CEO Bob Iger is investing in Disney’s amusement parks because they’re profitable. But that’s bad news for rival parks owners like Six Flags and Cedar Fair.
Walt Disney said on Tuesday it would nearly double its capital expenditure for its parks business to about $60 billion over the next 10 years. Disney CEO Bob Iger and Josh D’Amaro, the company’s parks chief, announced the accelerated pace of investment at a gathering of Wall Street analysts and investors at Walt Disney World Resort in Orlando, Florida, focused on the company’s parks business.
Parks have become a reliable profit engine for Disney and has helped cushion losses in the Disney+ streaming business, which is expected to become profitable only next year. Iger has described the parks as “a tremendous business” for the California-based global entertainment company.
Disney said its parks, experiences and products segment has expanded at a combined annual growth rate of 6% since fiscal 2017, and generated $32.3 billion in operating income over the last 12 months, according to a presentation included in a regulatory filing.
Periods of significant investment – including the addition of Cars Land at Disney California Adventure or Disney’s Hollywood Studios in Orlando – have spurred attendance, Disney noted in a blog post on Tuesday.
Iger has said the company plans to invest $17 billion over the next decade in Florida, where it is embroiled in a dispute with Governor Ron DeSantis, a Republican presidential candidate. It also is laying out long-term plans for new attractions and amenities at its Disneyland Resort in Anaheim, California.
“The political risks of doing business in Florida won’t stop Disney from continuing to invest in its most lucrative U.S. destination,” said Paul Verna, an analyst at Insider Intelligence.
Disney says it has more than 1,000 acres of land for future development at its six existing theme park sites around the world. It is seeking to appeal to some 700 million consumers identified by the company’s internal research as Disney fans who have yet to visit one of its theme parks.
According to the regulatory filing, Disney said it has a strong enough balance sheet, and borrowing capacity, to fund its growth initiatives.
The announcement of the planned investment followed a slowdown at Walt Disney World in Orlando, as attendance surges at its parks around the world, particularly Shanghai Disney Resort and Hong Kong Disneyland.
Disney also plans to nearly double the capacity of its cruise line, adding two ships in fiscal 2025 and another in 2026.
The company’s stock was last trading 3.0% lower on the day.
“Today’s price weakness is a short-term, knee-jerk reaction to a decision that will yield long-term value to customers and owners alike,” said Thomas Hayes, chairman at Great Hill Capital. “We own Disney and bought more today.”
(Reporting by Samrhitha Arunasalam in Bengaluru and Dawn Chmielewski in Los Angeles; Editing by Shailesh Kuber, Chizu Nomiyama, Paul Simao and Aurora Ellis)
This article was written by Dawn Chmielewski from Reuters and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to [email protected].