Destination Parks if oil gets scarce?

Wednesday, September 19, 2007 9:54 AM
Destination Parks, WDW being the leading example, get most of their traffic from tourists, not locals. Those tourists have to drive long distances, or fly. One suspects that this makes destination parks much more dependent on energy prices than local parks for their customers.

Kevin Yee has an interesting article today about what happens to a destination park if and when "peak oil" happens. It's an interesting hypothetical scenario---and normally I don't give Kevin much more than a glance.

Wednesday, September 19, 2007 10:50 AM
That was an interesting article, even though it puts the usual MiceAge "doom and gloom" spin on the situation. I'd say that pretty much all the Florida theme parks are in the same boat, and maybe even places like Branson, MO and Las Vegas.
Wednesday, September 19, 2007 10:56 AM
It's a travel industry issue overall. Despite rising oil prices and plane ticket prices, the airlines can barely keep up with demand, so thus far it doesn't seem like an issue.

But overall the issues are far reaching in every segment of our economy. Whether or not I can go to Disney World is not something I'd worry about much.

Wednesday, September 19, 2007 11:25 AM
In part that's been due to airlines cutting capacity. NWA's load factor is through the roof, but they've also cut about 4% of their flights over the past year.

They have gotten very good at forecasting no-shows though. I can't remember the last time I was on an NWA plane that had more than a handful of empty seats, or alternatively asked for volunteers. They are hitting capacity almost exactly every single time.

Other airlines I've been flying recently have been almost as good. Scary good.

Wednesday, September 19, 2007 11:47 AM
It could be argued that oil already is already scarce since at a price point of $0 there wouldn't be enough to go around. ;)
*** Edited 9/19/2007 3:48:03 PM UTC by GoliathKills***
Wednesday, September 19, 2007 12:01 PM
It is a travel industry issue in general. If things get really bad, a lot of destinations are going to suffer. But I don't subscribe to Kevin Yee's negative outlook. Sure, the cost of a barrel of oil has skyrocketed in recent years, but the cost of gas hasn't increased in lockstep with the price of a barrel of oil. I think it's way too early to be making predictions like he is making. But on the flip side of the coin, is it worth considering contingency plans.

Brian's right that most airlines have been cutting capacity, and that creates the illusion that demand is through the roof. I realize the need to eliminate profit-sucking flights but I'd hardly consider airline demand to be at an all-time high. It's just that there are less people flying and even less flights to service them.

Wednesday, September 19, 2007 12:07 PM
Cool read. :)

And hey, according to that article, even Disney is preparing for a "Gonch business model" future:

"Disney wants to ramp up per-person spending at the WDW property, because they realize trends are for people to visit less often. Disney hopes that means they'll spend more when they DO visit."

That sounds a lot like less customers at higher prices - even if it's not by choice.

Wednesday, September 19, 2007 12:10 PM
I'll agree with that, but I don't think that's something Disney suddenly dreamed up. Seems to me that Disney- and WDW in particular- have been trying to do that for years. Look at how WDW prices have been steadily increasing!

Which leads me to believe that Disney's plan to keep on upping the prices puts them in a vulnerable position. Right now they increase prices and assume that Busch and Universal are going to do the same thing. But what if those two suddenly decided to drop prices substantially? Would Disney stick to the "make more with less" business model, or would the likely drop in attendance lead them to make the same move? *** Edited 9/19/2007 4:12:24 PM UTC by Rob Ascough***

Wednesday, September 19, 2007 12:19 PM
If the doom and goom predicted in the article should come to pass, I think that the fate of destination parks (or any park for that matter) will be the last thing from most people's minds. Things like the collapse of the economy and basically the way of life for the past 100 years will be considered a little more important than the number of people passing into the Magic Kingdom.
Wednesday, September 19, 2007 12:33 PM
Location-based Entertainment-- minor amusement parks in smaller cities. Hmmm, maybe someday we'll have Disney Williams Grove, and Disney Conneaut!

But really, what's so new about this LBE "concept?"

Wednesday, September 19, 2007 12:55 PM
It's only "doom and gloom" to those who are so completely enamored with the "way things are" and can't fathom any other form of existence.

But I see a lot of good things come to pass such as a recentering of the economy to be more locally based and a reconnecting with the community. Things the cheap energy playground of the last 100 years has worked hard to eliminate through the exponential expansion of suburban growth and the associated car-based society. Maybe we'll look back at the foibles of the 20th century and chuckle about how silly we were.

There will be a rocky transition and worrying about Disney World is pretty superficial in the grand scheme of things.

Good point RGB, there is nothing new about "LBE" (except for the terribly annoying pretentious term). "LBE" is the way things were for most of human existence. It's just a matter of relearning the things we forgot how to do.

Wednesday, September 19, 2007 1:29 PM
Disney is unique in this category, even when you include other primary destination places like Vegas. Disney's intangible value from a brand standpoint is how I suspect they justify the higher prices - at least internally.

Even if a day with Mickey could be considered less fun that a day at any random Six Flags, Cedar Fair, or one of many independant parks, the fact that it was a day at Disney adds the intangible value.

Disney values their brands (see Goodwill and Intangibles in a balance statement) at over 50% of the company's assets - $30 billion dollars. Six Flags lists the same at just over 32% - $1 billion, and Cedar Fair lists theirs at 15% - $380 million.

Bottom line, people will skip their local park for a couple years, just to save up and visit Disney.

Disney saw a post-9/11 drop, but that was a perceived security problem, not necessarily a cost issue.

Wednesday, September 19, 2007 1:34 PM
So a person has a better time if they are attacked by Pluto than if they are attacked by Snoopy? ;)
Wednesday, September 19, 2007 1:54 PM
Considering that Snoopy could kick Pluto's ass, I would say so. Also I am sure Disney will roll out the hydrogen cars as soon as needed. Yes, they are that powerful.
Wednesday, September 19, 2007 2:04 PM
I'd agree that Snoopy could tear up Pluto, but I think CF would look at the big picture and just hire the Red Baron to Straf Disney parks characters instead. It'd be more cost effective and would look quite impressive.
Wednesday, September 19, 2007 3:07 PM
I would still label this a rather doom and gloom scenario. While the possibility certainly exists for worldwide meltdown and $200/barell oil, it is a painfully static look at a dynamic situation. Russia and China can afford $200/barell no better than we can. So reaching such price levels would leave a supply without much demand. Furthermore, if we suspend the knowledge that the rest of the world cannot afford such expensive oil…do you not think that we would adapt different transportation means more suited to an expensive oil environment?

We are doing this now. Heck, I’m one of the more conservative people I know :) and I bought a Prius 3 weeks ago (realistically gets 41 mpg in all conditions) to suit my 30,000 mile/year job-related driving habit (I had to throw a Reagan bumper-sticker on it to avoid looking like a complete weenie)! :) This is the most fuel efficient car presently on the market, but there are countless others coming. Boeing (I think) just released a new jet with 40% improved fuel economy. All this is in response to $60-$80 per barrel pricing.

You can bet your butt that the pace would accelerate if oil got to the projections this article indicates. We are an adaptive an innovative bunch. Oil less than $30/barell did not offer much incentive to utilize innovation. Such is not the case now. The short and long-term outlook points to technological advances that can reduce demand for oil (at least in our country). I realize the pace is not fast enough to appease the greenest among us, but the trend is definitely in that direction.

There are dynamic scenarios that could shift the political will of the people in our country to drill our own reserves (ANWR, Gulf of Mexico, Texas, Pacific Ocean, etc) should oil creep to the levels discussed. While such would be a temporary ploy to buy time, you can conceive situations somewhere around $125/barell where the majority, regardless of political propensities, might be willing to let the antelope and puffer fish fend for themselves in order to maintain accustomed quality of life.

I realize a lot of this is politically charged, and have no desire to turn this into typical personal attack debate, but rather, the real argument I make is that the situation is dynamic. We will not sit around and do nothing should oil get to the levels mentioned. We will come together like we did for those 2 days after 9/11 ;) to find solutions. We will innovate, we will change political philosophies, we will fight, scratch, and crawl to maintain our ability to take our children to the Mecca of all American Innovation, so they too can sit on Mickey’s lap.

*** Edited 9/19/2007 7:09:50 PM UTC by Jeffrey R Smith***

Wednesday, September 19, 2007 3:33 PM
The problem with all these optimistic scenarios (we will somehow adapt through the magic of technology) is that they still promote the status quo. Priuses do not make oil magically appear. The real key is learning or relearning to do things differently. Such as finally realizing that 4000 square foot mini mansions in the suburbs with no feasible travel options that do not involve a car do not make sense.

We will have to eventually learn to make do with less and drastically curb consumption of resources. Continuing on the same path we've been following since the 1940s only with a Prius instead of a Hummer isn't going to cut it. Pulling out the last drops of oil from the Artic to buy an extra 6 months of Mall of America consumerism isn't going to cut it. A cheap oil economy that makes lettuce from Costa Rica cheaper than lettuce grown 5 miles out of town will be a thing of the past.

Wednesday, September 19, 2007 3:35 PM
^JRS is right, while oil scarcity could indeed be considered a 'problem', the likely 'solution' would not be the complete elimitation of transportation, but I believe that people like me (i.e. engineers) will just come up with other innovations.

You see it starting already, with the whole push for 'alternative fuels'. I believe that when faced with the choice between unaffordable gasoline and other so-called "dirty" fuels (e.g. nuclear) you'll see that people have no desire to give up their SUVs and Ipods and so back to small-town, barter-system type living.

Specifically with travel, I can envision if the gas gets to the point where car and air travel get cost prohibitive, you'll see an Eisenhower type plan, this time centered around high speed rail.. Hell, if you listen to the Discovery channel, there are already talks/plans/discussions of trans-Atlantic high speed rail. Of course, today, there is no money to fund such a venture as airplanes seem to be working just fine. But, like they always say: Necessity is the mother of invention. If oil goes away, smart people will figure out something to take it's place.
lata, jeremy
--who has no desire to be a farmer

Wednesday, September 19, 2007 8:29 PM

Brian Noble said:
In part that's been due to airlines cutting capacity. NWA's load factor is through the roof, but they've also cut about 4% of their flights over the past year.

Damn, you beat me to it :)

It's especially funny here in Pittsburgh, listening to the CEO of UselessAirways talk about how Pittsburgh'ers "aren't flying", then going to the airport and having to fight for a parking space. There's plenty of traffic, they're just going to the other airlines (sadly, mostly Southwest)

Wednesday, September 19, 2007 8:36 PM
^Alternatively, he could have said "Pittsburghers aren't flying OUR airline"... ;)

Wait, the shareholders might have found that part a bit TOO candid... :)


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