Is Universal's Second Harry Potter Attraction a Disney Killer?

The rival park steps up the competition as it opens Diagon Alley July 8.

Jul 5, 2014 at 11:34AM

In the Harry Potter books, the young wizard battles a seemingly unbeatable foe, somehow emerging victorious. Is that type of win possible for Universal Studios Orlando, now set to unveil its second Potter-themed attraction July 8?

Universal Studios, owned by Comcast (NASDAQ:CMCSA), has always been the much lesser of the two big theme park operators in Orlando.  Walt Disney's (NYSE:DIS) Disney World parks -- which include the Magic Kingdom, EPCOT Center, Disney Hollywood Studios, and Disney's Animal Kingdom -- have generally dominated its rival. That began to change -- a little -- in 2010 with the opening of the first part of Universal's Wizarding World of Harry Potter, Hogsmeade.

Since then, park profits have more than doubled and attendance has increased by more than 30%, NPR reported. A bit of that growth can be attributed to the U.S. and other countries emerging from recession. But much of the credit goes to a certain boy wizard who wears glasses, has a fondness for scarves, and flies around on a broom.

With the second Potter-themed attraction, Diagon Alley, now set to open, can Universal Studios step up in weight class and become a true Disney World competitor?

What is Diagon Alley?
While Disney World has four separate major parks, Universal Studios has only two -- the original Universal Studios Florida and the newer Islands of Adventure. Like Disney, Universal sells day passes and multi-day passes for admission to a single park or pricier tickets that allow guests to visit more than one. At Universal, the list price for a single-day adult admission is $96, while a ticket that allows accessing both parks in the same day runs $136. The more days you add, the lower the per-day rate.

That's a tactic Disney also employs, likely as a way to force vacationers to choose to spend all of their holiday at one company's parks. Disney, because it's bigger with more parks, attractions, and rides, has generally had an advantage in selling multi-day tickets. Even big Harry Potter fans could spend four or five days at Disney, then see Hogsmeade -- which is in Islands of Adventure -- in a single day. 

The creation of Diagon Alley -- which is in the original Universal Studios park -- makes visiting for multiple days much more appealing. It also should up the expenditure for one-day visitors because seeing both Potter attractions and riding the Hogwart's Express train between parks requires the pricier two-park ticket.

Diagon Aley Preview Event

The Wizarding World of Potter-Diagon Alley

Diagon Alley should also address one of the main problems with Hogsmeade -- that it was just too popular. During busy times, Universal caps admissions to the attraction and staggers visits. Retail shops get very crowded. Waits for Butter Beer -- a drink described in the books -- can be very long.

The new Potter attraction will address these concerns by adding more shops and larger retail spaces, along with two new major rides.

How Is Universal Studios doing?
Comcast does not specifically break out results for its Florida and California theme parks, but revenue for the division has risen steadily since the first Potter attraction opened in 2010. The theme parks brought in $2.23 billion in 2013, up from $2.08 billion in 2012 and $1.98 billion in 2011. Profits have risen each year as well. The company credits the addition of Hogsmeade for at least part of the gain.

"The increases in 2013 and 2012 were primarily driven by the continued success of The Wizarding World of Harry Potter attraction in Orlando and the Transformers attractions in Orlando and Hollywood, which opened in June 2013 and May 2012, respective," according to Comcast's annual report. 

How is Disney World doing?
Walt Disney owns and operates the Walt Disney World Resort in Florida, the Disneyland Resort in California, Aulani, a Disney Resort & Spa in Hawaii, the Disney Vacation Club, the Disney Cruise Line, and Adventures by Disney. The company also manages and has effective ownership interests of 51% in Disneyland Paris, 48% in Hong Kong Disneyland Resort, and 43% in Shanghai Disney Resort, which muddles the financial picture of how the Florida parks are faring.

The growth of Universal and the popularity of the first Harry Potter attraction does not seem to be negatively impacting Disney. The theme park segment brought in $14.08 billion in 2013, up from $12.92 billion in 2012 and $11.79 billion in 2011.

Harry Potter may have taken down Voldermort, but he seems unlikely to slay Mickey Mouse.

Both sides can win
Disney is simply bigger, with more parks, more attractions, and an incredibly deep bench of characters that got even stronger with box-office hit Frozen -- characters from the film are appearing at Disney Hollywood Studios starting this week. Universal, however, has found a winning strategy with its Potter attractions. Launching the second should result in attendance increases, more customers buying two-park tickets, and people staying for more days.

Harry Potter has a die-hard fan base, and if Diagon Alley is as impressive as Hogsmeade, it should appeal to non-Potter fans as well. With the first Potter land estimated to cost $400 million, and the new, larger attraction certain to be more expensive, Universal is banking on the Potter characters having the longevity of Mickey Mouse, Donald Duck, and the rest of the Disney gang. Given Potter's appeal with young fans, it seems like a safe bet.

Diagon Alley should be good for Universal and good for Orlando tourism. The new attraction might swipe a little business from Disney, but it should also expand the audience for Florida's theme parks overall. Potter will likely have enough magic to make revenues rise for both companies.

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Daniel Kline has no position in any stocks mentioned. He visited Universal Studios last year with his wife and 10-year-old son. He is visiting Disney World later this month. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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