"Train yourself to let go of everything you fear to lose," Yoda famously says in Revenge of the Sith, and Walt Disney (DIS -0.64%) is apparently willing to let go of a lot of things that it once held dear.
Shortly after announcing on Thursday that it would not go forward with constructing a $1 billion campus in Central Florida -- putting an end to relocating its imagineering team from California -- Disney revealed that a piece of its galaxy was going far, far away. Star Wars: Galactic Starcruiser will be permanently closing at the end of September, 19 months after it launched to sticker shock and rave reviews.
The force awakens
Pulling out of the costly campus that would've opened in 2026 is strictly political. Central Florida's largest private employer and taxpayer could've brought the state three years of construction jobs, followed by 2,000 imagineering and other white-collar jobs that reportedly would've paid an average of $120,000 a year. However, with the state's governor targeting Disney with company-specific hurdles, it makes sense to hold off on big-ticket investments in Florida until there's clarity on that front.
"Does the state want us to invest more, employ more people, and pay more taxes, or not?" CEO Bob Iger asked rhetorically during last week's earnings call.
Pulling the plug on Galactic Starcruiser is strictly about survival. The two-night experience that immerses guests in interactive adventures set in a richly themed venue sounds great on paper. The math is juicy, with prices starting at $4,809 for a party of two. Additional guests sharing the same cabin are naturally extra. There are just 100 rooms, but even if every cabin housed just the minimum two adventurers at the lowest starting price, it would be more than $87 million in lodging revenue alone if it was fully sold out.
Image source: Disney.
Unaffordable for the masses, the launch of Galactic Starcruiser stung Disney enthusiasts. It was too expensive, but that was by design. It would take just 36,500 guests to generate $87 million in lodging revenue plus millions more in merchandise and premium food and beverage sales. This is just 0.006% of the nearly 60 million guests that visited Disney World the year before the pandemic arrived. It was a niche product, but one with an aspirational purpose.
Star Wars: Galactic Starcruiser was doomed the moment that it offered its first promotion in January, giving its guests as much as a $700 discount when combined with a traditional Disney World resort stay. It would be hard to get back to retail pricing after that. The markdowns eventually widened to a 30% discount on select springtime "sailings" for annual passholders, Disney credit cardholders, and members of the Disney Vacation Club. As demand continued to soften, Disney started to pare back on the actual number of voyages.
The headlines will say that Disney failed, and the trickle of schadenfreude will erupt into a downpour. The cavernous shell of a building that housed a starship simulation will echo with "I told you so" come October. This doesn't mean that Disney isn't better for the costly learning process. The media giant was able to create an interactive journey that would let guests weave themselves into Star Wars lore storylines. It offered a round-the-clock adventure that makes its equally costly cruise ships seem uninspiring by comparison.
The secret to Disney's success as a media stock is its ecosystem. A single hit can reverberate across other segments. We may never see Galactic Starcruiser again come fall, and Disney hasn't announced plans for what will become of the actual building adjacent to Disney's Hollywood Studios. However, the best of the starship experience -- what clicked with the roughly 60,000 guests that have taken the journey -- will make the rest of Disney better. It's the way great things start. A Star Wars fan can even say that it's a new hope.
