Pressler Presentation – Good information, sort of

[larworth]

While waiting for some shareholder meeting scoop, decided to listen to Pressler's recent presentation at the "Leisure" conference. Some parts have been reported, but thought there was some interesting stuff not mentioned. Here is my summary. The bad news is at the end, as if we didn’t already know it. It will be interesting to see what some of these new vacation businesses are.

Tokyo
Huge benefit from locals staying closer to home.
Last year generated $100 million in royalties. Expect this will be up 80% once stabilized.

Paris
Attendance flat, but believe reasonable given soft economic climate.
Studios should get >4 million visitors first year. WDC has an equity investment of only $90 million dollars.

HKong
Open late in 2005 or early 2006.
Enough land for 2 theme parks and several hotels (hint). WDC equity is $300 million.

WDW
Slow, steady improvement.
Flights into Florida are 10% less since 9-11 .
Current split of drive/fly is 65/35 versus historical 55/45.
Per cap spend at WDW surprisingly unchanged.
100 Year’s has been slightly more successful than the Mill. and 25th celebration.
International travel has not rebounded at all. Suspended a lot of int. marketing till things get better.

DL
Per cap spend at DL down 10% due to ticket discounting.

Cost Cutting
Paul said he likes to say we have an infinite capacity to cut costs.
Learned some cuts hurt the guest experience and were forced to reverse.
800 cost initiatives yielding $250 million, expect big part to be permanent.
Wide range from adjusting park hours, work hours, to big back office cuts.

Indicators They Watch
1. Consumer confidence – 3 month consecutive trend up or down foretells park attendance (Dec and Jan both up).
2. Advance bookings – On par with last year, but less rooms for the year booked as of today.
3. Considerations – Ask people these two questions a) what places come to mind when you think about vacation b) what is next likely vacation destination.

“Destination Disney” Program
Making big investment in better tailoring guest vacations.
Examples:
- getting your favorite room with no check-in
- direct access to dining and entertainment reservations thru wireless technology
- special offers related to anniversary, etc.
Goal to shorten time between visits and improve the experience.
What if we could:
- increase domestic return rate by 1 month
- have greater purchase of tickets pre arrival
- get as little as $5 more per person per trip
Expect soon to have 20 million people in the system

DVC
Has been a terrific business for us.
Beach Club in 2002 and Disney Int. conversion by spring 2004.
75,000 members who visit more often than average person.
Disney gets 2-3 year payback on invested capital.

Internet Reservations
Want to participate in every possible outlet. Can save on commisions, but real interest is getting people into our hotel rooms.

New Businesses
Cruise business has shown us we can create new Disney vacation businesses. Will start exploring some of these this year and will say more about these in the future. Model is to share risk and capital. Believe we can build on our expertise in understanding vacations, knowledge of travel industry, and great customer service to be the largest and best run family vacation business.

Upcoming Attractions
Bugs and ToT coming to DCA. ToT has been a tremendous success story for us. It immediately added visitors when opened in WDW. In 2001 it had the same incremental attendance boost that it did in its’ first year (extra 1 million visitors). Reprogrammable ride system a real plus.
Space will be next great experience. Personally tested and it is awesome.


The Cash Flow Gremlin
Mandate is more than $1 billion of after tax free cash flow from this division. Had to cancel, postpone, or reduce capital investment this year to compensate for lost revenue. When asked about domestic investment beyond Space here is excerpt of his reply

Massively rigourous process. NPV projections with hurdle rates well above cost of capital. As stated, we have a goal of delivering over a $1 billion of after tax free cash flow.

Needless to say there is a significant amount of re-occurring capital in our business. But the number of attractions we need to add over the next couple of years is significantly less than the number of attractions we’ve added in the past. So you are going to see a lot less investment in these areas.

Big attraction at WDW is Space sponsored by Compaq. Which helps us...we mutually invest in the project. You can think about WDW as probably adding one new attraction each year on property. Some will be of the scope and size of Mission:Space, others will be like our Dino-Rama which we are adding at the AK which takes significantly less capital. We have slowed down our hotel development. We have put on hold the second phase of our Pop Century hotel. You will see a continued slowing of our capital as we move forward

 

[YoHo]

Having Just got back from my Disney Cruise I have to say My glasses are ruby red, but I can't say I'm upset by a slowdown in capital expenditure, Although the remark about Dinorama scares me.

 

[airlarry!]

Glad to see you back, Yoho, I was wondering what happened...

Thanks for the long post larworth and the comments. Paul intimates that they are listening to customers as to their vacation plans. I just completed last week a survey that Disney sent to me. I did it over the internet (it took almost 30 minutes!) with lots of questions about where I vacation, where my family likes to vacation, etc.

Anybody else get this questionaire?

 

[All Aboard]

Thanks a bundle larworth. Not too much suprising info, just about what you'd expect. But one thing is very interesting to me, described in the "Destination Disney" discussion:

getting your favorite room with no check-in

That would be a terrific addition. Perfect for a "regular" like me. Have a "full time" card-key that gets activated as required. So, I'm driving up and I call: "yes, Mr. Curling you are in room 7934 and it's ready." I just park and move in. No standing in line to get shown a map of a property that I know better than my own home or handed a pamphlet on park hours that I knew before I left, or having the priority seating process explained to me, or asked "do you have your park admission?" or shown where the pool and foodcourt are. What a fantastic guest service this would be!

 

[Bob O]

I am upset about the cut back in capital improvement expenditures! This just means wdw will add nothing innovative on their own, only with a sponsor footing the bill. And it means if the economy does improve they will just siphon more money away from the parks/resorts and not undo the numerous cutbacks they have implemented. Thanks for the info laworth!!!!

 

[Testtrack321]

Hmmmmm....

Millennium not as succesful as 100 YoM?

I guess 10 new things vs. 5 is better, huh? I think we should look into that...

 

[doubletrouble_vb]

It's funny I thought the Millenium celebration was much nicer than 100 years. I can't figure out how 100 years could be more successful since it started along with the downturn in attendance...unless they are looking at a broader market than theme parks.

 

[JeffJewell]

I can't figure out how 100 years could be more successful

...the 100 Years celebration is considered more successful based on the fact that with the lowered attendance, Disney shut down hotels and cancelled park hours to maximize resources. Their sales dropped precipitously, but they cut out the excess capacity. Effectively, Disney became a smaller resort making larger margins.

It's the increased margins compared to expenses that's an "improvement." It's probably what Eisner's regime has done best: cutting expenses faster than people stop buying his products.

Jeff