Time To Think…

So I’ve had a little time to ponder the thoughts and facts from last weeks conference call for the end of FY ‘08 and projections for the FQ FY’09.

Here are some thoughts in no particular order:

1.  Tom Staggs mentioned specifically that the average booking window for the vacation crowd has been about 12-14 weeks.  That means most of us can’t think about a vacation any further out than 3-4 months.  Disney requires full payment usually 45 days out, so we are barely doubling that window on average.  We are SOO able to save and wait no?

Tom also mentioned that window has narrowed a little bit in the past month or so, but that it’s too early to draw any conclusions from it definitively. 

That says to me that the $200 gift card offer is sized to target that booking window almost exactly (January 4th through March 29th is about 12 weeks eh?  Coincidental?  I think NOT!)

2.  The discount is pretty cool, but as Tom noted is not unprecedented, and not even the biggest discount they’ve ever given.  Disney usually has a pretty good discount deal in the winter through early months with discounted rooms from mid-January to mid-May, with some exceptions for spring break.  So this deal isn’t that different other than maybe the timeframe is a little longer.

3.  Mary Waring over at the fantastic website MouseSavers.com has a typical breakdown for the savings here.  The Value Resort stayers, which Bob Iger said they figured this would really appeal too, get to save about $500 through the end of March and $300-ish through the end of June.  Just to prove that this isn’t unprecedented, last falls free food deal for a typical family of 4 (2 adults, 1 junior and 1 child) over the same 7 day timeframe resulted in a savings of just over $900 at list price. 

So I’d say the $200 kicker is a little higher than last year, but the overall discount is about the same on the core hotel room.

4. The theme park tickets are a cheap giveaway, since after a 4 day base ticket, 3 additional days is about $9 a ticket.  You still have to pay full freight for the park hopper and the park hopper/more options if you have them, so frankly I’d consider this a wash.

But from a marketing standpoint I’d say it’s brilliant.  Only the most ardent fan really keeps track of the fact that days after 4 are that cheap, even for the sporadic return visitor.  Most people will look at the one day price and think they are getting a $75*3 days discount, so the PERCEIVED value of the package is greater than the REAL discount.

5. Do you notice how Disney has gone this past couple of year to really emphasizing the cost per person per night?  This new promotion has great zingers like ‘That's like paying $46 a night per person for this package’.  It’s like buying a car… ‘well Mr. Jones, what DO you need the payment to be for us to make this deal?’ 

Don’t get me wrong, it works and works well, but again it’s that soft marketing psychology of ‘see honey, that’s CHEAP!’

6. After the last 3-4 conference calls, I’ve determined that the studios and consumer products guys never get their true due unless something is going horribly wrong.  There was a smattering of discussion about DVD sales and Bob and Tom both briefly mentioned the upcoming Studio slate in their prepared remarks, but it’s almost like those parts of the Company didn’t exist for the cabal manning the phones (who are these people anyway???  They ask some of the dumbest questions.)  Otherwise, nothing about Andy’s positioning of product for the holiday season or Dick’s upcoming lineup for the theaters and how they think those will do.  Zip.  Zilch.  Nada.  *sigh*

7. As has been mentioned other places, it appears the DCA makeover is still a go despite anything in the economy (read that as already priced in to our forward looking capital-X budget plans, and has a high enough expected return on investment to make this a go even in this crap economy). 

There is some interesting math buried in that discussion about how to roll the expenditures and then capitalize on incremental revenue as you upgrade parts of the park and get more people through the gate.  My guess is this effort is engineered to pay for itself in not more then 2-3 FY’s after completion, if not sooner. 

Disney has what I would consider a pretty average Return on Equity of 14%.  In other words, if the project wasn’t expected to do at LEAST that well, then in general it wouldn’t be worth doing, and they wouldn’t be.

8. Bob and Tom both talked a lot about variable expenses and controlling them, especially in the parks.  This is pretty self explanatory, but not always very obvious frankly. 

For those of you without any background in accounting or finance, basically a fixed expense is something you have to pay regardless of how much or how little you use it, vice a variable expense that ‘varies’ with usage.  The goal for most companies is to have as many variable expenses as possible and as few fixed ones, all things considered equal.  That is because by definition you are in direct control of variable ones, but not the price of fixed ones.

If you stop to think about it for a second however, there are some things that make sense and some that aren’t so obvious.  Frankly I think just about everything you and I can interact with at Disney World falls into the variable expense area, since most of those costs are directly related to the hours the parks are open and what venues are open.

9.  Lastly, did you catch the part where Tom said that even though the company feels the stock is WAY underpriced from what they consider its intrinsic value, they have suspended stock buybacks for the moment?  That’s first good cash management, but it’s probably also hammering stockholders by a few bucks a share on that $10 slide in the last 5-6 weeks, since a large buyer is out of the market for the moment on the sidelines. 

Oh yeah, and before I forget, if you are waiting to find your dream job in professional services at this point, be prepared to wait… and wait… how long?  Who knows. 

The job count in Florida is down to less than 40 as of yesterday, and I’d bet you a paycheck that new hires that are coming on are being scrutinized and questioned at the HIGHEST levels of the Company. 

That’s a suckers bet on your part though, so keep your money safe. . . trust me on this one.