Disney sees 'blockbuster' profits, 'unfavorable attendance mix' with Magic Key passholders

General views of Sleeping Beauty Castle at Disneyland on May 27, 2022, in Anaheim, Calif.

General views of Sleeping Beauty Castle at Disneyland on May 27, 2022, in Anaheim, Calif.

AaronP/Bauer-Griffin/GC Images

The message in Disney’s most recent earnings report was clear: The company is making more money than ever, but annual passholders are more of a liability than an asset — at least financially speaking. 

In the Walt Disney Company’s third quarter earnings report, released Aug. 10, the company reported a 50% increase in operating profit, to $3.6 billion, and a revenue increase of 26%, to $21.5 billion. The New York Times called it a “blockbuster quarterly earnings report,” in that it surpassed analyst predictions in everything, from new Disney Plus subscribers to theme park revenues. 

“Higher operating results for the quarter reflected increases at domestic parks and experiences,” the report read.

“The increase in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane in the first quarter of the current fiscal year and a reduced impact from promotions at Walt Disney World Resort,” it said later. 

But there was a caveat. The profits would have been more, the report stated, but for those earnings being “partially offset by an unfavorable attendance mix at Disneyland Resort.”

Translation: There were too many annual passholders at the parks versus single-day ticket purchasers, so profits weren’t as high at Disneyland as they could have been. 

Disneyland’s Magic Keys, the revised version of annual passes that replaced the program the park offered before its pandemic shutdown, went on sale Aug. 25, 2021 — which means early purchasers’ passes are about to expire. No new passes are currently available on the Disneyland website. 

Could the delay in offering renewals have something to do with the company trying to boost its single-day ticket sales to current passholders? Disneyland has already announced its seasonal plans and schedule for not just the Halloween season but, in an uncharacteristically early move, the holiday season as well. Given that annual passholders are the ones who are most invested in attending new events at the park, it doesn’t seem out of the question that some of them will purchase single-day tickets and make park reservations for important days that could sell out before they’re given the chance to renew their passes. 

Financially speaking — and let’s not forget that this report strictly focuses on the company’s financials and not its company culture — Magic Keyholders are especially undesirable. The majority of them are day-trippers who often go for just part of a day, and inherently spend less on food, merchandise and extras like Genie Plus and Disney PhotoPass. 

In the third quarter earnings call on Aug. 10, Disney CEO Bob Chapek said that “about 50% of the people who come through the gate” buy Genie Plus, “which I think you can see the result of in our yields”

Disney chief financial officer Christine McCarthy noted that Disney’s domestic hotels saw 90% occupancy during the quarter, and that park attendance on many days has surpassed attendance on the same days in 2019. 

She also cited limiting attendance at Disneyland as a strategic financial move. “We had limited the number of annual passes that we have across some … of the parks,” she said. “And all of those come with some — with the exception of the highest tiered priced annual passes — they all come with some blackout dates.” 

Those blackout dates come on the days of highest demand. When there is “lightened demand,” she said, “you could loosen up some of those to bring more people in the park and just enjoy the park and spend money while they're there.” 

However, since demand is there, the company isn’t particularly incentivized to allow more passholders in — or, it seems, let more people buy passes. “We have not yet seen demand abate at all. And we still have many days when people cannot get reservations,” McCarthy said. “So we're still seeing demand in excess of the reservations that we are making available for our guests.”

Disneyland stopped selling the highest tier passes just months after they went on sale, and suspended sales of the lowest tiers earlier this year. 

“Comments made during Wednesday's earnings call didn't make it seem as if Disney would be expanding its annual-pass selling efforts anytime soon,” Rick Munarriz wrote for The Motley Fool. 

“If anything,” he added, “it seems as if the world's leading theme park operator has seller's remorse for the ones it did sell late last year.” 

As of press, there has been no official word from Disney on when renewals might be offered, or when more passes could go on sale. 

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