Disney has ‘long way to go’ to rebuild theme park reputation: Expert

Frommers Editor-in-Chief Jason Cochran joins Yahoo Finance Live to discuss Disney earnings, Bob Iger’s plans for Disney, troubles running through theme parks, consumer spending, travel demand, and the outlook for Disney.

Video Transcript

RACHELLE AKUFFO: Well, Disney is certainly optimistic on the outlook for its theme parks with CEO Bob Iger making known his bullish stance in yesterday's earnings call. But our next guest sees troubles in sight that may not be solved even with Iger's return as Disney's chief executive officer. Here to discuss is Jason Cochran, Frommers editor-in-chief. Good to see you, Jason. So--

JASON COCHRAN: Good to be here.

RACHELLE AKUFFO: --why do you think that's changing-- good to see you. Why do you think this changing of the guard might not have the impact that some investors are perhaps banking on?

JASON COCHRAN: Well, it won't be immediate. That's the biggest reason. There's a long way to go, I think, for Disney to rebuild its reputation within the theme parks because it's been a good half a decade of not so much investment. I think it's getting a little dirtier and the experience for customers getting a lot more difficult.

And that's going to take some time to iron out, especially as Disney's method right now of making that 21% increase at the parks, as you reported, has been basically to charge guests who are going more, to get more yield out of each person. And that's a strategy that they don't plan on reversing any time soon.

RACHELLE AKUFFO: And we know that Bob Iger did speak about this pricing for consumers and how offputting it's been for people who want to come in. And perhaps that's why we didn't see parks grow perhaps as fast as he would have liked. But where does pricing rank for you in terms of really the issues affecting Disney's theme parks? You mentioned things like how happy customers are when they go there.

JASON COCHRAN: Well, it's pretty significant. I think if you ask most people what their biggest concern about with the Disney Park vacation that they want to give their families, pricing would be right up there. Rooms at some of the resorts at Walt Disney World cost almost $1,000 a night in some cases. And the way Disney's been able to get a lot more money into its coffers is to charge people a little bit more when they go into the parks. For example, I'll give you an example.

Years back, five, six years ago, one could get a reservation for a ride, a time to ride, for free. That now is a revenue stream for Disney. And it's only started in the last two or three years. And that $20 or $30 extra you're going to pay every single day to guarantee that you're going to ride the rides you want is on top of parking, on top of ticketing, on top of souvenirs and food. That's a new increase.

And it's one of the reasons that the parks have been making so much money that the rest of the company has been able to use to sort of pay down its debts or shoot shows for Disney+, is the parks increasing the pressure on each customer has been getting higher and higher. And customers are starting to get frustrated.

RACHELLE AKUFFO: And as you note, another way they're saving money on parks, though, is not having any major new attractions for a long time. I mean, we know that Bob Iger talked about the success they saw with "Avatar" expanding beyond, like, the land they have at Animal Kingdom to do something at Disneyland. But he didn't go into details that something would be "Avatar" related, though. But when you think of what it takes to build one of these parks and the time involved, what do people need to know about when some of that might pay off?

JASON COCHRAN: Disney is famous for being very slow about its construction projects, even more so lately. It's about to open a brand new roller coaster in the Magic Kingdom in Florida. I think the shovel went into the ground in 2017, perhaps. It's been a very long time for this thing to happen. Partly, that's COVID. There were shutdowns in the middle. But it still does take Disney a long time to build a new attraction.

And there are no major rides or attractions now that are in the pipeline after this new roller coaster, Tron, opens in April. None of the American Disney parks have a major ride that's under construction now. It will take a long time for those to come online when they finally start to be built. In the meantime, Comcast is about to open a brand new theme park in 2025 in Orlando to compete with Disney.

And so that, I think, is going to be the biggest thing to watch in the next decade or so, is, how far ahead does Comcast think it's going to get? And is it going to come neck and neck with Disney because increasingly, it's building the infrastructure that people want to have. There's a nonstop appetite for new rides and new parks. But also, it's kind less of a hassle for people to visit. And Disney is going to have to contend with both of those issues on the consumer front.

RACHELLE AKUFFO: And we are expecting a lot from Universal. We've seen their growth as well. How do you think Disney, Universal, how do they stack up against some of these up and coming and other growing entrants into this theme park space, especially when you look at the overseas markets?

JASON COCHRAN: Yeah, the nice thing about Disney and Universal within the United States is, they're just sort of competing against each. There are other theme parks, but they're considered maybe a day out with your family, much less of an event that the Disney and Universal experiences give people. So they don't have a lot of competition on that front. And very few Americans will fly to Paris or Tokyo or Hong Kong, to those Disneylands. They just spend the money locally. So we do get a lot of international visits, especially to the Florida theme parks that Disney runs and Universal runs.

But generally, the international parks don't get them as much competition. There's sort of-- it's an arms race. And it always has been for the last 25 years, an arms race against the two of them within the American market. But Universal is figuring out new ways to reach people across America without requiring them to travel to Orlando or to Anaheim.

They're building with a new-- sort of like a kids' theme park in Texas. They've announced plans to build like an all year long Halloween scare house in Las Vegas. They're figuring out ways to reach smaller groups of people on a year round basis with a lot less investment. And Disney is still sort of wedded to its massive resorts that cost so much to operate.

RACHELLE AKUFFO: And that access is definitely important as consumers consider how much they can actually spend in this sort of environment. It's certainly no small feat trying to pay for tickets to Disney. A big thank you there, Jason Cochran, Frommers US editor-in-chief. Thank you for joining me this morning.