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Anaheim Resort Outperforms; A Standout Among Theme Parks

Anaheim’s Disneyland, dubbed the Happiest Place on Earth, is certainly a source of good feelings for its parent company these days.

The Disneyland Resort, Orange County’s largest employer with around 34,000 workers, has served as a bright spot for Burbank’s Walt Disney Co. (NYSE: DIS) over the course of a challenging year for the $153 billion-valued firm, with 2023 attendance reported to be up over last year’s levels.

Disneyland Resort—which includes the namesake theme park and Disney California Adventure—last year brought in close to 26 million visitors, according to a report backed by the Themed Entertainment Association (TEA).

Disneyland is the No. 2 amusement park in the country, while California Adventure is No. 8, according to the report.

Buena Park’s Knott’s Berry Farm is No. 11 in the U.S., with an estimated 2022 attendance of 3.9 million.

The company has seen “continued strength at Disneyland Resort,” Walt Disney CEO Bob Iger told analysts during its latest conference call.

The attendance increases come despite rising prices for tickets at Disneyland. A one-day pass for the park now ranges between $104 and $194 depending on tier, with the highest price up 30% from pre-pandemic levels.

Disney last week implemented more price hikes across the board for park tickets, annual passes and parking.

The continued draw for the Anaheim parks also serves as a counterpoint to attendance issues at other Walt Disney Parks of late, with Iger pointing to a “softer performance at [Florida’s] Walt Disney World from the prior year.”

More in Store

Walt Disney is banking on Anaheim’s continued appeal, with billions of dollars earmarked toward its roughly 500-acre collection of land in Orange County over the next decade.

Last month, Disney shared plans to double capital expenditures for its parks business over the next 10 years to roughly $60 billion.

The company is already investing heavily in upgrades—and a potential long-term expansion—locally, which analysts point to as a sign of strong fundamentals.

“We know that when Disney invests, it is good for Anaheim, its residents, and the business community,” Disneyland officials told the Business Journal.

Disney’s Parks, Experiences and Products division is headed by Josh D’Amaro, who oversaw Disneyland from 2018 to 2019, a period that saw the opening of Star Wars: Galaxy’s Edge, the Anaheim park’s largest expansion in years. Its cost was estimated at around $1 billion.

Florida Issues

Disneyland Resort reported higher attendance and increased guest spending for the third quarter, balancing out higher costs driven by inflation, according to officials.

Overall attendance in domestic parks grew “slightly” year-over-year, Interim Chief Financial Officer Kevin Lansberry told analysts in August, with declines at the larger Florida theme parks offsetting gains from those in Anaheim.

“Local tax data shows evidence of some softening in several major Florida tourism markets,” Iger said.

Walt Disney World’s struggles were in part attributed to the company’s Star Wars-themed Galactic Starcruiser hotel that recently shuttered after less than two years in operation, due to poor occupancy levels.

Hotel Boost

While Walt Disney’s issues at its Florida parks resulted in an accelerated depreciation charge of approximately $100 million from the hotel closure, Disneyland spent the past year investing in local hotel upgrades, from reworking of its Paradise Pier Hotel to adding all-new guest rooms to The Disneyland Hotel.

The September opening of The Villas at Disneyland Hotel, a new 344-suite timeshare tower set new monthly sales records for the company, it said.

OC Tourism

Orange County’s tourism market, which has largely rebounded from the pandemic, has benefitted from the increases to the Disneyland Resort, its biggest draw.

The city of Anaheim witnessed a visitation increase of 2.9% in 2022 compared to 2019, according to Tourism Economics.

Anaheim expects transient occupancy tax revenue to reach a new high of $184.4 million for the 2022-2023 year, compared to the $162.6 million from before the pandemic.

“The resort alone is responsible for $8.5 billion in economic benefits” in Southern California, Disneyland officials told the Business Journal.

Boost From Locals

A global attractions report from the TEA and Aecom said Disneyland reported the highest gains in attendance in 2022 of all U.S. theme parks tracked.

According to the report, local markets played a critical role in keeping attractions alive during the pandemic.

“In California, parks are much more resident driven,” said Wonwhee Kim, co-founder of The Park Database, an analyst site for theme parks and attractions.

Future Demand

Disney counts over 1,000 acres of land across its existing portfolio of six resorts that could benefit from the planned $60 billion investment.

In addition to adding and renovating Disney-owned hotels, the company is investing in new attractions at both Disneyland and Disney California Adventure and an expansion of the Downtown Disney shopping district.

“It’s a big thing because whenever these parks tend to have big capital expenditures, or new lands or rides, there is usually a measurable attendance impact that even the parks will announce,” The Park Database’s Kim said.

In Anaheim, approvals from the 1990s provided entitlements for Disney to build up to 6.5 million square feet for theme parks, hotels and other uses.

The company has yet to near buildout for any of the possible uses, meeting less than half of its allowed theme park space, about 40% of its hotel space and two-thirds of its retail space for both inside and outside of the theme park gates.

The proposed DisneylandForward expansion would add new theme parks, hotels, dining and parking within the 500-acre resort in Anaheim over the next several decades.

Going Forward

Disney last month released a draft environmental impact report for the potential DisneylandForward expansion, and will close a 45-day public comment period on Oct. 30.

A larger expansion in which Disneyland Resort is developed to its full entitlements could result in annual tax revenue of $244 million for the city of Anaheim, more than twice the city’s tax revenue in 2019, according to Anil Puri, director of California State University, Fullerton’s Woods Center for Economic Analysis and Forecasting.

DisneylandForward is “another reminder that even the oldest parks will continue to reinvent themselves and offer new experiences to keep guests coming back,” the TEA report said.

Walt Disney’s Turbulent Year

Outside Anaheim, headlines have largely been negative for Walt Disney Co. (NYSE: DIS) over the course of 2023.

Bob Iger—who was previously CEO of the media and entertainment giant from 2005 to 2020—returned to the top C-suite position in February in a course-correcting move to mitigate losses from the company’s media and entertainment segments, among other issues.

Areas of concern included streaming service Disney+, which has struggled with profitability.

The company’s stock hasn’t gotten much of a boost from the exec move; shares of Southern California’s most valuable public company are still off some 11% year-to-date.

Third-quarter revenue for Walt Disney’s theme parks unit totaled $8.3 billion, and despite challenges in Florida the unit’s operating income grew 11% to $2.4 billion.

The theme park segment’s health and plans for accelerated investment have kept Disney on the good side of investors and analysts for now.

Fiscal third-quarter revenue “was largely in line with consensus expectations, with a parks beat largely offsetting media softness,” Guggenheim analysts reported.

“More parks value is good for the stock long term,” equity analysts from Wells Fargo said, putting faith in the division’s sustainability and intellectual property.

The firm maintained its “overweight” rating for the company while citing uncertainty about the segment’s spending growth matching future earnings growth.

“The [capital expenditure] build is slow [and] discretionary and the balance sheet is healthy,” analysts reported shortly after an investor summit in September.

Ahead of Disney’s fourth-quarter results, JPMorgan analysts raised estimates for the park segment’s operating income despite the domestic division’s struggle and “to reflect sustained investment beyond F2025.”

“The company’s DPEP (Disney Parks, Experiences and Products division) capital spend plan of $60 [billion] over the next 10 years is more of a guidepost in our view [versus] hard target and likely more intended to highlight the company’s plans to accelerate growth in that business,” analysts wrote.

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