Disney News > Disney News Article
How Disney Triumphed Over Sin City
5/16/2008 10:23 AM EST
Winner Winner Chicken Dinner.... In these times of economic uncertainty, many people are cutting back on the luxuries of life; vacations being one of them. While many would see this as a detriment to their bottom line, Disney has once again risen above the rest and is still seeing a profit.
Disney, over the past few years, has begun to offer value packages, and scale down pricing of lodging. In 1991, more than 55% of rooms at Disney World were premium priced, and now, about 75% of the rooms are considered moderate or value priced. On the other hand, vacation destinations, such as Las Vegas, have, over the years, begun to make things more expensive and upscale. They cater to people who make more than an average income. That concept of making Vegas high class has backfired on them. While people may still gamble no matter what their financial situation, they won't spend the outrageous amounts of money on rooms and restaurants.
Disney has earned 22% more than they have last year at this time, and seem to be holding strong. Some of the increase is due to the value of the weak dollar, as well. Foreign travelers are able to travel to the Disney parks cheaper now. Robert Iger, CEO of Walt Disney Co., says that offering lower priced accommodations is what is helping get through the tough economic times. He says, "We believe creativity, focused capital investment and strategic pricing have helped to make us more resilient to economic downturns than in the past, and our recent results are evidence of that".
On the reverse side of this is Las Vegas. Gambling, only responsible for 41% of the city's revenue, used to be the city's main breadwinner, and now that has been replaced by high priced restaurants and hotels. "We were recession-proof when gaming was the No. 1 source of revenue," said Sig Rogich, who heads a marketing firm bearing his name that advises casinos. "Now the paradigm has shifted, and we get hurt when people decide to eat out or shop less."
Hotels are losing money drastically, down 10.4 % in convention losses alone. Big names on the strip, such as Bellagio and MGM Grand have shown a loss as well as shops owned by Simon Property Group at Caesar's and two outlet centers.
"We're seeing some softness in Nevada, Las Vegas, for the first time in quite some time," said CEO David Simon during a conference call with analysts on April 29.
Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada at Las Vegas, "If they offer the penthouse suites at Motel 6 prices, then people will come. People may be more willing to visit if they can see some value for their money."
21 Photo Copyright Sony Pictures. All Rights Reserved.
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