The Walt Disney Company released its second quarter earnings statements on May 10, 2011. For Disney, the second quarter includes (essentially) the first three months of 2011. These months are, as any listener of the DIS Unplugged Podcast knows, a slower time for the Parks and Resorts (and most other segments of Disney’s business) making comparisons to other quarters unhelpful. Disney compares its 2011 quarter performance (and fiscal year to date performance) to the same period from the prior year (and, as I said in a blog about Disney’s 2010 fiscal year-end statement, 2010 wasn’t exactly a stellar year to begin with.)
The earnings statement for Parks and Resorts (which includes Disney Cruise Line) shows revenue for the quarter better than for the same quarter in 2010. Revenue for the second quarter in 2011 was $2,630,000 as compared to $2,449,000 for 2010. On the other hand, operating income (essentially profit) shows a $5,000,000 decrease as compared to the same quarter in 2010. Disney attributed most of this decline to the fact that the Easter break occurred late in 2011, and falls in the third quarter. Revenue for the international resorts was higher but when taking into account the impact of the March 2011 earthquake, was pretty much flat.
Further discussions about revenue (and net earnings) for three of the slowest months of the year are not all that helpful to park visitors. A better forecast about what this means for park visitors came during the May 10, 2011, earnings teleconference call where Disney executives Bob Iger and Jay Rasulo answered questions from investment managers. The investment managers were surprisingly interested in how the Parks and Resorts segment was looking for the third and fourth quarters of fiscal year 2011.
In response to several questions, Rasulo emphasized that Disney was still working on “weaning” theme park visitors from expecting discounts. The weaning is not fully accomplished, he acknowledged as current quarter bookings are running behind expectations by about 2.5 percent. The consumer, Rasulo said, is willing to pay higher prices for good product but are still booking late expecting discounts. Disney still wants to send a message to consumers that discounting is a thing of the past. Unfortunately, it appears to be working. While saying the current information is mild and not easy to read, Rasulo also said the decrease in discounting and recent room rate price increases “are definitely sticking” because room bookings (so far this quarter) are up by double digits as compared to last year. Bookings are also following the familiar trend of filling value and deluxe resorts before the moderates. Once the values fill up, Disney starts to trade guests up to moderates because volume is of “great strategic importance” to Disney.
Asked about the revenue from the Disney Dream, Rasulo refused to break out the revenue individually. He did say they were very pleased with bookings and that marketing and launch costs for the Dream were between $15 and $20 million. Guests expecting cruise discounts in the near future will be disappointed to learn that, currently, the three DCL ships are over 95% booked for the current (3rd) quarter, 86% booked for the fourth quarter (which ends in early October) and 60% booked for the first quarter of 2012 (the last three months of 2011).
The replay of Disney’s May 10, 2011, second quarter earnings teleconference can be listened to online (you will have to have Windows Media Player or a Realtime plugin to listen). Disney’s press release about the earnings report is also available online.