” to offer “discount structures” and entice guests to visit.
As we’ve mentioned repeatedly, Walt Disney World has pulled out the 2019 deal playbook for 2024. It’s basically back to normal on the deal front, and most of these discounts have been released earlier than normal by historical standards, and offer better savings than their counterparts from the last two years. Some are superior to 2018 or 2019, but baseline prices and perks have also changed since then.
In something of an about-face, Disney also acknowledged Annual Passholders in a positive way: “We are fortunate to have an incredible community of annual passholders and Magic Keyholders, many of whom are our most loyal fans.” This was cited as a way to weather economic uncertainty and as the basis for long-term confidence in further investments in the parks.
Ultimately, this call went pretty much perfect from my perspective. Disney CEO Bob Iger and CFO Hugh Johnston were measured about the “demand moderation” at Walt Disney World and Disneyland through 2025, because the situation is still far from dire–the parks won’t be empty or dead, as you’ll see for yourself if you visit from October 2024 through March 2025. This will be painted as a five-alarm fire by those cheering for Disney’s downfall, but that’s not reality.
However, the parks are slowing down. I don’t know how anyone who visits regularly could deny it at this point–it’s plainly visible and the company itself is saying so (and yet, some fans still do!). Quite frankly, I view this as good news. Pent-up demand lasted longer than anticipated, and frankly, it was a distortion that had unhealthy consequences for the broader economy (beyond Disney). Putting that in the rearview mirror may be bad for the company, but it’s good for consumers and the country as a whole.
It’s a positive sign that this is happening at both Universal and Disney’s domestic theme parks, that both are acknowledging it’s in part due to a lack of compelling new offerings, and that both are bullish on the future thanks to investment initiatives. From my perspective, we’re in the “Goldilocks zone.”
If Parks & Resorts took too big of a hit, with revenue and attendance falling too much as a result of anticipated economic uncertainty or exhaustion of pent-up demand, that could’ve spooked Disney into nixing its “turbocharged” plans for $60 billion of investment. If the segment continued to overperform, there may have been no cause for a sense of urgency about investments–things are going just fine without adding new offerings. Instead, they’ve seen just enough of a downtrend to underscore that the parks are not on autopilot, and guests do need compelling draws (and not just discounts, which they’ve been doing aggressively for ~18 months at this point).
Lower demand that could lead to better incentives and initiatives to draw Annual Passholders to the parks is good for casual guests and diehard Disney fans. As with the arrival of Epic Universe, it seems that disgruntled former fans want to see Disney taken down a notch and are engaged in a lot of completely unmoored wishful thinking.
While I’d welcome even more of a “normalization” to bring numbers closer to 2019, I don’t want to see too much of a drop. This earnings call delivered precisely what I was hoping to see: improvements for pretty much all other divisions (streaming profitability is huge) coupled with a slight decrease for Parks & Resorts. All of this should give the company a renewed sense of urgency on those turbocharged investments, as well as the resources to turn its attention to theme parks, thereby further setting the stage for a blockbuster D23 Expo. Bring on the Parks Panel!
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YOUR THOUGHTS
What do you think of the Walt Disney Company’s ‘warning’ that attendance is going to continue to soften into 2025? Thoughts on a slowdown at Walt Disney World or Disneyland? Predictions about other “levers” the company will pull to boost demand and buoy bookings? Does this have you more bullish on the “turbocharged” plans for growth or a blockbuster D23 Expo? 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!
I am consistently surprised how much Disney is ok gaslighting (at best) or blaming (at worst) its guests for their parks poor performance. Stating that the problem is guest’s income rather than the issue being how much they are charging is extremely insulting. How about trying making the parks more affordable and you might get more guests? It seems they will default to blame financial issues on guests in order to save face for the stock price. Maybe try taking care of the guests and the stock price will take care of itself.
There’s a good new Disney-focused episode on the Hollywood business podcast “The Town” where they talk about this same stuff in similar detail; the earnings report and D23. They clearly are both Disney fans to some extent. I particularly liked the discussion of Disney’s many “levers”, right down to the Churro prices. They also bash Chapek some more, which is always fun. https://www.theringer.com/2024/8/7/24215748/disneys-streaming-profits-and-parks-problem
Seems like a good heads-up in anticipation of Epic Universe opening. Also, they may realize if they put construction walls back up again in order to start other projects, the frustration of navigating that will deter out-of-staters anyway. It did just make me wonder if that’s why the free water park day for resort guests next year. We love Disney property in general so we’ll be back a few times regardless of changes…
As owners in DVC, we go annually regardless. We always find something new to do or a new place in the park to examine. We love documentaries on the builds, the Imagineers, and history behind WDW, and often take those into consideration when visiting. Regardless of the 16 times now, each and every visit includes something not done before. We will book for next year as soon as it opens to see what Epic has in store, but as I cannot ride anything at Universal due to a medical condition, Disney will always be home. And, given my parents and in-laws are moving up the age tree, they are far more equipped to handle their needs. That bubble, IMO, is my escape from everyday corporate life and I’ll always be a patron.
As a WDW Pirate AP holder, I try to visit two parks every Sunday. Years ago, when prices were reasonable, I would eat dinner at a different buffet every week. Now, though, because of insane price increases, I cannot afford to eat ANYTHING during my visits! Although my AP offers 10% food discounts, it isn’t enough!! I want the discounts boosted to 20% for Florida residents- plus another 10% for Seniors like me. If Diz made these adjustments, I could return to my old buffet habits. And Diz would see a significant increase in food revenues!
Do you think this will affect November 2024? The discounts weren’t amazing for November, the highest discount was 20% off rooms Sun-Thurs for deluxe resorts and also a free park hopper. Is that saying crowds will be up then, the dates of Oct 6-Nov 21? Or will there still be more discounts offered during that time I wonder?
Classic case of “nobody goes there, it’s too crowded”
I have emailed Disney guest relations several times over the years, usually right after a visit to Disney World. I would list out my grievances, heap on the praise, and offer my ideas on how to make things better. I would always get at least a personally written reply from a Disney rep, and sometimes a phone call to discuss my concerns. Sometimes they would give me a little Pixie Dust to go along with it, for instance a small gift card or extra Fast Passes, and one time after a horrific experience with our resort stay, two nights in a deluxe hotel.
Recently, we came to the painful decision to not renew the Annual Passes we have had for many years. For the first time in forever, my My Disney Experience page is empty. No tickets, passes, resort stay, dining reservations … nothing. Just a vast wasteland. I wrote again to guest relations to let them know why – included are the ongoing park pass requirements, the crazy increases in prices for APs, resorts, food, merchandise and extras along with decrease in quality of such, the general attitude from Disney that annual passholders are “undesirable” guests, and certainly not the least is their political and cultural corruption.
In return, I got a scripted email – “Thank you for your feedback. Have a magical day.” – and it felt exactly like an annoyed Cast Member responding to a demanding guest with the same snark as a southern lady snarking “Bless your heart.”
So yeah, Disney doesn’t care about guest satisfaction anymore. They are focused on catering to the upper middle class to wealthy crowd, and would rather the middles just stay away. It looks like they are getting their wish.
The decision to not renew our APs is a lot less painful now.
That’s disappointing to hear, although I have to admit I’m somewhat surprised that you never got a form letter response in the past. You must be one heck of a letter writer! (Seriously.)
With that said, it would not surprise me if mentioning politics, culture, or other ‘sensitive’ subjects–even in passing–would be enough to trigger a form letter response. I’m not suggesting that should be the case or making any value judgment one way or another–I could just see there being certain topics or even phrases that result in that outcome no matter what the rest of the letter says.
As a more mundane example, any unsolicited attraction idea (Armchair Imagineering) is supposed to trigger a form response. Disney Legal has fairly stringent parameters with that sort of stuff.
I think “cultural corruption” is pretty harsh. They defend the rights of gay people. My nephew is gay, and a better person than most in all ways. How is praying to an orange false idol who cheated on his wife with a porn star while she was nursing his son not “corruption” but showing empathy to those born different (gays) – and teaching that empathy in school – is somehow “corruption”. Do you realize that Walt had many openly gay people working for him? That the gay community has been tolerated and respected by the Walt Disney corporation since long before someone taught you that you should be intolerant?
Speaking of the parks panel, can you think of any rationale on why they would not stream it this year?
I know there are a lot of theories swirling, any of which could be plausible: music rights, non-public concept art, wanting to preserve the in-person experience, logistics, etc.
I’ll throw in a simpler, dumber explanation: Disney does not like D23. By that, I mean that there are a lot of *people* within DPEP that don’t love the hassle of the event, to put it mildly. It wouldn’t surprise me if D23 wouldn’t pay for a polished, public-facing livestream and the response on the parks side was to not do one as a result. I’m not saying this is what happened–I truly don’t know–just that it wouldn’t surprise me.
Logistics makes the most sense to me. It is significantly more complex to film in an arena versus a large convention center hall, especially if the expectation is multiple camera angles and close ups. It is also very expensive. Was there ever a charge for watching the livestream in the past? Because I suspect there would have to be for this one to cover the costs, and I can’t imagine that would go over well.
Livestream was free to view, and it was only introduced during the “COVID era” at Destination D23 (2021 and 2023) and 2022 D23 Expo. Before that, they only did live blogging.
I disagreement over who would eat the cost of a livestream is entirely plausible just based on the cursory amount I know about internal billing. D23 doesn’t want to pay for anything and its events are perpetually losing money (seriously). Kinda surprised they didn’t kick it to Disney+ and make streaming pay the cost, but then again, Disney has belt-tightened there in major ways.
Also likely that costs would’ve been a lot higher at the Honda Center (a non-Disney venue) versus a random ballroom at the Contemporary or Anaheim Convention Center.
They did seem to move Marvel announcements *and* spending (back?) to Comic-Con this year, and ,,, pardon the repetition, but that $7.5 billion in cuts has to come from specific items at some point.
I don’t want Disney to fail or not be able to invest in the parks. I love Disney! It IS the most magical place in the world. However, I do think the leadership needs to focus more on increasing value than prices. Decreasing value as you increase prices is not a sustainable strategy. They need to refocus on Walt’s original dream and include it in all of their decisions. WWWD – What Would Walt Do
Annual visitor from 2018-2023; I always have a good time and probably the best was last year during my first-ever December visit.
That said, I don’t feel the burn to head back quickly anymore. We are probably holding off until a year into Epic Universe when they iron things out and we can see what it has to offer. I always have a good time at Disney but I feel like I need something more and newer to justify going back. There are so many areas of some parks that are baaadly dated. Animal Kingdom is in desperate need of a facelift. And that entire circus Dumbo area of MK is awful.
The $7.5 billion cost reduction target hasn’t been increased, which is good for people overly obsessed about how decisions about IT resources affect the 21st century Parks experience. (I mean, it *will* be good for every guest, but right now it’s good for me to know one thing is not just on the right path but also progressing forward before this weekend.)
When will any of these (hopefully amazing) ** promotions be released for mid May?
Just yesterday I received an Annual Passholder survey. I let them know a few things how I felt and how I thought APs were being mishandled. Get rid of the reservations system, except maybe Christmas week and Easter. Also, more robust discounts and events would be appreciated. Sometimes it feels like being an AP is considered being a “red headed step child.” No offense to red heads. I took the email to arrive as a sign they may increase the annual passholder rate soon too but maybe I’m wrong.
Do you think this will open the availability for Magic Key Passes at Disneyland? We’d like to go at Thanksgiving time and upgraded our tickets to annual passes on the last day but I’m nervous about them not opening up passes OR having them available right until Thanksgiving and then closing them before we can buy our Magic Keys
“Do you think this will open the availability for Magic Key Passes at Disneyland?”
With regard to Magic Key sales, I’d expect those to resume at some point in the next few months and stay on sale. They have the bandwidth, so it feels like a “Disney Vault” style strategy more than anything else.
As for reservations, I wouldn’t bank on increased availability during Thanksgiving week, though, as that’s incredibly busy. You’ll want to make those park reservations as soon as you can.
I saw they acknowledge those not as high on the income scale are not attending the parks since everything else is higher in cost. I really don’t know if that means Disney would do something about it. When I worked as my last company (ski industry), we lowered our prices to help people economically as COVID was ebbing. Are we due for a correction or will the company continue to put their heads in the sand?
I’m a diehard Disney fan, but without new things to see/do at the parks, it becomes harder to part with our money to go. When we were there a few weeks ago, I was shocked that Soarin’ and Living with the Land were walk ons each time we went to the Land. My son qualifies for DAS but there was no need to use it for many rides. We even did several character greetings as walk ons (Anna/Else/live action Ariel). As we were sailing along in the Land and I saw those sad shrimp and fish containers for the umpteenth million time, I thought to myself, they have done nothing to spruce up this area for YEARS. So when I price out trips and see that we can go to Europe for about the same price (our Canadian dollar doesn’t go far in the USA), we decided to go to Europe a couple of times this year and just one Disney trip, as opposed to the 3 WDW trips we did this past year. Not saying this as a flex, but just in case people from Disney read this and want to understand people’s thoughts when booking trips.
We have essentially come to the same place as you, Martha. The rest of my extended family gave up on Disney pre-pandemic. We began taking our family trips at the beach or other destinations with a longer flight, but new experiences. We still visit, but not nearly as often as in the past. We enjoyed all of Florida in fact, but our favorite spots have been discovered and the whole landscape of Florida appears to be becoming more and more generic and losing its uniqueness. I keep wanting to plan a trip to WDW,/Florida then cancel and book someplace else instead. I’m wondering if we wait a long time and go back after 5 or 10 years (its already been about 2 1/2 years since our last visit) will be have renewed interest? I’m not sure, but we have the next four years planned out with no plans to return as of now.
There are tens of thousands of disabled guests being discriminated against. If they don’t have access to the Disability Access Service anymore they are canceling their trips. At some point Disney will need to acknowledge their disastrous rule change is affecting their $$$.
As a parks fan you couldn’t ask for better news. With the streaming situation turning the corner and theatrical returning to its former levels the eye of Iger now returns to the parks and experience division.
“…theatrical returning to its former levels…”
Let’s not get carried away too quickly there. It’s been, what, 2-3 films so far? I’m confident that Iger “gets” what they need to do with the film slate, but it also seems like luck plays a role there.
Nevertheless, very much agree with the overall sentiment. Everything else overperforming/doing fine means attention and resources ($$$) can FINALLY be turned to the parks. And there’s the motivation to do so with attendance/demand being soft.
Hugely positive news.
Do you think any of this uncertainty/possible slowdown explains why WDW hasn’t released any reservations for Nov/Dec 2025? Is that hedging to see when Epic Universe opens? I’m no Bricker, but from what I can find, this “partial year” release is unusual.
I don’t know, but my guess is that it’s totally unrelated. They’ve done weird things with their vacation package/hotel inventory releases the last few years, so I long ago stopped trying to make sense of that or predict what would happen.
I’m skeptical there’s some master plan or rationale for it in the first place. Rather, that it just…hasn’t happened for no particular reason at all.