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Disney investors focus on streaming, mustn’t forget theme parks

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LOS ANGELES — In April of last year, I strolled down an empty Main Street in Disneyland with Walt Disney theme parks manager Josh D’Amaro.

The California park was a week away from opening after more than a year of closure due to Covid-19 restrictions, and cast members were hard at work putting the finishing touches in place before guests arrived.

It was a strange walk down the iconic cobblestone driveway. It was quiet, a word that has probably never been used to describe a Disney theme park. There was no background music, no commotion of children clamoring for a Mickey balloon or a soft pretzel, and no parade of colorful characters ready to pose for pictures or sign autographs.

As we followed the trolley tracks to the statue of founder Walt Disney, D’Amaro spoke of the future of the company‘s parks in optimistic, yet practical terms. The road ahead, he noted, was not going to be easy. Attendance caps, mask requirements and mandatory temperature checks have been the cost of reopening. For five quarters, Disney’s parks division had posted an operating profit loss, and that would continue if the doors didn’t reopen. If D’Amaro was worried, he didn’t show it.

While much of Disney’s revenue over the past two years has gone into Disney+ and the company’s streaming efforts, resurrecting the theme park industry is critical to Disney’s bottom line. On Wednesday, the company will update shareholders on its most recent results and trends when it announces its fiscal second quarter results. Shares of Disney are down about 30% since January.

In 2019, the segment, which includes cruises and hotels, accounted for 37% of the company’s $69.6 billion in total revenue. Typically, theme parks account for the majority of that revenue.

New theme park lands such as Avengers Campus and the opening of Star Wars Galactic Starcruiser have enticed guests to visit Disney’s national entertainment centers, but other expansions, including new additions to Epcot from Disney World, are on the horizon.

A year after that ride with D’Amaro, the Disney parks have rebounded significantly. The division, which also includes Disney Experiences and Consumer Products, saw revenue exceed $7.2 billion in the fiscal first quarter, double the $3.6 billion generated in the 2019 quarter. ‘last year. The segment saw operating income climb to $2.5 billion from a loss of $100 million in the same period last year.

The company said in February that its national parks had yet to see a significant return from international travellers, who pre-pandemic accounted for 18% to 20% of guests. Additionally, not all of its international parks were open full-time in the last quarter. As Paris Disneyland turns 30, Shanghai Disneyland has temporarily closed due to local Covid spikes.

A new start

“As miserable as the pandemic has been, we had this opportunity to not only reopen those doors, but to kind of restart,” D’Amaro told CNBC last week. “You don’t have many of those opportunities in life where the world stops for you for a while.”

Technology that was put in place or updated during the pandemic remains a big part of the Disney experience. While the rides, restaurants, and character encounters are often what keep people coming through the park’s gates, shorter waits, faster service, and ambiance keep visitors coming back.

Virtual ride queues, which help maintain social distancing, and an online reservation system, which helps control crowds, aren’t going away, D’Amaro said. The company relies on data from these services to help staff in high-traffic areas of the park and redistribute traffic to less-trafficked locations.

Mobile ordering and payment, which was available before the pandemic, has become increasingly popular with customers. Before the pandemic, Disney saw single-digit adoption of its mobile ordering system. Today, about nine out of 10 customers choose to use it.

A bonus is that consumers tend to spend more money when shopping through mobile ordering and payment options than traditional cash or credit card purchases.

Chewbacca is seen at Disneyland Park on July 14, 2020 in Anaheim, California. Disneyland plans to reopen on April 30, 2021.

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A recent addition to Disney’s suite of technological innovations is Genie, which is a kind of digital concierge. First announced in 2019 at Disney’s D23 Expo, the service creates personalized itineraries for customers based on the attractions they most want to see and the restaurants they want to dine at.

A paid version, called Disney Genie+, replaces the national park’s FastPass, FastPass+ and MaxPass offerings, which were discontinued during the pandemic.

For $15 per ticket per day at Walt Disney World in Florida and $20 per ticket per day at Disneyland, customers can use the new Lightning Lane at select attractions. Visitors can select one at a time to bypass the main line at a scheduled time for rides such as Haunted Mansion, Big Thunder Mountain, and Millennium Falcon: Smugglers Run.

D’Amaro said adoption rates for Genie, Genie+ and Lightning Lane exceeded expectations.

“We haven’t taken our foot off the pedal when it comes to investments,” D’Amaro said. “We’ve had the chance to look much more clearly at our future and start laying the groundwork for a future that isn’t tied to what we did before the pandemic or what we did 10 years ago. or 20 years, but which is, in fact, boundless.”

Strengthen the experience

In addition to smoother operations, Disney has provided guests with new places to explore inside and beside its parks over the past year.

Avengers Campus opened in June 2021. The new area, located in Disneyland’s California Adventure theme park, replaced A Bug’s Land. It includes the pre-existing Guardians of the Galaxy: Mission: Breakout ride at the edge of Hollywood Land.

It’s also home to a new Spider-Man attraction, a food spot called the Pym Test Kitchen, and a portal to Doctor Strange’s Sanctuary. At its center is the Avengers Compound, home of Marvel’s Mightiest Heroes. On the rooftop launch pad sits a scale quinjet that lights up and revs its engines for guests.

Avengers Campus is a popular destination for Disneyland guests to see and interact with their favorite heroes, anti-heroes and villains from the Marvel Cinematic Universe.

And for theme park junkies looking for more than just a photo op, Disney recently opened its new Star Wars experience, the Galactic Starcruiser. Billed as an “immersive adventure,” the Star Wars Galactic Starcruiser blends elements of the company’s resorts, cruise lines and theme parks into a 48-hour space adventure.

Ouannii, a Rodian musician, is aboard the Halcyon with galactic superstar Gaya.

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The experience comes with a hefty price tag — around $1,200 per person per day — but has been generally well received by customers since it opened in March.

The upcoming fiscal second quarter results will include the first month of these trips and give shareholders a preview of what they can expect in terms of revenue from this attraction in the future. The two land-based Star Wars Galaxy’s Edge expansions cost around $2 billion, but it’s unclear how much Disney has invested in other recent improvements to its parks.

The next expansion of the Disney park will take place at the end of May. Xandar’s Wonderland Pavilion at Disney World’s Epcot is the newest piece of Disney’s massive transformation of the nearly 40-year-old park, which has long been known for its unique food offerings and annual festivals.

The former Energy Universe Pavilion is now the Xandar Marvel Pavilion, home to Guardians of the Galaxy: Cosmic Rewind.

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Xandar’s Wonderland Pavilion is based on Marvel’s “Guardians of the Galaxy” and features a new rollercoaster: Guardians of the Galaxy: Cosmic Rewind.

“There’s a lot going on here at Epcot,” Epcot vice president Kartika Rodriguez told CNBC in February during a media tour of the new attraction.

Already, Epcot has expanded its French pavilion to include Remy’s Ratatouille Adventure, a trackless ride that takes guests through a Pixar version of France. It also added a new space-themed restaurant called Space 220, which takes diners hundreds of miles above the park to eat among the stars. There’s yet to come a “Moana”-inspired guided attraction called Journey of Water.

“I think our [Walt Disney Imagineering] partners have found is a really unique way to ensure Epcot stays true to what it’s about…it’s about growing, it’s about being connected,” Rodriguez said. “And that’s what Epcot is, dreaming about the world of tomorrow.”

Refreshing its parks is a way for Disney to keep its guests excited to return and elevate its stories and experiences. D’Amaro said the company is far from done innovating.

The company is set to launch its new cruise ship, the Disney Wish, this summer and is working to complete the Tron: Lightcycle Run roller coaster at Magic Kingdom.

However, perhaps more exciting is the promise of something new on the horizon. Disney’s Galactic Starcruiser is a model that could easily be applied to other company-owned franchises, and innovations in animatronics and AI could bring fan-favorite characters young and old to the parks.

“There are so many things we can do and so many places we can go,” he said.