isney Smells Profits in Animal Park By Bruce Orwall 04/24/1998 The Wall Street Journal Page B1 (Copyright (c)

1998, Dow Jones & Company, Inc.) Now that the federal investigators and anti-Disney protesters are gone, Walt Disney Co.'s Animal Kingdom theme park can get down to the task at hand-making money. The opening this week of the $800 million wildlife park in Orlando, Fla., was touched by the kind of controversy that accompanies nearly everything Disney does these days. Investigators examined whether federal law had been violated in the recent deaths of cheetahs, hippos and rhinos at the park. The probe cleared Disney, but that didn't stop a small contingent of picketers from waving signs. Disney rivals, meanwhile, began calling the park "Minimal Kingdom," because a few visitors said they didn't see as many animals wandering through the recreated African savanna as they had expected. Disney says plenty of animals are on display. But even if wildlife sightings have been in short supply, few people expect visitors -- or profits -- to be scarce. On Wednesday, opening day, so many visitors showed up that the park was filled to capacity by 7:15 a.m. Analysts expect big crowds to be the rule. Some predict Animal Kingdom will attract as many as eight million visitors in its first 12 months of operation. That would make for a sizable contribution to Disney's bottom line. At a meeting with analysts held in conjunction with Animal Kingdom's opening, Disney said the park should contribute about $150 million in operating income for its first 12 months in business. Salomon Smith Barney analyst Jill Krutick says that would add 15 cents to 20 cents a share to Disney earnings for the 12-month period. Disney Chairman Michael Eisner insists Animal Kingdom will be a commercial success. "I think we're past the risk, which was making [Animal Kingdom] good," Mr. Eisner said in an interview. The goal was to make the park "be to zoos what the Magic Kingdom was in 1955 to iron-ride amusement parks," he said. "The risk was in the idea." But two unknown factors are lurking in the brush for Disney. How does the company prevent Animal Kingdom from poaching visitors to Walt Disney World's three other theme parks -- the Magic Kingdom, Epcot and DisneyMGM Studios? And what happens next year, when competitor Universal Studios, a unit of Seagram Co., opens an ambitious $2.6 billion complex centered on its own theme park, Islands of Adventure? In both cases, the answers aren't just inside Animal Kingdom's gates. They are all around the 30,000 acres that make up Disney World. Disney has in recent years methodically laid down dozens of traps on Disney property for tourists and their money. The most important is the 18,000-room hotel empire that Disney owns and operates there. Some of the hotels -- such as the convention-oriented Coronado Springs Resort -- have been crafted to broaden Disney's appeal beyond families. This week, Disney suggested several thousand more rooms are on the way in coming years, including the 1,300-room Animal Kingdom Lodge, slated to open in 2001. Mr. Eisner concedes that there's a "certain amount of cannibalization you can't do anything about." But to protect the older theme parks, Disney has made plans to bolster each of them. Some of Disney's moves counter Universal, which aims its parks at older kids and adults seeking an edgier experience than the Disney one. Animal Kingdom itself, for example, has a dinosaur attraction that seems designed to pre-empt the "Jurassic Park" attraction slated for Universal's Islands of Adventure. In 1999, Disney will creep onto Universal's turf with a thrill ride at Disney-MGM Studios called "Rock 'n' Roller Coaster," billed as the first Disney World ride to feature "high-speed launch and multiple complete inversions." Disney-MGM this fall also will open the water-and-light show "Fantasmic!" that has been a hit at Disneyland in Anaheim, Calif., for years. Epcot, meanwhile, will become the focal point of Disney World's millennium promotions, with a 15-month blitz scheduled to begin in the fall of 1999. Epcot is also supposed to be buttressed by Test Track, a high-speed ride that re-creates the crash-dummy experience, in partnership with General Motors Corp. But development snafus have delayed that project, and now it won't open until later this year. Many people see Universal's new park, along with several new hotels on Universal property, as a major threat to Disney. The head of Universal's Florida operations, Tom Williams, said he thinks both Islands of Adventure and Animal Kingdom will attract new visitors to the market and comfortably coexist. But it seems logical that someone will lose at least a little business when all the parks are open, he adds.

Mr. Eisner, however, said he thinks if Universal woos more people to Orlando, it will only benefit Disney. For parents who might opt to stay on Universal property, he asks: "Do you think your children would let you not go over to Disney?" Admissions to Disney parks in Orlando have doubled to a projected 42 million in 1998, up from 21 million in 1984, the year Mr. Eisner took over as Disney's chairman and chief executive. The company's recent growth has also come from getting people to stay longer and spend more. The average visitor to the Disney World resort now stays for 3.5 days, as opposed to 2.5 in 1984. Disney told analysts this week that it expects the average stay to rise an additional half day. Over the past three years, visitors' spending on food, beverages and merchandise has been on the rise, to nearly $26 per person per day this year from about $22.50 in 1994. And those figures don't reflect another hallmark of the Eisner era-rising ticket prices. The one-day Disney World adult pass that cost $18 when Mr. Eisner took over hit $44.52 this week. The average effective ticket price, including children's admissions, has gone up nearly 14% in the past three years alone, to an estimated $29 as of Wednesday from $25.50 in fiscal 1995, according to Salomon Smith Barney's Ms. Krutick. The extra spending is mostly the result of Disney's drive to create more spending opportunities. Last year, for example, the company opened the Downtown Disney retail complex, adjacent to the Pleasure Island nightclub complex. Late this year, Cirque du Soleil will open a new production at a specially built theater there. The recent opening of a participatory sports complex called Wide World of Sports has attracted hordes of youth soccer players and other junior athletes, who trundle off to the theme parks after playing in tournaments at the complex. And to make spending more convenient, Disney created a key-card system that allows guests to charge purchases anywhere on the 30,000 acres to their Disney hotel room. Of course, there's always the risk that a prolonged economic downturn or some other circumstances could disrupt the travel business. Judson Green, president of Walt Disney Attractions, said Walt Disney World has faced such interruptions five times in its 26-year history, from the 1974 oil crisis to the 1991 Persian Gulf War. In most cases, he said, Disney World boomed afterward, partly a result of pent-up demand.