Can Comcast Steal Market Share from Disney in Orlando?

When you hear the word 'Orlando,' you think of Walt Disney (NYSE: DIS  ) . After all, it's the happiest place on earth. At one point down the road, will your children or grandchildren possibly think of Universal above Disney when they hear the word 'Orlando'?

Changing landscape?
NBCUniversal's parent company Comcast (NASDAQ: CMCSA  ) claims that it does not plan to become the biggest theme park company in Orlando, it simply wants to increase its market share. While Comcast may be thinking in such a friendly manner, bowing to the current king (or mouse), this does not look likely. Comcast, like any other competitive business, probably has secret desires of ruling Orlando in the future. 

Comcast involves itself in several businesses: it has cable communications, cable networks, broadcast television, filmed entertainment, and theme parks segments. However, it recently announced that it wants to improve its top and bottom lines via theme parks.


Comcast's Universal owns Universal Studios and Islands of Adventure, and soon it will increase its Orlando room count by a whopping 75% (to 4,200) with its Cabana Bay Beach Resort. For the record, Disney has 20,000 rooms in Orlando. Therefore, Comcast would still have a long way to go to catch Disney, at least when it comes to offering accommodations.

Cabana Bay Beach Resort is a 50/50 investment between Comcast and Loews Corp. (NYSE: L  ) . The resort will open on March 31 with a theme based on the 50s and 60s. Guests can choose between family suites with kitchenettes and standard rooms. The average room rate (for now): $209 per night. The resort has 1,800 rooms total. Amenities include two large pools, a lazy river, and a bowling alley. The resort will also have a complimentary shuttle bus to Universal theme parks and Universal CityWalk.

The concept doesn't just include the theme, as it will provide travelers with a place to eat, sleep, and swim on a sprawling 750-acre paradise. Will it work?

Betting on the past
Comcast plans to double down on theme parks and resorts because it feels this move will lead to long-term success. However, a new Harry Potter Ride will likely drive more excitement than the Cabana Bay Beach Resort. The 50s and 60s theme might appeal to baby boomers, but it will probably not drive much excitement for Generation X, millennials, or children. That said, a recent phone call indicates solid (but not excellent) demand.

To find out first-hand about the demand for the Cabana Bay Beach Resort, I called and pretended that I was interested in booking a room. The 50s-themed music I heard while on hold provided a nice touch. I was also only on hold for less than one minute. When I inquired about the opening weekend, the polite lady on the other line told me that they were 90% sold out. You can look at this from two angles.

The positive angle is that a new resort being 90% sold out is good, especially since there has been no word of mouth to help drive demand yet and it wasn't a holiday weekend.

The negative angle is that in Orlando popular resorts sell out in a hurry, regardless of whether it's the weekend. Was the marketing not strong enough to drive sell-out demand for Cabana Bay Beach Resort's opening weekend? Are vacationers more interested in other Orlando options? By the way, the room price quoted to me: $179 per night plus tax.

With a theme that's not likely to drive enough excitement to compete with other Orlando resorts and an inability to sell out for its opening weekend only two weeks prior to its launch, this isn't likely to be a major long-term success for Comcast and Loews. However, nobody has actually stayed at the resort yet, and its customer service could possibly lead to exceptional experiences and positive word of mouth which would drive demand. 

The Foolish takeaway
For now, as well as for the foreseeable future, Comcast will continue to bow down to the mouse in Orlando. As long as Disney controls this market -- for the most part -- Disney should remain the best investment in theme parks. Disney will also have an opportunity to implement Frozen's success into its theme parks with attractions and merchandise, which should help drive traffic and sales in the future. Please do your own research prior to making any investment decisions.  

Disney is the best theme park investment, but will it dominate in the living room?
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


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Dan Moskowitz

Dan Moskowitz spends the majority of his time researching stocks. He believes that fundamentals, and logic pertaining to industry trends, win out over the long haul.

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9/2/2015 3:59 PM
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