Tuesday, 12 May 2015

The Disney distinction

The Disney distinction

The Christening of the Disney Dream 

Walt Disney Co. and its cruise line are on a roll. 

The entertainment and media giant reported earnings rose 10% for the second quarter of this year with the fastest growth at its Parks and Resorts unit (which includes Disney Cruise Line), where operating income grew 24%. 

What is Disney doing right?  

First and most directly, it is raising prices. Disney said its earnings growth at parks and resorts was “primarily due to increases in average ticket prices at our theme parks and cruise line,” along with more spending on food and merchandise and higher average hotel rates.

Single-day tickets at Walt Disney World in Orlando cracked the $100 barrier last year.  And Disney Cruise Line prices are generally much higher than competitors on similar routes.
Tom Stieghorst
Tom Stieghorst
A random comparison shows a balcony cabin on a 7-day Eastern Caribbean cruise departing Port Canaveral on Dec. 5 listed at $1,814 per person on Disney’s website and $912.50 on Carnival Cruise Line’s site.

Several things that underlie Disney’s pricing power are qualities that other cruise lines are also trying to achieve. 

One is brand strength.  On a 2014 ranking compiled by Interbrand, a unit of ad giant Omnicom, Disney held the 13th strongest global brand, just behind Intel and just ahead of Cisco Systems. Interbrand said Disney’s power as a brand stems from its “use of technology and data to understand what customers want and personalize their experiences.”

A second pillar of pricing power is capacity control.  Disney has resisted the temptation to expand its fleet of four ships, the last of which was delivered three years ago. Unlike many lines, Disney has no ships on order.  That helps keep supply scarce and drives demand.

But that doesn’t mean Disney gets stale. It frequently upgrades the experience, especially with new entertainment including shows from hit movies like Frozen and Tangled. 

And Disney has a pipeline to first-time cruisers through its theme parks, where much of the programming on a Disney ship can be experienced.  Disney cruise customers know what they’re getting even if they've never been on a cruise ship before.Of course, we don’t know exactly how Disney’s higher pricing translates into profits, as those vital numbers are buried in the results of the overall parks and resorts division.

My guess is that Disney Cruise Line makes a solid contribution.