Disney Parks Chief Says Focus on Familiar Formula
Fri Oct 18, 9:42 PM ET
By Peter Henderson
SAN FRANCISCO (Reuters) - Facing skittish tourists, a weak economy and investors calling for deep changes at Walt Disney Co., the new head of the company's hard-hit theme parks division is placing his faith in the tried and trusted Disney magic.
Drafted from Paris, where he headed Euro Disney since 2000, Jay Rasulo, 46, was appointed parks chief of Walt Disney Co. on September 29 after the former head unexpectedly left Disney to become chief executive of retailer Gap Inc.
"What we do know about our guests is that they come to Disney resort destinations to have memorable, magical moments, and I don't think that has changed at all," Rasulo told Reuters in an interview late on Thursday.
"It certainly hasn't changed for the last 50 years that we have been in that business, and I seriously doubt it has changed in the last 18 months."
Rasulo inherits the division which is the financial backbone of the Burbank, California-based company in tough times. The theme parks division accounted for 40 percent of Disney's operating earnings last year, but Disney lowered its fourth-quarter financial forecast due in large part to weak park attendance.
Credit rating agency Moody's Investors Service downgraded Disney debt on Friday to Baa1, a low investment grade, from A3, highlighting concerns about parks and Disney's ABC network.
The theme parks' fixed costs meant low attendance would hit earnings deeply, the ratings agency said.
"Until the global economic and political climate improves Moody's expects that theme park attendance will not materially improve from current levels," the agency said, adding that a Disney plan for reducing its debt relied on revenue growth.
Rasulo said Disney needed to listen to its guests and respond. "I think we've been doing the right things," he said.
Disney had not changed its message, had not altered its advertising strategy or spending in order to attract a different mix of visitors and had not modified its already successful strategy of partnering with companies to sponsor park rides, he said.
But it was already having success with a new attraction geared to young children at its Anaheim, California-based California Adventure, which failed to meet early expectations.
To lure guests, Disney has offered some discounts and incentives at California Adventure even as Florida-based Walt Disney World parks hiked entrance prices, he said.
The new attraction, related to the animated feature "A Bug's Life," opened on Oct. 7 as part of a bid to offer more for young children at California Adventure, Rasulo said.
"A week doesn't make a trend, two weeks don't make a trend, but what we see so far in the response to this product is that it has absolutely hit squarely on that objective," Rasulo said.
Weak financial performance in recent quarters has led some Disney investors to press for change. The company's board has responded by adopting stronger corporate governance measures and backing a plan to revive growth.
Rasulo said Disney should focus on the long run for its 10 theme parks in the United States, France and Japan. Together the parks employ some 90,000 "cast members," as Disney calls its employees.
"You really shouldn't focus too closely, even though we love to, and even though inside we do, on the first six weeks, six months, six years," he said. "This is a business for the long term."
Asked if improved attractions could offset the slow economy, Rasulo said Disney's best bet was to focus on the customer: "They are the things that will do you the best in an up cycle and will do you the best in a down cycle."
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