Theme parks and resorts are some of the major tourist attractions in the U.S. and should benefit from a pickup in the consumer spending. This bodes well for Disney (NYSE:DIS) and Comcast’s (NASDAQ:CMCSA) NBCUniversal units. While Disney operates Disneyland and Disney World resorts, NBCUniversal operates theme parks under Universal Studios brand. We estimate that theme parks constitute about 8% to our $46.40 estimate for Disney’s stock and very little to our $27.40 value for Comcast’s stock. Our estimates are 20% and 10% above Disney and Comcast’s respective stock prices.
Below we take a quick look at certain trends that might affect the profitability of this business in near future.
Attendance will rise as the economy improves
Theme parks are considered as a destination for leisure activity and therefore the attendance is tied to state of economy as well as level of travel & tourism. Consumers are more likely to travel when the economy is in a better state and discretionary spending is more viable. The economy has improved gradually in the past year, and although not as much as previously expected, we expect theme park attendance to gradually improve.
Trending per capita expenditure at theme parks
Per capita guest spending at a park comprises of spending on tickets, food/beverage and merchandise. Tickets form a major portion of this spend.
Recently, Disney hiked ticket prices for its theme parks which was soon followed by price hikes from Universal Studios Orlando. This is a positive sign given the economic recovery. As more people begin to turn up at theme parks they will spend more on food/beverage and merchandise and so overall per capita expenditure rises.
International tourism
International tourism is likely to influence theme parks business to some extent. Recent quarterly results for American Airlines indicated that the international travel to the U.S. has been increasing which seems to be a positive development. [1] However on the flip-side, there is a concern that the earthquake in Japan might impact travel for Japanese tourists to the U.S. Since Japanese tourists form the fourth largest group of international visitors to the U.S. with 2.9 million tourists in 2009 and have overall per capita expenditure standing at around $4,400 this is one small area of concern. [2]
See our complete analysis for Disney and Comcast Stocks
Notes:- AMR Loss Beats Estimates as Airfares, International Travel Demand Increase, Bloomberg, APR 21 2011 [↩]
- US Travel May See Decrease Due to Japanese Earthquake, American Daily Herald, Apr 11 2011 [↩]
