Like most of corporate America, Walt Disney Co. had a terrible quarter. Yesterday, it reported its first-quarter revenues dropped eight percent and earnings fell 32 percent over the same period last year. While revenues and earnings sunk for all of its business segments, the parks and resorts division fared the best, as revenues dropped just four percent during the quarter. And the future looks bright: The company says hotel bookings for the second and third quarters are up over last year.
The reason for the relative success of Disney resorts is the company's very-attractive seven-for-four promotion it launched last year and recently extended through the middle of August. The scheme offers resort guests three free nights when they book four. Not only does the promotion provide a substantial savings for guests, it presents a strong price/value proposition because consumers feel they're getting a lot of bang for their buck.
As company officials warned stock analysts following the earnings release, the promotion fills the house (properties in both Anaheim and Orlando had 85-percent occupancies during the quarter) but ADRs suffer. Of course, Disney's rationale is to get families to the resort, where they'll spend lots of money on park admissions, food, drinks, souvenirs and more.
Disney's strategy provides a good lesson to all hoteliers looking to survive current recessionary pressures. You need to provide promotions that pack a lot of pizzazz but which don't appear to be straight discounts (20 percent off today!) and hopefully create an environment in which your guests will spend money while on property. It's easier said than done, but it's a good model to emulate when you can.