money

Three years ago, Josh D’Amaro stood in a nearly empty Disneyland.

The California theme park’s Main Street was quiet: no cheery tunes from famed barbershop quartet the Dapper Dans, no clanging railroad bell, and no wafting scent of waffle cones from the Gibson Girl Ice Cream Parlor.

It had been more than a year since the Covid pandemic had forced Disney’s domestic parks to shutter, but D’Amaro, chair of Disney’s experiences division, was confident guests would flood back in when the gates reopened.

His confidence was well founded. D’Amaro’s division is now Disney‘s best-performing segment, rebounding and offering stability in recent quarters as Disney shuffles to adapt its entertainment business to match consumer habits that changed after the pandemic.

On that quiet day in 2021, D’Amaro had been in charge of the parks, experiences and consumer products division, now just called experiences, for only a little more than a year. He took the helm when Bob Chapek was tapped as CEO in early 2020. D’Amaro spent much of those 12 months dealing with substantial operating losses from global park closures, a docked fleet of cruise ships and a plunge in hotel visits.

Revenues fell 35% in 2020, a nearly $10 billion decrease from the $26.2 billion the experiences division had tallied in the year before the pandemic. Then revenue dropped an additional 3% in 2021.

But a lot has changed in three years. D’Amaro — sitting in a conference room in Burbank, an hour north of Disneyland and just a few miles from the heart of Disney’s theme park creative engine, Walt Disney Imagineering — has much to brag about.

The experiences division posted record revenue of $32.5 billion in fiscal 2023, a 16% increase from the prior year. Operating income jumped 23% to $8.95 billion.

D’Amaro described the pandemic as “an opportunity to take a breath” and a time for his division to “think about what we wanted the future to look like.”

“So, as difficult as that situation was, we saw it as a platform, a new vantage point for us to look at the operation,” he said.

While its parks were shuttered, Disney continued construction of its Avengers Campus themed land in Disneyland and touched up old favorites such as the King Arthur Carousel. And it built new rides, and refurbished others, in the years that followed.

World of Frozen opened in Hong Kong Disneyland in November, and a Zootopia land opened in Shanghai Disneyland in December. The company also launched two new rides at Walt Disney World in Florida: a “Guardians of the Galaxy”-themed ride in its Epcot park in 2022, and a “Tron”-themed roller coaster in the Magic Kingdom in April 2023.

Additionally, the company has revamped attractions and themed park areas, turning the Pacific Wharf area of Disneyland’s California Adventure into San Fransokyo Square, based on the animated hit “Big Hero 6,” updating Mickey’s Toon Town at Disneyland and making major transformations at Epcot.

Those investments, coupled with new technology in mobile ordering and the ability for guests to pay to skip to the front of the line for certain rides, have kept guests coming and boosted Disney’s earnings at a time when the entertainment division is struggling to recapture its late-2010s boom.

“Sitting here now, today, you’ve seen our results; our results have been record-setting as recently as the last first-quarter earnings,” D’Amaro said. “Record revenue, record margins, record operating income. So, the recovery has been swift, it’s been strong. But more importantly, I think the future looks incredibly bright for our segment — and the company, quite frankly.”

In 2023, experiences was the best-performing part of Disney’s business, accounting for 36% of the company’s total revenue but 70% of its operating income. Meanwhile, Disney’s entertainment division, which includes its theatrical and streaming businesses, represented 45% of revenue but just 11% of operating income.

The ability to get more out of the parks in recent years was crucial for CEO Bob Iger and Disney’s board as they tried to make the company more profitable and improve share performance. On Wednesday, Disney beat back activist investor Nelson Peltz’s proxy fight, reelecting its full board.

The division’s strength is why Disney has pledged to invest $60 billion in experiences over the next 10 years — a key part of its strategy to keep the parks fresh and relevant in a competitive segment.

That emotion was on display at the South by Southwest conference in March 2023, when Disney debuted a new iteration of its “stuntronics” robot, this time in the form of Judy Hopps from “Zootopia.” This technology had previously been used to create the Spider-Man leap stunt at Avengers Campus. During the 2023 presentation, Imagineers showed the audience how the Judy Hopps robot could balance on roller blades and perform somersaults.

The biggest audience reaction came at the end of the presentation, when an Imagineer lifted the bot to sit on his shoulders and it realistically moved its legs to fit around his neck, as a child would. The simple motion — programmed just for the presentation, Imagineers told CNBC — captured something intrinsic to the human experience.

D’Amaro said those moments show why it’s important for Disney animators to be part of the development process: As the Imagineers craft new technologies, the artists can help bring them to life.

It shows in Disney’s rebrand of Splash Mountain. In both the California and Florida parks, the company is refurbishing the ride into Tiana’s Bayou Adventure, which will feature dozens of animatronic characters from “The Princess and the Frog.”

Imagineers have developed all-electronic audio-animatronics for the ride for characters such as Lewis, the trumpet-playing alligator from the film. Disney revolutionized animatronics decades ago with its hydraulic, or liquid-fueled, and pneumatic, or air-fueled, systems, but the electronic animatronics for Tiana’s Bayou allow for more refined and precise movement, making them appear more realistic. Similar animatronics can be seen in the rides Smuggler’s Run and Rise of the Resistance, in Galaxy’s Edge.

Interior pieces of some of the animatronics were crafted using 3-D printing, resulting in a lighter-weight material.

Disney’s ambitions to grow its experiences unit hinge in part on making its attractions feel more real.

“They continue to push the envelope of storytelling and creativity,” D’Amaro said of the Imagineering team.

He cited the recently shuttered Star Wars Galactic Starcruiser, a hotel and immersive experience that took guests on a two-day “voyage” in space. It was a 48-hour interactive story that allowed fans to physically play in the Star Wars universe.

The company is developing what it’s dubbed “blue sky” ideas for its parks — projects that are still in early development and may ultimately not see the light of day.

“We actually have a fairly good idea in the near term of what’s being built, but we’re purposefully not going to allocate it all,” Iger said at a media event Tuesday, according to the Los Angeles Times. “Because who knows? In five years we can end up with a giant hit movie — think ‘Frozen’ — that we may want to mine essentially as an attraction, or a hotel or restaurant in our parks. So you want to maintain some flexibility.”

But Iger won’t be head of the company in five years, if all goes according to plan. The CEO, who returned to the post in 2022, is set to step down at the end of 2026. Disney’s board is in the process of succession planning.

D’Amaro is on the short list.

His track record helming Disney experiences is part of a 26-year career with the Walt Disney Company, in which D’Amaro has held posts as chief financial officer for consumer products and global licensing and chief commercial officer for Walt Disney World Resort.

For now, however, D’Amaro said he is concentrating on his current post. He called it a “blessing” to have Iger back as CEO.

“I’m focused on Disney experiences,” he said when asked about potential succession plans. “And I’m focused on driving innovation and storytelling forward and paying tribute to our fans and continuing to grow this business.”