Can New Attractions Solve Disney’s Attendance Problem This Year?

by Trefis Team
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Disney  (NYSE:DIS) reported a 5% decline in theme park attendance for Q1, which the company attributed primarily to Hurricane Matthew, the shift in timing of winter holidays and significantly higher attendance last year owing to the 60th year anniversary celebrations in its parks. While the company has seen a decline in attendance for three of the past four quarters, revenues from the parks and resorts segment have been growing due to a higher per capita spend. The Magic Kingdom did not hit capacity on Christmas Day last year, which is a very rare event. This can be attributed to the seasonal pricing introduced by the company last year, where peak season ticket rates are much higher. This ensures that the company earns higher revenues on peak days despite a lower turnout.  Recently the company announced a minor increase ($2-$5) in its park ticket prices and introduced expiration dates for all tickets. This is a routine increase and not as significant as the change in pricing policy last year. The slight increase in ticket prices can easily be justified by the new attractions which are being launched in 2017, which include The World Of Avatar.  We believe that as the company focuses on upgrading its parks with newer attractions based on popular themes, these can attract crowds this year and lead to higher attendance in the future.

Parks and Resorts Key Growth Driver

According to our estimates, the Parks and Resorts segment is the most important segment for Disney, accounting for nearly 30% of its valuation. We expect the number of visitors at Disney’s U.S. theme parks to increase steadily and reach around 100 million by the end of our forecast period.

2017 promises to be a year when its long-awaited attractions will open, attracting customers and driving growth. These include Pandora-The World of Avatar, which is opening in May this year.  Star Wars Land and Toy Story Land are likely to open in the next 2-3 years. With several new attractions lined up to open in 2017 and beyond, we believe theme park attendance should improve in the near term.

Revenues from theme parks are a key value driver for Disney. As the company looks at international markets to fuel growth, newer attractions in its domestic parks are likely to play a significant role in attracting customers. We believe the interesting lineup of new attractions based on its fairly successful animation movies should keep consumer interest high and drive growth for the company in the long term.

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