Disney Parks are the latest business to face slowing consumer demand in the face of higher prices.
Disney’s parks business underperformed expectations and profit fell somewhat last quarter. Although the company said attendance remained steady and people were spending more at parks, it also acknowledged a slumping economy was weighing on travelers who had once buoyed the company while its movie and streaming business was struggling.
While Americans have pulled back on everyday purchases such as fast food, travel and leisure was still a sector they spent on. But average Americans choosing to stay at home could be a worrying sign for the economy as the job market fades.
A slump at Disney Parks would be worrisome for the entertainment giant as a boom in post-Covid travel supported the company when its movies were in a slump and its streaming business had yet to make a profit.
Inflation also helped drive the decrease in income at Disney’s domestic parks, and new technology and rides ate into profit, according to the company.
Disney’s park issues also came on the heels of disastrous Airbnb earnings, which sent its shares tumbling Wednesday after it reported slowing demand from US consumers.
Disney’s domestic parks and international parks and cruises, though, are seeing different results.
“The lower income consumer is feeling a little bit of stress. The high-income consumer is traveling internationally,” Johnston said.
But even with higher prices, people are reluctant to cancel vacations, especially with a company with a brand recognition as strong as Disney, he added.
“While we saw a slight moderation in demand, I certainly wouldn’t call it a significant change,” Johnston said on the call. “I don’t think I’d refer to it as protracted but just a couple of quarters of likely similar results.”
Marriott also reported stronger results at its luxury resorts compared to its cheaper chain hotels.
Disney’s international parks had increases in attendance and more rooms booked. Guests are also spending more at the parks. The company noted that attendance at the parks was comparable to this time last year, and spending per guest was up.
Disney’s streaming service turned a profit for the first time, a feat which only Netflix has been able to achieve consistently. The media giant announced price hikes across the board for Disney+, Hulu and ESPN+ on Tuesday.
The company’s entertainment business has also rebounded from the Covid era, when customers weren’t visiting movie theaters.
“We’ve returned ourselves to the standard of excellence that we had when we were producing multiple billion dollar films per year, and we had the three biggest films in the biggest film in May, biggest film in June and biggest film in July,” Johnston said on CNBC Wednesday.
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