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Pent-Up Demand Supersedes Delta Variant Fears as Disney Parks Bounce Back

By Parkev Tatevosian, CFA – Aug 18, 2021 at 8:22AM

Key Points

  • So far, the delta variant is not causing a drop in attendance.
  • Disney made improvements at its theme parks that will improve the guest experience.
  • Investors can expect even better results from the theme parks in the next quarter.

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Revenue at theme parks quadrupled from the same time last year.

Walt Disney (DIS -1.46%) reported its fiscal third-quarter earnings on Thursday, Aug. 12. After more than a year of potential visitors being purposely kept from entering to reduce the chances of spreading COVID-19, the latest results showed the public's eagerness to return to Disney theme parks.

There was concern that the recent rise of COVID-19 infections caused by the delta variant would hinder the appetite for outdoor activities like visiting a theme park. But Disney's results strongly suggest that pent-up demand is superseding those concerns.

Kids riding horses on a carousel as an adult looks on.

Disney reported stellar third-quarter results. Image source: Getty Images.

Theme parks bouncing back

The segment that includes Disney's parks, experience, and products increased nearly fourfold, to $4.3 billion from $1.1 billion in the same quarter last year. Although not completely at full strength, more of its operations were open this year's quarter compared to last. Importantly, these results were for the three months leading up to July 3. CEO Bob Chapek was asked about more current trends in Disney's theme parks in light of rising infection rates from the delta variant, to which he responded optimistically:

But on the whole, we see really strong demand for our parks. In fact, our park reservations now are above our Q3 attendance levels. And as you just saw with our earnings announcement, our Q3 attendance levels were pretty darn good. So we're still bullish about our park business going forward.

In other words, shareholders can expect better numbers in the theme park segment for the fourth quarter. Certainly, it will help that Disney's parks in California will be open the entire fourth quarter, instead of 65 days in Q3. Similarly, the park in Paris will be open all of Q4, versus only 19 days in Q3. This is, of course, barring any further shutdowns caused by the pandemic.

As impressive as these results are, they're a reminder that The House of Mouse is still in recovery mode. It looks as though there'll be at least another quarter or two before the entertainment giant is at full strength again.

Better than before

Fortunately for shareholders and guests, Disney did not sit still when the parks were closed to the public. The company was working on putting in place technological improvements to make the guest experience better. Here's a bold claim from Chapek, made during the company's Q3 conference call:

Guests are going to spend less time waiting and more time having fun in our parks with a dramatically improved guest experience. That's going to make their navigation of their day and their planning of their day much easier. Essentially, what it's going to do is take the consumer preferences that we know from our consumers ... and blend that with basically industrial engineering data that we've got in terms of how our park is operating that day, and meld those together to make suggestions on the fly that not only will lead to that improved guest experience, but at the same time lead to substantial commercial opportunities for us as the guest navigates their days.

The shutdowns gave Disney an opportunity, and it decided to act.

I recently tested a few of the new features at Disneyland Park in Anaheim, California, and they made the experience better. For instance, you can order and pay for food via the app, then all you have to do is pick it up at the designated time. And anyone who has visited the park before knows how valuable it can be to wait in one less line.

Moreover, it also better maximizes the efficiency of the employees (less need for cashiers, for instance) -- a feature that is good for shareholders as well.

Parkev Tatevosian owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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