It’s a question that’s been hounding Disney theme-park managers for months: How much longer will they continue offering discounts to keep people coming?
Disney executives are sure to face that question again tomorrow when the Walt Disney Co. reports earnings for the second-quarter of its fiscal year (essentially January through March), particularly now that there is growing evidence the national economy is on the mend.
As it has for more than a year now, Disney continued to lean on promotions through its second quarter. Walt Disney World, for instance, had a buy-four-get-three-free hotel-night offer in place for travel during the period.
As a result, Disney’s theme-park results are once again expected to show the double-edged effect of discounts: Relatively strong attendance offset by pinched profits. Laura Martin, an entertainment-industry analyst at Needham & Co., projects that Walt Disney Parks and Resorts will report operating profit of $107 million, down 38 percent from the same period last year (when operating profit was down another 50 percent from a year earlier).
What’s more, Disney has recently signaled that the discounting won’t stop any time soon.
Disney World just announced that it will bring back a free-dining promotion this August in which travelers who book hotel stays can get free dining plans. It’s become an annual promotion for Disney World, which conceived it a few years ago as a way to stimulate travel during the typically slow early fall.
But the 2010 edition of free dining covers travel for seven weeks – Aug. 15 through Oct. 2 – which is nearly twice as long as Disney World’s free-dining promo in 2008. (Last year, Disney also offered free dining from mid-August until the start of October – and then extended it until December).
Disney execs have said during past earnings calls that they intend to gradually wean consumers off of promotions and return to full prices. And they are clearly trying to: The seven-for-four discount during the company’s second fiscal quarter, for instance, wasn’t as deep as a similar offer in place in early 2009 because Disney World only offered it to travelers who booked rooms in its medium- and high-priced hotels (those booking the resort’s cheapest hotels could only get two nights free).
Similarly, the new free-dining promotion is slimmer than the version Disney initially introduced a year ago. But the fact that Disney is offering the dining discount for almost two full months suggests that the company expects travelers will continue to display the frugal spending habits they adopted during the downturn.