The Walt Disney World Barometer
By most estimates’ consumer spending drives more than 70% of
the US Economy. This makes the Walt Disney World Resort in Orlando, FL, an
excellent barometer of what’s going on with the consumer and implications for
US GDP. I have been a Walt Disney World enthusiast most of my life. I’ve
watched the resort expand as new parks and attractions have been added, and
Disney has grown its inventory of intellectual property. For full disclosure,
at the time of publication, I own shares of Walt Disney Company stock and have
purchased shares in the accounts of my clients.
Four things make the Walt Disney World resort a great
economic barometer.
1.) Discretionary
Expense - Vacations are a discretionary expense. Unlike food, clothing, and
paying the utility bills, vacations are a lower financial priority and a luxury
for many people. During times of
economic stress, the family vacation is often the first casualty, and rightly
so. The advice I give clients, and we use in our own home is to periodically
assess all discretionary expenses and decide what needs to be changed or
eliminated. During times of economic uncertainty, vacations are a significant
budget item that can be cut and have a considerable impact on the family
budget. A busy Disney World Resort suggests a healthy consumer.
2.) Future
Expense - Disney World vacations are usually planned far in advance.
Looking at crowd levels in the parks, hotels, and restaurants gives us insight
into how the consumer feels about their intermediate financial conditions. If a
person feels insecure about their job security or their ability to find a job,
they are less likely to commit to considerable discretionary future expenses.
3.) International
Audience - Walt Disney World is a global destination. I am always aware of
the indications of the number of international visitors. I watch for tour
groups whose leaders will carry pennants from their home country. I will quiz
the people at the front desk of hotels about their vacancy levels and the
percentage of international guests. I listen for the accents of people around
me, and much to my wife’s dismay, engage them in conversation to glean insight.
The number of international visitors can be an indication of the health of the
consumer in other countries. I would also point out that the currency exchange
rate between the US Dollar and other currencies also influences tourism.
4.) Discounts
- Disney has their finger on the pulse of the consumer. Watching their
marketing, the number and depth of discounts offered can tell us something
about the health of the consumer. Walt Disney World is a massive operation. To
give some perspective, Walt Disney World is roughly the size of San Francisco.
Disney has over 30,000 hotel rooms, over 300 dining outlets, and more than
70,000 employees. In a typical year, over 50M people will visit the Walt Disney
World Resort. If Disney anticipates consumer weakness, they are incented to
offer discounts to maximize the utilization of their facilities and maintain
their workforce.
For a sense of the financial health and attitude of the
consumer, there are few better gauges than what’s happening at the Walt Disney
World resort. Regardless of when you may be reading this, if you would like to
know my take on what Walt Disney World is currently telling us about the
economy just ask. I’ve usually been there recently.
For more information on this topic I invite you to watch this
5-minute YouTube video https://youtu.be/GWc6UnLDMzs
