Originally Posted By SuperDry <<< You know, I promised Doobie, I'd keep this more on the economics/Disney angle than politics. >>> Fortunately, you really don't have to go into politics in order to figure out what today's oil prices are doing and going to to do WDW. Take a look at the 20% reduction in flights to Orlando by the various carriers combined. A question might be: why don't they just raise the price of the tickets in order to cover the increase in fuel? The answer is that there's a segment of the leisure market that simply can't afford higher prices and/or is unwilling to pay them. The dramatic reduction in the number of flights is very telling. Collectively, the carriers have come to the realization that there is price/demand elasticity in the leisure market. Well, we all knew that all along, but not necessarily to the tune of 20%. That's quite a dramatic reduction. Imagine if going forward, visitors to WDW that arrived by air went down 20%. I think that's the kind of thing that is worrying the execs at this point, and it's starting to look very real and not just hypothetical. Assume for the sake of argument that oil prices stay in the neighborhood of where they are today. Southwest Airlines is in a rather good position right now, as they have a large amount of their fuel purchases hedged at lower prices: <a href="http://blogs.usatoday.com/sky/2007/04/southwests_fuel.html" target="_blank">http://blogs.usatoday.com/sky/...uel.html</a> For this year, they have 65% of their fuel priced at the equivalent of $49/barrel, and next year, 50% at $51/barrel. That's way more hedging and thus way lower fuel cost than any of the other large carriers, and is one thing that lets them be the low-cost provider. On routes that compete with Southwest, they set the price, and other carriers have to match in order to get passengers. But what happens when Southwest's fuel hedges expire? Starting in 2010 (now just 18 months away, if you can believe that!), Southwest's fuel costs are going to rise dramatically, even if the price of oil stays at current levels or even goes back down to $100. What do you think that's going to do to pricing, and subsequently, demand for leisure travel? I don't think it's at all the case of Disney execs pulling a Chicken Little when they project that there may be major changes to leisure travel that they have no control over. The politics come into play when you try to affix an underlying cause to the rising oil prices, and/or try to figure out what to do about it. Personally, I don't think there are any easy solutions.
Originally Posted By Spirit of 74 <<Fortunately, you really don't have to go into politics in order to figure out what today's oil prices are doing and going to to do WDW. Take a look at the 20% reduction in flights to Orlando by the various carriers combined. A question might be: why don't they just raise the price of the tickets in order to cover the increase in fuel? The answer is that there's a segment of the leisure market that simply can't afford higher prices and/or is unwilling to pay them. The dramatic reduction in the number of flights is very telling. Collectively, the carriers have come to the realization that there is price/demand elasticity in the leisure market. Well, we all knew that all along, but not necessarily to the tune of 20%. That's quite a dramatic reduction. Imagine if going forward, visitors to WDW that arrived by air went down 20%. I think that's the kind of thing that is worrying the execs at this point, and it's starting to look very real and not just hypothetical.>> Oh yeah. And again, it's not one airline removing 20% capacity. It's many airlines each removing over that. That's a HUGE chunk of seats the airlines don't feel they can make money or fill (or more likely, both) to Orlando. How can that not hurt WDW? Most people fly there. It isn't 1978 when most folks drove. And with gas going up, up, up, I can't see many people saying 'You know, I can't get a flight to Orlando so I'm just going to drive on down.' Sure. Some will. But you can bet it won't be a statistically important number. And let's not forget how some markets are losing service to Orlando completely ... or at least direct service. How many of those people are going to decide let's just go to the beach, lake, mountains or whatever is the closest 'destination' to them? And back to your point on prices, I'll just say that no one will ever convince me that these huge jumps won't impact people to change plans. If I've flown a family of four to WDW the past four years for $250 a ticket and now the best I can get is say $520 a piece ... many of those folks are just not coming here. I don't care how strong people believe the pixie dust is. People will be finding other sources of magic. I am convinced this is why WDI is largely in creep mode as far as future projects go. <<I don't think it's at all the case of Disney execs pulling a Chicken Little when they project that there may be major changes to leisure travel that they have no control over.>> I don't either. I can be very critical of Disney management, but as a stockholder do I want Disney to invest a billion in WDW attractions and improvements if we're going to have 9/11 type attendance ... or even 2003 crowds? Of course the fan inside of me wants Disney to spend, spend, spend. Like they should have been doing a decade ago (DAK excluded). Now ... prudent thinking might be stalling, which rest assured is exactly what is happening now. <<The politics come into play when you try to affix an underlying cause to the rising oil prices, and/or try to figure out what to do about it. Personally, I don't think there are any easy solutions. >> I suppose you're right. The thing is we knew gas was a problem. We knew this back in the 1970s. And we've done exactly nothing ... the fact most cars get better gas mileage is negated by the all the crazies in Hummers and Escalades and big trucks. We didn't have to be in this position. And ultimately, I don't care where anyone stands politically, it's due to the oil lobby, which has about as much desire to get Americans to kick their oil habit as Phillip Morris truly wanting to not have new generations of smokers.
Originally Posted By SuperDry <<< And again, it's not one airline removing 20% capacity. It's many airlines each removing over that. That's a HUGE chunk of seats the airlines don't feel they can make money or fill (or more likely, both) to Orlando. >>> At first, I thought that perhaps Southwest will just step in and fill the void, but they have the same problem as everyone else does. Although they have a huge hedge on fuel, they're already burning all of their hedged fuel and then some. So, each additional gallon of Jet A that Southwest buys is at market price, just like all of the other carriers. Most telling is what happened a couple of months ago, when both ATA and Aloha went bankrupt and stopped operating within a week of each other. They probably were the lowest cost operators in the mainland-Hawaii market. At first I thought, how can the low-cost operators go out of business? Why didn't they just raise prices to cover their costs? Well, if their market is passengers only willing to pay up to a certain amount, then there's your answer. And that may very well describe a large portion of WDW guests that might stay at the value resorts yet fly to Orlando. Iger was quoted recently as saying that WDW is somewhat immune to the sorts of problems that Las Vegas has, as LV has built much of its recent expansion on luxury accommodations, fine restaurants, expensive shopping, and so on. But since WDW had focused on expanding the value market segment, they had not seen such a pullback. I think that the airline situation might end up being the great equalizer.
Originally Posted By davewasbaloo >>>But I believe they're looking at Europe and starting to get very, very concerned.<<< Well I paid $160 to fill my gas tank up yesterday (that's about 14 hours of a minimum wage person's salary and 4 hours of the average professional's). And for Sarah's birthday, we went to the movies - 1 bag of popcorn and 1 coke was $18 and the two tickets for Indy were $32. We do not go often. So, yep, not great, and the leisure and restaurant industry are starting to feel it. House values have plunged the lowest in 15 years. And industries that were seen as solid, are laying off 1000's - banking, building and legal.
Originally Posted By Witches of Morva ORDDU: Yes, Spirit, the wealthy elite DO watch out for each other whenever THEY make unwise financial decisions. This has been proven over and over again. As a result, they hardly ever have to pay the price for their mistakes. The people down lower on the totum pole have to do that. It's disgusting. ORWEN: Somebody on another web-footed site was saying that the Walt Disney Travel company only received 2 phone calls to make reservations a few days ago and that some cast members were sent home early because of that. I guess it's a sign that Walt Disney World is about to suffer, too, because of the bad economy in America.
Originally Posted By dshyates "People need to go out and buy machines. So there will be jobs at the machine making places". That's W.'s Mucho Grande economics policy. As soon as it kicks in we will all get raises. WaHooooo!!!! Thank God the nightmares over. W.'s got his ginourmous intellect on the case.
Originally Posted By deephil <<< gas is headed toward $8 a gallon is because that damn Congress won't let his oil cronies drill wherever they want etc ... >>> Everyones feeling the pinch even here in Europe. Here in England we are already over $8 a gallon mark and rising daily. Airline prices are increasing there sur charges to cover fuel, again. One thing is for sure, we always find means and ways of going on vacation even with a weakening £. Were lucky this year to fly free with Virgin Atalantic on our loyalty points, seems they were useful after all!!! Thankfully we joined DVC two years ago making this trip even sweeter as we could not have afforded it otherwise.
Originally Posted By mousermerf About the call-center - that's a blatant overreaction by someone who doesn't understand how the place operates. The have slow periods and send people home all the time. The turnover is so high there that it's quite likely whoever is reporting this has no concept of the annual ups and downs of the business.
Originally Posted By Socrates (#23 was for #20. I was in a hurry when I posted.) Actually, what has drawn me to this thread are the long-term implications for theme parks. Assuming the days of cheap energy are over, how does Disney react? Could this become a major boost for DisneyQuest? Socrates "The unexamined life is not worth living."
Originally Posted By NikkiLOVESMickey Spirit, I hear what you're saying about flight reductions. We booked our flights for our Mardi Gras 2009 trip about six weeks ago because we could get a direct flight on Delta and the rates were decent ($225 round trip). I just checked our flights and they've been switched from direct flights to one stop flights through Atlanta. If we were to book the same flight today, it would cost us $504 round trip. I guess I should be grateful the flights haven't been canceled (yet-February is still a long way away).
Originally Posted By fkurucz <<GM union workers were making on average over $30 per hour plus huge benefits in a World Economy that averages less than half that.>> The same could be said of anyone who works in a cubicle farm, in a hospital, etc. If the middle class's wages are doomed to slouch to 3rd world levels, pray tell who will be able to afford a WDW vacation?
Originally Posted By fkurucz <<So, yep, not great, and the leisure and restaurant industry are starting to feel it. >> Same here. In my neck of the woods you pretty much walk into any restaurant any day, any time of the week. A sharp contrast from 1-2 years ago when they had 1 hour+ waiting lists on Fridays and Saturdays.
Originally Posted By fkurucz <<Actually, what has drawn me to this thread are the long-term implications for theme parks. Assuming the days of cheap energy are over, how does Disney react?>> I have been wondering how will this affect DLR? Will locals, strapped by rising gas and energy prices not renew their AP's? Or will people forego their annual vacation trip and buy APs instead? Or will it be a combinatin of both?
Originally Posted By fkurucz <<I guess I should be grateful the flights haven't been canceled (yet-February is still a long way away).>> Plus there is a distinct possiblity that your airline of choice will go out of business by then.
Originally Posted By Spirit of 74 <<Enron? Tyco?>> If you're inferring that the company leaders did fall for their crimes, my response would only be so what? Look at what happened to the employees. Imagine having $300,000 in a 401K after working for decades and retirement comes and ... oh well, you're outta luck and don't go looking to your President or Congress to make sure that money comes your way. You can spend retirement making $7 an hour as a greeter at WalMart, while your house slides into forclosure.
Originally Posted By Spirit of 74 <<The same could be said of anyone who works in a cubicle farm, in a hospital, etc. If the middle class's wages are doomed to slouch to 3rd world levels, pray tell who will be able to afford a WDW vacation? >> Only the very wealthy ... and WDW hasn't exactly been a destination of choice for them for a long time. It's funny that so many people feel the only way we can 'compete' with other countries is to lower our standards and become 3rd world. Government never says, 'no, you can't do this' to big business ... they encourage those $30 an hour jobs (and that isn't a great wage, it's just a fair and realistic one) to head to India. Are our leaders really that stupid that they think people can live on $10 an hour wages? (don't answer, rhetorical) That's why I get a kick out of folks saying that the housing crisis here isn't that bad and it's not affecting many people and we're sure not in a recession. This weekend I did some real estate shopping (more for info than anything). I went to Wellington, a very affluent suburb of West Palm Beach to a major development that was advertising what I term mini-McMansions originally close to $1 million for $499,999. They must have had 25 of these babies built and ready and countless empty lots or ones with foundations and tumbleweeds ... 5 and 6 bedrooms, 3-4 baths, 3 car garage, swimming pool and jacuzzi, a few had a mini guest house (more like a bedroom and bath on the other side of the pool) on a lake, incredible floor plans and upgrades throughout and there were about three of us looking. Every single one of those homes had mortgages fall through and they've been sitting ... some since 2006 ... built and ready and empty. The shopping center up the street is 2/3rds empty. The public areas are struggling to be maintained. As I left, I said to the saleswoman what would happen if I could give her $300,000 cash for a home she was asking $479,000 for and originally went for $860,000 ... she ran to make a telephone call. Didn't even hear me say I was kidding. yeah, but things are just fine ... On a similar note, a buddy of mine just bought a condo in Miami in a gigantic tower overlooking Biscayne Bay (one of about six huge ones that began construction around 2004-05 and are about complete). Original asking price: $750,000 ... sales price this week, $250,000 with them picking up all closing costs and adding about $25,000 in upgrades for free. My local shopping center has lost 40% of its tenants in the past six months. This in one of the most affluent communities in South Florida. Milk is $6.50 a gallon here. And none of this is going to affect WDW?!?! Yeah, sure if you're snorting that pixie dust. Tell it to yourself, you might believe it. Vacations may be one of the last things people give up in hard times, but guess what? They give them up. I have decided against two Disney trips, one to WDW for Memorial Day and one to Anaheim next week for the Midway Mania debut for strictly financial reasons. I honestly don't recall the last time that happened. I think they were likely pressure cleaning the MK nightly though! ;-)
Originally Posted By Spirit of 74 <<I guess I should be grateful the flights haven't been canceled (yet-February is still a long way away).>> <<Plus there is a distinct possiblity that your airline of choice will go out of business by then.>> Don't scare her! Besides, I think Delta's safe for a while ... although if oil hits $200 all bets are off ... and the talking heads on cable news will finally have to say we're in a recession (of course, by then it will be a depression for most average people).
Originally Posted By SuperDry <<< Only 35% of WDW guests come by plane. >>> If that number is correct, and if there's a 20% reduction in passenger volume, then that's a 7% overall decrease to WDW visitors. That's huge, especially if you're responsible for delivering a 20% or whatever it is earnings growth every year. Also, I would imagine that visitors that arrive by air have a longer average stay and higher average spend than other guests, but that's just an educated guess.
