Started with Comcast, but really Universal Theme Parks. We're thrilled to have Mark Woodbury back, Chairman and CEO of Universal Parks & Resorts. So thank you for joining us again.
Pleasure.
You've been at Universal for over 30 years and Chairman and CEO of Universal Destinations & Experiences since 2021. Pretty turbulent period and a lot of change. Prior to that, you were Vice Chairman of Universal Creative, which is responsible for planning and design for Universal attractions and destinations worldwide, so kind of a very extensive background at the parks, and over that time, you've seen some transformative developments in the whole industry, particularly, you know, I guess there's just been so much change in post-COVID. It feels like the market's changed, like there's just been this surge in growth and attendance in brands of major theme parks, so, you know, what do you think accounts for that?
Well, you know, I think parks have always been a place for families and friends to create shared experiences and memories that last them a lifetime. And I think the pandemic reinforced that and really made people realize how precious those opportunities are. So I think that's a piece of it. And then you combine it with just the complexity of life. I mean, you know, you see what the work experience is like, you know, both parents working, kids in school, after-school activities. Those opportunities to get together and create a special experience are rare. And I think people really have just doubled down on the value of that. We see it in how they use the parks.
And I think it's supported by, you know, what we do in the business is to create something truly unique that is a must-see experience and creates that, you know, intent to visit and drive to get people to take the opportunity. And our hope, of course, is that they do it with us around the world. But in order to do it, you have to have really great product. And Comcast has been behind us all the way in helping execute that.
So before we get specifically to Universal Theme Parks, just a general question, but what is your outlook for the theme park industry over the next, say, three to five years?
Yeah, you know, it's strong. I think we think the future is quite favorable for the parks business. We see near-term, mid-term, and long-term, and we plan accordingly. And you know, our strategy is aligned with that. Our strategy looks at really three pillars: to continue to invest in our existing businesses, drive those, deliver the product that we've been known to deliver, do it at an exceptionally high level, and continue to grow those businesses. And we have a really clear line of sight in each of our destinations around the world as to how far we can take that. And it's considerable. The second piece of it is to bring the Universal brand to new audiences in new markets. And you can see that in what we're doing with Universal Horror Unleashed in Las Vegas, which will open next week, and Universal Kids Resort in Frisco, Texas.
And I can talk more about that if you'd like. And then the third piece of it is to expand our global footprint. And you can see that taking shape with the announcement that we made right before opening Epic Universe in the U.K. So the U.K. will be our next major destination resort. And so, you know, you look at those three pillars as part of our strategy, and it all leads into our bullish outlook on the future.
And then you just actually alluded to, you know, what Comcast. So, you know, over your tenure, which is probably as long as I've been following the company, Universal's had a lot of owners. I mean, a couple of them come to mind: MCA, Seagram, GE, and I'm missing like somebody else.
Matsushita.
Matsushita and then Comcast, so there's five owners, so how does being part of the Comcast umbrella benefit Universal Parks?
Yeah, well, I've been with the company long enough to have experienced all five of those owners prior to Comcast. And, you know, Comcast is just a different game. And being part of a company as great as it is, with superior leadership and Brian and Mike and Jason, I mean, it's just a different game and a different value that they put on the business. We're one of the six growth pillars of the company, and their continued investment in it is evidence of that. So, you know, we think it's been a fantastic run. I think the best evidence that you can look at, the best illustration, is if you look at the origins of our business, started in 1964 in Los Angeles with the tram tour. From 1964 to 2011, we grew the business to a modest $600 million EBITDA business.
Since being part of Comcast, 2011 to today, we've quintupled that performance. So it's just evidence of the enthusiasm and continued support that we get from Comcast across the board.
Okay. So now drilling down to what everyone wants to talk about, Epic, you know, you opened in May. I think the official date was May 22nd. Can you talk about the... wrong? Are you shaking your head? Oh, no, no. I thought you were just saying no. How has the initial reception and attendance trended since opening? And what key metrics are you most encouraged by so far?
Yeah. So you have to look at the strategy behind Epic. So if you rewind a few years, we had these two great parks, water park, hotels, and we had reached a point in that market where we were banging up against, you know, how to continue to grow. So we went out to our fan base and we asked them, "What's it going to take to get you to give us more of your vacation time?" And they told us. They told us, "We love your intellectual property. We love your technology. We love how you create these immersive worlds. Give us more of what you do best and we'll give you more time." And that was the origins of Epic. And so when we launched into creating the most technologically advanced park we've ever created with some of the greatest intellectual property we could muster.
The results have been really strong. It's doing exactly what we wanted to do in terms of driving incremental attendance to the resort as a whole. The performance on per caps, very strong since we opened the doors. You can see it in merchandise. You see it in the food offerings. A lot of great creative work went into both of those. Not without, you know, challenges when you open an entire theme park at once. I mean, when you take technology that we deliver, even on a standalone attraction, it's always a little complicated to get it to ramp up to full speed. We're in the process of doing that now. Nothing that we didn't expect. We're very pleased with how things are shaping up.
Are there any early KPIs that you can share, like from just, you know, summer's just over? What have you seen so far in guest mix or per cap spending relative to the two existing Orlando parks? Is there any notable outperformance in food and beverage or merchandise?
Yeah, we're not giving out specific guidance on Epic, but I can tell you that the performance on food and beverage and merchandise exceed our expectations considerably. And the front gate at Epic is a premium over our other two parks. And then when you look at the incremental attendance growth at the resort, combined with those per caps, pretty great start.
So now that Epic Universe is open, what are the top three priorities for the next, say, 12-18 months to cement Universal Orlando as you guys have set as goal a week-long destination from the current three days or so?
Three days or so, yeah. Get the full week. Yeah. So when you look at what we're focused on, you know, this business is really driven by creating a pipeline of great product, telling the world that you have it with really breakthrough marketing, and then maybe most importantly, delivering it with world-class service across the board to create that awareness, create that intent to revisit. And that's, of course, number one. Continue to drive that. Two, get the message out to the outer U.S. Continue to drive awareness. Continue to drive share of voice and continue to drive business to the marketplace. And we think that we'll see UO continue to grow visitation to the market as well as take market share in the process.
That actually was kind of my question, like my next one, which is like, do you think that it will lift the overall Orlando market? It sounds like you think there'll be some share shifts as well, but.
Yeah, we think both. We think we'll drive incremental visits to the market and we'll drive share shift. And we're seeing that in the first two, three months of operations.
So how would you define success in year one? Is it attendance, per caps, occupancy, EBITDA contribution? Like how do you, how would you define it?
I'm going with all the above. Yeah. Yeah, definitely all the above. Incremental attendance, incremental per cap growth. You look at our premium products, incremental growth on things like Universal Express, great product for us. You know, as part of Epic, we introduced 2,000 new hotel rooms. One premium in the form of 500 rooms at the Helios Hotel, which is positioned within Epic Universe in a geography that is really unparalleled, creating magnificent views and proximity to the park that has just never been seen before, and it's themed into the whole experience. So we're seeing great performance in that hotel in terms of occupancy and ADR. Then the two other hotels, Terra and Stella, 1,500 rooms that are part of our value proposition. The great thing about that is we introduced those 2,000 rooms now have 11,000 total, and we saw no cannibalization.
In fact, we see ADR growth across the resort on the back of those and strong, sustained occupancy. So we think that that strategy is really working.
What's the potential for Epic expansion? How long do you think it'll be before we see a sixth world or maybe a Wicked world?
I think I might have stirred that pot when I saw the Wicked sets and said it was a theme park waiting to happen. If you fly over Epic or you look at Google Earth, you'll see how we plan the park and you'll see greenfield space between the existing worlds. And that is strategically positioned to give us flexibility to expand a world or create a new world. And so that's how we look at it. I don't really have anything to announce specifically as attractions, but I can tell you that there are multiple attractions in the works, not just at Epic, but when you have the three parks, the cadence of product delivery across the resort to continue to drive the resort is really a key part of our strategy going forward.
And like I said at the opening, we have a clear line of sight into how far we can take this. It's considerable. And we have a pretty sophisticated and well-thought-through long-range plan that takes us out another decade in terms of product offerings, not just in Orlando, but around the world.
Right, and you mentioned you do believe, given the high-quality product that you just introduced, that you will take share. Do you think that you could ultimately wind up with something approaching an equal attendance split in the market or?
You know, I think.
Aggressive or?
Yeah, I think that we have, we're in a really strong position to continue to drive incremental growth to the overall marketplace, to take share in the process of that. You know, our chief competitor, Disney, is a strong competitor. They're going to be investing pretty heavily in the market too. I think it's a case of, you know, all ships rise with the tide. We'll both drive audience to the marketplace and we'll be able to take our share of that.
And then turning to some of the regional parks, as you mentioned, you opened a couple of weeks ago the Universal Horror Unleashed in Las Vegas. You have the kids one coming in Texas. You've got another Horror, I think planned for Chicago in 2028. How do you think about the right mix between destination resorts and this kind of new category with younger kids, you know, this regional model, Horror concepts? I mean, this all seems pretty new. Are there other concepts coming? Just how do you think about the mix and what's coming?
Yeah. Well, if you go back to the strategy and those three pillars, this is really where I think what you're asking about is that second pillar of being able to bring the Universal brand to new audiences that we don't see as cannibalistic to the big destinations. It also gives us the opportunity to focus our big destinations on what we do best. And those destinations are really targeted at families with kids eight and above. And that allows us to go deep into immersion, to explore the kind of intellectual properties that we think really are resonating with the audience and to deliver a level of thrill that we're known for. And so our big destinations, families eight and above, that created a space for us to go after a new audience, families with kids three to eight.
And we think this is really a great place for us to be because we have a terrific pipeline of intellectual property in the form of DreamWorks and Trolls and Gabby's Dollhouse to build around. And so Frisco is our first Universal Kids Resort that allows us to both segment the audience and segment our portfolio of properties and in the process build a regional product that is sort of a rite of passage for families and much more accessible for young families in a regional form. They can get to that park from all over Texas, Oklahoma, Kansas, and 300-room hotel as part of it, great product and a feeder as they age up to become aligned with our brand and then grow into our bigger parks. And then you mentioned Universal Horror Unleashed in Vegas opens next week.
That is another opportunity where we've had great success with our Halloween Horror Nights over the last 32 years. Fantastic business for us. But it's really a local play. It's a local regional play for Orlando and it's a local regional play for Los Angeles. So there's a lot of space in the rest of the U.S. and internationally to bring to life the horror franchises that we're known for in our film business as well as our parks. And Universal Horror Unleashed is exactly that. It's a 120,000 sq ft year-round horror experience. We like to say that horror isn't for Halloween or just for Halloween anymore. Four different houses, a couple bars, great food. We've been open for a few weeks in a soft opening period in Vegas. We go grand open on the 18th.
Reaction to the product has been really great and performance of the product has been really great from a per cap standpoint. We plan to roll that out. Chicago is our next place. We picked those destinations because they have a great base population and they have big inbound tourists.
So is there anything you can say about what a successful ramp looks like in year one?
For either of those?
Yeah.
Yeah. So, you know, this year you'll see horror ramp up. Again, September 18th, we open. We're going to hit the ground running because we've had a really good soft opening period in Vegas. And I know, you know, people comment often recently that Vegas business is down. They still have, you know, close to 40 million tourists that come to Vegas. And we only need a very small margin to that to make this very profitable. So we'll see that happen. And then we'll see Chicago in 2028. And then next destinations downstream from that.
How should we think about margins for the regional businesses? How do they compare to the typical theme park margins?
Yeah, the regional businesses, kids, the kids performer and the horror performer are in line margin-wise with the balance of our businesses at UDX.
Pretty healthy margins. What are the two highest priority DMAs for the next wave of regional products? I mean, besides what you mentioned, besides Chicago, I mean, are there thresholds for population, for tourism flow, land costs? Like how do you make those decisions?
You know, before we started to execute the strategy, we looked at a deep dive into those DMAs. We have a pretty good lineup of places that we think both of those products could play. You size them up just like you said, it's, you know, base population, inbound tourists. In the case of kids, it's a strong growth market, high family population. We think there's several of those to explore.
So you just said there's a lot of room for expansion at Epic Universe. What's the calculation for adding capacity or new IP to that park versus like a greenfield regional or even a resort build elsewhere?
You know, when you are trying to drive that full week destination over the long term, which Epic is, it's a long-term play. You've got to have a strong pipeline of continuing to bring new news to the marketplace. It's not just true about Epic. It's true about Los Angeles. You'll see in Los Angeles, we're going to next year open a new Fast and Furious roller coaster. Then we have a pipeline, a new product coming to Los Angeles. In Japan, same, you know, same story. We've had a release of Donkey Kong last year that was an addition to our Nintendo World that we opened in USJ and a pipeline of attractions that will continue to feed USJ as well. Clear line of sight to continue to build those businesses.
We look for the opportunity to plant the flag in new geographies like U.K.
Right. So I'm going to get to like one more question. But just on the U.S., like how should we think about multi-year CapEx for the U.S. parks now that you've opened Epic?
Yeah. So when you look at the cycle, the development cycle of a major theme park like Epic, you know, multi-billion-dollar investment, the big part of that CapEx lands in the last two years of that development cycle. So that in the case of Epic would be 2023, 2024. And then when you look forward to U.K., it'll be 2029, 2030 to open in 2031. So that in between period, you know, we'll see less investment on individual, you know, at that scale. So the individual things that we're looking at range from big attractions to new lands. But even at that, and even when you look at the kids and horror, those are in the hundreds to several hundreds of millions of dollars versus billions for the theme park.
Okay. So let's turn to Japan. Over the next three to five years, how are you prioritizing larger expansion versus capital light activations at Universal Japan versus like just alternative uses of capital?
Yeah. I mean, you know, you look at Japan, we're tremendously proud of that business. Opened in 2001, opened to 11 million year one. It was a record-breaking opening of a theme park. And we've built just a tremendous business in Japan. It's a top-rated brand in Japan to the extent that one in seven tourists that come to the country of Japan visit Universal Studios Japan. That's a powerful statement about how strong a brand we built there. We've continued to add great attractions over time, thrill attractions, the whole Nintendo land, Donkey Kong recently. Next year will be our 25th anniversary, big celebration around that. And this year we opened a Minion attraction based on Villain-Con, an interactive gaming attraction. So a lot of runway in Japan and a really well-thought-out master plan to continue to grow that well into the future.
On top of that, we just have a stellar team, management team on the ground, not just in Japan, but across our different businesses. That's so important to make them work.
Is that one in seven tourists to Japan? Like, that's a kind of a shocking number because it's Osaka. It's a little, it's not, this is not Tokyo.
That's Osaka.
Right. It's another plane right away.
No, no. It's the Kansai region is where our park is in Osaka. And the great thing about that number and the strength of the Universal brand in Japan is Japan's move and vision for 2030. Tourism in Japan is about 42 million now. And the plan by the vision of the central government of Japan is to move that number another 20 million. So to take inbound tourism up to 60 million in Japan. The expo was a piece of that. You know, that's the kind of thing that they're doing to drive destination Japan. And that's definitely a place where we're leaning into continuing to drive our business as part of that growth.
With MGM Osaka's resorts slated to open in 2030, how do you think that resort will impact the overall tourism to Osaka? And how do you think about capturing like incremental demand?
Yumeshima Island, where this will be, where MGM is planning to be, is a little bit of a complicated connectivity from Osaka. So there really isn't an opportunity we didn't think for us to really be part of that. And it didn't make sense for us to be a part of that growth-wise. So we see MGM integrated resort going there. We don't see it as cannibalistic. They're really two different audiences. You know, we experienced that with our park in Singapore, very different audience that goes to the casino experience and goes to the family park experience. So we don't see it as cannibalistic. We do see it as lifting the overall market. And we'll tap into that as best we can, regardless of that point about the different audiences.
Actually, before we move on to China, like so with the lifts, this is basically like a 50% lift in visitation to Japan over the, you know, I don't know, the next like.
By 2030. 2030 is their time.
So would you think that the same, the one in seven would apply? Like, you know, do you think you'll, is that your goal?
Oh, hopefully grow it. You know, the inbound tourists to Japan are coming from mainland China, Taiwan, and Korea predominantly. And, you know, we have great channels to those destinations. So our ability to drive awareness, salience, and share of voice in those markets feeding USJ is pretty strong.
Do you own, just remind us, do you own the whole park or?
We do.
Okay, so on China, can you give us an update on phase two expansion, Universal Beijing Resort? Are there specific milestones that have to be met to fully greenlight phase two and for construction to begin?
Yeah. I mean, just a little bit of background on that. You know, it's one thing to build a theme park anywhere, complicated endeavor. It's another one to build it in the capital city of the People's Republic of China, and it's almost, you know, unimaginable to do it in the middle of the pandemic, but we did all those things, and we opened in September of 2021. We have a spectacular master plan that our first phase, Universal Studios Beijing, is part of with its two hotels and its CityWalk, but that master plan very much resembles Orlando in terms of potential, so now we're focused on driving our business in Beijing.
We have a tremendous market in the form of the Beijing population and the surrounding Hebei province in terms of population, hundreds some million people in that area alone, which is, you know, as you know, less than a tenth of the overall population of China. So this is really a China play. It doesn't rely on inbound tourism really at all. It relies on inbound to Beijing. So great opportunity, great potential. There are ways to go before we announce anything for future expansion.
And then just one more thing on China, but how are you balancing global IP with China-specific content? You know, there are issues with governance. How do you think about repatriation risk?
Yeah. I mean, without sounding, you know, corny, the product that we build in Beijing is predominantly a Universal branded product with the addition of Harry Potter and Transformers from Hasbro. And what we have found is those Western intellectual properties are universal. You know, not being cute on that, but that is what really works. And that is what has defined that business. And it's not to the exclusion of being able to find opportunities to do things with Chinese properties like the Honor of Kings, but we're doing those at kind of an event scale. And we use it as parade material. We use it as entertainment opportunities. So we think that balance works. But the point is really that the Western properties that define us as a brand and the way that we deliver them are what works in China and what works around the world.
And then moving on to the U.K. So I think you just finished the Special Development Order consultation process. It was like the end of August, I think was the end date. Can you walk us through that post-consultation timetable? Is there anything that could affect the 2026 groundbreaking and the 2030 or 2031 opening?
Yeah, we haven't finished the consultation process. We're in the consultation process. We submitted a special development order, which is a very complex submission to the government that you would be surprised that, you know, 10,000 pages of documents. And that's not an exaggeration. That's actually a number. 10,000 pages of documents submitted to the government that support the whole development. And then what the government does is they take that out to consultation to the local marketplace to test support for the project. But our due diligence when we did that work testing support, we had 93% support for the project. We have had 18,000 people register on our app to come and work for us, 2,000 vendors in the marketplace that want to be part of this development. So our hope, you know, our hope is that that process will go very smoothly.
But parks are complicated, you know, organisms. And this takes some infrastructure in the form of rail expansion and highway off-ramps and things like that. Not things that we haven't done before, but they're complicated. So, you know, that could be an issue, but we think we have a pretty good handle on it at this point.
So, can you outline the CapEx, the return profile, the timetables? You already gave us peak year spend, even attendance. Like, what, you know, kind of, how do you?
Yeah. The best way to look at it is like one of our standalone parks. It's a full-blown Universal theme park with a 500-room hotel that is part of it, very much like Epic in terms of a park with a hotel. It's designed in a way that we don't see as cannibalistic to our strong U.K. visitation to Orlando. So we've created a different mix of attractions that we think will work great in the U.K. But basically, it'll perform very much like one of our standalone parks in terms of attendance, in terms of per caps, and overall EBITDA performance.
Then how do you mitigate U.K. seasonality? Like you have the same issue, I guess, in China with the weather.
In Japan.
Oh, right. Yeah.
I mean, you know, those are, you design it in a way that allows you to really take advantage of the great weather and protect against the inclement weather as best you can, but you know, Japan, it gets, you know, very cold in the winter, very hot in the summer. China has its, you know, cold climate as well. The issue in the U.K. is precipitation, but you'd be surprised to find that it's a lot less than Orlando, and it just rains less and more frequently, which is not a bad problem. The torrential downpours are the bigger problem, but yeah, you just design accordingly.
What are the biggest differences in developing a park internationally versus either building or adding on to an existing park in the U.S.?
You know, the process is pretty much the same. You do come across different governmental protocols and processes in terms of development. The U.K. is unique in terms of the SDO. China was very unique. Different procurement in terms of construction, different business culture in that building part of the project. But most of the hardware comes from tried and true sources, predominantly around Europe and North America, from a ride system and show system product, and then it's mainstream construction. And then when you get into the detail of design, like I said before, I mean, the main product is Universal and it's Universal branded IPs. But then you get really focused on menu is very unique culturally. You got to pay close attention to that. And the other place where international development is unique is around humor. Humor varies very differently in different cultures.
Interesting. So as a live entertainment operation, theme parks are somewhat insulated from some of the harmful impacts that other areas of entertainment have had to experience. What are some of the ways theme park operators can take advantage of technology to benefit the business? For instance, to improve the in-park experience by enhancing crowd management through AI tools, or what are the ways you, you know, kind of, you know, are there other ways that you're integrating AI into the planning process?
Yeah. Like I'm sure all of you do in your businesses, you're focused on how to leverage AI technologies to the betterment of your operation. We're no different. We bucket it in two buckets, really. We look at how AI can help us enhance growth and revenue generation. And we see several areas for that dynamic pricing, making dynamic variable pricing much more efficient and much more real-time. We see new product offerings. We see AI assistance at our call centers. And that enables our agents to move much quicker to better customize offerings for the consumer. Same goes for our AI-assisted conversational AI on our website. So that's multilingual. So all those things really speed through the entire funnel from consideration to conversion. And that's where we kind of see it on the growth front.
And then, on the savings front, I'm sure all of you are doing the same, back of house on legal and HR and those support functions. Everywhere you can streamline those is savings. So we're hard at it on those fronts. Probably one of the bigger areas for us that's unique to our business is how AI can assist in predictive maintenance on the rides to reduce maintenance costs, which is a considerable piece of business for us. So being able to employ that, employ different ways to look at machine learning in terms of how guests use the park to be able to direct them to revenue-generating opportunities in the form of food and merchandise to manage crowds.
All those things are in deep work right now and part of a big operation that's not just at parks and resorts, but it's part of the NBC and Comcast overall.
And pricing, there's a couple of things you mentioned. So I'm going to just ask you about pricing. How do you think about pricing and instituting price increases across your various parks?
Yeah. So, you know, we pay close attention to pricing. We're looking at top-line revenue generation at the front gate. I mentioned that a place like Epic right now is premium over other two parks. We think it garners that because it's the first park built in 25 years, most technologically advanced park, and all those things that make it what it is. So it's at a premium. But we're also looking closely at consumer sentiment. We're looking closely at the marketplace in each of our businesses to manage price. And then, you know, we've got the ability to dynamically price now much better than we had historically.
And then you mentioned Comcast properties. Like, how do you prioritize using NBCU IP versus third-party licenses? I mean, obviously you have a lot of third-party like Harry Potter, but you know, how do you think about the balance?
We have a great pipeline of properties. If you look at our base offering, Jurassic Park, Minions, DreamWorks, that pipeline continues to come forward. New movie being made on Shrek. I mentioned Fast and Furious in Hollywood. The Universal IP is our bread and butter and the foundation of our work. We're not afraid to go outside when we see an opportunity to drive business with unique properties like Harry Potter or Nintendo.
And then I guess finally, because we're kind of running out of time, but are there any other paths to grow Universal Destinations and Experiences that we haven't discussed? You know, a question I know you always get is cruise ships. Is there anything else?
We're always looking at every opportunity near, mid, and long-term to drive the business. And, you know, we take a very hard look at each different industry that may be adjacent for us where we can form another engine to drive our business. So pay close attention to all of those ancillary industries that we could potentially tap into in the future, but nothing new to announce today.
One thing that, you know, Disney just announced and, you know, is opening in the Middle East. Is that something like, does that take years and years before planning? Is that?
You know, I know their announcement is pretty fresh. The Middle East has been sort of on a boom for a while. Again, it's just, you know, a place that you look, investigate, and make decisions about where your priorities are. Our priorities right now are driving Epic to full throttle and to execute on U.K. and then our Mideast strategy, and at the same time, looking ahead for other places and opportunities.
That's great. Thank you. Obviously, this is a long growth path here. Thank you so much.
My pleasure.
So.