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  1. #1

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    Enough arm-chair imagineering... You're president of DLR.

    Today you've just been told that you are being promoted to president of DLR.

    1) Disneyland Resort is grossing $600 million a year at the gate off 18 million visitation. You can break these visitations into 3 roughly equal-sized groups.

    (visitation: unique person visiting either or both parks per day.... Visiting multiple parks or multiple times on the same day is 1 visitation.)

    a) 6 million visitations by 600,000 APs (averaing 10 visits each) at an average of $175 each for the AP = $105 million annual revenue
    b) 6 million visitations by 4 million non-AP "out-of-towners" averaging 1.5 days each and spending $50 per person per day on tickets = $300 million.
    c) 6 million visitations a year by local, non-AP using a variety of off-season (2-for-1) and other discounts they average $32.50 per person per day = $195 million.

    (Where these numbers come from... 18 million visitations is aproximation from Amusement Business. $600 million annual revenue is gustimation based on $2 billion domestic gate revenue (as reported in 2003,2004 annual reports) multiplied by DLR pulling ~30% of domestic park total attendance. AP number is from many sources including Al and Marcie. Non-local is based on widely reported 2/3-locals, 1/3 non-locals numbers from DCA construction time-frame. Remaining number is simply what is left....)



    On top of the $600 million gate revenue, you're grossing another $600 million revenue on merchandise and food.
    $25 per AP per visit = $150 million.
    $40 per non-local per visit = $240 million
    $35 per non-AP local per visit = $210 million

    (Where these numbers come from... $600 million from annual reports that show ticket and in-park sales are roughly equal. Per guest break-down... mostly guess, with a need for 18 million visitations to generate $600 million... means about $33 each with APs below this, locals near this level and non-locals above this level.)


    In addition, you're making another $120 million a year on the 2000 DLR hotel rooms.

    (Where this number comes from 2000 rooms * 365 days * .87 occupancy * $200 a night.)

    And $120 million on DTD leases. (a number plucked out of thin air....)


    To counter this $1,440 million in annual revenue, you have $1,240 million in operating costs.
    (This number comes from parks and resorts as a whole having 14% operating margin)

    These break down to: (pure guestimation)
    $40 million for hotel operations. ($50 per room per day)
    $40 million for DTD operations (thin air)
    $300 million for food and merchandise (50% margin)
    $600 million in park operation (maintenance, custodial, attraction operation, tram service, utilities, insurance, etc) costs
    $160 million in management including TDA, corporate governance, property taxes, benifits to retirees, etc
    $100 million advertising




    Because of the $200 million in operations positive cash flow(revenue - costs), your capital budget is limited to $150 million a year. Out of this amount of money, you have to cover refurbs of older rides (running you about $75 million a year) and the construction of new attractions.


    The top complaints of your guests:
    #1 Way too crowded during summer and holiday (when the bulk of you non-locals visit)
    #2 Too expensive. Tickets are too expensive. Merchandise is too expensive. Food is too expensive. Hotel rooms are too expensive. Shops in DTD are too expensive. Parking is too expensive.
    #3 Not enough good rides at DCA
    #4 DL has not had a major new ride in 10 years.
    #5 Maintenance sucks and your operations employees do not have the positive attitude of prior days that made Disney magical.**


    ** Here's the rub... Your park looks good right now, because you got an extra $150 million in capital from the 50th anniversary budget to fix it up. Next year's revenue are expected to rise by enough to cover that extra capital investment. However, the $600 million you have budgeted for park operations will just match the level of spending from 1995-2003 when guests were complaining loudly about poor maintenance.


    Now, the task....
    Corporate is demanding you increase the operational margins from 14% to 20%. Expected revenue from the 50th will cover the 2005 fiscal year, but you're asked for a 2006 budget.

    You have to cut ~$90 million in costs (below the 2002 budget) or increase revenues $360 million with 25% margin on those increased revenues or some combination of the two.


    What do you do?

    Try to keep the plans at least semi-realistic and logical... Example: raising prices sharply will drive away attendance, lowering operations budgets but also dropping merchandise, hotel and DTD revenues. Dropping prices will bring more guests, but will lower per guest spending, increase operations budgets and make the overcrowding problem worse. Building new E-Tickets is nice, but eats up all your capital budget, increases operational costs, and makes the overcrowding worse (unless built in DCA where overcrowding is less of a problem except during 2-for-1 when you're giving the park away).

  2. #2

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    Oy. Too many numbers....can't take it... brain implosion...
    “In a world filled with hate, we must still dare to hope. In a world filled with anger, we must still dare to comfort. In a world filled with despair, we must still dare to dream. And in a world filled with distrust, we must still dare to believe.” -Michael Jackson



  3. #3

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    wow- maybe we need business 101 before we can answer this question
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  4. #4

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    This takes me back to all my marketing classes...I wish i paid more attention...
    Marge: Barnacle Bill's Home Pregnancy Test? Homer, shouldn't we have gone with a better-known brand?
    Homer: But Marge, this one came with a corn-cob pipe!
    Marge: [reading from the test box] "Ahoy, Maties! If the water turns blue, a baby for you! If purple ye see, no baby thar be!"
    Homer: So, which is it? Blue or purple?
    Marge: Pink.
    Homer: D'oh!
    Marge: "If ye test should fail, to a doctor set sail!"

  5. #5

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    Quote Originally Posted by dramaqueen
    wow- maybe we need business 101 before we can answer this question

    Not Nearly as much fun as "dreaming up new rides" or "plans for the 3rd gate"..... but may make some realize why things are being done the way they are being done.

    AND, this is more like a MBA level problem than a business 101 level problem.

  6. #6

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    Hopefully I can find some time to work this over. Dang school project work!

  7. #7

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    Eh- that's why we have CM Matt!!! And that's why we love him soooo much- he figures all that stuff out so we can enjoy the park!
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  8. #8

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    Why will decreasing prices lower spending per guest? If I'm paying, say, $20 to $25 tops for tickets, that means I have more left over for souvenirs, food, etc., right? If ticket prices were rolled back to 1975 levels (less than $10 per guest), even if just for a select number of days per month, each guest would have even more disposable cash available to spend in the Park. OK, so it'll likely cause overcrowding (not if you're watching the gates, though, and turning people away once you've reached capacity), but your stores and food services will be raking it in.

    Think about it for a brief moment - Walmart didn't get to be the retail king by inflating prices.

    Another thing - corporate is demanding way too much. Corporate will always demand way too much, because the investors will always demand way too much. That's why WDC needs to enact a stock buyback and take the company private again, and sell off ABC/ESPN as part of it. This malarkey about "increasing shareholder value" is destroying the company and making it less and less unique. If I wanted to go to Corporate Amusement Park presented by Megacorp and buy their Corporate Souvenirs and ride their Corporate Rides, I'd go to Six Flags. They don't have a creative legacy to uphold. Disney does.

    By the way, Walt wasn't an MBA, neither was his brother Roy, but somehow they always seemed to make money hand over fist in theme parks, film, and television. Dick Nunis had a Master's in Education, no MBA there. He did pretty damn well too.

    So half the problem is this notion of having to "answer to corporate". The other half is that corporate is being greedy in wanting a 6% increase in operational margins. Satisfying shareholders at the expense of pleasing Park guests is something only a loser would do.
    My fondest memory of Walt Disney was the day Disneyland opened....I was standing next to him - I was 12 years old - he was looking at the gate where people were coming through, he had his hands behind his back, he had a grin from ear to ear, but you could see the lump in his throat and the tear coming down his cheek because his dream had been realized. -- Mouseketeer Sharon Baird, "Mouseke-Memories", Walt Disney Treasures: The Mickey Mouse Club

  9. #9

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    Uh... I cower in the corner and suck my thumb?
    "Say, uh, ever hear of the devil's paint pots? Real mystery of the desert. Bubblin' pots of mud in all kinds of colors."

  10. #10

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    Quote Originally Posted by dshimel
    Not Nearly as much fun as "dreaming up new rides" or "plans for the 3rd gate"..... but may make some realize why things are being done the way they are being done.

    AND, this is more like a MBA level problem than a business 101 level problem.
    I swear "MBA level" will be our catch phrase! Do you know what mine is? If you dream it they will come. You don't see Roy Disney's statue in the middle of Main Street, you see Walt. Walt was a dreamer and a perfectionist and money was not the force that would stop his dreams.

    Tell ya what since I love to dream I'll play Walt and you can play Roy, but don't forget, that Roy supported his brother's vision because he knew that artists could not be constrained by economics. So what do you say brother, can we dream it?







  11. #11

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    Well, let's remember, Walt may not have had an MBA, and Roy may have, but they were also gambling (to a large extent) with their own money. Yes, they leveraged a lot of financing, but in the end, the company was largely their own.

    If you're now the president of DLR, you don't get to stand up to Eisner, Iger, the board, the Street, or the pension funds who hold so much of the company. You've got to play the hand of cards you've just been dealt.

    So what do you do?

    You try to leverage margins as much as is possible. This means giving more autonomy to middle management to find ways to cut costs in the centers they're supposed to know inside and out--so long as the show remains at the current quality. You cannot compromise on maintenance or custodial, for that's a no-win situation: it shows right away, and it costs three times as much to fix.

    This also means a lot of people at TDA get the boot. You start with anyone who obviously holds their customers in contempt. Everyone else starts spending more time in the parks and not in their office. If you spend more than 85% of your time in your office, you're not doing a good job.

    You try to expand the high end merchandise selections which have the largest margins, and you try to squeeze your other merchandise vendors as much as is possible.

    Annual passes will go up. No way around it. Everything else, you try to hold in line with inflation (which is going to spike over the next 12 quarters).

    Corporate just gave you $150m to dress things up for the 50th. On the one hand, that means hopefully everything is in pretty good shape. On the other hand, nothing is going to go down until the end of the celebration, so in 18 months, you're going to have to run around and play catch up.

    Attractions. You're going to have to cost them out over 5 years before you build--so you might get a C- and a D- for what you'd drop on an E-. Can't be helped. You start with another one or two attractions in DCA in attempts to get that started, and hope that attendance rises there sufficiently enough for you to concentrate perhaps on one more E-ticket for across the esplanade.

    If you can't run attractions, you can sure work on the entertainment. Something should always be happening at DLR, every day. The new parades and fireworks are a beginning.

    That's where I'd start. I'd hope that this would work well enough that I could squeeze more capital budget out of corporate. My main argument? DLR is still a bit short of what it needs to become a true multi-day resort. If enough attractions are brought in to warrant that (either by reforming DCA and expanding it, or a third gate), the economies of scale, and the ROI on DTD and DLR hotels increases.

    How's that? Where do I sign up?

  12. #12

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    Quote Originally Posted by SilentBob66
    Why will decreasing prices lower spending per guest? If I'm paying, say, $20 to $25 tops for tickets, that means I have more left over for souvenirs, food, etc., right? If ticket prices were rolled back to 1975 levels (less than $10 per guest), even if just for a select number of days per month, each guest would have even more disposable cash available to spend in the Park. OK, so it'll likely cause overcrowding (not if you're watching the gates, though, and turning people away once you've reached capacity), but your stores and food services will be raking it in.

    Think about it for a brief moment - Walmart didn't get to be the retail king by inflating prices.
    Yes, but would you rather have Walmart quality(and crowds) or Sharper Image Quality?
    Waiting for Godot Micechat.com

  13. #13

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    Quote Originally Posted by Wotan
    Well, let's remember, Walt may not have had an MBA, and Roy may have, but they were also gambling (to a large extent) with their own money. Yes, they leveraged a lot of financing, but in the end, the company was largely their own.

    If you're now the president of DLR, you don't get to stand up to Eisner, Iger, the board, the Street, or the pension funds who hold so much of the company. You've got to play the hand of cards you've just been dealt.

    So what do you do?
    You inspire them. Have we lost the great leaders, the rousing speechs, the strength and courage to do what is right? Have we lost the ability to dream in place of the quest for almighty buck? Nah, nah I say, the dream is alive! There MUST BE a level of compromise and negotiation to make it work, but work it can. You can have all MBA level idiots in the world in a room and they still can't right a great story, compose a great piece of music or paint a picture that touchs the soul.

    Those corperate big shots and corperate stooges know they make there living on the backs of dreamers like me. I am a screenwriter, I sleep at night and dream of worlds they can't imagine. They can't sleep at night wondering if I dreamt up a new world for them to conquer...







  14. #14

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    awwww...what happened to the dreamy, optimistic ride dreaming? oh well you guys are so political and corporate

  15. #15

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    Fire everyone and Liquidate. Then its off on a permanent vacation :devil:


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    For the world to see.
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    And simply let it be.
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