Disney’s Cruise Ship Expansion: Why Investors Should Be Watching This Rapid Growth

Disney Is All In on Cruise Ships: What Investors Need to Know

Disney (DIS) is betting big on cruise ships, and it's a strategy that investors should be paying attention to. The company has recently announced plans to add multiple new vessels to its fleet, with the launch of the Disney Treasure on December 21, 2024, marking the sixth ship in Disney's growing cruise line. With seven more ships expected to join the fleet by 2031, Disney is positioning its cruise business as a significant driver of future growth.

Disney’s cruise expansion comes as part of the company's broader Experiences segment, which also includes theme parks and consumer products. This segment has seen a rapid expansion in recent years, and cruise ships are quickly becoming a key player in Disney's overall strategy to capture a larger slice of the travel and leisure market.

Disney's Cruise Fleet Is Expanding—Fast

The Disney Treasure is just the latest in a string of new ships. After the launch of the Disney Wish in 2022, Disney is set to launch two additional ships in 2025—Disney Destiny and Disney Adventure—with five more planned over the following six years. These additions represent a major step forward in Disney’s cruise ambitions, and analysts are taking notice of the potential for growth within this sector.

Morgan Stanley analyst Ben Swinburne shared his optimism, telling Yahoo Finance, “We think that these businesses have a higher return on invested capital than your average non-Disney cruise business,” citing factors like high occupancy rates and strong revenue-per-room metrics. With families making up a significant portion of the cruise passengers, Disney’s unique appeal as a family-friendly brand positions its cruise business for success.

A Profitable Investment: Disney Treasure’s Maiden Voyage

The Disney Treasure is more than just a new ship—it's a symbol of Disney’s commitment to growth in the cruise industry. The ship is designed to carry 4,000 passengers and 1,555 crew members, and despite its newness, all rooms for its maiden voyage are already sold out. Prices for a ticket on the first sailing start at $8,511 per person, demonstrating the high demand for Disney cruises.

"This is a recipe for a very profitable investment," said Swinburne, noting that Disney’s focus on family-friendly experiences and its strong brand reputation ensures high occupancy and profitability.

Disney’s Strategy: Offering All-Inclusive, Theme Park-Style Experiences

In addition to the ships themselves, Disney is using its theme park expertise to enhance the cruise experience. According to CEO Bob Iger, the Disney Treasure will feature recreated rides, characters, and storylines from Disney’s theme parks, creating a seamless transition for those familiar with Disney’s immersive vacation experiences.

As consumers increasingly opt for cruise vacations, which tend to be more all-inclusive than theme park stays, Disney is tapping into a new market segment. Cruise ships offer families an opportunity for an immersive, multi-day vacation experience, all while enjoying the magic of Disney.

The Cruise Business: A Key Player in Disney’s Future Growth

Disney’s Experiences segment, which includes both the theme parks and the cruise business, is projected to see a rebound in operating income next year, with growth estimated to be between 6% and 8%. Disney CFO Hugh Johnston specifically cited the Disney Treasure as a catalyst for this expected growth, signaling that the company’s investment in new cruise ships is paying off.

In fact, analysts expect the cruise division to become an increasingly important part of Disney’s overall financial picture. As the company’s cruise fleet grows, its capacity to generate revenue from these ships will more than double by 2027. Morgan Stanley estimates that the cruise revenue will jump from its current 5,500 staterooms to over 10,000 staterooms by 2026, positioning Disney’s cruise revenues for a sharp increase.

Cruise Ships Are Projected to Rival Disney’s Sports Segment in Earnings

Although Disney does not break out cruise-specific financial metrics, analysts at Morgan Stanley have uncovered key insights that suggest Disney’s cruise business is on track to become a major revenue generator. The firm estimates that by 2032, Disney’s cruise division could generate around $9 billion in revenue and $2.3 billion in operating income, making it nearly as profitable as Disney’s flagship sports segment, including ESPN.

While the cruise business is still smaller compared to Disney’s core theme park and sports divisions, its growth trajectory makes it an exciting area to watch. The addition of new ships, paired with high demand and Disney's powerful brand, makes the cruise line an increasingly important part of the company’s overall strategy.

Why Investors Should Pay Attention to Disney’s Cruise Expansion

For investors, understanding the timing and impact of Disney's cruise ship launches is essential. Each new ship represents not only a new revenue stream but also a significant increase in operating income for the company. Analysts like Swinburne have stressed that as Disney continues to expand its fleet, the contribution from cruise ships will become more pronounced, potentially outpacing growth from other areas of the company.

"The cruise ships play a very important role," said Swinburne. "For those of us focused on growth and the company's ability to deliver or outperform expectations, understanding the timing of cruise launches and the earnings contribution of launches is actually very important. And it's very important to the stock."

The Future of Disney’s Cruise Business: What’s Next?

Looking ahead, Disney’s cruise business is poised to continue its rapid growth, with new ships on the horizon and an ever-increasing number of passengers flocking to Disney’s immersive, family-friendly vacation experiences. As the company expands its fleet and refines its offerings, Disney’s cruises are set to become a major pillar of the company’s future earnings.

With the potential to rival the company’s other key divisions in revenue and profitability, the cruise segment is something investors cannot afford to overlook. As the industry continues to recover and Disney refines its cruise offerings, the company’s cruise business could prove to be one of the most lucrative aspects of its diverse portfolio.