Does Expansion Mean Increased Revenue for Disney?

     Recently, Disney has announced that they will be investing massively into their Experiences division (including theme parks, resorts, and consumer products). Earlier this year, they stated that 20% of the $60 billion over the next decade would go toward its cruise business and some other projects. They will be specifically focusing on expanding their cruise lines, doubling their fleet from six to 13 ships by 2031 and expanding its service internationally. Thomas Mazloum, the head of Disney Experiences' cruise ship division, stated: "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." 

    Cruise travel overall has increased in the past year, and affluent millenials are choosing cruises over land-based vacations because of premium amenities on large, luxury ships. In addition, rising airfares have made cruises that leave from ports in consumers' home country more attractive. With this in mind, market expansion makes sense for Disney. Opening more ports internationally will stimulate demand for the cruises. They are increasingly focused on the Asian market, where hundreds of millions of potential Disney Experiences customers live without a nearby theme park. They will launch the Disney Adventure, the biggest ship yet, next year, which will sail out of Singapore. They aim to attract affluent Indian, Indonesian, and Malaysian.

    Disney thinks that this increased interest in cruises will prompt travelers to pay more for them. Their cruises, however, already cost more than popular mass-market lines such as Royal Caribbean or Carnival. A Bahamas cruise on the Disney Wish ship starts at $7,692, while a comparable one on Royal Caribbean starts at $3,368... less than half of the price. Disney, however, thinks that their innovation quality, service quality, and relational value make up for their glaring lack of price parity. Disney provides personalized packages with unique experiences. "You're paying up to cruise with Mickey", says Matt Hochberg, editor of a cruise blog. The company states that their entertainment and dining options and free unlimited soda are part of the value proposition that passengers find attractive.

   California State Fullerton professor Andi Stein said that "Disney really understands entertainment and that carries through onto their cruise ships. But they add the luxury experience that a cruise can provide that you're not necessarily going to get in the theme parks." Disney has a strong brand with valuable customers, which allows them to sometimes push prices higher and higher without significant consequences. Despite the prices, perceived benefits outweigh perceived costs for many loyal Disney customers. Consumer satisfaction surveys show that 82% of Disney cruise passengers intend to take another, and sea journeys are the highest-rated experience in Disney's Entertainment division portfolio.

    Disney's ships are billion-dollar investments. Their capital expenditures are projected to rise 27% to  $7 billion companywide next year. Their prices reflect these heavy investments, as well as their confidence in the customer value they provide... their cruises are priced two to three times more than that of comparable lines. Are these investments in market expansion worth it for Disney, when prices are increasing with it in a time of negative economic outlook? Does Disney provide a "must-have" for families through their children's favorite characters, theater and movie entertainment, incredible food, childcare, and "magical" excursions that truly set them apart? Is price parity not a factor in this situation?

Sources:

https://www.wsj.com/business/hospitality/disney-cruises-expansion-new-ships-76103f9f?mod=business_lead_pos2

https://www.latimes.com/entertainment-arts/business/story/2024-10-23/disneys-cruise-fleet-is-set-to-double-by-2031-why-its-ships-are-a-bright-spot-for-the-company

https://better.net/travel/disney/reasons-disney-cruise-worth-every-penny/