Disney’s Magical Cruise Company sails ahead as Disneyland parks struggle

According to recently filed accounts, Disney’s cruise line sailed past the £1.6bn ($2bn) revenue mark in 2023 for the first time in its 25-year history, thanks to a surge in demand as it emerged from the pandemic.

Disney’s filings in the United States don’t disclose the results of all of the businesses it owns and only give general guidance on its cruise line.

However, its fleet of five ships is run by Disney’s Magical Cruise Company subsidiary in London, where it files annual accounts, and they have lifted the lid on its performance.

The figures revealed that in the year to 30th September 2023, revenue rose 90.6 per cent to a record £1.7bn ($2.2bn). Meanwhile, net profit hit £142.1m ($180.5m), up from a £256.5m ($325.8m) loss the previous year.

Occupancy hit 95 per cent in 2023 and rose to 97 per cent in December last year.

The accounts added that so far, “in fiscal 2024, the company has seen occupancy and booking levels continue to perform well, with occupancy exceeding the comparable 2023 financial period quarterly levels.”

The cruise industry has steamed ahead since it left the choppy waters of the pandemic. The Cruise Lines International Association has said the global number of passengers would reach 34.7m this year, up 17 per cent from 2019.

Data from market analyst CruiseMarketWatch showed that Disney carried 2.8 per cent of cruise passengers and generated 4.2 pe rcent of the total revenue.

The strength of Disney’s brand has made it a bellwether of the cruise industry, but it wasn’t even a player just 25 years ago.

Disney first dipped its toe in the water in the mid-1980s when it signed a partnership which allowed the now-defunct Premier Cruise Lines to sell combined cruise, hotel and theme park packages and offer on-board appearances from Disney characters.

In 1993 Premier decided to partner with Warner Bros instead and although it continued to offer land and sea packages with Disney’s parks, it also added Universal Studios as an option.

The led Disney to approach Carnival and Royal Caribbean about becoming its exclusive sea partner. However, the talks went nowhere so Disney took the plunge and launched its own cruise line. Its then-chief executive Michael Eisner decided to base it in London and it has remained there ever since.

The accounts forecast that Disney’s cruise line “will maintain profitability in 2024 due to favourable cruise industry demand coupled with the expanded capacity of the fleet.”

Demand for Disney cruises grows

Last month, Disney opened Lookout Cay, its second private island destination in the Bahamas, and in December, its sixth ship, the Disney Treasure, will set sail.

This will be followed next year by Disney Destiny and Disney Adventure, which will be based in Singapore.

The Adventure will be able to hold 6,700 passengers, making it one of the world’s largest ships by capacity. Disney acquired it in 2022 for a reported £34.3m (€40m) after its previous owner, Genting Cruise Lines, fell into administration.

Earlier this month, Disney unveiled plans to launch a ninth ship. The ship will sail from Tokyo in 2029 and is expected to generate about £500m (¥100bn) in annual sales within several years of launch.

The outperformance of the cruise division stand in stark contrast to the cutbacks in other divisions of Disney.

Notably, the studio has slashed spending on entertainment content by £3.5bn ($4.5bn) to £19.7m ($25bn) in the current financial year after its Disney+ streaming platform burned up more than £8.7bn ($11bn) of losses since it was launched in 2019.

Combined with a decline in cinema admissions, it has led to the dominance of Disney’s ‘Experiences’ division, which includes its theme parks and cruise line.

Disney’s latest results showed that in the second quarter, experiences accounted for more than a third of its revenue and nearly 60 per cent of its operating income.

However, the company’s stock tumbled in May after Disney’s chief financial officer Hugh Johnston warned that its third-quarter results would show an attendance drop in its theme parks due to “a global moderation from peak post‐Covid travel”.

Disneyland parks struggle

According to UBS analyst John Hodulik, the growth of Disney’s cruise line could help offset this softness in the company’s domestic theme park business.

In a report last month, he said that “rapid expansion of cruise capacity helps de-risk the medium-term outlook” for the parks business.

However, it hasn’t all been plain sailing. The accounts show that Disney has banked a total of £1.3bn ($1.6bn) in dividends from its cruise line since it was founded in 1998 but it hasn’t made a payment since 2019.

Its net profit last year was less than half of its peak of £319.8m ($406.2m) in 2019, so although the business is now in calmer waters, it still isn’t firing on all cylinders.