The raft ride is one of the icons of the new park
In a recent article, Dan Steinberg
contended that Disney’s California Adventure (DCA) was, financially at
least, a bad idea. I completely agree with his 10 well-reasoned arguments—yet
overall disagree. While every point is valid, I predict the opposite result.
DCA won’t be a magnificent failure but a clumsy success.
Now, I won’t use any fancy business theories, furnish any spreadsheets, or cite Porter or Prahalad or Hamel or Howard or Fine. Just real world examples.
1. There aren’t enough rides
Yes, Disneyland has about 60 attractions — and the Company thinks
that’s too many. To lower operation costs, they’d like nothing more than
to unplug Mr. Lincoln, stuff the Tiki birds, and board up all the low-capacity
attractions.
Compare the New Tomorrowland of today to the last time the land was remodeled: CircleVision, the PeopleMover, Mission to Mars, the Submarine Voyage and the Carousel theater show have been replaced by corporate exhibits, a restaurant and a rocket ride living on borrowed time.
Attractions entice people into the park in the first place. Once people
are in the park, attractions no longer generate revenue for the company
(except, possibly, by extending guests’ stay in the park or at the resort).
Initially, DCA doesn’t need a quantity of attractions to lure people through
the gates. Locals, who regularly pack Disneyland, are starved for an all-new
park and will go, at least once.
But guest dissatisfaction with the paucity of attractions would spell
long-term disaster if the park stayed that way. Fortunately, there’s the
Company’s maxim: “Disneyland will never be complete as long as there
are shareholders left in the world.” An anticipated lull in attendance
will prevent Disney from letting DCA stagnate.
When Disneyland opened in 1955 there were only 17 attractions. Opening
day crowds at Disney-MGM Studios—and later at Animal Kingdom—wanted
to know where the rest of the park was. Like those parks, DCA has time
to feast on the crumbs of its established predecessors, until its novelty
wears off.
2. DCA has no “weenie”
DCA has no attraction that’s a weenie. DCA itself is the weenie. Disney-MGM Studios opened with no true E-ticket attractions. It took a few years to add the Twilight Zone Tower of Terror and several more for the Rock ‘n Roller Coaster. Still, while vacationers didn’t frequent Disney-MGM as often as the Magic Kingdom, most did spend at least a half day there.
Business-wise, DCA will probably get more bang for its buck by adding a $100 million thrill ride later instead of making it one of two dozen attractions on the opening day roster.
In the meantime, using rethemed “off-the-shelf” amusement park
rides saves DCA millions of dollars in development and construction costs.
3. Capacity problems
Capacity at DCA will be capped at 30,000-some visitors, fewer than half of Disneyland’s max. But limited capacity (or supply) can be a financial plus, since the park may be able to charge more.
At least initially, don’t expect DCA to offer annual passes, which artificially
inflate attendance numbers and lengthen attraction lines without increasing
daily admission revenues. Sure, Disneyland attracts 13 million visitors
a year — just not 13 million different people.
Limited capacity also encourages guests to stay at Disney-owned hotels, since early, guaranteed admission becomes a valuable perk.
A smaller park allows DCA to operate with less of everything, from employees to electricity, while still enjoying some economies of scale, such as sharing ticket booth and parking operations with Disneyland.
DCA has room to grow and, in time, will build out to the corners of Katella. Maybe one day we’ll see roller coasters rising over West Street and wrapping around the high-rise hotels.
4. The hotel business isn’t the same
as in Florida
Yet. Right now there’s not enough to do in Anaheim to convince out-of-towners
to spend their entire vacation there. DCA and Downtown Disney will help.
Certainly other hotel operators know it. Witness all the new Hyatts and
Hiltons and Marriotts cropping up within a shuttle’s drive of the resort.
Disney will never have a monopoly on adjacent hotel sites in Anaheim like it has in Orlando, but similar advantages will help to justify higher room rates. The Grand Californian directly borders DCA, with views into the park. New hotels will be built abutting the inevitable third gate. Convenient modes of transportation such as a Monorail or PeopleMover will connect Disney’s holdings. Themes such as Paradise Pier will be carried over from the parks to the’ hotels.
And, of course, don’t discount the Disney name. Certainly there are nearby hotels nicer than the Disneyland Hotel, but few that can rival its occupancy rate.
It just makes sense to spend the night in the area. The tactic worked on me during my last trip to Orlando. I’d never stayed anywhere but on Disney property, but now that Universal has added a second excellent park, it became more convenient to spend a night across the street from them.
5. The mall business isn’t the same
as in Florida
The Disneyland area has greater access to more locals, who regularly fill up the restaurants and movie theater seats at outdoor malls like the Irvine Spectrum and the Block in Orange. They’re a given to spend time at Downtown Disney.
Plus, DCA has been designed specifically to attract out-of-towners, and
Downtown Disney—along with third gate area properties—will encourage
them to become captive customers. That’s one reason why WDW provides its
hotel guests with free shuttle service throughout the resort: tourists
don’t have to rent a car (which would allow them to drive off property
and spend their money somewhere else).
6. DCA, like Epcot’s World Showcase, lacks rides at the expense of shops and restaurants
Yes, and in time DCA will get more rides. But, despite all the kids bored by it, World Showcase does provide a valuable function, providing a more adult theme park experience to counter the thrills of the other parks. The new customer drawn to WDW by World Showcase wasn’t the tourist already entranced by the Magic Kingdom. With the romantic, educational World Showcase, WDW has spread its net a little wider, extending its reach from family fun to couples and older adults. WDW is now a top honeymoon destination. Epcot does more than just expand existing visitors’ stays, it expands the number of visitors.
DCA, with few walk-around characters, wine service and more interesting choices in dining, should appeal to an older audience than Disneyland.
7. DCA is not based on Disney’s strengths
DCA is intentionally built not on the company’s traditional strengths, but on those of its competitors. You can’t miss the influence of Knott’s Berry Farm and Universal Studios, which both rely heavily on Disney tourists for their dollars. Next time you’re at Knott’s or Universal, check out all the Mickey Mouse T-shirts. That’s because the majority of visitors either were at Disneyland the day before or will be there tomorrow.
Universal executives fear attendance during DCA’s first year could be down at least 40%. So by going after the Knott’s and Universal customer, Disney may not only be getting a larger share of tourists’ vacation expenditures, but all of it. Whenever Disney adds a park in Orlando, the company risks cannibalizing visitors and dollars from its other four full-scale theme parks or a dozen other major attractions. DCA doesn’t have that problem. It’s stealing guest not from itself but from the competition.
Not that DCA couldnt stand on its own. Certainly, I don’t think tourists
would be clamoring from surrounding states to see a faux Alamo
at Disney’s Texas Adventure or phony waterfalls at Disney’s Hawaii Adventure.
Disneyland is built on Disney’s strengths and will carry DCA. As a second
gate, it will do just fine.
8. DCA may not increase Disney’s competitive advantage
While it may earn low marks in guest satisfaction surveys, DCA should bolster Disney’s theme park division even if just in terms of sheer size, thereby increasing its dominance of the industry.
Consider Disney-MGM. Aside from arguably the two E-ticket attractions mentioned earlier, what’s so unique or technologically advanced about the park? Other parks have better stage shows and children’s playlands and sound effects demonstrations and backlot studio tours. Its main advantages were its location, elaborate theming and the Disney name, all of which DCA will have.
As well, with a strictly tourist-centered concept, DCA should have a greater adverse effect on competitors than would, say, the addition of a fifth park in Florida.
DCA will prosper as long as it continues to expand and evolve closer to the quality of Disneyland.
9. DCA may not enhance Disney’s core
competencies and
10. in the long-term, no innovation = no advantage
With its familiar attractions and borrowed themes, DCA doesn’t appear to offer anything new. But with new parks under construction the world, Disney has other venues for hatching technological experiments.
With DCA, Disney is trying something fiscally new. The park is an experiment unto itself: to create a Disney theme park on a minimal budget with maximum profit centers.
The competition doesn’t have that luxury. With Islands of Adventure,
Universal spared no expense and created the ultimate theme park for the
guest — but not the shareholder. The park will spend years struggling
to reach profitability. But, in a way, Universal didn’t really have a
choice. If they would have built a second-rate second gate, it probably
would have detracted from rather than boosted attendance at the studio
park.
Its proximity to Disneyland allows DCA to see if it can do more with less. Executives, money men and designers throughout the industry anxiously await tracking not so much DCA’s popularity but its profitability. It success should have serious implications on the design, construction, operation and expansion of future theme parks.
In the end, we’ll learn that short-cuts may not make a better theme park, but maybe a more profitable one.
