We're thigh-deep in the peak summer travel season at Walt Disney's (NYSE:DIS) iconic Florida resort, and things are mostly going according to plan. Beyond the horrific mid-June tragedies in Orlando and initial operating hiccups of Disney World's newest ride, it's mostly business as usual for the House of Mouse.
However, approaching Disney World from the eyes of a shareholder -- and not merely a theme-park enthusiast -- there are some interesting developments that could result in the media giant making a ton of dough during the tail end of its fiscal third quarter, and through most of its fiscal fourth quarter. Let's look at some of the potential game changers at Disney World this summer, as well as one important area that may fall short.
1. Disney Springs is going through a swanky update
Disney's ABC spent years dolling up residences for deserving families in its Extreme Makeover: Home Edition series. The same thing is taking place at what used to be Downtown Disney -- only it's taken a lot more than a week to flip this outdoor shopping and entertainment district around.
The same complex that used to offer quaint and offbeat stores and restaurants has gotten a ritzy upgrade. The expanded shopping area includes Vince Camuto, MAC Cosmetics, Luxury of Time by Diamonds International, and the debut of Marcus Jordan's high-end athletic footwear concept, Trophy Room.
The eateries have been upgraded with celebrity chefs Masaharu Morimoto, Rick Bayless, and Art Smith setting up camp with their foodie-centric offerings. Access has improved dramatically with the opening of two massive parking-garage structures and direct highway-ramp access.
The end result is that Disney Springs has been packed this summer with affluent shoppers, diners, and fun seekers. Whether it was the awful parking situation or a lack of quality tenants that kept visits in check last year, that doesn't seem to be a problem now. With a lot more stores and restaurants on the map, Disney's going to be a pretty happy landlord.
2. Animal Kingdom is a nighttime thing
Another dramatic transformation is taking place at Animal Kingdom. Disney World's third-busiest theme park added a new lakefront show, turned the park's centerpiece into an illuminated hub of visual art, and ramped up its nighttime offerings with more live entertainment and nocturnal enhancements to its outdoor daytime attractions.
The result? The same park that closed as early as 5 p.m. last summer will now be open until 11 p.m. every night. The new experiences and operating hours are keeping guests around longer, possibly extending their resort vacations. This is also stirring up dinner-time traffic at the park's growing number of restaurants.
3. Folks are paying more
Disney's shift to on-demand pricing is making one-day tickets at Disney World cost 18% more this summer. Annual pass holders and guests buying multiday tickets are also shelling out more money per day to enjoy Disney World this season than they did a year earlier.
Disney used to charge the same price all year round until the shift to tiered pricing earlier this year. The highest prices for single-day tickets go into effect during the busy summertime and holiday periods, making this the time of year when the biggest increase in revenue per visitor will be experienced. The vast majority of people trickling through Disney's gates aren't on single-day tickets, but those that are will be contributing mightily to the company's top and bottom lines.
Disney's theme parks and resorts division accounted for 31% of the entertainment behemoth's revenue in fiscal 2015, but just 21% of its segment operating profit. Expanding margins would mean that the division is carrying more of its own weight -- and helping offset the potential sting of its media networks segment coming under fire.
Check-ins may not check out
Disney has a lot of catalysts that could push revenue and earnings higher at its largest theme-park resort. The rejuvenated Disney Springs, Animal Kingdom's lax curfew, and higher ticket prices could give Disney's theme-parks division a big boost this summer. However, what if Disney threw a catalyst party and nobody came?
There are some rumblings that Disney World resorts aren't as busy as they used to be. One source tells me that he's hearing that an Epcot resort saw its occupancy rate dip to 69% during this past holiday weekend. It was at 81% during the same holiday last year. Disney Vacation Club timeshare bookings continue at occupancy levels north of 95%, but it could be that the more traditional resort guests are staying away.
There's no way to to know if the chatter about one hotel speaks for all of Disney World's properties, but it wouldn't be a surprise if June's Pulse nightclub shooting, and the alligator attack at Disney's Grand Floridian resort a couple of days later -- along with the seasonally spiked pricing that kicked in this summer -- are weighing on last-minute trips to Disney World.
Theme-park attendance at Disney World was already down in the March-ended quarter, likely the result of a sharp drop in Latin American tourists. Tourism marketing agency Visit Florida's data shows that Brazil, Argentina, and Venezuela experienced double-digit declines in visitors to the state last year, and you know things continue to be bad when a rival theme park operator mentions Brazil 21 times in this year's first-quarter earnings call.
Disney has been able to more than make up the difference in volume through higher prices, something that is true at both Disney World and its ESPN juggernaut. That will more than likely be the case this summer; but keep an eye on discounting trends to see if the theme-park leader gets aggressive in an effort to fill up its vacant rooms.
Disney doesn't have to hit on all cylinders at Disney World to drive a big summer at its theme parks, but it obviously never hurts.