Disney announced that it’s adding four more cruise ships to its fleet.
It was easy to miss this in Walt Disney‘s (DIS -0.12%) nearly three-hour D23 presentation on the future of its theme parks and experiences on Saturday night, but the media giant announced a pretty massive expansion of its cruise ship fleet. Disney announced that it’s adding another four ships to its cruise line, on top of the four that are already in the works.
In a few years, Disney-branded boats will go from today’s slate of five vessels to a baker’s dozen. With the cruising industry growing a lot faster than the theme park space, it’s easy to see why the world’s largest theme park operator is boosting the capacity of its ships.
There are risks, too, but let’s take a closer look at one of the biggest D23 announcements over the weekend that may have slipped through most investing radars.
Bon voyage
A quick overview of the Disney Cruise Line business is probably in order. Disney Magic — the first cruise ship in its fleet — began taking passengers on watery adventures in the summer of 1998. It had previously partnered with an existing cruise line to license its characters, but when that fell apart and negotiations with larger cruise lines failed to bear fruit, it decided to set sail on its own.
The Disney Wonder had its maiden voyage the following summer. It waited until 2011 and 2012 to add a third and fourth ship, respectively. The pandemic would go on to rock the industry four years ago, but the resilient cruise line operator’s fifth ship — Disney Wish — came online in 2022.
This is where we are right now in terms of ships in operation, but Disney is about to add three more ships before the end of the 2025 calendar year. This is a pretty big deal, and not just because the House of Mouse is picking up the cadence on its deliveries.
These three new boats are larger than the earlier vessels. One of them — Disney Adventure — is 44% larger than the biggest of the ships currently in the entertainment-giant’s fleet. In the next 15 months, the capacity of Disney’s fleet will more than double, despite adding just three new ships.
The ninth ship was announced last month and will be different. Oriental Land Co. is the owner and operator of the Tokyo Disney Resort and the only Disney-branded theme park resort in which Disney doesn’t have an ownership stake. Oriental Land Co. will own and operate the cruise ship following a financial agreement with Disney. It will sail exclusively out of Japan year-round, starting in early 2029.
The four new boats introduced at the D23 fan expo over the weekend are Disney-owned cruises and will have their maiden voyages between 2027 and 2031. If Disney Cruise Line wasn’t really moving the needle for the Mickey Mouse company with $90 billion in trailing revenue, it should start to matter soon.
Image source: Disney.
Even landlubbers should be rejoicing
There are naturally risks with owning and operating 12 of the 13 Disney-branded cruise ships that should be sailing seven years from now. We saw how unforgiving the COVID-19 crisis was to the traditional cruise lines, suspending sailings for more than a year, in most cases.
However, the cruising industry is experiencing one of the more impressive turnarounds in the travel space. An industry that was obliterated during the pandemic is already well ahead of pre-crisis highs.
All of the major cruise lines have record trailing revenue, and the bottom line is storming back with a vengeance. They all have a record number of deposits for future sailings. Demand is robust, and customers are willing to spend more now than ever for a sea vacation. All four of the publicly traded cruise line operators are posting double-digit revenue growth.
When Disney announced earlier this year that it was doubling the capital expenditures for its experiences business to $60 billion over the next decade, it wasn’t kidding. Disney will be more susceptible the next time there’s a cyclical downturn in the cruising industry, but if it can make sure that demand keeps up with its rapidly expanding supply — no small feat, I know — this could be one of the biggest stories coming out of D23 for the leading entertainment stock.
