Over the past three years, Disney theme parks have cast a harsh spell on their bottom line. As the pandemic receded, visitors flocked through their turnstiles with cash time off and a pent-up call to travel. Many Disney resorts have reached new heights. , but one of them has not been so lucky.
Few countries have suffered from the pandemic for as long as Japan. Its location on an island protected it in the first place, but tourism plummeted as most countries in the world may simply not travel there due to the lockdown. As countries began to emerge from the pandemic, Covid-19 reached Japanese shores, forcing Japan to impose strict limits on inbound tourism. Its restrictions on tourists were not fully lifted until last April, leaving the country without travelers for years.
The tourism industry had to pull back to attract foreign travelers after the clock reset. As they say, the bigger they are, the harder they fall. So it’s perhaps no surprise that one of the most severely affected companies is Tokyo Disney. Resort, Japan’s most visited theme park complex.
The 494-acre hotel on the outskirts of Tokyo is the only Disney-branded hotel in the world that is not owned or operated by The Walt Disney Company (TWDC). Instead, it is owned and controlled through Oriental Land Company (OLC), a specialized recreational venue operator indexed to Japan’s Nikkei stock exchange.
OLC is hiring Disney’s Imagineering design department to expand the Tokyo hotel and the media giant is also collecting royalties on its revenue. They come from five official hotels, an entertainment district and two theme parks. Tokyo Disneyland Park opened in 1983 and is at most a carbon copy of Walt Disney World’s Magic Kingdom in Orlando with its centerpiece, Cinderella’s Castle and surrounding fairytale-themed grounds. It followed in 2001 through Tokyo DisneySea, widely regarded as the world’s most elaborate theme park, as it features hyper-realistic recreations of Venice and Cape Cod, as well as fairytale harbors.
The pandemic has cast dark clouds over Tokyo Disney: Exhibits were canceled, park hours were reduced, attendance limits were introduced, and restaurants even reduced their menus. To decrease the number of visitors and minimize mass gatherings, annual passes were created. and multi-day tickets have been eliminated.
The skies have yet to clear as many of the iconic exhibits are closed, day tickets remain the only options, and visitors will have to specify which park they need to visit. Although, thankfully, Covid-19 is a remote reminiscence for many theme parks. , the OLC’s track record does not hide that one of its objectives for 2024 is to “recover from the pandemic”. This is not the only challenge he faces.
Several other obstacles faced by the OLC are due to its archaic operating procedures. Many exhibits at their theme parks feature a lottery formula that visitors will have to enter to get a spot. Also, unlike most primary parks in Europe and the United States, visitors can’t register for queues until the last minute, as queues close if they grow past the park’s opening hours. So when Tokyo Disneyland closes at nine p. m. and the Big Thunder Mountain roller coaster has a 40-minute wait time at 8:20 p. m. , visitors cannot register to queue.
Getting to the parks is not usually very easy either, because although the monorail stops at the doors, it is not loose like in Disney World or Disneyland in California. Passengers will need to purchase a ticket, and if they don’t have a Japanese credit card ticket, you’ll have to use cash.
Tokyo Disney’s virtual infrastructure is also weaker than that of its counterparts in other parts of the world, with Wi-Fi only available in certain parts of the parks. They’re obviously not aimed at foreign visitors since the staff speaks very little English, and in following Japanese tastes, the top attractions are much more docile than their American counterparts. The Tower of Terror’s free-fall tower even features seat belts over the shoulders instead of lap restraint systems like those in the United States.
These peculiarities are not new, but they become even more vital due to the increasing dependence on foreign visitors. According to OLC data, they accounted for about 12. 7% of the 27. 5 million total visitors in the year to March 31, 2024 and are expected to achieve 14% of the 29 million expected for this year. This is not a surprise.
High airfares and low wage increases have prompted Japanese travelers to explore closer to home. Residents who live far from Tokyo might think twice before visiting the parks. Similarly, the withdrawal of annual passes has discouraged many locals, who were among the most common visitors.
“We don’t have annual passes, so day tickets are the only option. As the value is decreasing, I stop on them less often. If it was exorbitant, it would probably happen several times a year,” said user X @8_theme. in octubre. dernière. @MagicalNezumi he added that it is “a shame that COVID has made OLC realize that they didn’t want us [annual pass], people. “@TRVLtruth agreed, asking, “Does anyone @TDR_PR know that the pandemic is over and it’s time to bring back the annual passes?
Annual passes and multi-day theme park tickets were especially discounted from the equivalent number of one-day tickets, a credit to buyers who pay a significant amount at once. As a result, Tokyo Disney visitors now have to buy several expensive tickets for a day, whereas in the past they paid much less for exactly the same amount of time in the parks.
This additional cash inflow flows directly into cash inflows and helped OLC generate $1 billion (165. 4 billion yen) in operating profit on $3. 9 billion (618. 5 billion yen) in cash in the last fiscal year. This is just the beginning.
Last month, DisneySea opened Fantasy Springs, a new land containing a 475-room luxury hotel, gift shop, 3 restaurants, and 4 new themed attractions around Disney’s hit animated films, Frozen, Peter Pan, and Tangled.
The recent opening of Fantasy Springs has not improved the resort’s fortunes (Photo via STR/JIJIArray. [ ] Press/AFP Getty Images)
At a cost of $2. 1 billion (320 billion yen), it’s only Tokyo Disney’s biggest expansion in its 41-year history, but also one of the most expensive ever added to a Disney park. , Fantasy Springs looks cartoonish and seems incongruous in DisneySea’s realistic setting, which has escaped the attention of some enthusiasts, as we’ve reported.
It also suffered from byzantine barriers to entry, as guests will have to purchase a $13 Disney Premier Access pass or a loose Standby Pass for each charm just to enter Fantasy Springs. Standby passes are awarded at a notoriously fast rate, so the chances of getting one are low, even if you arrive before the park opens. Premier Access passes can only be purchased after you have entered the park and can only be booked one at a time, with availability only opening once one has been used.
Alternatively, visitors can purchase a Fantasy Springs Magic Passport to gain access to all four attractions around the country. It costs between $147. 45 and $166. 76 per adult, but it can only be purchased if you have booked a package with Tokyo Disney. They charge north of $500 a night and are hard to find, as shown through a quick check on the resort’s online booking portal.
Although access to Fantasy Springs is being hyped, social media has been inundated with report after report about its emptiness, suggesting that the hotel is releasing far fewer passes than it could. It’s a place away from the crowds that weren’t unusual elsewhere in Tokyo’s Disney parks before the pandemic.
Thanks in part to expensive one-day tickets at the parks, OLC expects cash receipts to rise 10. 7% to a record $4. 3 billion (684. 8 billion yen) this year, with operating profit hitting a record high of $1. 1 billion (170 billion yen). even if attendance is expected to decline by 11% compared to its peak of 32. 6 million in 2019, as we revealed. The OLC documents charge that next year, “the number of visitors from mainland China is expected to increase to a greater extent than in the fiscal year. “3/24, but not at pre-pandemic levels. ” This is far from a dream for investors.
This inventory chart shows that OLC’s market capitalization (the total price of its inventories) peaked this year at $62. 7 billion in January, but has fallen to $15. 8 billion since then. This is due to an overall decline in the market. This is transparent from the fact that the functionality of OLC inventories contrasts sharply with that of the Nikkei 225 Domestic Exposure 50 Index, of which it is a part. As the charts below show, the index’s price jumped roughly 15% around the same time that OLC collapsed by as much as 19% under the leadership of its executive leader Yumiko Takano.
Oriental Land’s percentage value has fallen this year
As we recently reported, opening new theme park attractions is not a magic formula for monetary success, as they are expensive and generate little to no direct revenue. Disney theme park price tickets allow guests access to all attractions and guests do not wish to purchase passes or skip-the-line tickets if they do not wish to do so. Even Fantasy Springs, with its diversity of access options, can still be visited with a normally-priced park ticket and a free Standby Pass.
The real monetary feat comes when the park’s operators manage to increase the number of visitors without spending large amounts of cash on new attractions. Fantasy Springs was given the green light long before the pandemic and recovery, but large capital expenditures still appear at a theme park. It seems an ambitious measure at a time when we are emerging from a prolonged crisis. It has a chance of attracting new visitors, but it also leaves little room for investors to worry.
OLC’s loose coins rose just 8. 8% to $590 million (94. 8 billion yen) over the past decade, thanks to the opening of new top attractions at its two parks. Capital expenditures can lead to a decline in currencies as businesses spend coins on assets that don’t generate a source of income right away. Over time, investments can generate a greater number of coins as corporations enjoy higher sales; However, theme park attractions are designed to last for decades, so many investors might not be willing to wait that long.
The threat of large capital expenditures is amplified through the nature of the investment and OLC has taken on threats by building a Tangled-themed amulet that has yet to prove that it can stand the test of time. In addition, the amulet component, and the entirety of one of the others, is situated outdoors despite the bad weather in Tokyo, meaning that the turn-of-the-century street in front of Tokyo Disneyland is covered.
The true monetary effect of Fantasy Springs will only begin to be felt in October, when OLC reports its second-quarter effects covering the period from July to September of this year. Its first-quarter effects will be released before then, but it only comes with the first few weeks of Fantasy Springs’ release, an era during which its popularity is expected to peak. The new land does not seem to have delighted investors much, as the value of OLC’s inventory has increased by only 1. 5% to $28. 65 (4,605 yen). ) in the month since the opening of Fantasy Springs.
Some investors are happy to finish as soon as possible. In November last year, British fund Palliser Capital suggested personal rail operator Keisei Electric Railway that it delist its OLC shares in order to free up capital for its core investments. Keisei has reduced his stake, but Palliser is now applying for additional discounts until March 31, 2026.
Keisei is one of OLC’s largest shareholders, followed by Japanese asset developer Mitsui Fudosan, which has also faced similar tensions from investors. In February, it reported that U. S. activist investor Elliott Management had asked Mitsui Fudosan to sell its stake in OLC so it could simply continue with a buyback percentage.
Blinded by the quality of most of DisneySea, many enthusiasts say they wish Disney had its outpost in Tokyo. Given the functionality of your stock, this turns out to be the last thing you need.
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