Disneyland in California -- the company's first park. Image Source: Disney
Walt Disney (DIS -0.93%) opened the Shanghai Disney Resort over the summer, adding to its family of theme parks around the world. While the resort is expected to generate significant sales, Disney actually owns less than half of this new property and will only keep part of its revenue. The same is true for all of Disney's international parks. Still, its international theme parks are a great growth opportunity, adding to why the theme park segment is a highlight of the company's long-term earnings potential.
Breaking down Disney's theme park ownership
Disneyland opened its doors in California in 1955 as Walt Disney's grand vision of a magical getaway for families. In 1971, the company opened its second theme park, Walt Disney World, in Florida. The company fully owns these two resorts. In the years since, Disney has opened various international locations as joint ventures with local companies, keeping only partial ownership.
In 1983, Disney opened its first international park near Tokyo, Japan. Now called Tokyo Disney Resort (which includes Tokyo Disneyland and Tokyo DisneySea), the theme park is actually owned 100% by Disney's local partners. Disney collects licensing fees from ticket sales and in-park purchases such as merchandise.
A water fountain display at Tokyo Disney Resort. Image Source: Disney
Disneyland Paris (formerly Euro Disneyland) opened next in 1992. Disney and its partners created a local publicly traded company in which Disney owned about 40% of the shares. However, after more than two decades of slow growth at the resort, Disney added over 1 billion euros to its investment in 2015 to now own over 80% of the park's umbrella company.
Hong Kong Disneyland debuted in 2005 as a joint venture with the local government. Similar to Disneyland Paris, Disney and the government of Hong Kong started a local umbrella company in which Disney owns 48%. While technically in China, Hong Kong Disneyland still didn't fill the needs of a growing middle class in mainland China.
Hong Kong Disneyland. Image Source: Disney
After years of development and a $5.5 billion total investment from Disney, Shanghai Disney Resort finally opened in June. Disney again partnered with state-owned entities that own the majority of the park, while Disney owns 43%. Disney also owns 70% of the joint venture company that manages the park, another source of revenue from the project.
In total, Disney operates or licenses six parks on three continents, which together served nearly 140 million guests in 2015. That's more than double the 66 million that visited the second largest theme park company, Merlin Entertainments.
| Theme Park | Disney Ownership |
Visitors in 2015 | Disney's 2015 Revenue (in billions) |
|---|---|---|---|
| Walt Disney World (All parks, FL) | 100% | 54 | $13.6 |
| Disneyland and Disney California Adventure (CA) |
100% | 27.7 | |
| Tokyo Disney Resort | None | 30.2 | $2.6 |
| Disneyland Paris | 80% | 14.8 | |
| Hong Kong Disneyland | 48% | 6.8 | |
| Shanghai Disney Resort | 43% | 15 (est. first full year) |
International park revenue does not include Shanghai Disney resort. Data Source: Disney 2015 annual report, Themed Entertainment Associations's 2015 Index
Smaller sales, but huge potential
Disney doesn't break down its revenue per individual park, but it does break down revenue by domestic and international properties. In fiscal year 2015, Disney generated just $2.6 billion in revenue from its international parks, less than one-fifth of the $13.6 billion from its domestic, fully-owned parks.
Even though domestic park revenue dwarfs the international segment, Disney's operations abroad still hold huge potential. Analysts at Piper Jaffray predict that Disney's international theme park revenue could grow more than 40% in the next two years, driven largely by the new Shanghai Disney Resort, which has no revenue included in the table above.
Over the long-term, Disney is likely to continue expanding its theme parks globally. With less upfront investment and a local partner to help navigate regulations and taxes, Disney will be able to continue its expansion at a faster rate than by going it alone, which helps to boost that international theme park revenue even further. New park openings should have the added benefit of helping Disney increase its global brand reach, helping to drive more sales for its movies and merchandise in these foreign markets as well.
A solid long-term investment
During fiscal 2015, Disney's theme park segment revenue grew 7% year-over-year to $16.2 billion, nearly a third of the company's $52.5 billion top line. If current parks continue to post similar growth as in the last two years -- and with added revenue from Shanghai Disney Resort -- that theme park segment revenue could grow 20% by fiscal year 2017. With the success of domestic parks and growth in international locations -- even those only partially owned by Disney -- the theme park business continues to be a highlight of why Disney looks like a solid long-term investment.
