"Nobody goes there anymore," Yogi Berra once famously said. "It's too crowded."
The same thing can probably be said about Walt Disney's (DIS -1.01%) sprawling theme park resort in Florida. I've spent the past few days at Disney World and at a couple of rival attractions, and as a regular visitor even during some of last year's peak travel periods, I've never seen Central Florida's parks as busy as they are right now since the pandemic began. Sure, the Presidents Day holiday played a part in drawing locals and snowbirds alike to thrills, and whimsy set in relatively fantastic weather.
If you were impressed by Disney's record or near-record results at its domestic theme parks for its fiscal first quarter, ending in December, the current quarter should be even better. It's a sharp contrast from the vibe you get scrolling through some theme park enthusiasts' posts on social media. The concerns there are that the value proposition of booking a trip to Disney World isn't what it used to be. Between prices that are inching higher -- and multiticket ransoms did go up again last week -- and some previously included perks that are either slow to return or coming back in monetized form, the pressure points are everywhere. It has to be frustrating for some of the more irate Disney World passholders to see the House of Mouse cashing in at their expense, but here we are. Disney is getting more expensive, yet folks keep coming.
Image source: Disney.
These go to eleven
If you think we've hit peak Disney World, you might be surprised to learn that the world's leading theme park operator turned a lot of guests away over the holiday weekend. Unlike nearby rivals SeaWorld Entertainment's (NYSE: SEAS) SeaWorld Orlando and Comcast's (NASDAQ: CMCSA) Universal Orlando -- which I checked out Monday of this week and Thursday of last week, respectively, and were also brimming with park guests -- Disney World is requiring visitors to secure park reservations along with having valid admission. Folks trying to make last-minute trips to the House of Mouse were in for a bit of a surprise, as online park reservations were hard to find for annual passholders and even single-day ticket buyers over the extended holiday weekend.
In short, Disney World is doing great even as it turns guests away. As it continues to open new attractions and restore shuttered capacity creators, it will let even more visitors tap their way through its front gate.
The cherry on top is that the haul from guests these days is far more lucrative than before the pandemic. Last week's increase for mouse-eared visitors buying multiday tickets is tame -- a four-day ticket to visit Disney World starts at $447.70 now, a modest 3% uptick -- but the real upside comes from the add-ons that diehard fans hate but shareholders are starting to love.
A big driver for Disney World's record results in its fiscal first quarter, which ended in December, was the rollout of Genie+ and Lightning Lane, two offerings to get folks into fast-moving lines at a premium. Folks pay $15 per person to access Genie+, a platform similar to one that existed as MaxPass in the original Disneyland park in California. It's a better deal for folks staying at one of Disney's resort hotels, as they get earlier access to the attractions reservation system. Lightning Lane+ is the one-off purchase of access to expedited queues for one or two of the most popular attractions at each of Disney World's four theme parks.
Paying for something the regulars had mastered at no additional cost may not sit well with annual passholders, but they're not who Disney is catering to these days. Securing park reservations during peak travel weekends -- like now -- is hardest on annual passholders who have a limited pool of available slots. It's math for Disney. Passholders pay $1 to $4 a day for year-round admissions. If you want a one-day ticket to visit a Disney theme park this Saturday, it will cost you $149, and that's the target audience for the premium upgrades.
A third of domestic park guests purchased Genie+, Lighting Lane, or both during the fiscal first quarter, but that figure jumps to more than half of the park guests during the holidays. In short, the more crowded Disney World may be the more money it averages per guest.
Wall Street isn't sold on Disney as an investment right now. The stock has tumbled 19% over the past year. Investors are too concerned with slowing Disney+ signups, the persistence of cable cutters, and weak box office receipts to embrace the margin-widening revolution happening at the theme parks. The market doesn't realize that despite higher prices and new add-on offerings, folks will still line up for hours just to buy a purple popcorn bucket.
With Comcast also checking in with record results at Universal Orlando for its latest quarter and SeaWorld Entertainment likely to follow suit when it reports on Thursday -- along with inevitable wedding bells -- where's the love for what could be one of the hottest sectors of 2022? I know this seems like an odd request in a world with a pandemic and intensifying global tensions, but you may want to think about adding leisure stocks to your portfolio.
When something isn't selling, they say a company couldn't give it away. You probably wouldn't want to invest in that company. On the other hand, we have Disney being widely criticized for being too expensive by a segment of fans who can't get in because there's no room for them. This is going to be a quarter of ridiculous math for Disney's theme parks, and the stock is as inexpensive as its parks are apparently not. This usually ends well for investors.
