Risk and Reward, is Disney Parks & Resorts on the Right Track?

With the recent announcement of an Avatar themed land and attractions coming to Disney’s Animal Kingdoms and the troubled opening of Disney’s first Hawaiian resort, Aulani, a lot of the conversation has settled on the types of risks the Walt Disney Company’s parks and resorts division has been taking lately.

It’s a bouillabaisse of different complaints:

  • The monorail and bus system is no longer inpsiring, future world has stagnated, Tomorrowland is now toontown, with the result that Disney’s position as a company with vision has been lost.
  • That Disney should believe in its own artists to come up with compelling stories and themes instead of buying properties like Avatar or Prince of Persia. Franchising is fine, but it shold be ‘Disney’ franchises, not Fox.
  • That building in Hawaii will not pay off for DVC. Either no one will buy it, or they’ll be using those points on the mainland anyway leaving Aulani an empty shell much of the year.

You can see why the Disney company may be confused. One one hand they get attacked for not doing enough on the other for doing too much. That’s true, but the general theme is Disney needs to take more risks when it comes to its parks and resorts.

The last time the Disney company bet its whole existence on a project was with EPCOT. Turns out, that was the last project to be scoped from Walt Disney own vision. I don’t see a corporation the size of Disney ever making those sorts of risky moves again. It’s just not in their DNA.

Disney might fail because it failed to take risks, but the stock holders will never fire the board because of that. On the other hand take a big risk as an executive and fail and the board of directors will show you the door. It took herculean effort to oust Eisner after 15 years of letting the company languish. You may complain about Iger’s franchise theory of business, but at least he’s doing something to expand the worth of the Walt Disney Company.

Disney is never going back to the days when it would risk profitability by building a huge project in the parks. It’s best to just accept that reality and find something else to love about the Disney legacy.

It’s also important to realize there are different types of risks.

The decision to license Avatar was about opportunity risk. The risk of passing on this opportunity was too great. If Universal landed it (they’ve proved they have the chops with Harry Potter) it would cement Universal as a two-day park in Orlando robbing WDW of one day of the typical families vacation. That was too big a risk for Disney to take at the price of acquiring Avatar. Opportunity risks are often overlooked in business, so I give Disney, and specifically Tom Staggs, credit for catching this one.

The ironic thing about Aulani was that at the time of the decision it wasn’t considered very risky at all. In 2006 and 2007, Disney’s land developers, run by the division of executives who populated Walt Disney World with DVC hotels and successfully captured the family vacation audience on property with EMH and Disney’s Magical Express, were riding high on the hog with plans to build resorts like Aulani all across the globe (Washington DC, Macau, UAE, etc). It was only the collapse of the world economy in 2008 that put a stop to most of those projects. That turns out to have been fortuitous because as we know now, the risk was actually much greater than Disney’s developers had calculated.

Which brings me to the famed Walt Disney World transportation system. At one time it was a vision to inspire America to build a system of interconnected mass transit across their own communities. Today it’s an injured beast trying desperately to heal its own wounds and last long enough until the next generation can take over the hunt. Monorails are running at reduced hours, the bus system experienced accidents and alerts over the last few years and continues to frustrate guests with delays, and, so far, Disney has not articulated a vision for fixing the problem.

I don’t have an answer. Disney is spending between $1.6 and $2.2 billion on a Next Generation experience for its theme parks, should they be expected to simultaneously spend a similar sum upgrading its transportation system to something that once again inspires future generations?

I want Disney to take more creative risks with its theme park properties, but they have to be smart risks that will pay off. I like the head that Tom Staggs has on his shoulders. I think he’s willing to take some risks, like with Avatar, and is able to put himself in the place of the guest and see what they really want. I think that bodes well for the future of Disney parks and I expect to see them take more risks in the future, even more than just Avatar.

What risks do you think Disney should be taking with its parks and resorts right now?

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