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WDW officials knew that '09 was going to be a real challenge

Jim Hill

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WDW officials knew that '09 was going to be a real challenge

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Wayne C. sent in an interesting follow-up question to yesterday's article:

"When exactly did Disney World executives realize that their resort was about to hit a rough patch? Based on some of the things they've done over the past six months (EX: Announcing back in July that they'd be closing Pleasure Island down at the end of September), they clearly must have known that something serious was about to happen. But the way today's story was written, you make it sound as though Wall Street's freefall caught these guys totally by surprise. So when did they know that they were in trouble?"

Based on what I've been told, the folks who work at Disney's Reservation Centers began raising red flags back in January. Even then, there was enough of a deviation from the way that people typically made their Disney World reservations, the numbers of days that Guests were opting to stay on Property, the types of packages that they were booking to suggest that late 2008 / early 2009 was going to be a real challenge for the Resort.

Copyright 2008 Disney. All Rights Reserved

Which is why -- starting in February -- WDW management began getting aggressive about cost containment. They started by shutting down PI's Rock 'n' Roll Beach Club. They then asked managers all over Property to come up with new ways to save money at the Parks & Resorts which (hopefully) wouldn't be all that obvious to the Guests.

Okay. Admittedly some of these cost saving measures (i.e. pulling the plug on PI) were a lot more noticeable than others. But there have been lots of other changes made at the Resort that you may not have noticed. Not yet, anyway.

Take -- for example -- the operational changes that have recently been made over at "Monsters, Inc. Laugh Floor." This Tomorrowland attraction used to open at the exact same time that the Magic Kingdom did. But these days, "MILF" doesn't start presenting shows 'til an hour after that theme park officially opens for the day. It now also closes its doors a full hour before the Magic Kingdom shuts down for the night. Which then allows the Mouse to cut back on the number of Cast Members who typically work at the "Laugh Floor."

Copyright 2008 Disney. All Rights Reserved

Mind you, "Monsters, Inc. Laugh Floor" isn't the only attraction that has recently shortened its hours. Over at Disney's Hollywood Studios, "Walt Disney: One Man's Dream" has begun closing its doors in mid-afternoon, hours ahead of when that theme park actually closes for the day. Again with an eye toward reducing the number of Cast Members that WDW actually needs in order to operate this DHS walk-thru attraction.

So for every obvious change that's been made (i.e. When they stopped serving lunch at Epcot's Garden Grill earlier this week), there have other not-so-obvious  changes. Like the removal of some of the pricier items from buffets all over Property. Not to mention the reduction of portion sizes. All with an eye toward lowering overhead, reducing payroll costs and/or just saving money.

"So when does Disney expect things to really start getting bad?," you ask. Well, if you'll recall the changes that have already been put in the pipeline for January (i.e. "Fantasmic!" will be cutting back to just two nights of performances each week then and the Liberty Tree Tavern will be discontinuing character dining just about this same time), it's pretty obvious that Mouse House managers think that the first three months of 2009 are going to be rough on the Resort

Copyright 2004 Disney. All Rights Reserved

And when you take into consideration that WDW officials knew at least 9 months ago that we were headed into some tough times economically ... Well, that then puts Disney Parks & Resorts' "What Will You Celebrate" campaign in a whole new light.

I mean, think about it. Knowing now what they knew about how the Resort's advance reservations were falling off (at least from its stateside customer base), wasn't it clever -- gutsy even -- for Disney to craft a promotional campaign that would actually take into account the coming bad times? Which would then offer Guests free admission to a Disney theme park at a time when people might need an incentive like that in order to make a trip to the Parks & Resorts seem that much more affordable?

I know, I know. There are tons of strings attached to that "free admission" (i.e. registering in advance, producing a valid I.D. that then verifies your birthdate, etc). But strictly from a PR point of view, this is a very savvy maneuver by Mickey. To give something away at a time when people would genuinely appreciate getting a freebie. That -- to my way of thinking, anyway -- was a really smart move on Disney's part. Particularly given this economy.

Copyright 2008 Disney. All Rights Reserved

And then -- when you factor in what this "What Will You Celebrate?" balloon-based promotion will actually cost the Company versus what Disney must have spent on some of those earlier, far higher profile promotions that were done for the Parks -- this one looks like it'll be far more affordable. Which once again brings us back to Disney's recent focus on cost containment.

As WDW management getting caught by surprise ... The one place where (I think) Disney slipped up is that they didn't take into account what might happen if the U.S.'s financial problems were to suddenly spread overseas. Which is obviously going to have an impact on the number of tourists who can now afford to fly in from Europe, South America & Asia for an Orlando vacation.

This is why the postponement of the Fantasyland facelift project caught so many people within the Company by surprise. It had always been assumed that -- as long as there was this steady stream of international Guests coming in to Walt Disney World to compensate for any U.S. -based attendance shortfalls -- that the Resort would then be able to weather any sort of economic downturn. That WDW would chug along as it always has. But now that it's not just Wall Street that's gone weird but also the overseas stock markets ... All bets are off.

Copyright 2008 Disney. All Rights Reserved

Which brings me back to your original question, Wayne: Based on everything that I've heard, WDW officials were aware that something was up as far back as January.Which is why they really got proactive about cost cutting starting in February.

But they -- just like everybody else -- never dreamed that things could get this bad this fast. With Citi cutting the target price for Disney's stock yesterday because Disneyland & Walt Disney World's room prices are approximately 30% off of what they were this time last year.

Which is why no one who works for the Resorts right now is looking forward to the start of 2009. Which is when the real hurting is supposed to begin.

Your thoughts?

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  • I just hope that Disney execs remember the difference between saving money and making money, and keep in mind that during a recession (or depression) "value for money" is almost as important as actual cost.

    You can't keep charging more while offering less and not get found out, and if the current problems continue, Disney Parks' true value will start coming under scrutiny a lot sooner and harsher.

  • I understand they *want* to cut costs, but I think they *should* keep plussing the day-to-day operations so people will feel like a trip to WDW is still worth it.  Delaying the future Little Mermaid ride?  I understand that.  Cutting current Fantasmic and the pricier buffet food offerings?  Careful there, guys.

    They need to make people feel like coming to WDW is the sensible vacation right now (i.e. you can drive here!  you can have a free ticket!  we have lots to do that you don't have to pay extra for!) and not like they're just leading us in to be milked.  Or people won't be coming at all.

    Jim, the article I'd like to see is "What's happening at Universal?"  Are they slowing down Harry Potter?  Was their cheepie "get a whole-week, 2-park hopper ticket for $86" promo successful?

    I know we left Disney and went to Universal for the first time on those tickets last summer, and we were impressed.  It seemed like Universal was doing a lot of things well, and we'll be back.  Is Universal investing while WDW is scrimping?  Will it pay off?

    Sue in Texas

  • I would be curious to see what other plans they have should this economic situation get worse or last longer than just a few months. I would imagine they have more cuts and closures planned, hopefully none of them permanent.

  • I'm sure the next logical step is to close entire resorts if the economy really goes down the tubes.  That move is not unprecedented.  If I recall correctly, CBR and FQ both closed for "renovations" post September 11.  Months ago Kevin Yee over at MiceAge speculated that WDW would go as far as shuttering entire parks on specific days of the week (AK on Monday, DHS on Tuesday, etc.) with the historical fact that once upon a time even DL was not an every day of the week park!

  • I know this "crisis" is just happening, and people may have booked their vacations up to a year in advance, but I was at Downtown Disney last night (which, if I rememebr correctly, is supposed to be offseason) and it was absolutely slammed. Lines out the door for all restaurants. Lines through the stores to check out. I was STUNNED. Even if people booked their vacations far in advance, last year's economy wasn't all that hot either. And either way you can typically cancel a vacation if you feel that a couple grand vacation is no longer worth while. What I'm trying to get at is that for some people, people who would be able to spend 4 grand in a week anyway, probably won't be hurt all that much by the current economy. The people who will be crushed by this crisis are the ones who couldn't afford to fill up their mini van before and now are completely screwed. People who were flying their family to Florida, staying in a delux resort and getting hopper passes for a week aren't exactly trembling just yet.

  • Scrimping is good for the short-term stock price, but a better investment would be this: Focus on cost cuts that won't dilute the company's rep (and long-term stock prospects). It's assessing CEO salaries and severance packages (especially when the company is left in bad shape), the cost of materials, not giving animated films a release date until a final cut in the form of storyboards is locked-in (Black Cauldron set an expensive precedent in finished animation being cut in post), and having conservative contingency plans and a schedule discouraging the expensive rush towards a release date for the likes of POTC movies. Then, there's investments to be made. Plussing the guest experience in the parks with an eye to the future is one. (Remember, these things are cyclical. Best now to pay up, especially when the government will be giving tax incentives)  Local sources of food and other products will be an increasing bargain, because it cuts shipping costs. And it would be nice if the move to green allowed for more competition in transportation. I think the dependence on individual cars, airlines and inconvenient-to-poor public transportation infrastructure hurts businesses across the board.

  • A couple of thoughts on this one...

    My family and I returned a few months ago from a big WDW vacation. In looking at our travel habits statistically, we seem to go the parks once every 5 years. So for us, we never even noticed any of these cost cutting manuevers. So, having Laugh Floor open up an hour after the rest of the park... no biggie. To us, its just the way it was and we never questioned why. So kudos to Disney for making the changes that will help them to save money without drawing too much attention or raise red flags. Sure, the annual passholders that go every month may notice some things, but for those of us that are only there every once in a while... we'd never even question them.

    Next, more Kudos to Disney for the new promotion. I know.. alot of people don't think its a big deal. But we just got back from WDW.. that trip wasn't cheap by any means. But to suddenly have my ultra-frugal wife e-mail me, proposing that we fly to California next year as a special way to celebrate our sons birthday, simply because he can get in free... That's amazing!!! Yes, she is the kind that will drive across town (using up all the gas in the process) to go to the one gas station where she can save 5 cents a gallon. So the thought of one of us getting into a Disney park for free has made the whole idea suddenly "doable" and we are planning a trip that we otherwise would not have even thought possible for a few more years. Totally brilliant plan in my book... (Plus I get to go to Disneyland!!!!!) :)

  • I just wanted to correct Jim on the "strings attached" to the birthday promotion. From the FAQs here (http://disneyparks.disney.go.com/disneyparks/en_US/WhatWillYouCelebrate/index?name=WDWCelebrationFAQsPage):

    "As long as you have valid identification, including date of birth, you can take advantage of this birthday offer at the Walt Disney World® Will Call windows. The reason for registering your birthday online is to save you time. You won't have to wait while you fill out the forms at the Will Call windows."

    While pre-registering on the site can save you time, you won't be left high and dry if you show up at the parks without having done so. Just make sure you've got your identification (If you're age 18 or older, proper ID would be a Driver's License, State-issued or Government-issued photo ID, or a Government-issued Passport. If you are under age 18 and don't have any of the above mentioned ID, an original Birth Certificate or a notarized copy of a Birth Certificate is required.).

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