Disney CEO Addresses Staffing Shortages, Genie+ Popularity, Record Revenue, Attendance Caps
Disney reported its first quarter fiscal year 2022 earnings for last October through December on an investor call held by CEO Bob Chapek on February 9, 2022. This covers the good & bad of these results from “the final year of the Walt Disney Company’s first century,” including Genie+ sales at Walt Disney World & Disneyland, record revenue from theme parks, surprising Disney+ subscriber numbers, and more.
Let’s start with the numbers. The first quarter of the Walt Disney Company’s fiscal year (or the fourth quarter of the calendar year) is another quarter of positive results, especially as the previous year offers an weak comparison due to ongoing closures and soft attendance last year.
In fact, this was the Walt Disney Company’s best quarter in two years, exceeding Wall Street estimates across the board during the quarter, sending the stock up more than 8% in after-hours trading. Forecasts called for revenue of $20.91 billion, but the actual total was $21.82 billion. Earnings per share for the quarter were $1.06 versus $0.63 expected in a survey of analysts. The biggest bright spot was Disney+, which rebounded in a big way after a disappointing fourth quarter…
Disney announced added 11.8 million subscribers, as compared to 2.1 million in the previous quarter. The number exceeded Wall Street expectations, with average forecasts estimating between 7 and 8 million new subscribers. Analysts on average expected Disney Plus to reach 125.1 million subscribers for the quarter. In actuality, Disney+ had 129.8 million paid subscribers worldwide. The company also reiterated its guidance of of reaching 230 million to 260 million Disney+ subscribers by 2024.
This has caused an after hours spike to Disney’s stock in after hours trading, as this bucks the narrative of slowing streaming growth. That has been the story of earnings calls for many other legacy media companies in recent quarters, as AT&T’s WarnerMedia (HBO Max), ViacomCBS (Paramount+), and NBCUniversal (Peacock) all added fewer new subscribers than anticipated.
Even Netflix reported disappointing results a couple of weeks ago, dragging down its stock price and that of its competitors. Netflix also lowered its forward-looking forecast in its latest company outlook, citing heightened churn, delayed content, and pulled-forward demand in the past two years. Investors also believe that market maturity and heightened competition from Disney and other platforms could be playing a role.
For their part, Disney executives predicted this during the last quarterly earnings call where they noted that the Disney+ slate was fuller in Q1 than Q4 FY2021. Chapek also praised the launch of a new franchise in Encanto. He has further stated that the second half of this year is expected to be stronger, with the massive investment in original programming starting to pay off with regular releases from Marvel, Star Wars, and more.
Of particular interest to us is Parks, Experiences and Products (or Parks & Resorts). Revenues for the quarter increased to $7.2 billion compared to $3.6 billion in the prior-year quarter. This also beat analyst expectations of $6.13 billion. Segment operating income results were $2.45 billion, as compared to a loss of $119 million in the prior year-quarter.
For the first time in…a while (sorry, I’m not sure how long)…theme parks outperformed consumer products. Domestic theme parks revenue was $4.8 billion (versus $1.49 billion in the prior-year quarter), whereas the international parks made $861 million. Income for the domestic parks was $1.56 billion, versus a loss of $800 million in the prior-year quarter.
The earnings document also revealed that capital expenditures increased from $760 million to $981 million year-over-year, driven by the temporary suspension of certain capital projects in the previous year. Capex increased for Walt Disney World and Disneyland year-over-year by $121 million, and for all of the international parks combined by about $20 million.
Spending has increased in the last couple of quarters as projects have started to resume and kick into higher gear. Work has resumed at Epcot and on Tron Lightcycle Run. For the international parks, the Zootopia expansion at Shanghai Disneyland, Arendelle: World of Frozen at Hong Kong Disneyland, and the expansion of Walt Disney Studios Park at Disneyland Paris are all underway again.
In an interview with CNBC prior to the earnings call, Chapek indicated that the cheapest days have stayed the same price for 3 years at both Walt Disney World and Disneyland, offering those on a budget an opportunity to visit the parks. He also said that there were a range of upgrade options, pointing specifically to Genie+ and Lightning Lanes.
Chapek indicated that between one-third and half of all guests at Walt Disney World are upgrading to those paid line-skipping services. He said that this has surprised even Disney, which did not anticipate uptake that high for Genie+ and Lightning Lanes.
The CNBC interviewer asked about online backlash among fans to pricing for vacation packages, and what was the primary cause of the increases. She offered Chapek a range of palatable options, from labor shortages to inflation.
Chapek didn’t take the cop-outs, instead bluntly stating that demand was the driver. He said that Disney’s theme parks are seeing unprecedented demand, and they have pricing power as a result. (During the CNBC interview, he didn’t mention labor costs or inflation.)
During his prepared remarks on the earnings call, Bob Chapek expressed a lot of enthusiasm about Encanto, the breakout Disney+ hit. He covered its popularity in the parks (specifically, DCA–I don’t think it’s anywhere else yet), boasting that merchandise is flying off the shelves, and how proud he was that the franchise was launched by the Disney+ streaming service.
At this point, it’s probably not premature to fire up the rumor and/or speculation mill about how and when Encanto comes to Walt Disney World and Disneyland in full form. Every CEO tends to make their mark on the parks, and Encanto is the company’s biggest success under Chapek’s stewardship thus far. I wouldn’t be surprised if there’s an announcement at or before the D23 Expo.
When directly discussing theme parks, Chapek said that Disney’s “domestic parks and resorts achieved all-time revenue and operating income record despite the Omicron surge.” He said that this stellar performance was achieved at lower attendance levels than 2019, which was due to carefully managing demand via the ticket and reservation systems.
He also said that during the holiday season, over 50% of guests bought Genie+ at Walt Disney World and Disneyland.
Disney CFO Christine McCarthy stated that attendance at Walt Disney World and Disneyland was up 10% as compared to the prior quarter. That’s not particularly significant since the prior quarter was the off-season and also saw a Delta-driven downturn in Florida.
Honestly, I would’ve guessed attendance was up way more than 10% for the quarter, which encompassed the start of the 50th Anniversary, Thanksgiving, Christmas, and New Year’s Eve.
More notably, McCarthy stated that per capita spending at the domestic parks was up more than 40% versus fiscal first quarter 2019, an absolutely staggering number. (It was up 30% as of the prior quarter.)
She said this was driven by a more favorable guest and ticket mix (read: fewer Annual Passholders), plus higher food & beverage and merchandise spending, as well as contributions from Genie+ and Lightning Lanes. Putting these factors together, domestic parks and resorts delivered Q1 revenue and operating income exceeding pre-pandemic levels, and that’s even as Disney continued managing attendance.
The increase in per guest spending should be unsurprising–it’s been a similar story in the past few earnings calls. You don’t even need to follow earnings calls to observe it: resort discounts are virtually nonexistent and prices of everything else–from tickets to food to souvenirs–is all up. On top of that, merchandise is flying off of the shelves and Advance Dining Reservation availability is minimal for most table service restaurants.
What’s notable is that revenue and income are now exceeding pre-pandemic levels, as this was not the case before. And again, this is with Disney “managing attendance.” The company notes in the earnings report that “our domestic parks and experiences are generally operating without significant mandatory COVID-19-related capacity restrictions.” Mandatory is the operative word there–Disney is now self-limiting capacity at the parks and resorts for a different reason: staffing shortages.
During the Q&A, McCarthy was essentially asked whether per guest spending would increase even more as bigger-spending international guests return. In response to that, she basically said yes–and that technology plus “creativity at our parks” was driving incremental spending increases and helping the margins get to this quarter’s level. Your guess is as good as mine as to what that latter quote means.
Joking aside, it’ll be interesting to see how that plays out. The return of international guests in full force definitely could drive those per guest spending numbers higher. However, that could also be offset by the return of more hotel rooms to the inventory. No one knows how many rooms are currently out of commission at the operational resorts, but at some of them, it’s a lot. Pent-up demand among domestic visitors could also fizzle out, and spending could decrease as household savings decreases and stimulus money dries up.
Chapek actually addressed the staffing issues directly later in the Q&A when asked about attendance caps. He stated that “the two areas that have been difficult is hospitality, and right now we’ve got 90% of our hotels at Walt Disney world open, all hotels at Disneyland open, and all sorts of cooks, short-order cooks. The capacity constraints are self-imposed capacity constraints and are really a function of our food and beverage sort of mitigation, if you will…because people spend a long time in our parks and Resorts, the food and beverage component is a big one.”
He did not specifically mention the housekeeper shortage, which we addressed a couple weeks ago in this post. That’s a significant impediment for resort occupancy, and is one reason hotels aren’t filling all of their rooms. The causes of the current labor shortages are multifaceted, and the analysis in the above post more or less applies to both housekeepers and cooks.
In that same answer, Chapek also addressed entertainment: “One of the last things to come back for us in a post-COVID world–that we hope is a post-COVID world–is actually live entertainment. Because much of the live entertainment is close proximity, we are self-regulating that. We are self-managing that, because we don’t want our guests to feel an excessive level of density.”
“The place that you get [excessive density] is parades, fireworks shows, and things like that. I suspect that over time we’ll start to regain some of the capacity drop off we’re kind of self-imposing on ourselves.” (Note: fireworks shows returned to Walt Disney World and Disneyland in July 2021.)
Ultimately, it’s always interesting to listen to these earnings calls to get an idea of the company’s results and expectations for the future. While there was no bombshell news during this one, it was particularly illuminating on the topics of per guest spending, record revenue, capacity constraints, and forward-looking expectations about demand and revenue.
It’ll be interesting to see whether per guest spending actually can maintain or exceed the incredible 40% growth over 2019 levels, even as Walt Disney World and Disneyland return to full operational capacity. That number is absolutely staggering, especially since there’s still more pent-up demand among international guests.
Personally, I’m skeptical–which is exactly what I wrote in response to the last earnings call when per guest spending was up “only” 30% over 2019 levels. At some point, pent-up demand fizzles out, inflation on necessities influences discretionary spending, and the stimulus money plus what people saved during the pandemic is depleted.
When all of some of that happens, consumers will return to being more cost-conscious and price sensitive, and things will normalize to at least some degree. However, there don’t appear to be any signs of those things happening anytime soon. So, get used to high prices, heavy crowds, and nickel & diming at Walt Disney World and Disneyland as this record run of revenue and income continues for the foreseeable future.
Planning a Walt Disney World trip? Learn about hotels on our Walt Disney World Hotels Reviews page. For where to eat, read our Walt Disney World Restaurant Reviews. To save money on tickets or determine which type to buy, read our Tips for Saving Money on Walt Disney World Tickets post. Our What to Pack for Disney Trips post takes a unique look at clever items to take. For what to do and when to do it, our Walt Disney World Ride Guides will help. For comprehensive advice, the best place to start is our Walt Disney World Trip Planning Guide for everything you need to know!
YOUR THOUGHTS
What do you think of Walt Disney Company’s Q1 FY2022 earnings and future forecast? Thoughts on the company’s claim that xxx? What about the sharp spike in per guest spending? Are you worried about the future of Walt Disney World, Disneyland, or the company in general? Think things will improve or get worse throughout this year? 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!
Staying one night in a Universal Luxury Hotel entitles you to 2 days of Express Pass, the day of check in and the day of check out. So, for my family of 4, it compensates for 1 night in a luxury hotel and 2 days of skip-the-line Universal parks.
I don’t think Disney has to do like Universal. Disney has to manage in the best way – and it’s doing it, it’s just not better for its customers. But at Universal you don’t have the stress of a day at the Disney park, even if you pay a premium for it.
The pent up demand will fade. It’s happened to every Disney CEO. They raise prices as much as the market will bear and then there is a serious lull in attendance. Then those “low spending APs” become hot commodities.
I was Silver when the free month of June happened. Disney decided June was a premium month and they could charge premium prices…for June. In Florida. There’s also usually a list of restaurants where AP get 20% off.
I remember when they said there would be an AP price for Genie+ then walked back from that. I think it’s coming just slowly.
They act like the Disney bubble doesn’t burst but it definitely does.
I am with you Tom as well as others, and I love Disney, but I sure hope all this crazy spending and demand dries up and Disney feels the effects of customers running the other way and not spending it at Disney so their numbers get hurt. It infuriates me because all of this spending is due to everyone being stuck at home and now the “revenge” travel and spending is happening. and so many are purchasing Genie+ and LL because there are many trying / testing it out and also for those that have trips planned already and use it just so they can get on rides and it is driving the numbers us. I am hoping a lot of people will get fed up and stop spending the money at Disney.
I don’t think the only option is to schedule LL at 7am as a benefit or a week before. At Universal, nobody goes through this, after all they are on vacation and those who intend to pay for the Express Pass do not need to schedule anything, they simply get in the Express Pass queue, without any suffering. The question is whether people are willing to go through the Disney procedure. I know my family is Disneymaniacs, but if you have to opt for a better time of relaxation and fun, Universal has always surpassed Disney with free Express Passes at Luxury Hotels or buy them. What Disney does in LL is to deceive guests with this charge much lower than Universal Express, but with negligible results compared to Universal.
Universal has far fewer “deluxe” hotel guests. For non-deluxe, they charge $100-$300 per person per day.
You couldn’t give that perk “for free” to WDW guests. That would make the Express lines nearly as long as the standby lines.
So… if you want the Universal system, are you prepared to pay up to $300 per person per day during peak travel?
Yes, Universal has only 3 luxury hotels, but it sells the Express Pass which really gives you a plus for skipping lines. Although the LL is cheaper, it does not guarantee you to go to all attractions with a short line, such as the Universal Express Pass. So it’s an illusion to spend all day at the park on the app instead of enjoying the park without worrying about it. In addition Universal opens 1 hour earlier for all guests which makes it possible to go to 2 attractions which is almost impossible at Disney with 30 minutes earlier for a much larger number of resorts than Universal. I just highlighted that even buying the LL, the ride in Disney parks is not easy, because from 7 am you have to make appointments all day.
The biggest perk of Universal’s Express Pass is that it is stress free. You do not need to do anything on your phones while in the parks and can just enjoy! Whether you get it free by staying at a Deluxe hotel or paying for it – it’s benefits far out way ANYTHING being offered at Disney right now. Disney could do a version of this for their deluxe guests but they chose not to. I’m sure it is because of money or the appearance of being “tech forward” and “innovators”. In reality, it is just a mess. A needless mess. Universal already perfected it. All they had to do what take lessons from them but they are too stubborn and greedy!
After almost fifty years of vacationing at WDW, after hundreds of wonderful trips, I am reaching the breaking point. It’s not just the many price increases or every experience that has been altered or removed, or dirty hotel rooms, or even park reservations, or Genie, Genie+ or LL – it’s ALL of that. There is absolutely no way one can enjoy a relaxing trip to Disney anymore.
My son just booked one of the best resorts on Antiqua for much less than half the cost of a Disney vacation. He said he will not go back to Disney with everything the way it is now. And after seeing the resort in Antiqua and all its amenities, I may just agree with him.
My group of six that has been going to WDW at least twice a year has come to the same conclusion. I don’t think WDW will suffer as a result of us going somewhere else. The bigger point is, we will have a more relaxing and enjoyable vacation.
Curious, what resort in Antigua?
Thanks!
Scott S. – It’s Galley Bay Resort & Spa. It’s an all inclusive. I can’t vouch for the hotel because I haven’t been there, but it sure looks nice. And so do the restaurants, which are located on the beach.
Our family has stayed at Disney World every April since 2010 and always purchased six day tickets. This is the first year we will be cutting that in half to three day tickets. We also will not be staying on site, which is normally a consideration, but Disney’s parking fees, ending of magical express, and lack of housekeeping have really turned us off. We will also be doing very few table service meals. My educated guess is that the spike in attendance and spending will be short lived as the number of families willing to go deep into consumer debt begins to wane.
“Chapek didn’t take the cop-outs, instead bluntly stating that demand was the driver. ”
There you have it folks. We can moan and complain about how much it costs all we want. As long as people keep filling the parks, Disney has the leverage to keep increasing the prices. Will there be a fall off once the pent up demand from Covid goes away is my only question.
Say what you will about Chapek, but when not reading prepared remarks, he’s fairly blunt and says what he thinks–even if we don’t want to hear it.
Would’ve been pretty easy to claim they were trying to ‘reduce crowds to improve the guest experience’ or their hand was forced by higher wages, inflation, etc. Nope. He was very blunt about it being demand-driven. I was surprised, as that is NOT the answer Iger would’ve given in the same circumstances.
As much as I am not a fan of his thus far (or at least the changes that have been made under his regime), I would certainly have to agree there. Giving a blunt, honest answer as opposed to a prepared, political statement is something that is rare from someone in his position. Kudos to him.
Honestly, this was great to see. SO MANY people in these blogs and elsewhere have been 1. complaining about prices or 2. Said they are too worried about the virus to return to the parks. Both of those are fine, but these earnings prove that complaints from the minority don’t match the sentiment of majority. If you don’t like the price increases, then buy Disney stock, because clearly price hikes mean demand is high and not steering away. The tide may turn at some point, but for now Disney is operating in a “pay the price or step aside so the person behind you can” type of mentality, and it’s working.
I love going to WDW but the prices have gotten way out of control!! When there 2 months ago a simple bottle if water was $4.50! Ridiculous!
What is frustrating is paying extra for a crappy experience. Please, Disney, move the Lightning Lane booking time to one week in advance and at a reasonable hour. That way we can get the rat race of booking LLs over with before we go on vacation, not at 7:00 day of. I’m happy to pay, but I hated this so much on our last trip that I already cancelled our May trip and won’t book another until/if that booking time changes.
Thing is, for every person who likes booking a LL a week or a month in advance, there is someone else who hates it. And you can’t make them both happy.
I much prefer booking LL’s the same day. If I’m going to a morning park, I’m up by 7am anyway. And I prefer the flexibility of making my reservations the same day. This way, I have the flexibility to change my park plans (subject to park pass availability). I have the flexibility to adjust my priorities. Let’s say I planned Monday night and Tuesday morning for DHS. Booking a week in advance, I’d get a Slinky Dog LL for Tuesday morning.
But instead… Monday night, near park close, Slinky line is pretty reasonable, so my family does it standby. They don’t love it, so collectively decide no reason to get a Slinky LL for Tuesday morning. Or maybe Tuesday morning is chilly and gloomy, so we decide to book a LL for an indoor attraction instead.
I much prefer the flexibility of same-day booking.
And it’s impossible to please both camps.
Genie plus question….I often keep on an on genie plus availability right at 7 AM. As we know, most days it’s gone immediately. Then some days like today, it still shows availability at 730. Wonder why?
Disney was always suppose to get better. Sadly, it is devolving into an experience for only the privileged and rich. I never thought I would look back at the”good old days” when Disney was more enjoyable when I was a kid. Now I won’t take my family. If you go, you’re forced to pay Genie + to get the “magic” or stress in line. Free Fast Pass -a perfectly working system- was their competitive advantage. Now it gone and rebranded, monetized by a character for some reason. Magic = Money.
When we went to WDW right before Christmas there was very little housekeeping or services at the resort (it was basically a timeshare for hotel prices without the amenities). Earnings are being made by charging higher prices than pre-pandemic with lower costs due to lack of staffing (park fully staffed hotels obviously not staffed and it shows). In the short term this creates amazing earnings … in the long term it creates mistrust with consumers who either a) opt to spent their money elsewhere or b) stay off resort where they can get value for their dollar. This may not matter for visitors from other countries but I suspect it will be several years before that travel continues … if it does after the upcoming corrections that are brewing.
Mr. Disney is rolling over in his grave. Shame on you for ruining a family experience. Lightning lane is crap. As a once to twice a year family trip we are No longer. Besides when I stifle my grandson excitement to show me something in Disneyland because I am trying to secure a ride through t Genie + on my phone we have already failed!
As a shareholder I’m celebrating. As a pass holder I’m furious.
Ditto
I want to upvote this, so true!
P.s. love the new font and comment reply format on the website Tom!
Nail in the coffin for us. What a bummer. Glad some people are enjoying it.
“He said that Disney’s theme parks are seeing unprecedented demand, and they have pricing power as a result. ” In other words, as long as the people come and continue to pay the ransom to ride, we can charge whatever we want with no thought at all to the customers comfort, convenience or financial limitation. “We’re out for us!” I really wish people would boycott Genie+ and Lightening Lanes. And any “self-limiting” they do has nothing to do with Covid precautions. We were herded onto the monorail like cattle – standing room only. We didn’t even bother with the busses. So unbelievably disgusted.
Me too.
Agree!
Agree! It is disheartening to see the money spent by consumers on things like Genie+ and Lightening Lane. People should not be supporting this! I’m so saddened to see the greedy money hungry Disney people laughing in our faces and people are still endorsing it. Some, happily paying more for everything and in turn, making Disney’s approach “look good” and these earnings calls look great. I was so hoping people would not support this.
We are going in March with our kids and grandkids. They purchased genie+ because the kids are small and we don’t want them to have to wait in long lines. My husband and I are AP holders and will have to purchase it daily, which is short of insane. This will be our last year as AP holders and we intend to not frequent DW until they get back to the magic and stop being so greedy. All of this money grabbing by a multibillion dollar company, is out of hand and basically makes me think that they only want the very ultra rich to frequent their parks. It’s really sad. We have loved going to Disney for so many years and made some amazing memories, priceless memories but with all of the increase’s and less character interaction, the experience and magic is just not there. It’s not worth it at this point. So it’s goodbye Disney, for us, after July of this year when our passes expire. AP’s are no longer a valuable customer. They are taking memory maker away and we don’t get any special consideration with genie+, in fact they have made it more difficult for AP’S where genie is concerned. I’m done!
Tom, as someone who follows Disney history, do you think there are parallels to be drawn between Chapek and Paul Pressler’s infamous tenure or is it too early to tell? I was reminded of it, particularly with the “fireworks” comment by Chapek, because it’s 1 of the things Pressler was infamous for. Pressler was big on cutting services and pushing merchandise and paid services and they kept him around because on his watch, attendance declined but profits stayed stable. The parks probably have 12-18 more months of riding the post pandemic demand wave, then we shall see if it follows the previous pattern. Before, it took 2 deaths to change direction in DW parks – I hope it doesn’t come to that.
It’s hard to say.
Chapek has a track record as head of Parks & Resorts, and that doesn’t exactly instill confidence–but it’s difficult to say which initiatives were his and which weren’t. On top of that, a lot of what’s happening now was an inevitability and the closure just gave them a window to implement long-desired changes. Then there’s also the billions lost during the last couple of years, and pent-up demand presenting an opportunity to “get away” with making cuts in the short term to help offset that.
My instinct is that Chapek is probably bad news, but I’m not nearly as confident in that assessment as some fans seem to be. I think a lot of what’s happening now is circumstantial and he’s partly vilified because he’s not as smooth as Iger (or even D’Amaro, who largely escapes this criticism).
Re: “…per guest spending was up “only” 30% over 2019 levels.” My question is how do they calculate the percentage by which spending has rose? If an item used to be $100 in 2019 and now it is $130, of course spending went up 30%, if you only use the total dollar value spent. Then they have taken away items from some packaged things that cause you to spend more in order to get the same thing you would have had in the first place. Phew, lots of words. I.e. The light saber experience. Went up $20 and they took away the carrying bag which you have to buy next door for $50. So, a use to be $200 item is now $270 which is more than 30%.
Disappointing to hear, Chapek will take this and run with it as proof that he can cut more and keep raising prices.
Hopefully it’s just a holiday + 50 year anniversary bump that comes crashing back down shortly. We are long time AP holders that let them expire in September, hopeful they reverse course at some point.
Chapek only cares about how much he can put in his pocket. He cares nothing for the guest experience.