Move Over Disney+: Why Theme Parks Could Be Disney's Real Growth Driver In 2022

Walt Disney World is honoring its 50th anniversary with an 18-month celebration that began in October 2021. The anniversary and pent-up travel demand are leading to strong attendance at the company’s parks, which could turn into the biggest growth driver for Walt Disney Co DIS in 2022.

What Happened: Walt Disney World, which is the most visited theme park in the world, is seeing massive crowds and sellouts in the first months of 2022, which is typically a slower period.

Magic Kingdom, Animal Kingdom, Hollywood Studios and EPCOT all reached capacity crowds over Presidents' Day weekend (Feb. 21 and Feb. 22). Dates near the holiday were also seeing large reservation numbers, according to the popular Disney blog Inside the Magic.

From Feb. 25 through Mar. 1, Magic Kingdom was not reservable, with the other parks having limited availability during the stretch.

The upcoming St. Patrick’s Day holiday might not jump out as a typical vacation time, but Disney is already seeing sellouts across several parks.

From Mar. 14 through Mar. 17, all Disney Park Passes are reserved for all four Walt Disney World theme parks. The dates of Mar. 11, Mar. 13, Mar. 18, Mar. 21 and Mar. 22 have limited availability outside of Magic Kingdom.

The holiday leads into the busy Spring Break period of late March and early April, which is typically one of the busiest times at the parks.

Disney is still operating at limited capacity, although the number hasn't been announced, and requires reservations for all park attendees.

“To enter a theme park, you will need a park reservation and valid admission for that park – for each day you’d like to visit,” the company’s website says.

Related Link: Disney Q1 Earnings Highlights: Parks Segment Up 100%, Disney+ Hits 129.8M Subscribers, ARPU Increases 

Why It’s Important: The COVID-19 pandemic had a huge impact on the business of Disney, specifically its parks and resorts business segment.

Crowds aren't showing up to theme parks, specifically the company’s Walt Disney World in Florida, in pre-pandemic levels.

Disney reported 100% year-over-year growth for its parks and resorts segment in the first quarter, with revenue of $7.2 billion. The same segment saw year-over-year growth of 99% in the fourth quarter. The company’s media and entertainment business had revenue of $14.6 billion in the first quarter, up 15% year-over-year.

While Disney’s direct-to-consumer business including streaming platform Disney+ was the big growth story in 2021 and helped weather the company through the COVID-19 pandemic, the parks and resorts segment could see the most meaningful growth in 2022 and reward shareholders.

“After a 2-year COVID-19 driven drag, theme parks came roaring back in FY1Q22 with operating income nearly reaching FY1Q20 levels,” Bank of America analyst Jessica Reif Ehrlich said in a recent note.

Ehrlich, who has a $191 price target on Disney shares, points to technology enhancements in theme parks, increased capacity and pent-up demand as major growth drivers for Disney and its parks and resorts segment.

Higher revenue at parks is an area to watch, with Genie+ and Lightning Lane items being purchased by park visitors to skip long lines. Future growth could also be seen with “the eventual return of international visitors, which account for roughly 20% of total park visitors.”

Disney’s first-quarter report was for the period ending Jan. 1, 2022, which means the next reported quarter will include the months of January, February and March. The second quarter includes the President’s Day, St. Patrick’s Day and Spring Break holiday periods.

Outside of those holidays, the company’s largest park, Walt Disney World, is seeing strong crowds and reservations, as reported by several Disney fan blogs. The company could report another large year-over-year increase for its parks and resorts segment. The comparable period from 2021 was when parks were still operating at capacity limits of 25%.

DIS Price Action: Disney shares have traded between $129.26 and $203.02 over the last 52 weeks.