Exec swap part of Disney's efforts to boost parks and resorts

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Walt Disney Co.'s parks and resorts division, often overshadowed by the company's mammoth media assets, is suddenly in the spotlight as Disney pours significant investments and star executive power into the division.

For one, the entire division will have a new boss starting next year: Disney CFO Tom Staggs will be swapping posts with Parks and Resorts Chairman Jay Rasulo at the end of this year.

The move sparked much speculation, including that Staggs and Rasulo were being groomed to succeed Disney CEO Bob Iger.

As for the logic behind the swap, Iger said during the company's year-end earnings call earlier this month, "I made both Tom and Jay offers I felt they couldn't refuse."

"They were also both very right, from a timing perspective, to make this move, having been in their current positions for quite a long period of time. These [positions] were kind of perfect for both of them," he said.

Rasulo has been with Disney for 23 years and was appointed chairman of the worldwide parks and resorts division in 2005, after serving as president of the division since 2002.

Staggs has been CFO since 1998, managing Disney's capital for more than a decade, and has been reporting Disney's financials to analysts since well before Iger moved into the top seat in October 2005.

All of which raises the question: What will a finance man like Staggs bring to a business that includes theme parks, resorts, a cruise line, tours and a vacation club?

"I'm getting the chance to go over to the parks at a time when they have a very exciting period in front of them," Staggs said during the company's Nov. 12 call. "My goal is to go in there, get down the learning curve as quickly as I can and hopefully continue a lot of the great work that Jay has put in place."

Parks and Resorts is Disney's second-largest business segment after media networks, which includes Disney's broadcast TV, cable TV, radio, publishing and Internet divisions.

The parks and resorts division is also where Disney is spending most heavily in the coming year.

"We're investing in a fair amount of initiatives that are designed to create long-term growth," Iger said. He added that the "dominant expense increases comes on the parks and resorts front," mentioning investments in cruise ships as well as expansion plans at the theme parks and resorts.

Those expansion plans include a $1.1 billion project under way at Disney's California Adventure Park; a $3.6 billion plan to add 30 attractions and three themed lands at Hong Kong Disneyland; and an ambitious expansion project for Fantasyland at Walt Disney World's Magic Kingdom, to be completed by 2013.

Additionally, an $800 million resort in Hawaii is expected to open in 2011, and Disney Cruise Line has two 128,000-ton ships in the works, the Disney Dream and Disney Fantasy, scheduled to enter service in 2011 and 2012, respectively.

Another huge investment for the division will be an estimated $3.6 billion theme park in Shanghai, a plan for which Disney received approval from the Chinese central government in late October.

But while Disney continues to pump money into its parks and resorts segment, clearly in a down economy, the segment is not without its challenges.

Revenue for the division fell 7%, to $10.7 billion, for the fiscal year ended Oct. 3, 2009, triggering a 25% drop in operating income, to $1.4 billion. For the fourth quarter, revenue fell 4%, to $2.84 billion, and operating income dropped 17%, to $344 million.

And Disney has been rolling out aggressive promotion after aggressive promotion to stimulate attendance at the parks during a time when families have been more hesitant to travel and spend.

"Not surprisingly, our promotional packages led to greater room and admissions discounting, which contributed to softer guest spending," Staggs said during the call.

Excluding the impact of an additional week in the fourth quarter of 2009 over 2008, combined attendance at the parks was up 3% for the year -- a 15% attendance increase at Disneyland in Southern California offset a 4% decline at Walt Disney World in Florida.

But per capita guest spending at domestic parks decreased 10%, and per room spending at the resorts was off by 7%, Staggs reported. He added that first-quarter bookings for next year were running roughly 5% behind this time last year.

"We're looking at a year that at least at the beginning is showing some potential signs of improvement," said Iger. As bullish as Disney's investments in parks and resorts may seem in a down economy, Iger cautioned, "visibility is somewhat limited, and we're going to continue to address the cost side, particularly with the economy being somewhat uncertain."

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