"Park attendance is down, and prospects don't look good," said David Miller, senior VP-entertainment media analyst for Los Angeles-based Sander Morris. "Theme parks are a consumer-confidence type of business. Right now consumer confidence is at a 10-year low."
Industry watchers fear a repeat of the situation after Sept. 11, when non-U.S. visitors, who make up 30% of the business at the major Orlando theme parks, stayed away. That could particularly hurt the big area players: Walt Disney Co.'s Walt Disney Attractions, Vivendi Universal's Universal Studios Theme Parks and Anheuser-Busch Co.'s Busch Entertainment. Disney, in fact, recently warned that severe acute respiratory syndrome might cause tourists to curtail travel to its parks.
That admission follows a warning Jan. 30 by Disney, the country's largest operator with six of the top ten parks in the country, which forecast-lower-than-expected profits this year due to war fears. Disney predicted profits for the fiscal year ending Sept. 30, 2003 would be up 25%, which falls short of the 35% gain it posted in fiscal 2002.
Last year, industry-wide park attendance fell slightly. According to VNU's Amusement Business, park attendance in 2002 was down less than 1% to 170.7 million.
Disney lost attendance in most of its Orlando parks, but attendance grew 5% at Disneyland in Anaheim, Calif. Analysts said that although profits were down, the company was able to stem the losses with cost cuts such as closing some restaurants and hotel floors. Additionally, Disney did heavy discounting to keep attendance losses at a minimum.
ad spending down
Ad spending has also dropped with the slowdown. According to Taylor Nelson Sofres' CMR, category ad spending dropped to $248.9 million last year from $287.3 million in 2001.
Disney is the category's largest spender, laying out $112 million in measured media last year vs. $133 million in 2001, according to CMR.
A Disney spokesman declined to comment about its marketing plans. Since December, Walt Disney World's ads have carried the tagline "Where Magic Lives" that goes back to Disney's roots by illustrating special moments that happen in Disney parks.
The effort, from Publicis Groupe's Leo Burnett USA, includes four sweet-natured spots, showing family and children. In "Firefly," for example, a little girl captures a firefly in a jar and explains to her mom that it's Tinker Bell she's captured. Her dad says: "If you let her go, maybe we can see her at her place."
While foreign visitors may be traveling less, U.S. families may be sticking closer to home-and visiting more local theme parks. "If people don't think it's a domestic terrorism threat and just an overseas war you are going to [see more] travel domestically," said Tom Wolzien, equity analyst for New York broker Bernstein Media Group.
That may already be happening. At Universal Orlando Resort, the second largest theme park operator in Florida, reservations are stable, according to Gretchen Hoffmann, senior VP-marketing and sales. "We have not been seeing any cancellations," she said. "We expected to get a number of them immediately." She said the company expected "a strong Easter, mainly from the U.S. The international business is still a bit off," but bookings via the Internet are good.
Despite the fallout from 9/11 and war concerns, Ms. Hoffmann added, "We had a very strong year in the U.S." Universal positions itself as a more adult park than at Disney. "I don't live and die about taking Disney's business," said Ms. Hoffmann. "But more and more people are making [other] choices and kids are getting older."
Even so, Universal recently launched an edgy marketing campaign, specifically attacking Disney in a 60-second commercial. The commercial's closing line is "Fairy tales and pixie dust not quite your thing? Log on to UniversalOrlando.com for a vacation package."
Its advertising, carrying the theme, "Vacation from the Ordinary" features members of the rock group Kiss, as well as popular TV chef Emeril Lagasse, and was created by David & Goliath, Los Angeles, Calif. Universal spent only $6.5 million last year on its theme parks, according to CMR, down from $7.4 million a year earlier.
Universal's Ms. Hoffmann is confident that the industry will rebound fast. "In 2001, the industry had started to soften before 9/11. Then it just came to a dead stop. Then people bounced back pretty quickly. They didn't cancel with us, they postponed. "
Vacationers deciding not to travel far, daytrippers and those making last-minute decisions could benefit smaller theme park operations such as Six Flags, according to analysts.
Six Flags has 31 U.S. parks and 38 worldwide. A Six Flags spokeswoman wouldn't disclose details of any current advertising but said the parks all run individual market campaigns using TV, radio and outdoor and target a broad range of customers from teens to children, family, and adults. Its spending was $45.3 million last year, down slightly from $46.8 million in measured media in 2001, CMR reported. Six Flags' agency is Ackerman McQueen, Oklahoma City, Okla.
Analysts expect Disney and other operators won't stand idly by. For the better part of last year Disney and other parks began discounting the price of admission and other travel fees to keep the park traffic coming.
"They have been discounting," said Sander Morris' Mr. Miller. "The issue going forward is how long of a disruption do we have. What we saw last year was a lot of people driving to Florida" instead of vacationing overseas. The outlook "is tough to tell unless we get a good lay of the land."