Walt Disney Co. (DIS) is increasing its international theme park footprint for the primary time in practically a decade with its lately introduced plans for a brand new park in Abu Dhabi, United Arab Emirates.
However this isn’t a typical Disney challenge. As a substitute of pouring billions into building and operations, Disney will license its mental property to a third-party developer — giving the corporate the possibility to earn regular royalties with out the capital threat related to main theme park improvement.
Disney shareholders welcomed the information. Following the Could 7 announcement — which coincided with strong second-quarter outcomes for the corporate general — Disney shares jumped 9.7 % in afternoon buying and selling.
That enthusiasm got here regardless of weak spot within the very phase Disney is increasing into. Worldwide parks had been a drag on earnings: Income fell 5 % 12 months over 12 months, and working earnings dropped 23 %. The outcomes got here in sharp distinction with Disney’s home parks enterprise, the place income rose 9 % and working earnings gained 13 %.
So why is Disney transferring ahead with one other worldwide park now?
The corporate’s shift to a light-touch method in Abu Dhabi may clarify why.
Disney faucets a brand new market within the Center East
The brand new Disney theme park can be its first within the Center East and it’s seventh worldwide. The park can be positioned on Yas Island, the UAE’s flashy leisure district that’s already dwelling to Ferrari World, SeaWorld Yas Island and Warner Bros. World.
Disney didn’t choose Abu Dhabi by likelihood. Yas Island is an engineered mega-attraction district that clocked 38 million guests in 2024. It’s a few 20-minute drive from downtown Abu Dhabi and accessible to vacationers from the Center East, Africa, India and Asia.
Dubai, Qatar and Saudi Arabia have all reportedly made overtures to convey a Disney-branded presence to the area over the previous decade. Now, Abu Dhabi lastly sealed the deal.
The UAE is the second-largest economic system within the Arab world, after Saudi Arabia, and a rising star in international tourism. Between its trendy infrastructure and status as a luxurious vacation spot, Abu Dhabi’s location may drive excessive per capita visitor spending — an important metric for Disney and its shareholders.
A sensible, low-risk play for Disney
For long-term shareholders, the construction of this deal is simply as essential as the placement.
Disney is licensing its mental property to UAE-based developer Miral, which can finance, construct and function the brand new park. Disney walks away with royalty checks, whereas Miral shoulders the operational and monetary dangers.
Miral, which has developed different profitable points of interest on Yas Island, will lead all the challenge. Disney will provide Imagineers to steer design and operational oversight of the park, nevertheless it gained’t make investments any capital.
In the meantime, Disney will earn royalties based mostly on the challenge’s revenues in addition to service charges.
“It’s all their capital, and we are going to get a royalty,” Disney CEO Bob Iger mentioned through the firm’s earnings name. “So there isn’t possession. We personal our IP and license it to them. …That is basically a license association, however with appreciable involvement of us.”
Whereas the park gained’t open for years, it represents the corporate’s strategic shift towards extra capital-efficient development. Abu Dhabi could possibly be an instance of how the corporate expands its theme park presence transferring ahead — not by spending billions, however by leveraging its model whereas companions do the heavy lifting.
It’s a transfer that echoes the Tokyo Disneyland mannequin — probably the most profitable worldwide park partnerships within the firm’s historical past.
What Tokyo teaches us about Abu Dhabi
Tokyo Disneyland is a blueprint for the way the corporate’s upcoming Abu Dhabi park may play out.
Opened in 1983 and owned by Japan’s Oriental Land Co., Tokyo Disneyland operates below a licensing deal the place Disney receives royalty charges that common about 7 % of its complete income, in line with Morningstar. The identical goes for its Tokyo DisneySea’s park.
That setup has earned Disney constant, low-risk income through the years, even throughout unstable occasions within the journey and tourism sector.
And enterprise has been booming. OLC reported file income of $3.9 billion for fiscal 12 months 2023 and a web revenue of $755 million, each all-time highs.
The upcoming Abu Dhabi park will possible mirror that association. It’s a licensing deal that, if it tracks equally to Tokyo, could possibly be a notable income generator as Disney additional cements its worldwide presence.
What this implies for Disney’s inventory
Shares of Disney jumped following the corporate’s new park announcement, netting one of many inventory’s largest single-day beneficial properties this 12 months.
Nonetheless, Disney hasn’t disclosed the Abu Dhabi park’s opening date and building may take as much as 5 years, if comparable initiatives like Shanghai Disneyland are any indication. There’s additionally little element within the firm’s 10-Q submitting concerning the Abu Dhabi park— no monetary projections, no timeline, no formal income steerage.
However from a long-term investor standpoint, the announcement signifies a number of optimistic indicators.
- Licensing income enlargement: If the park performs wherever near Tokyo ranges, royalties may ship a constant earnings increase with minimal capital threat.
- Worldwide diversification: Disney’s worldwide parks have usually outperformed their home counterparts in latest quarters. Even with dips in income and working earnings from worldwide parks in Q2 — pushed principally by price pressures and attendance declines at its Shanghai and Hong Kong parks — international operations have traditionally carried out nicely.
- Model constructing by means of international IP: Licensing parks abroad lets Disney deepen model consciousness. It opens the corporate as much as areas with rising client spending.
For long-term shareholders, that’s bullish information.
Whereas the royalty price hasn’t been disclosed, if it aligns with the Tokyo mannequin, the brand new Abu Dhabi park may quietly grow to be a brand new, sturdy earnings stream for Disney’s experiences phase. Transferring ahead, traders ought to take note of how Miral in the end constructions ticketing, capability and park points of interest.
Disney’s upcoming park may not juice the inventory a lot within the months forward. However because the park takes form on Yas Island, it’s prone to contribute to long-term upside — particularly for traders who’re considering in five-year cycles or longer.
Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing resolution. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
