Why Disney Is Plowing Cash Into a Cruise Line Expansion
Entertainment titan plans to launch seven new ships by 2031, looking to overseas markets far from theme parks
Entertainment titan plans to launch seven new ships by 2031, looking to overseas markets far from theme parks
Chief Executive Bob Iger had christened the 1,119-foot-long Disney Treasure the previous evening while 1,000 drones hovered overhead in the shape of a Champagne bottle. The fleet of drones transformed into shapes of images from “Aladdin,” “Coco,” “Moana” and other movies as pop star Jordin Sparks belted out a song written specially for the new ship.
The spectacle was a coming-out party of sorts for a business that for years has played a bit part in Disney’s overall entertainment empire, but is now increasing in prominence. Growth is slowing in the entertainment company’s parks businesses, and its legacy TV business is suffering from cord-cutting , but Disney fans worldwide can’t seem to get enough of cruises.
When Disney announced plans last year to “turbocharge” investment in its Experiences division, which includes theme parks, resorts and consumer products, the company said 20% of the $60 billion over the next decade would go toward its cruise business and other projects that haven’t been announced yet. Disney plans to more than double its fleet from six to 13 ships by 2031 and further expand its service internationally. undefined undefined “Given the fact that we are still a relatively small player and we see this strong demand, it’s only natural and actually the best time to invest in this business,” said Thomas Mazloum , who leads the part of Disney’s Experiences division that includes cruises.
Cruise travel overall surpassed prepandemic levels last year, attracting 31.7 million passengers, up from 29.7 million in 2019, according to the Cruise Lines International Association, a trade group.
More affluent millennials are choosing cruises over land-based vacations in part because a host of new, larger ships with premium amenities make them feel they get good value for the money, JPMorgan Chase said in a June research note. Rising international airfares have also made cruises that leave from ports in their home country more attractive to some overseas families.
Most cruise lines offer chaperoned children’s activities. On the Disney Treasure, parents can sunbathe with cocktails by the pool while children are entertained until as late as midnight with activities such as playing in a “Star Wars”-themed workshop, completing hero’s missions set in the Marvel Comics universe or designing a virtual theme-park ride to their specifications.
The Disney Treasure offers “Moana” and “Beauty and the Beast” themed stage shows, a piano bar themed after the movie “The Aristocats,” and a Mexican eatery where you can watch mariachi musicians sing songs from “Coco” while you sip a margarita and eat enchiladas. On a typical Disney cruise, costumed characters such as Pluto, Goofy and Donald Duck roam the decks and movie theaters show Disney films that are playing on land in cinemas.
Disney is betting that interest in cruises will prompt travelers to pay more for its cruises, which tend to cost more than mass-market cruise lines such as Royal Caribbean or Carnival. A four-day cruise to the Bahamas for a family of four on the Disney Wish ship, leaving from Florida’s Port Canaveral during a popular spring-break week next April, starts at $7,692. On Royal Caribbean, a much larger cruise line, a comparable trip starts at $3,368.
“You’re paying up to cruise with Mickey,” said Matt Hochberg, editor of Royal Caribbean Blog, which focuses on the cruise industry and isn’t affiliated with the cruise line.
Disney says that some of the cost of cruise tickets comes from docking fees charged at ports, which are largely passed on to the customer. Entertainment and dining options and even free unlimited soda—a perk harder to come by on competitors’ cruises—are part of the value proposition that passengers find attractive, the company said.
“You want it to feel like part of the mythology,” said Danny Handke, one of Disney’s parks and attractions designers who helped create the Haunted Mansion-themed bar aboard the Treasure.
The company discloses certain financial metrics for its cruise business but doesn’t share its full financials. In the year ended in September, Disney said a 5% increase in revenue for the Experiences division that includes cruises was driven in part by higher average cruise line ticket prices.
“Passenger cruise days,” the number of passengers aboard Disney ships multiplied by the days they spend on voyages, rose 14% in the company’s 2023 fiscal year (the most recent time period for which such figures are available) and 32% the previous year.
Mazloum, the head of the division that includes cruises, said that with only 5% of the Caribbean market and 2.5% of the global market, Disney is still a small player in cruising. But among Disney’s menu of entertainment options, it is one of the experiences that rates the highest among guests.
Consumer satisfaction surveys show that 82% of Disney’s cruise passengers intend to take another and that sea journeys are the highest-rated experience in Disney’s Entertainment division portfolio, Mazloum said.
At Disney’s busiest cruise port, Port Canaveral, two of the line’s ships launched 157 voyages that were on average 92.4% full in the year ended in September, publicly available port information shows. That metric, the average number of passengers per vessel as a proportion of each vessel’s maximum capacity, has returned to prepandemic levels for Disney.
Disney is now increasingly focused on the Asian market, where hundreds of millions of potential Disney Experiences customers live without a nearby theme park.
Launching next year, the Disney Adventure, which can hold up to 6,700 passengers and will initially operate in Southeast Asia, is Disney’s biggest ship yet. It will sail out of Singapore—the company’s first-ever service there—and aims to attract affluent Indian, Indonesian and Malaysian travelers.
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The company is best known for its prestigious Penfolds brand
Australia’s Treasury Wine Estates admitted defeat in its effort to divest brands including Wolf Blass and Blossom Hill, moderating its annual earnings guidance amid weaker sales of its cheaper products.
Last year, Treasury outlined plans to offload its so-called commercial portfolio in a pivot toward costlier, higher-margin brands. As part of the move, it bought California’s Frank Family Vineyards in 2021 and Daou Vineyards in 2023 in deals worth US$1.31 billion combined.
On Thursday, Treasury told investors that it had failed to find a buyer for its budget brands.
“TWE has concluded that the offers received for these brands did not represent compelling value and therefore their retention is the best course of action,” Treasury said.
The company, which is best known for its prestigious Penfolds brand, said that demand for brands typically retailing for less than US$19 a bottle had fallen by 4.9% in the December-half. That includes the commercial portfolio, which comprises the company’s cheapest offerings.
As a result, Treasury expects so-called Ebits—earnings before interest, tax and other impacts including one-off items—for the full fiscal year of 780 million Australian dollars, or about US$489.8 million. That’s at the bottom end of its previously issued A$780 million-A$810 million guidance range.
Even so, Treasury on Thursday reported a A$220.9 million net profit for its fiscal first half, up 33% on year as the company continued to re-establish its Penfolds brand in China following that country’s removal of tariffs on Australian wine.
Revenue rose by 20% to A$1.57 billion, while profit increased 33% to A$239.6 million once material items and currency moves were stripped out.
The average analyst forecast had been for a net profit of A$242.1 million from revenue of A$1.57 billion, according to data compiled by Visible Alpha. Treasury reported first-half Ebits of A$391.4 million.
The board declared a dividend of 20 Australian cents a share, up from 17 cents a year earlier.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.