http://www.orlandosentinel.com/business/tourism/os-disney-earnings-20100810,0,6277787.story
Outlook improves for Disney theme parks
By Jason Garcia, Orlando Sentinel
7:08 p.m. EDT, August 10, 2010os-disney-earnings-20100810
The Walt Disney Co.'s theme-park business may finally be near the bottom of what is now a nearly two-year downturn.
Disney said Tuesday that fiscal-fourth-quarter hotel reservations at its resorts in Orlando and in Anaheim, Calif., are running just 1 percent behind the same period a year ago — the most promising bookings pace the company has reported in more than a year.
That prompted a relatively upbeat — though still tempered — assessment from Disney Co. President and Chief Executive Officer Bob Iger.
"The fact that we're only 1 percent down in the parks at this time is very encouraging," Iger said during a conference call to discuss Disney's fiscal-third-quarter earnings. Iger added, though, that "visibility is still relatively limited, and you're dealing with an economy that is certainly fragile."
Iger's remarks followed an earnings report that easily topped Wall Street expectations, as Disney was powered by a resurgent movie studio and its ESPN cable-sports network.
Disney said it earned $1.3 billion during the three months that ended July 3, up 40 percent from profit of $954 million a year ago. Revenue grew across all of Disney's major divisions, rising overall by 16 percent to $10 billion.
Disney's theme parks were the weakest performer among the company's five main segments. Operating profit at Walt Disney Parks and Resorts fell 8 percent to $477 million, though sales climbed 3 percent to $2.8 billion.
The park results reflected Disney's efforts to continue reducing the size of the discounts it has been using to stimulate travel during the global economic downturn.
Combined attendance at Disney's U.S. resorts fell 3 percent from a year ago, with a 2 percent decline at Walt Disney World and a 4 percent drop at Disneyland. But per-capita guest spending rose 5 percent, as smaller promotions produced higher average ticket prices.
Attendance comparisons were hurt by a shift in the timing of Easter, one of the busiest travel periods of the year. Excluding the effect of that shift, Disney said, combined U.S. attendance was down 1 percent for the quarter.
The effect of reduced discounts was particularly pronounced at Disney's hotels: Average occupancy at Disney World, where the company has roughly 25,000 hotel rooms, fell eight percentage points to 83 percent. But per-room spending, which includes the average room rate, rose 4 percent.
Disney Co. Chief Financial Officer Jay Rasulo said executives were pleased with their progress in phasing out discounts. "The volume and price tradeoff, we've been pretty happy with domestically," he said.
Executives said their theme parks were also hurt by higher operating costs for new offerings, including a summer parade and fireworks show at Disney World and the lavish "World of Color" water-and-lights show at Disney California Adventure — which Iger said has been luring "record crowds" to Disneyland's long-struggling second gate.
Profits at Disney Cruise Line suffered. Disney said the business was hurt by soft bookings for European cruises as well as by higher fuel expenses and start-up costs ahead of the January launch of its new, 4,000-passenger Disney Dream cruise ship.
But Disney said its forward-looking trends are more promising. Domestic hotel bookings for Disney's fiscal fourth quarter are currently running 9 percent behind last year's pace, but only because a quirk in Disney's accounting calendar gave last year's fourth quarter an additional week. When the effect of that extra week is stripped out, Disney said, bookings are down only 1 percent.
In each of the past two quarters, bookings had been running 10 percent behind the year-ago pace. "That suggests an improvement," Iger said.
Disney's best performances during the third quarter came from television and movie screens.
The company's movie studio rebounded from a year-ago loss to a $123 million operating profit, thanks to a string of hits that included Alice in Wonderland, Toy Story 3 and Iron Man 2, which was produced by Disney's recently acquired Marvel Entertainment studio. Disney's media networks reported operating profit of $1.9 billion, up 43 percent from last year, thanks in large part to continuing gains at its ESPN sports cable-TV channel.
Operating profit in Disney's consumer-products segment rose 22 percent to $117 million, helped by sales of Toy Story 3 and Marvel merchandise. And Disney's interactive-media unit narrowed its operating losses to $65 million, thanks to sales of the video games Toy Story 3 and Split Second.
Jason Garcia can be reached at jrgarcia@orlandosentinel.com or 407-420-5414.
