Walt Disney World (WDW) in Florida, the spiritual (if not commercial) flagship of the Disney Corporation, just embodies business genius in many different ways. I can think of (and list below) at least five separate, brilliant maneuvers made by Walt Disney and his successors in the design and management of this property. What’s especially intriguing, I think, is that all five of these strategies operate at two separate levels of analysis – as a short-term, “pretty good” strategy (that leads to smaller yet immediate short-term gains) as well as a long-term, “really good” strategy (which maximizes long-term profitability).
Maneuver One: large real estate acquisitions prior to park development
Idea: Using a series of separate holding companies (so that nobody would realize that Disney was making a large commercial investment in central Florida), Disney’s representatives began buying up a very large, contiguous property from multiple land-owners. Disney acquired much, much more land than was needed for his immediate purpose (the initial development of the Magic Kingdom).
Short-Term Benefit: By hiding the real buyer and disguising his intent, Disney was able purchase land much more cheaply than he otherwise would have been able to. Likewise, by building a theme park in the center of the property, he was able to boost the value of all of his surrounding real estate.
Long-Term Benefit: More than just the price of land factored into Disney’s decision to purchase such a large property before building. The corporation eventually petitioned the State of Florida to recognize the property they owned as two separate cities – Bay Lake and Lake Buena Vista – and to have those cities managed by a special governmental unit, the Reedy Creek Improvement District. This gave the company effective control of zoning, taxation, and other governmental powers that other companies could only dream of obtaining for their business operations.
Maneuver Two: multi-level theme park design
Idea: The Magic Kingdom introduced the concept of a UTILIDOR system – an underground network of storage areas, maintenance centers, and passageways, providing support for above-ground business operations. Almost all merchandise and food enters the park via these corridors; likewise, all trash is removed from the park via this system.
Short-Term Benefit: Obviously, a direct benefit of this approach is the improved aesthetics – visitors to the parks will not see all of the delivery trucks, trash bins, and other unpleasant necessities required for an small environment containing so many people. In other words, the UTILIDOR system is key in helping to maintain the “magical atmosphere” that Disney wants guests to feel throughout their stay.
Long-Term Benefit: Just as Steve Jobs “borrowed” the idea of the computer mouse from Xerox, Walt Disney (consciously or not) borrowed this idea as well. Indeed, it is fundamental to almost every modern retail store and restaurant that there be a separation between the “show room” and the “back room” (i.e. the stock room, the kitchen, etc.). Some would argue that Disney not only created a more pleasant theme park, but actually transformed the Magic Kingdom (and later, the other parks) into gigantic retail malls that look like theme parks – and which guests are eagerly actually paying to enter! In other words, the scope of retail activity in the park is almost certainly much larger than the amount of resources dedicated to running the rides and attractions. In theory, rational people would never pay money to enter a large retail mall (with a few free rides); but the UTILIDOR system helps to obscure what’s really going on in the theme park by making everything (even stores) appear “magical” and “entertaining”.
Maneuver Three: a comprehensive transportation system
Idea: Disney maintains an extremely efficient and comprehensive transportation system throughout the entire resort. Comprised of fleets of buses, small boats, and monorail trains, these transportation options make it very easy for most guests to “live without their automobiles” throughout their entire stay. In addition, the boat and monorail options (available from several of the resorts to the theme parks and entertainment areas) add to the “magical” experience for many guests. Disney also offers direct-to-WDW transportation from the Orlando airport and the nearby Port Canaveral (where Disney Cruise Lines docks).
Short-Term Benefit: Obviously, the sophisticated transportation options are a great convenience to the guests, and add to the “all inclusive” feel that the resort wants to convey. This, in turn, encourages guests to spend more money on-site instead of driving to off-site entertainment and dining options.
Long-Term Benefit: The transportation option offers more than just another guest benefit; it practically allows Disney to control the flow of movement of guests throughout the greater resort area. This makes crowd control much better than you would ever expect in such a small, densely packed area (which in turn lets Disney devote more resources to developing attractions instead of building more roads and parking lots). In fact, since the enormous parking lots for each theme park are located beyond the bus terminals, monorail stations, and boat docks (and even the parking is reached via small shuttles), potential congestion problems (when the park opens and closes, for instance) are dispersed over a broad area.
Maneuver Four: a time-share sales unit (DVC)
Idea: Disney Vacation Club emerged in 1991 as a competitor in the “vacation ownership” (time-share hotel) industry, where customers make lump-sum payments up front in return for being able to obtain lodging in a Disney resort for a certain number of nights per year, over a term of many years. Club “members” also pay a smaller annual maintenance fee, in addition to the larger up-front purchase.
Short-Term Benefit: Prepaying for “on-property” accommodations made sense to many consumers, and DVC’s offering was therefore more attractive than the many “off-site” time-share projects that were springing up all over the Orlando area in the Eighties. Not only was Disney able to sell its product at a premium to its competitors, but it found a way to make money from that vast amount of real estate that might not have otherwise been utilized.
Long-Term Benefit: The growth in time share sales ran parallel to the development of several new resorts. From the late eighties through 2010, Disney began a campaign of vastly expanding the number of hotels and rooms on site. In other words, Disney performed another transformation; instead of WDW just being a theme park based attraction, it became a true multi-resort vacation community. However, operating a very large resort involves risk; downturns in the economy, or unexpected events (like 9/11) could have a major impact on occupancy. The development of time-share units significantly helped to mitigate that downside risk. Just as airlines discount seats in order to ensure that each flight is at least partially full, DVC – by guaranteeing at least partial occupancy in many WDW resorts, for many years to come – enables the company to aggressively expand its resort options while mitigating any unforeseeable threats.
Maneuver Five: Wearable Computing (Magic Plus)
Idea: Disney’s latest brilliant maneuver was initiated in 2008, and rolled out in early 2013. Disney replaced paper and plastic tickets (for park admission, hotel room keys, resort charges, etc.) with wrist-based bands that would be issued to all members of the family.
Short-Term Benefit: Obviously, most customers found wearing the bands around the resort more convenient than carrying around multiple tickets and cards. Although there were significant hurdles and costs in implementing the required infrastructure, this move helped to streamline many network-related processes. For instance, guests could now make reservations (for rides or restaurants) on their cell phones, and admission could be quickly granted by scanning the guest’s wrist band.
Long-Term Benefit: In the age of Hadoop and other “big data” technologies, being able to track the movements of customers all over your property creates a huge amount of useful consumer data to be mined. Just as the original park guests were willing to pay to enter a “retail mall disguised as a theme park”, today’s guests are now paying for the privilege of participating in the largest ongoing, corporate-sponsored scientific study of mass human behavior – once again, masquerading as a theme park!
Written by Gary Kulwin, M.Sc. in Business Administration (Organizational Behavior)!