Some Cuts are Deep, But the Parks Runneth Over

Al Lutz posted his usual informative and insightful update over at MiceAge.com today.  The interesting thing about Al’s article is how they got to some of those unfilled positions we talked about the other day on here. 

You’ll note that I said many of the positions in both California and Florida weren’t ‘real’ people layoffs, but were instead merely scheduled positions that weren’t going to be filled (something like 40% of the cuts were this way in P&R).  What Al highlights in California is how some of those were made.  I’m sure Florida isn’t much different, and that part IS pretty messy.

The way I read Al’s description if you were a VP for instance and had 4 Directors reporting to you in a back-of-house operation, it’s possible your 4 Directors got laid off and then you got DEMOTED back to a director over what is left of that organization and took a pay cut(if there’s much left at all).  That’s rough… so do you take a principled stand and loose your job or be thankful that you still have on in this economy even though you just took a hair cut?  Ouch.

I do know one thing for certain in Florida, through a friend (that works at WDW) of a friend (the used to work at WDW) that the cuts went into some places they hadn’t been in a long time, if ever.  Places like Reedy Creek Energy Services (WARNING:  Small PDF link), the folks that are responsible for electricity, water/sewer, trash, etc. even got whacked in this round.  How much I can’t say for sure, though if it’s like in California according to Al it’s possible the layoffs in these areas were token at best to ‘share the pain’. 

On the other hand, it’s also possible these cuts are because of the reduced capital expenditures and updates planned for ALL the parks at this point, and is just the beginning of a long stretch of low investment in new attractions, etc.  Something that would be backed up anecdotally anyhow by cuts at RCES, Imagineering and announcements in the 10k and other fora that they’ve cancelled more investment in HKDL, Paris is a tapped out group other than some ride makeovers, most stuff in Florida is on hold or canceled, and the only real big work in CA right now is all at the second gate. 

Who knows at this point…  only the folks at Jay’s level most likely.

All that said, the Florida parks are HONKING this week.  Aaron noted today back at The Disney Report no less than two posts saying that MK and DHS had both reached capacity pretty early in the morning.  I can’t fathom wanting to go to DHS and being told to park at Epcot and bus over… I’ve been there at Christmas and not had to do that.

It just makes me think more about my post not to far back about the balance between price and capacity.  As the price goes down, capacity gets eaten up quicker, but at what price?  Do people who couldn’t afford a more expensive Disney vacation suddenly say, ‘Hey, we afford that now.’ and go?  And if more of those folks that have to stretch to go at the lower price do go, they certainly probably aren’t the folks that Disney liked in the past that would have spent a lot of additional money on bling and plush to pad out those nice profit figures.  I’m sure Disney makes money on gate admission, but you can bet your FastPass that merchandise has a LOT higher gross margin and therefore profit contribution rate than tickets. 

You CAN go overboard and price too high however, as apparently evidenced in Al’s article and the OC Register video post about the new Celebration Roundup and Barbeque.  Then demand just falls off a cliff and you eat it, HARD.

I have to agree from what I’ve seen that Disney blew it on this one completely.  $119 for a typical family of 4 in a theme park atmosphere is just bordering on insane, even if it DOES have non-stop entertainment and is all you can eat.  They should have taken a cue from the wildly popular Whispering Cannon Cafe at Florida’s Wilderness Lodge (a Jones family favorite) instead of taking it from the Hoop-Dee-Doo Review.

I’m not trying to make a judgment call here about people who can and can’t afford to go to Disney, BTW.  I love Disney enough that I think EVERYBODY should be able to go whenever they want and be able to afford to do so.  However, any first semester business major will tell you that, in general, as you lower price, volume goes up and margins get squeezed (your costs are still your costs, no matter what you sell it for, unless you can cut them somehow too).  Plus you have the problems the need for extra capacity brings to deal with for wear and tear, quality, etc.  Overall, it typically leads to brand dilution and people won’t come back because they have a miserable time.  That’s just basic business 101.  

So either there is a lot more money out there than Disney or any of us thought, people still REALLY want to take vacations despite their debt situations, or maybe they might have overshot a little on the discounts?  In any case, you have to ask yourself if you REALLY want to be there with 30+ THOUSAND other people.  We’ll have to wait until late summer to see, since this is all now in the third fiscal quarter for Disney this year and those numbers won’t be reported for sometime. 

I know for me the quality and experience is generally inversely proportional to the crowd level and I’d happily pay a little more for my vacation if that meant a smaller crowd level. 

All I can say is hold on people, it’s gonna be a WILD summer.