This May, when Disney opened Galaxy’s Edge, the new 14-acre Star Wars–themed section of Disneyland in California, the company worked hard to ensure the park would not be overwhelmed by crowds of visitors coming to see it. It raised prices, required reservations, and imposed restrictions on employee and pass-holder visits.
They seem to have done too good of a job: Despite expectations of ridiculous crowds, park attendance at Disneyland this summer has been so far below expectations that the Orange County Register says this summer is “the best time to visit Disneyland.”
Unfortunately for Disney shareholders, these light crowds were a driver of disappointing profits for the quarter that ended June 29. Here’s how CEO Bob Iger explained the low attendance numbers on the company’s quarterly earnings call last week:
First of all, helped in part by some of our efforts, there was tremendous concern in the marketplace that there was going to be huge crowding when we opened Galaxy’s Edge. And so some people stayed away just because they expected that it would not be a great guest experience. At the same time that was going on, all the local hotels in the region, expecting a huge influx of visitation, raised their prices. So, it simply got more expensive to come stay in Anaheim. In addition to that, we raised our prices. We brought our daily price up, so if you think about local visitation, we brought the price of a one-day ticket up substantially from a year ago. And then we have opened up Galaxy’s Edge with one attraction instead of two. The second attraction is going to open in January. And so all of those factors contributed to attendance that was below what we would have hoped it would be.
Park attendance also fell short at Walt Disney World in Florida; Iger said that was because travelers have been delaying their visits until the Florida version of Galaxy’s Edge opens later this month.
This isn’t what the company hoped for, but to put it in perspective: Over the decades, Disney-park launches have often looked rocky, even as the company has built the world’s most successful theme-park franchise.
Disneyland’s opening in 1955 was “disastrous,” with Tomorrowland unfinished, Peter Pan and Dumbo unready to open, and ladies’ heels sinking into fresh, hot asphalt on Main Street U.S.A. Epcot, which opened in 1982, suffered major cost overruns and disappointing second-year attendance, factors that former CEO Michael Eisner cites as reasons he was brought in to rescue the company. Disney’s Animal Kingdom was plagued at opening with bad press over animal deaths. Disneyland Paris (formerly known as Euro Disney) has repeatedly required financial restructuring to avoid bankruptcy.
But the opening that may be most instructive for the performance of Galaxy’s Edge is that of the Disney–MGM Studios in Florida in 1989. With a sense that it had bitten off more than it could chew when building Epcot (more than twice the size of the Magic Kingdom and boasting over a dozen elaborate attractions at its grand opening), the company aimed small with Studios, offering just five main attractions at opening in a park smaller than the original Disneyland.
All five of those original rides and shows have since closed; the park, now known as Disney’s Hollywood Studios, added its current marquee attractions like the Twilight Zone Tower of Terror and Star Tours in the ensuing years. This phased strategy allowed Disney to invest capital into the park gradually and also gave visitors reasons to keep coming back even if they might have thought the new park was a little … light the first time they visited.
Galaxy’s Edge, of course, isn’t a whole new park; in Florida, like in California, it will be a sizable addition to an existing park. But because it is so big and so hotly anticipated, it poses the same problems to the company that a whole new park would. People put off visiting because it’s not open yet. Then they put off visiting because they think it will be really crowded. Or they want to wait until the whole thing is actually open, which won’t be until December in Florida and January in California.
That Disney (and, apparently, the independent hotel owners who surround Disneyland) overestimated visitors’ willingness to pay and queue to get right into Galaxy’s Edge at opening has cost the company some money in the short term. But if Iger’s read is right — visitors want to come to Galaxy’s Edge, but they just want to wait until the hotels are cheaper, perceived crowds are lighter, and both of the new Star Wars–themed rides are actually open — that should be a transitory problem instead of an enduring one.
Refreshes and expansions are necessary aspects of the theme-park business. If you want to keep people coming back, it’s important to offer them something new they didn’t experience on their last trip. But those refreshes and expansions are always risky, because they require extensive upfront investment (especially when built to the standards set by Walt Disney, whose vision called for not just amusing rides but comprehensive theming) and you don’t know how they will pay off until customers get to ride them. Over the years, no park operator has done a better job of calculating those risks than Disney.