Disney (NYSE:DIS) is the worldwide leader in theme park entertainment, and parks such as the Walt Disney World Resort in Orlando are a cornerstone of Disney's global operations. Cumulatively, these parks comprised more than 31% of the company's total revenue in 2013, and as a segment grew revenues over 2012 faster than the company's revenues as a whole.
Now, Disney is battling to hold its family-oriented dominance in Florida in the face of casino companies seeking to build gaming resorts in the area. Disney waged the battle in February of this year as legislation to allow casino expansion into Florida, where it's currently regulated, was introduced by pro-gaming lawmakers. Now, the race for Florida's next governor is under way with each candidate yet to publicly choose a side. As voters are waiting to hear the candidates' stances on this issue, this upcoming election could heat up Disney's casino battle again as voting on Nov. 4 draws near.
Disney is battling these gaming companies by lobbying Florida lawmakers and seeking to sway the opinions of the voters of Florida. Disney spokesperson Andrea Finger said in a statement in February that "the massive expansion of gambling that would come from legalizing megacasinos would be a bad bet for Florida's taxpayers, tourism brand, and existing businesses." For Disney, the current tourism model of family-oriented theme park entertainment that Florida is famous for has worked well for the company, and it would like to keep it that way.
Las Vegas Sands (NYSE:LVS) and its outspoken CEO, Sheldon Adelson, are on the other side of this battle, pushing to get its casino resorts in operation in South Florida as soon as possible. Currently, the law in Florida allows for only eight Native American casinos with Vegas-style gambling, and 31 pari-mutuel betting facilities (such as horse- and dog-race betting). Adelson believes that many families will want to experience not only the gaming that the casino company will offer, but the non-gaming entertainment that the company's expansive resorts have provided the world over as well.
This town ain't big enough for the both of us
What would the threat to Disney look like if these casino resorts were legalized in Florida? Walt Disney World in Orlando, the world's most visited theme park, hosted 18.6 million visitors in 2013. This included families from around the globe who visited the world-renowned and global-brand powerhouse.
Las Vegas Sands would like to break in on this market. While the companies traditionally serve different markets, Disney for families and Las Vegas Sands for gambling adults, the threat to Disney is that Sands can offer a family-friendly, fully integrated resort that includes not just gambling, but many forms of non-gaming entertainment as well.
An example of this is in Singapore, where the local government only allows for two resorts. There, Las Vegas Sands' sole competitor, Malaysian gaming company Genting, teamed up with Universal Studios to add a theme park to its casino resort. Las Vegas Sands' own integrated resort in Singapore, which includes not just a casino, but theaters, rooftop pools, vast spaces of shopping, dining, vast gardens, and more, has done a great job of attracting families to visit for more than just gambling. In terms of total revenue for each resort, Las Vegas Sands edged out Genting in 2013 taking in 52% of the total revenue shared by these two Singaporean gaming resorts.
Will competing with Disney in Florida be the same as with Genting and its Universal Studios theme park in Singapore? Not likely. For one thing, Disney has incredible brand strength already, especially with its Florida Disney World, which is one reason that Disney is by far the largest theme park operator in the world, with over $14 billion in theme park revenue in 2013. That's more than Las Vegas Sands' total revenue of $13.77 billion in 2013.
However, because Disney relies mostly on family vacations to provide the bulk of its guests, Las Vegas Sands suddenly being allowed to build one of its integrated resorts nearby could still take away a sizable chunk of families who would otherwise choose Disney World.
The governor's race in Florida could heat things up
The political battle to allow new casino resorts has stagnated since February. However, the current governor's race happening in Florida might take this battle to a new level. The race between Republican Gov. Rick Scott and Democrat Charlie Crist has become a mudslinging battle, with each candidate looking to demean the morals and business-development potential of the other. Gambling is an issue that encapsulates both of these sides, with strong opponents of what some people think are its moral drawbacks, and strong proponents of the revenue and job growth potential that it is said to bring.
Both candidates have tried to avoid pinning themselves too closely to one side of the debate thus far. Even as recently as early August, the governor's office's official response was noncomittal: "We are currently reviewing all the gaming issues facing Florida and look forward to discussing these issues in more detail in the days and months ahead."
They'll have to choose sides soon
Current Gov. Scott was pro-casinos at least at one point, and after he was elected in 2010, he took a trip to Las Vegas to meet with Sheldon Adelson about potential investment in Florida. When Scott was elected in 2010, he promised to build 800,000 jobs in Florida. Genting, the Malaysian company from above, also put in a bid for a casino project in Florida and the company stated that allowing casino expansion in Florida could contribute as many as 100,000 jobs, something pro-business voters would be happy to see.
A study commissioned by Florida lawmakers in October 2013 showed that allowing full casino resorts could increase spending in Florida by $1.5 billion annually. Other states have been interested in this revenue as well and 11 states have expanded casino legalization since 2008.
Now, journalists in Florida are starting to ask the candidates to give their opinions on the matter. Eventually, as voting in early November nears, voters in Florida, both those who are for and who are against extended gambling, will be demanding that these two candidates publicly choose a side. Once they do -- and they will likely be on opposing sides -- Disney and Las Vegas Sands' battle will once again heat up and these two companies will be closer to having a decided winner.
Foolish final thought: Disney vs. casinos, who will win?
It is still unclear when a vote to allow casinos in Florida would be under way, but at least getting the debate started again is enough to start thinking about which of these two companies is likely to win this battle for Florida tourism.
Whether Las Vegas Sands and casino companies would actually be able to dip into Disney's family market in Florida is still questionable. However, clearly Disney is worried enough to be fighting against casino legalization in Florida, which leads us to believe that there are real reasons for the company to fear this competition. According to Bloomberg, Disney has contributed $1.7 million to Florida lawmakers since 2012, though gaming companies and interests combined have contributed $3.4 million.
With $1.5 billion in potential annual revenue on the line, this will definitely be perking up lawmakers' ears, and Foolish investors with an eye on interesting market trends should keep watching the upcoming governor's race and the battle for gaming in Florida; a vote either way could be an interesting investment catalyst.