Walt Disney World recently turned 40 years old. The giant resort's strategic focus has shifted over the past decade from growth by expansion to growth by maximization.
That's not say, of course, that the Walt Disney Co. is done building in Central Florida. About $2 billion worth of capital projects are in the pipeline for Disney World right now: the "Next Generation Experience" technology initiative, the expansion of Fantasyland in the Magic Kingdom, the Disney's Art of Animation Resort family-suites hotel, and the just-announced Avatar-themed land for Disney's Animal Kingdom.
But even these projects are designed primarily to fill in gaps or extract more from the infrastructure already in place at Disney World.
Take Next Generation Experience, or "NextGen," which accounts for about $1 billion, or about half of the capital spending underway at Disney World. While Disney hasn't disclosed many details about the project, among the elements it will include: a new reservation system in which guests will be able to book ride times on popular attractions even before they depart on their vacations; the ability to obtain room keys in advance and bypass hotel check-in desks; interactive queues in attractions; personalized ride experiences and character greetings; and new information-collection systems allowing Disney to cull more detailed data from guests.
Taken together, the NextGen initiatives are more about protecting market share and getting guests to spend more within existing vacations than they are about extending the length of those vacations. One goal, for instance, is to reduce wait times and ease other hassles that many consumers have come to associate with big theme parks. Another is to give Disney access to far more information about its guests, enabling it to better tailor sales pitches to individual guests (both before and during vacations). And, while Disney hasn't confirmed this, it is widely expected that NextGen will create additional perks exclusively for guests staying in Disney hotels, helping the resort persuade even more travelers to book rooms in company-owned hotels.
Getting more people to stay on property is obviously also the goal with Disney's Art of Animation Resort, the roughly 2,000-room value hotel scheduled to open next year. While Disney World already has 17 hotels (counting the Fort Wilderness campground), it doesn't have anything in its portfolio like Art of Animation, where more than half the rooms (1,120) will be suites with room for as many six people.
Family suites have been a fast-growing niche in the lodging industry for the last few years, popular with families who want the privacy afforded by separate rooms for themselves and their children but who can't or don't want to pay the higher prices for traditional, high-end hotel suites.
And yet, of Disney World's roughly 22,000 existing hotel rooms, only 215 rooms at Disney's All-Star Music Resort are family suites. That means Disney hotels are likely losing business to off-property competitors such as the Nickelodeon Suites Resort or the Holiday Inn Resort Lake Buena Vista.
Moving more people into company hotels does a couple of things for Disney. First, it obviously gains the spending on the room itself and the associated ancillary spending (room service, drinks at the pool, etc.). But it also typically drives more spending in Disney's theme parks, too. That's because the number of park visits per guest that Disney gets is much higher (almost double, according to one person familiar with the research) among people staying in Disney hotels vs. those staying at non-Disney hotels.
Meanwhile, the primary goal of the $425 million Fantasyland expansion is to add capacity and ease congestion rather than draw more traffic. The Magic Kingdom, after all, is already the busiest theme park on the planet, with about 17 million visitors a year and Disney doesn't want the guest experience to choke under the size of those crowds. There's also a guest-spending element to the project: One of the biggest additions is the large, Beauty and the Beast-themed "Be Our Guest" restaurant that will do double duty as a quick-service dining station during the day and a more expensive, sit-down restaurant at night. There'll be a second Beast-themed eatery called "Gaston's Tavern," too.
Of all the new projects, the just-announced Avatar expansion in Animal Kingdom, said to cost somewhere between $400 million and $500 million, is the closest to a pure expansion play. Walt Disney Co. Chief Financial Officer Jay Rasulo told analysts after the Avatar announcement last week that Disney had already decided to expand Animal Kingdom even before it landed the Avatar rights (though the Avatar land will now replace whatever Disney had earlier planned).
Disney's betting on Animal Kingdom for a variety of reasons. For one thing, it's the least developed of Disney World's four theme park and has quite a bit of ready-to-build expansion space. For another, while guest ratings for Animal Kingdom are said to be as high as any of Disney's other parks, it's doesn't score as well on repeatability, so it has room for growth there. And after the Magic Kingdom (which, practically speaking, probably can't be grown too far beyond 17 million), Animal Kingdom is perhaps the most differentiated theme-park product Disney has in a crowded Orlando market.
But there's a defensive element to the Animal Kingdom expansion, too. Given that there is so much to do in Orlando already and most vacationers only spend a week or so in the market, travelers may swap out time at one place to do something new at another. That's a big reason why attendance dropped at SeaWorld Orlando in 2010 after Universal Orlando opened its hugely successful Wizarding World of Harry Potter in Islands of Adventure.
Now, however, SeaWorld Parks & Entertainment is in the midst of big new construction spree that's likely to result in several new attractions for the Orlando park. And Universal is widely expected to expand Wizarding World at some point in the not-too-distant future, too. Adding Avatar should help Disney shore up Animal Kingdom and protect the park from losing market share.
Source Orlando Sentinel