Why Disney is doubling down on its parks business again

In the decades since Walt Disney opened his first theme park in 1955, the company's tourism industry has grown into an enterprise with annual revenues in the tens of billions, with sprawling locations in Anaheim, Orlando, Paris, Shanghai, Hong Kong and Tokyo.

Today, the Burbank entertainment giant is doubling down again. Disney plans to invest $60 billion over the next decade in its so-called experiences division, which includes its theme parks, resorts and cruise lines, as well as merchandise.

In Anaheim, the City Council recently approved an expansion plan for the Disneyland Resort that could lead to at least $1.9 billion in development and include new attractions in addition to hotel, retail and restaurant space.

Why this huge investment? At a time when Disney is facing revenue challenges from cord-cutting, streaming wars and a slower movie box office, the theme parks are a smart — and reliable — place for its business. Furthermore, they play an important role in the company's strategy: using beloved films to inspire attractions and vice versa (think “Pirates of the Caribbean”), fueling an ongoing virtuous cycle.

“If you consider other elements of Disney's business, those theme parks, they have proven to be winners,” said Carissa Baker, assistant professor of theme park and attraction management at the University of Central Florida's Rosen College of Hospitality Management. “There is no doubt that they have remained very competitive in film and TV, but they have always led the theme park sector.”

During the most recent fiscal year, the company's experiences division — which is heavily anchored by its parks — brought in about 70% of Disney's operating revenue, according to a filing with the U.S. Securities and Exchange Commission. In contrast, Disney's sports sector, including ESPN, contributed 19% of operating income. The entertainment division, consisting of the company's TV channels, streaming services and film studios, came in last with 11%.

These numbers are a stark contrast to even a decade ago, when the company was heavily dependent on its TV networks, which brought in 56% of Disney's operating revenue (that segment included ESPN at the time). The parks and resorts division attracted only 20%.

The tide began to turn in 2019, when the global theme park industry saw record attendance just in time for the pandemic the following year.

With the parks closed, Disney reported an operating loss of $81 million in 2020. Disneyland and Disney's California Adventure in particular were closed for 15 months due to strict restrictions in the Golden State. Since then, pent-up visitor demand has boosted theme park revenue in a way never before seen in movie theaters.

“The industry was growing really quickly before COVID-19, and that obviously put a strain on everything,” said Martin Lewison, an associate professor of business management at Farmingdale State College in New York. “But it appears that as long as the economy remains healthy, the sector is back on track for that growth.”

Theme parks tend to be one of the parts of the travel and hospitality industries that bounce back fastest after economic downturns, says Dennis Speigel, founder and CEO of consulting firm International Theme Park Services. Part of that is because it's difficult to duplicate the theme park experience at home.

“Disney is setting the bar high for our entire global theme park industry,” said Speigel. “The guests, the visitors, they love the way Disney immerses you in their stories.”

The Disneyland Resort expansion plan, known as DisneylandForward, will keep the 490-acre park fresh for visitors. The plan calls for changes to the park's zoning, giving the company more freedom to combine attractions, theme parks, shops, restaurants and parking. While the plan doesn't specify exactly which attractions will be added to the resort, company officials have floated ideas including immersive Frozen, Tron and Avatar experiences.

Over the years, Disneyland has cycled out many attractions and exhibits to make way for new ones, e.g original 33 attractions that debuted with the parkonly a dozen still exist. (One that didn't make the cut? The Monsanto Hall of Chemistry).

While Disneyland and Disney's California Adventure have seen recent additions like Star Wars: Galaxy's Edge, Avengers Campus and the renovated Pixar Place Hotel, giving guests new reasons to come back again and again is the key to more growth. The Magic Kingdom will open this summer Tiana's Bayou Adventurereplacing the controversial 'Song of the South'-inspired Splash Mountain attraction.

“In the theme park industry, you generally make more money the more you invest,” says Lewison of Farmingdale State College. “People like to ride Haunted Mansion 50 times, but the truth is even that gets old. So new attractions, new lands, new parks – these things attract a lot of visitors, they create pricing power and they add capacity.”

And Disney's theme park rivals show no signs of slowing down, meaning Disney can't rely solely on its existing hits. Universal Studios Hollywood recently added Super Nintendo World to its park, SeaWorld is promoting new attractions and shows for its 60th anniversary this year, and even immersive art installation company Meow Wolf is expanding in the US.

The competition is becoming so fierce that Disney CEO Bob Iger was asked a pointed question at last month's shareholder meeting about Walt Disney World's willingness to compete with a new Universal park opening in Orlando in 2025. He returned to the question, saying: The idea that Disney World had not prepared enough attractions to compete for guests that year “simply couldn't be further from the truth.”

“We have known about Universal's plans for a new park for more than a decade,” he said. “We take a sophisticated approach to analyzing the needs of all our businesses and deploying capital strategically.”

The importance of the parks for Disney is also evident in the entertainment giant's search for Iger's successor. (Iger is expected to retire in 2026.) Josh D'Amaro, chairman of Disney Experiences, which includes the parks, is considered one of four frontrunners for the job. Notably, it was Bob Chapek, formerly of the parks division, who initially succeeded Iger, although he was later removed from the role.

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