At an investor conference this week, CEO of Universal Destinations & Experiences Mark Woodbury said, “The introduction of Super Nintendo World in Hollywood that has really brought Hollywood back in a big way--great momentum on the part of the existing businesses. With a deep understanding of each of those markets, we've got a really strong runway in the form of a very well-developed long-range plan for each of those. We have a very well-understood growth plan for each of each of our existing properties.”
We initially questioned how one attraction could impact an entire theme park. However, when we looked at the visitation data, we see that 3.2M visitors have visited the Super Mario attraction since it opened out of a total of 4.1M visitors to the theme park (where a visit is over 15 minutes). Said another way, 78% of park visitors also visited the new attraction.
The attraction’s arrival was timed to coincide with The Super Mario Bros. Movie, which did incredibly well at the box office and brought in a domestic total of $575M. Looking at Placer’s Favorite Chains by Type, we see that 75% of visitors also went to a movie theater. If we narrow the range down to just April and May, the figure remains high at 44%. For comparison, 76% of U.S. adults went to the movie theater at least once in 2019. Given that the 75% figure is only for eight months, these Super Mario Nintendo World visitors out-index for going to the theater.
Regarding any sign of a consumer pullback from theme parks, Woodbury said, “We really look at Orlando in a very positive light. Orlando came out of the pandemic in a really big way. We over-indexed in locals and really powerful out of the U.S., so unprecedented attendance in the Orlando market through 2022. And as expected, we would expect that to soften a little bit going into 2023. That was also fueled a little bit by the resurgence of cruise opportunities for people. They all came out in a big way in 2022. [In 2023], they had a few more options. Cruises would be one of those. I think everybody also knows the big spike in international outbound travel from U.S. So that's softened us up a little bit. International travel to Orlando, still trailing behind 2019 levels a little bit, but we're seeing some light at the end of that tunnel. I think we see it all really positive for Orlando. And then on the flip side of that in Los Angeles, we came roaring back on the back of the Nintendo property.”
These comments match our commentary about Q2 results and consumer trends which you can find here. Given Florida's theme park recovery in 2021 and 2022, we thought we'd focus the Placer lens on the other theme park market, California. Since July, Placer shows that the major destination theme parks in California have done well, in aggregate, following the soft week when the hurricane struck.
Over the past year, we have written quite frequently about the theme parks and how they were seen as growth businesses by their parent companies. Being growth businesses with attractive returns, theme park companies have been investing in new attractions and even new parks such as Univeral Epic. Disney has spoken about their desire to invest an incremental $17B in Florida. Given that 78% of Universal Studios’ visitors also visited the new Super Nintendo World attraction, if one were to flip that around, one could say that the new Super Nintendo World attraction created a heck of a lift for the overall park, and it highlights how important new attractions are to driving the business. To date, Universal has been pretty tight-lipped about Epic--a roughly $2.5B investment--so we were fascinated to hear Woodbury open up about it:
“We were really trying to understand what would take us to the next level in Orlando. What came out of that work was an understanding by the consumer that they really liked the product that we did. They like the immersive entertainment that we're offering. They like the way that we combine technology and storytelling. They like the intellectual properties that we were bringing to life and that if we gave them more, they would give us more time. That became an opportunity for us to how do we expand visitation to the Orlando market that would garner us a full-week vacation. Right now, we get a good 3 days. What we really are looking for was the full week, and Epic is really the driver of that full-week transformation to really make us the destination of choice in Orlando for families with kids 8 and above. That's kind of our sweet spot. So that was kind of the origins of the Epic strategy.
When you get into what is Epic, there is a slightly different challenge. We have these 2 really fantastic properties at Universal Studios Florida and Universal's Islands of Adventure. Well, how do we make the next thing complementary but uniquely different to those 2 parks so that when you come, you have 3 different park experiences? And Epic is really that. It's a totally different park...in terms of its physical makeup. It's four themed lands based on really powerful trip-driving intellectual property. One of those we've announced will be the Nintendo Land that we created in Japan and now in Hollywood but a bigger footprint. And then 3 others, all surrounding a center hub, which is our opportunity to bring the park back into theme parks. This is a lush landscape, a beautiful environment with attractions, food service, all kinds of opportunities in there. The physical makeup of the park is unique and different than anything we've done and anybody else has done. So from an experiential standpoint, it will be a totally unique experience.
And then technologically, it's the most technologically advanced park we've ever done. And that speaks to both the attractions themselves, the next generation of robotics, drone technology, all the way through to the guest experience. The full guest journey is really being taken to a whole new level, and Epic is really kind of the driver of that. And that will translate across all of our properties in Orlando. It will be managed through a facial recognition, photo validation technology that will enable you to have a very frictionless experience throughout your visit to all of our properties by that time in Orlando. So Epic is really truly a groundbreaking park...[To conclude, Epic will] drive more people to the market, and it will increase our share of those in the market.”
Going back to the California theme parks and their performance versus 2019, quarter-to-date, Placer shows +5% visitor growth. We suspect that where international visitation to be included, which is down, that the increase would be more in the +2%-3% range. When comparing the gains between parks, Disneyland and Magic Mountain are up, whereas the other parks are down. Of these parks, only Disneyland was able to drive an increase in visits per visitor.
Given that capacity limits have been an issue for Disney, we suspect that part of its domestic outperformance stems from it having additional capacity for domestic visitors given that international visitation is down. (Historically, international visitation was a larger portion of its visitor mix in California than the other California parks.) We also suspect that Disney's multi-day offer (i.e., people stay for more days) versus single-day offers has also allowed it to capture more share. That is also what’s implied in Woodbury’s comments above about Epic being positioned as a full-week vacation. Moreover, all resorts and destination vacations try to maximize on-property spend and limit off-property spend. The data table above demonstrates that Disney is succeeding as such in California.
