Disney World Record Guest Spending, Genie+ Popularity, Food Portion Cuts
Disney reported its fourth quarter earnings for July through September 2021 on an investor call held by CEO Bob Chapek. This post covers the good, bad & ugly of these results, including a sharp spike in per guest spending at Walt Disney World, uptake of the paid Genie+ service, possibility of reducing food portions to save money, and more.
Let’s start with the numbers. The fourth quarter of the Walt Disney Company’s fiscal year (or the third quarter of the calendar year) is another quarter of positive results, especially as the previous year offers an abysmal comparison due to ongoing closures and soft attendance last year.
Despite that, the Walt Disney Company missed Wall Street estimates across the board during the quarter, sending the stock down more than 4% in after-hours trading. Forecasts called for revenue of $18.79 billion, but the actual total was just $18.53 billion. Earnings per share for the quarter were 37 cents versus 51 cents expected in a survey of analysts. However, the biggest culprit for Wall Street’s disappointment wasn’t simply the numbers–it was the slowdown of Disney+.
Disney announced added 2.1 million subscribers, which is down from 12.6 million added the previous quarter. The number was well short of Wall Street expectations, with average forecasts estimating 10 million new subscribers. Analysts on average expected Disney Plus to reach 126.2 million subscribers for the quarter. Instead, Disney+ had 118.1 million paid subscribers worldwide.
Slowing growth was also the story of earnings calls for most other legacy media companies. During their recently-concluded quarters, AT&T’s WarnerMedia (HBO Max), ViacomCBS (Paramount+), and NBCUniversal (Peacock) all added fewer new subscribers than anticipated. Only Netflix bounced back this quarter, reporting 4.4 million new subscribers as compared to just 1 million in its previous quarter.
Content and competition are the stories there, as is the reality that people are no longer stuck at home. While Netflix has a non-stop pipeline of original content, the legacy companies all scrambled to launch streaming services powered by their massive libraries and have struggled to add new content at an acceptable pace for consumers. Chapek acknowledged this during the call, and also offered reassurance that the massive slate of original programming announced last year will soon start 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 $5.5 billion compared to $2.7 billion in the prior-year quarter. Segment operating results increased $1.6 billion to income of $640 million.
However, that $640 million profit isn’t all Parks & Resorts–it’s also consumer products. For some reason, the stuff sold at Target is lumped together with theme parks. And that stuff sells like hotcakes, accounting for $618 million of that income. Domestic theme parks “only” made $244 million, whereas the international parks lost $222 million. Still, that’s significantly better than the $1.5 billion the parks lost in the same quarter last year.
The earnings document also revealed that capital expenditures decreased from $2.9 billion to $2.3 billion year-over-year, driven by the temporary suspension of certain capital projects. Capex decreased for Walt Disney World and Disneyland year-over-year by $548 million, and for all of the international parks combined by $84 million.
While this is a year-over-year downturn, 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.
While discussing the theme parks business and its “yield management strategy,” Chapek spoke a bit about Walt Disney World’s newly-launched Genie service.
“The response to the [Genie] service in just its first month has been extremely positive. The majority of Genie and Genie+ users said it improved their overall park experience with nearly one-third of park guests upgrading to Genie Plus, making it possible for them to spend less time waiting in line and more time enjoying attractions, entertainment, dining, and retail opportunities. We’re very encouraged by what we’re seeing. We look forward to launching Disney Genie at Disneyland very soon.”
During the Q&A, Chapek again emphasized the utilization of Genie+ thus far at Walt Disney World: “I’m not sure if everyone appropriates the gravity of this to the Genie+ success. One third of the guests at Walt Disney World are buying the Genie+ upgrade. That’s $15 per guest, per day. That’s a marginal increase in per cap and margin.”
The company is no doubt pleased with the rollout thus far of Genie+, as it’s essentially new revenue from nothing. Utilization of MaxPass at Disneyland was actually higher than this, and we’d expect the number to increase over time–especially during busier times of year and once there’s a yearly Annual Passholder add-on available for purchase. The sweet spot is probably around 50% of Walt Disney World guests–anything higher starts negatively impacting the usefulness of the service, and thus, guest satisfaction.
Disney CFO Christine McCarthy stated that at Walt Disney World, guest spending per capita again was “very, very strong” in addition to improved yield management. This has been a familiar story of reopening, with her repeatedly calling guest-spending gains “exceptional” and saying the results have far surpassed expectations a number of times.
During this call, Disney quantified the increase in per guest spending, with Chapek stating that “we’re seeing an incredible 30% increase in per caps” versus 2019. Keep in mind that this was for the fiscal fourth quarter, which is before Genie+ launched.
The increase in per guest spending should be unsurprising–you don’t even need to follow earnings calls to observe it. Despite discounts being virtually nonexistent, resorts are booking up for most nights through the end of the year. The effective 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.
This isn’t unique to Walt Disney World. Hospitality companies around the country are reporting similar spikes to per guest spending or average daily rate (ADR), with numbers that are off the charts as compared to 2019. There is a ton of pent-up demand working its way through the industry. Most of the target demographic for these destinations spent less and saved more while being stuck at home, while also receiving stimulus money. Obviously, this isn’t true for everyone across the board, but it is statistically accurate for the bulk of Walt Disney World’s middle to upper-middle class visitor profile.
During the Q&A, McCarthy was essentially asked whether this was sustainable. In response to that, she noted that Walt Disney World and Disneyland are still operating under “capacity constraints.” This is something we knew to be true, but it’s not something Disney has discussed in several months.
At this point, neither California nor Florida have caps on attendance or hotel occupancy. This is almost certainly driven entirely by staffing. As has been noted countless times, there are still many key positions the company is having trouble filling on both costs, which are a limiting factor on overall bookings.
Unsurprisingly, this is undesired by Disney, which is doing job fairs and offering huge hiring bonuses for these positions in an attempt to get things back to 100%. Once that happens, it’ll be interesting to see what happens with discounting and per guest spending.
More ‘supply’ coupled with pent-up demand burning off could put a damper on those numbers. That’s my commentary, not anything from Chapek or McCarthy. The company expects per caps to continue running hot thanks to Genie+ and yield management strategies.
McCarthy also fielded a question about operating expenses and margins, stating that the company has done a lot of work on fundamentally changing some of the ways it does business on both the revenue side and the cost side to optimize margins. She noted that for the fourth quarter, the overall margin is just under 12%, which is well below 2019 levels.
McCarthy went on to say the company believes it will not only get back to past margin levels, but also have “a high probability” of exceeding those previous margin levels in the parks because of the some of the things that they’ve done.
She mentioned date-based ticket pricing, strategically managing attendance, mobile food ordering, contact-less check-ins at the hotels, and virtual queues in support of this. She also said Disney is looking at “physical park improvements that allow for better guest movements throughout the park.”
As a quick aside, it’s worth emphasizing that margins are “well below” historic levels despite the aforementioned significant increase in per guest spending and cost-cutting measures. That right there should put to rest all of the specious claims that Disney actually wants to reduce attendance and cater to higher-income guests.
It’s undeniable that Walt Disney World wants people to spend more money, but they also need volume. They can’t target the rich because that doesn’t scale; Walt Disney World is decidedly a destination for the middle class, and the company is dependent upon those consumers. The “reduce attendance” talking point is just that–and what the company uses to justify price increases. If Disney could sustainably double ticket prices and attendance, they absolutely would.
McCarthy was also asked about the impact of inflation on Walt Disney World and Disneyland. She started by saying this was a question that’s on the minds of every CFO and senior management team running companies in the United States, noting that Disney is watching inflationary pressures and trying to manage them.
As for how Disney could cut costs, here’s what she said the Parks & Resorts senior leadership team had discussed: “We can adjust suppliers. We can substitute products. We can cut portion sizes, which is probably good for some people’s waistlines. We can look at pricing where necessary. We aren’t going to go just straight across and increase prices. We’re going to try to get the algorithm right to cut where we can and not necessarily do things the same way. We’re producing technology to produce some of the operating cost. That gives us to absorb some inflation. We’re trying to use our heads here to come up with a way to kind of mitigate some of the challenges that we have.”
Some of this has definitely already happened, and has been over the course of several years. Portion sizes have become noticeably smaller post-reopening, with quality cuts along with them. Personally, I wouldn’t take much issue with this if there were a corresponding decrease in prices. Food waste is definitely a problem (we cringe a little when dining at WDW’s family style restaurants) and portion sizes in the United States are, across the board, larger than those in international markets.
But that’s not what this is about and we all know it, so let’s not pretend otherwise. Heck, even Disney acknowledged as much with the framing of this in terms of cost-cutting and minimizing the impact of inflation on margins. There’s certainly a conversation to be had about heath and wellness initiatives as well as food waste, but this isn’t it. This is all about saving the company money.
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, cost-cutting, and margins.
Of course, the company always puts the most positive spin on the results–that’s the nature of the beast in attempting to assuage investors. It’ll be interesting to see whether per guest spending actually can maintain or exceed the incredible 30% growth over 2019 levels, even as Walt Disney World and Disneyland return to full operational capacity.
Personally, I’m skeptical. It already seems pretty clear that pent-up demand and inflation are both going to continue playing out into early 2022, but for how long beyond that is up in the air. At some point, the money people saved while spending a portion of last year stuck at home is going to run out, consumers will return to being more cost-conscious and price sensitive, and things will largely normalize. Even with the return of international guests providing a second spike, my guess is that improved capacity in tandem with pent-up demand fizzling out will knock that 30% down to a more reasonable number, even taking into account Genie+ and whatever upcharges the company cooks up between now and 2022.
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YOUR THOUGHTS
What do you think of Walt Disney Company’s fourth quarter earnings and future forecast? Thoughts on the company’s claim that ~33% of Walt Disney World guests are upgrading to the Genie+ service? What about the sharp spike in per guest spending? The plan to reduce portion sizes? Are you worried about the future of Walt Disney World, Disneyland, or the company in general? Think things will improve in 2022? 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’m curious how big a percentage of the people buying into genie + during that time frame were bloggers, travel agents, etc who only purchased it to do research to pass along to others. I’ve seen many Disney blog titles about whether genie + was worth it or not. For us, we’re trying to cut costs on our December trip due to the insane price increases and all perks disappearing, so genie+ is a big no go. Fastpass+, we miss you already!! Sadly this will likely be our last trip for a long time unless Disney gets a grip and finds the Magic again 🙁
This type of thing comes up a lot, and I think people dramatically overestimate bloggers, vloggers, influencers, travel agents, etc. as an overall percentage of the park-going population. Disney’s number would mean at least 25,000 guests per day are buying Genie+ across Walt Disney World.
I am shocked that they’re receiving positive feedback for genie+. People are using it because they have too not because they want to. Otherwise you wait in ridiculous lines. We just came back from a 9 day trip with 12 people and it was a nightmare. The stress and inconvenience of using genie+…getting up at 7am to make reservations and hoping you get it right. Problems NON STOP with the app malfunctioning. We found ourselves at the hotel front desk so many times because things were not working properly. I’ve been going to Disney for over 30 years and NEVER once left feeling like “thank God that’s over”…that’s 100% how I felt this time. It made me so sad. This was the least fun we’ve ever had on a Disney trip, and for the $15,000 in money spent…that’s super depressing. It was so bad they comped us one night at the Polynesian because the hotel staff felt so bad at all the problems we were having. It was so rough. And we saw so many people at the parks and at our hotel having major issues.
I would love to see someone do a cost analysis to see what the 2019 cost of a Disney trip was vs. February 2022. Resort rates up, tickets prices will go up, no more free FastPasses then assume using Genie + every day for a family of 4, no more magical express and assume you have to pay for Mears/Uber/Limo service.
I think all of these price increases and cut backs will one day bite disney in the bottom.
Peoples image of disney is changing. All of our family (15) are not going back to disney at all. I have been going to disney sine l977 and have seen how disney should be run. Now it’s just sad, IMO.
Inflation is really rising and it’s beginning to hurt people. Food prices are ridiculous around here. But it is increases in fuel, food, all things that might cause a recession, IMO. Then disney will be hard hit. Sure, there are always people who will just use a CC and pay it off.
We have been die hard disney fans, but all the changes have squashed the nostalgia for us.
Walt made money and kept the guest experience at a high level. It can be done. Other companies do it.
I just feel that with increasing inflation and it’s consequences, disney might have to offer discounts again. I don’t think they will ever decrease prices, however. We will see. Meanwhile our family will go to Universal where we feel valued as guests.
My family and I just returned from the Halloween Boo Bash. In the 40 years we have attended WDW, this one was a disappointment. I know blaming Covid was Disney’s excuse but I was forewarned by you. I can not believe Walt had in mind the greed that this organization is exhibiting. I know we won’t be attending anytime soon. The cost was astronomical and it will only get higher. After Boo Bash we went to SeaWorld instead of another Disney Park. So sad.
I think most Americans like getting big portions because of perceived value. I also tend to eat a lot so I finish all my meals. Kind of sad that there actually said they may cut portions. Talk about penny pinching. Regardless all these cuts make me want to vomit anyhow.
@Charity
Your insightful comment is spot on! Reducing portions & food quality expenses, adding Genie+, deleting the Magical Express, charging for Magicbands, etc., etc. can only go so far. Once Disney has monetized all things that are monetize-able, then what?
In David Younger’s tome “Theme Park Design,” he talks about “declining by degrees” (increasing prices, decrease opening times, decrease live entertainment, show effects being turned off, theme dilution, etc.). Eddie Soto calls it “Death by 1,000 cuts.”
These cost-cutting & upcharging efforts can only provide value to Disney (and not the guests) for so long. There is a financial limit to “majoring in the minors” and not providing new and/or substantive value.
Then again, if the diehard fans die-off, how would a new Park visitor even know that quality standards and the overall guest experience had declined? Thankfully, folks like Tom have a historical perspective that provides an easy comparison between the past and present.
Direct flights between the U.K. and Orlando are very high priced. Although there is plenty of cheap indirect capacity, I expect there will be strong U.K. demand for the next year or so.
However, U.K. visitors have never made up more than about 5% (and even that may be generous). Even if that doubles to 10%, I don’t see it “moving the needle”.
As for other nationalities, it’s important to remember that tourism from other places such as Canada and Mexico never stopped. Brazil, India and some of the rest of Europe will be the other significant increase, though I’ve always been surprised at how under-represented visitors from mainland Europe are.
Thanks for watching these reports, which 99% of us wouldn’t, and keeping us informed. I still believe that 2022 will see Disney and many companies have to offer decent discounts to bring people in.
*Sizes
When it comes to cuts, I think reducing portion signs is the only one I’d be okay with! I’d rather have small portions and be able to try a lot of things without wasting food I love the Food & Wine festival for that reason, even if it isn’t cheap.
That said, when it’s combined with the larger picture of upcharges and reductions in “magic”, it’s still pretty gross.
I don’t mind Disney being expensive if it remains a really top-shelf experience. But crazy expensive + cutbacks upsets me. They keep downgrading the experience. After all, there’s no upcharge I can pay to get a (non-seasonal) night time parade, or to add entertainment offerings, or to get luggage delivery to my room (and I certainly would in that last case).
Any idea what “very soon” might mean for the Genie+ rollout for Disneyland? The lack of reporting on this (not by you, but by Disney) is frustrating. Now that we’re in to the Christmas season there as of tomorrow, it’s a heck of a time to make this shift (good for them, bad for us).
Last I heard was first half of December. That was credible when I heard it, but everything with Genie has been a race against the clock, so delays are possible.
If that’s still accurate, expect an announcement with a week or two.
I’d rather they adjust portion sizes (where reasonable) and/or marginally increase food costs than skimp on quality.
Just continuing so upset with Disney World Taking advantage of a bad situation. my whole family had Covid and we were very sick we were looking forward to going to Disney as we booked 9 months ago but now we have reconsider with all these pricey changes but how can you afford it now .You did away with Disney magical express for people staying at the Disney resorts. Then there was a stop in fast passes during pandemic but promised that it would come back. It sure did come back now you gonna pay $16 a person for the genie As a fast pass and that doesn’t include popular rides. But there’s a price on that also Then the ride you want to go on that are restricted you got a pay again to get on those rides I can’t believe what they’re doing. Now Disney want to cut portions of food but not change the price iare they OK. I’m a DVC member and I already lodge many complaints but it goes and deaf ears or should I say Mickey’s ears.
I wonder how much the 50th anniversary timing affects per-capita spending. I’m guessing a lot. What do you guys think?
Keep in mind that the quarter being discussed was July through September. So the bulk of 50th anniversary spending and merchandise-buying won’t show up until the next quarter. Meaning it’ll probably be even more than +30% over 2019.
Glaringly missing from this call-and Disney currently- is a hot product. Something i gotta see, gotta experience! Something to WANT to pay for! McCarthy touted reservations, date based pricing, mobile order, contactless check-in, and smaller portions. Chapek crowed over genie+, magic key. None of these line items are what consumers are wowed by, asked for, or to an extent-even want. Nothing guests are scrambling to get, experience, or pose with for Insta. Adding nickels and dimes is technically padding the bottom line. But long term success is dependent on consumers willing, happily, to fork over any amount for a product that lights them up. Disney is running on the fumes of rights-of-passage, nostalgia, and 2 yrs of cancelled trips. Consumers have to spend more to get it, and they do. But then what? It’s like paying for a meal and leaving hungry, or meh, or ill. That’s no success story.
I will continue to say you have to speak with your pocketbook. Just don’t go to Disney World for now. This will force changes back towards the Disney we all love. It will take 3-5 years to get better again but it will happen or they will have to close.
Sometimes, you have to teach Disney management a lesson. If you keep giving in then change will not happen for the better, here. It’s up to each one of you to speak from your pocketbook.
I was a diehard Disney World fan for many years with many trips there. Right now, I do not want to return there. It makes me sad to say but until Disney World gets back to the Happiest Place on Earth principles it’s just not for me.
Please open your mind and try other vacations for now. I truly believe you can enjoy other vacation destinations.
Ive been to Disney for over 30 years with my family. Its always been an expensive holiday coming from the UK, but it always felt worth it for the experience and the perks that you used to have from staying onsite.
We are currently booked to go again next year…….but this is the first time i feel that im being taken advantage of. The perks are gone, the cost has gone up and up, and it has soured my view of disney. After this trip i would def stay at Universal instead, for prob half the cost. Disney have forgotten about the normal person, they are focused on the rich.
Very interesting. The comments about portions, etc makes me think the DDP is going to look very very different when it returns. I wouldn’t be surprised if the dining credits are more money based than number of meals based. Instead of offering families a pay one price for one TS, one QS, and 2 snacks per day (with virtually all choices on participating menus fair game), I have a feeling it will be more of a pay $500 per person good for the length of your vacation and these have a value of $600 per person. Spend it at participating places. Kind of like the quick service card they seem to be trying out at hotels like Swan, Dolphin, etc. I really think that’s a test run. I also doubt they can bring back the Dining Plan the way it was before since there is really far less availability than ever before. Every time I spot check for dinner times for my family of 6, there is virtually nothing left. How can they sell (or even less likely – offer for free) dining plans when there probably isn’t enough availability to support everyone who buys it?
The biggest mistake my wife and I made was watching some of our videos from Christmas 3 years ago at the parks. Even with doing the first Universal trip vs. Disney because of cost increases in 3 weeks, we are still scheming on doing a day at Disney (ADRs for Whispering Canyon locked in). Beyond the savings, stimulus, and whatever cash people have on hand I think the past 18 months left a mark of people taking less things for granted. Kids are only kids once, and it goes fast. Cuts, cost increases, shrinkflation, real inflation, stagnation, and whatever else forces there maybe…Christmas time + Magic Kingdom + your family is pretty amazing.
P.S. Happy Veterans Day to your Dad Tom (95% sure I read he was a veteran in a post, apologies if mistaken).