If you were to follow along with the typical mainstream and Disney news sites, you might come away with a grandiose view of what The Walt Disney Company accomplished in their second quarter earnings report. In reality, the reveal was a mixed bag with some big wins and some noteworthy problems. And though the stock dropped in after market trading, CEO Bob Chapek is out there sending congratulatory messages to cast members. It’s all quite clever.
I hope that over the last few months you’ve figured out that we play it straight and try to just give you the accurate info beyond what the spin is. In doing so, I want to highlight something that Bob Chapek said yesterday that is very important if you’re trying to read the latest news articles and square that with the stock not shooting straight up. Note, I’m writing this article before the next opening bell, so there’s a possibility that does happen out of the gate before stabilizing.
Here’s what Chapek said in an earnings report that Disney wanted to highlight two things (beating subscriber expectations and domestic park profits):
Response to next-generation story-telling, like Star Wars Galactic Starcruiser has been phenomenal! In fact, guest ratings for this immersive experience, which opened March 1st, are incredibly high, and in line with our best-in-class offerings. Demand is strong, and we expect 100% utilization, through the end of Q3.” — Bob Chapek
Alright, now play close attention — I’m going to show you how that seemingly-incredible statement is actually really bad news… and you wouldn’t notice it unless you were keeping up with everything on places like this site.
Look at the statement above and ask yourself, “when does the ‘Q3’ end?” The answer to that query is the end of July, essentially two months from now. When you consider that what Bob Chapek is saying is that they expect 100% utilization of the Star Wars Galactic Starcuirse through the end of July, suddenly it’s not such a great claim. Instead, it makes you wonder… is he saying that they’re not expecting the hotel to be fully used after July. And since we know they’d toot the PR horn as hard as they could, we can pretty safely say that Chapek does not believe the Star War Galactic Starcruiser will be fully-booked after July.
Now let’s play another game. Let’s count the number of months the Starcruiser has been open. It opened in March, so that’s one, two, three months it has been open. July is in two months… that means Chapek is saying the hotel will be at full capacity for its first five months of opening. Okay. So with only one-hundred rooms available at the hotel, is Disney preparing for the experience to operate under capacity at just the six month mark??? This is something we’ve been talking about since before it opened but even we didn’t discuss this being a possibility until September.
So let’s do a comparison. This is not a perfect analogy, but let’s say that in six months, Cosmic Rewind no longer has a line and trains are running with empty seats as a result. That would be an epic failure for a new attraction, correct? Okay… now like I said, I know this isn’t a perfect analogy… but if a ultra-limited hotel experience is running at below capacity only six months into its opening, how in the world can this be considered a success? Again, you’d never know that if you just casually perused that Bob Chapek statement.
There’s a bigger issue at play that the Galactic Starcruiser is forecasting for us, however. When we look at the amazing increase of per-guest spending at Disney Parks for this year versus last year, do you know how and why that is happening?
Last year, the domestic parks — specifically Disney World because it’s by far the biggest revenue driver — were operating primarily for domestic guests. This year, as pandemic restrictions have abated, international guests have flooded Walt Disney World. They’ve done so in incredible numbers after being freed to travel globally, and probably because many of them want to make sure their children get to experience the most magical place on Earth before potential new waves of pandemic shutdowns come back again (we’re looking at you, China). What that means is that much of the increased spending at WDW is coming off of international guests blowing tons of money on a once-in-a-generation trip to Disney. It also means that it surely isn’t sustainable. It also… also means that this isn’t coming off the backs of domestic guests at the same level… and the Galactic Stracruiser shows us that.
Who reserves a stay at the Galactic Starcruiser for the most part? Domestic guests. Star Wars is far more popular in the states than outside them. Making the kind of deposit necessary for the Starcruiser is really only something you’re going to do if you can believe you’ll be able to go there in six months or a year. If you’re scared about lockdowns, you’re out. If you’re scared about travel restrictions, international trips to a mega commitment aren’t on the table. And when it comes to domestic travel to the Starcruiser, that’s becoming harder and harder to make happen.
There’s going to be a time when the international flood of guests to Disney World slows down. It may not be so far out there. And when that happens, Disney is going to struggle mightily in scaling back some of the high expenses they’ve baked into the Disney cake. That’s what the Starcruiser is telling us and it’s what you’re unlikely to hear anywhere else.
For all the latest news that should be fun, keep reading That Park Place! As always, drop a comment in the comments below if you found this information helpful or useful. You can even tell us if you disagree! We read it all. :)
