Hello readers! I apologize for the long time between articles. Family comes first…now let’s get back to some Accountaneering! I’m excited to share a story about a trip to WDI, in which I was able to ride a prototype attraction that I’ve never seen described online before. But before we touch on that, let’s set some context.
The A&E Menu: this is the document that outlines all the capital spending for the Disneyland Resort over the next five years and beyond (A&E=Attractions & Entertainment). As part of the Planning team, it was our job to populate the A&E Menu. Generally, the major items on the A&E Menu were new attractions, entertainment spectaculars, and major refurbishments.
Now, any Disney fan would take that menu and populate it with new E-Tickets every year. But just like any menu at a restaurant, you need some appetizers, entrees, and deserts at all price points. A nice dinner consists of a balanced order across the menu…not just two of the most expensive entrees!
The financial planning process begins with the Five-Year Plan (5YP), where the Resort develops an all-in five-year financial model. This model takes the base business, layers in known changes (labor rate increases, annualization of partial year impacts, removal of one-time events, etc), then adds on top new investments. The A&E Menu at this point is often a bit aspirational. This is when the business units “pitch” the ideal business plan up the ladder. By “ideal” I’d like to emphasize that it is what’s financially feasible. No theme park in the world (not even Tokyo Disneyland) can spend hundreds of millions of dollars every year on new attractions. The depreciation on the income statement would bury the Resort. What “ideal” translates to is a nice peppering of varied new offerings over the five year window.
In the years post 2001, Disneyland was in a rough spot. We had just spent $1.4B on the Resort expansion (conversation around the content of that spending will come in a future article) and 9/11 hit. I am not exaggerating when I say that the Resort, as a whole, operated at a loss for a few years after 2001. Let that sink in for a moment…had Disneyland been a standalone business, it was in the red. The last thing you can do in that situation is massively invest a boatload of new cash on expensive new A&E items. This resulted in minor investments such as A Bugs Land and Luminaria. Sure, it would have been great to go out and green light Cars Land but the Resort simply couldn’t afford it at the time.
We submitted the 5YP to Parks & Resorts who then would consolidate/edit and submit to Corporate. The Corporate Planners then crunch financial models and discuss with the Senior Leaders of the company. The results would be new targets being sent back to Parks & Resorts. Parks and Resorts then spit up the funding and handed new targets to Disneyland.
So, as expected, those new targets would often be more aggressive than the originally submitted financial model. This would put a squeeze on the entire business; it would push for more revenue, squeeze spending, and, most important to this conversation, reduce Capital spending. We’d take that submitted A&E Menu and start editing to make the menu fit the new financial target. It wasn’t always just cutting; sometimes it was just re-arranging. Let’s say we had an E-Ticket placeholder in year four but the year four targets were tight, while year three had some breathing room (perhaps spending was re-directed to the Studios for a new blockbuster in year four or the Cruise Line had a new ship being built). We’d potentially try to squeeze an extra D-Ticket into year three and push the E-Ticket out to year five, while year four relied on a parade. It was an annual jigsaw puzzle of making the spend levels match the targets.
I’d like to take a small aside to talk about one aspect of the process that you never hear about online. By reading all the blogs and forums online, it is obvious that Imagineering can do no wrong, while us Accountaneers destroy all the original concepts (I think the term DustySage used in the April MiceChat podcast was “slaughtered”). Let’s look at the other side of the coin for a second.
For argument’s sake, let’s say any of you have a set budget to repair and enhance your house and you have to plan those items over the next five years. Your kitchen needs a major remodel (think the current Big Thunder rehab), while you’d like to put on an addition for your growing family. Now let’s say that I tell you two things. First, that you can only spend 80% of what you thought you needed. Secondly, and most importantly, I tell you that the only contractor you can use is the best one around…and the most expensive. Despite the fact that you know this contractor may be charging you a 30% premium, you can’t work with anyone else. I hope you like your new kitchen because you just had to postpone your addition a few years. Welcome to working with Imagineering. Don’t get me wrong, the Disney fan in me loves WDI and (most) everything they do, but this is a very real part of financial equation. Let’s circle back and look at two specific examples…the first small and the second, well, much bigger!
In the early years of the Haunted Mansion Holiday overlay, the crowds easily exceeded all expectations! I was working with the Operations team during those early years and we needed some stroller parking signs. I got the call to swing out to the Mansion gate one morning, and one of the ops guys was so proud to show me the new digitally printed signs he had made. They looked great with perfect colors and great design. The best part was that the signs cost $10 apiece. So, over the course of the 3 months they were being used, we could reprint and replace as often as needed. It was a great solution to solve for an unbudgeted item that year…until WDI saw the signs.
Apparently they didn’t take too well to the fact that Operations took the initiative to have these signs printed. They came back a few days later with the demand that the Operations team pay $1,000+ (no joke) for a wooden sign with hand-carved lettering and painting. Sure, their new sign looked great, but I can tell you I’d never think twice seeing the $10 digitally printed sign in the park. Operations had to purchase the new sign (WDI had show quality authority). This resulted in an extra $990+ that got spent on a sign that sat in storage nine months of the year. That extra funding? It had to be cut out of the budget elsewhere (I’m sure some of you complained about a greeter position that disappeared that holiday season or that Space had cut down on some rockets to save some labor). While it sounds small in the grand scope of Disneyland, Operations just paid a 100x premium in the name of WDI show quality.
Now let’s go to the other end of the spectrum. Again, I’m as big of a fan of a great WDI E-Ticket as the next person, but wouldn’t some price competition be welcome? When we first placed the Tower of Terror on the DCA A&E Menu as an E-Ticket placeholder, we put it there as $100M. That’s a lot of coin. The attraction actually came in just above $115M. Think about that for a moment: $115M.
Now here’s a question: If you sent the Tower out to bid across a number of contractors, could it be built for less than $115M? My gut tells me not only yes, but significantly less. Working with WDI, and only WDI, to populate an A&E Menu is difficult at WDI prices. Wouldn’t it be refreshing to have a number of attraction vendors to put up against each other? WDI “overhead” can crush any hope for responsible spending. I know this is not a popular argument (see my first article…bad guy) but it’s a financial reality. How many of you work for a company where all of your Capital spending is dictated by a single vendor?
People are going to point to Cars Land and say “See what happens when you give WDI an unlimited budget?!?!?” Agreed! I LOVE Cars Land! BUT, anyone notice the dearth of new attractions at WDW the last few years? The lack of a true E-Ticket in the New Fantasyland? As much as people like to pit the TDO (Team Disney Orlando) versus TDA (Team Disney Anaheim), the reality is that it all comes out of the same budget…Parks & Resorts. Now think about if WDI had some competition in bidding for those projects. I’m not standing too far out on a limb to argue that an open bid process for Cars Land and New Fantasyland could result in enough funding being freed up to finally give Disneyland or Epcot that new E-Ticket (or a bunch of smaller attractions) they have been waiting for…all within the same budget.
Back to the original intent of this article (I think I broke my soapbox). After a rough couple years in the early 2000s, the funding for the A&E Menu started to open up a bit in the future years. I got the call in 2004 to go with a small contingent of DLR executives to WDI and have them pitch some blue sky ideas. Some of those ideas were merely concept drawings while others were actual functioning prototypes.
As we stepped through the front door of WDI…hold on a sec…let’s make this my first two-part article!
Coming next time: some concept art that many of you are VERY familiar with and a ride on a prototype that most people have neither seen nor heard about! Until next time…keep your pencils sharp and your beans counted!!!