Disney has stated multiple times over the course of the past year that they are at the beginning of a huge effort to turbocharge the growth of their theme parks business. They have stated that over the next decade they will invest $60 billion into Disney Parks.
We have shared a lot about the work to rezone property at Disneyland Resort to allow for a big expansion there and big plans for expansion pads at Walt Disney World for new lands in Magic Kingdom and Animal Kingdom. Work appears to be getting underway on both coasts and at international parks. Disney recently also shared details about the expansions planned for Disneyland Paris that even includes a theme park name change.
Today we heard more specifics about one of the areas that we haven't talked about expansion for as often but that we have a high affinity for as well.
Disney Shares Big Area For Continued Growth in Experiences Business
During the last earnings call, we focused in on a quote from the Disney CFO talking about how the money going into the parks over the next decade would be spent. “We plan to invest approximately $60 billion into the business over the next 10 years, of which approximately 70% is earmarked for incremental capacity-expanding investments around the globe which we expect to generate attractive returns”.
When discussing that quote we mentioned that the new capacity could be new theme park attractions or even new cruise ships. Now, the Disney CFO made new comments today that lead us to believe that some big chunk of that money will be spent to expand the Disney Cruise Line.
Today Disney CFO Hugh Johnston spoke more about where they see areas for future growth in the Disney theme parks business. Overall he first talked about the theme parks in general as great businesses. “[Parks investments are] a 25%+ margin business and has been for an extended period of time, has terrifically high guest satisfaction scores which create layers of advantage which suggests we should be able to sustain high margins and high returns on investment. With a business with that profile, you invest in it”.
He then dove into talking more about the specific opportunities within the parks business. “We know there are lots of opportunities to continue to grow attendance, both domestically and internationally. And the cruise business is one that has an enormous number of opportunities for us over time and that is why we're leaning more heavily into that business. We expect to get excellent returns out of the business, in particular in cruises given the margin profile of the business, and the fact that it's got the highest guest satisfaction scores in the company. This leads us to conclude this is a business with a lot of runway left in it, and that'll deliver great returns to our shareholders.”
Based on this quote it appears that Disney will continue to double down in their cruise line business. We love the Disney Cruise Line and have experienced the superb levels of service that drive those high guest satisfaction scores.
As we just shared here, there are tons of differences between a Disney World vacation and a Disney Cruise Line vacation. One of these key differences is just the level of attention to detail and personalized cast member interactions. Let's dive more into what this new investment would mean below.
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Disney is Already Doubling Down on Disney Cruise Line
Disney is already working to expand their Cruise Line capacity with an increased number of new ships including the Disney Treasure which will have its maiden voyage this year, the Disney Adventure which will make port in Singapore starting in fiscal year 2025, and the most recently announced Disney Destiny ship which will set sail in fiscal year 2026. In addition, Disney is getting ready to open their Lookout Cay at Lighthouse Point private island destination next month.
Overall it looks like Disney Cruise Line is not slowing down any time soon with their build-outs of these ships and the various destinations. The good thing here for consumers is that the more ships that Disney builds the more likely that we will see some amount of prices leveling off with experiences at all price points. Right now discounts are generally very rare for Disney Cruise Line because of the restricted supply for this in demand experience.
There is still a long way that Disney could go expanding their fleet. Though not an apples to apples comparison because the market Disney's cruises serve is different, it is worthwhile to look at the scale of the Royal Caribbean and Carnival Cruise Line fleets. Right now Disney has five ships with the sixth, seventh, and eight ship on the way. Royal Caribbean has 24 ships and Carnival Cruise Line has 27 ships. These two cruise lines continue to also expand. So, both are three times as big as Disney's fiscal 2026 planned fleet size. You can start to understand how Disney sees this is a big growth business.
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The downside of Disney's focus on Disney Cruise Line is that there is a finite amount of money slated for Disney Parks expansion and each one of these ships costs quite a bit of money to get online. CNBC estimated that the Disney Wish cost around $1 billion to build. Pretty quickly new ships will start to eat into the budget for other further expansions on land. There are so many different ways that Disney could choose to spend the money to expand their parks segment offerings. The Disney Cruise Line business would not be my personal first choice because I am most excited about new theme park lands that will reach millions of people, however it is easy to see why Disney is focusing in on the cruise line.
We will have to wait and see what this Disney Cruise Line expansion actually results in being announced. We anticipate quite a big amount of Disney Parks news – both for land and sea – at D23 this August.
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