Making Room for the Value Customer at Universal Orlando

Since opening in 1990, Universal Orlando has largely been playing catch-up to its theme park neighbor just down Interstate 4.  Much of Disney World’s attendance lead has resulted from the fact that it had a nearly two decade head start in opening and many more acres available to develop.
Indeed, for many amusement industry observers, Universal Orlando seems destined to remain the second place finisher in the ongoing theme park rivalries in Central Florida.  While Universal Orlando is unlikely ever to overtake Disney World in terms of total visitor counts, this sister resort to Universal Hollywood has recently taken some interesting steps that could make it a better competitor to the House of Mouse.
In this installment of The Large Park Report, we examine a major change that has placed Universal Orlando in an important new strategic position to compete.

Investing in Success

In July 2011, Universal Orlando announced that NBCUniversal had purchased The Blackstone Group’s 50 percent interest in the resort.  The result was that NBCUniversal now wholly-owned the resort.  With that ownership came the significant financial backing that NBCUniversal offered through its parent company Comcast.
These deep financial roots allowed Universal’s family of parks and resorts finally to compete on a relatively equal economic playing field with the Disney empire of parks.  This was a significant change because, until then, the various ownership structures under previous owner Vivendi had decreased investment into Universal Orlando to a small fraction of what Disney was investing in Disney World.
With the change, NBCUniversal could now invest not just in new attractions but also in the smaller yet extremely important details that could transform Universal Orlando into a true, multi-day theme park resort destination.
This is an important development since it is similar to the strategy that Disney World quickly adopted after Michael Eisner took over.  The ultimate goal of the strategy is to reduce the reasons for a guest to leave your resort by incorporating as many different entertainment experiences as you can into your resort.  Disney World did this by adding waterparks, miniature golf, movie theaters and expansive dining options on property.
For Universal Orlando, some of these options already existed following a 1999 expansion that, in addition to opening a second park, added an entertainment district that included a movie theater, retail stores, music venues and a variety of themed food and beverage options.  Known as CityWalk, the complex was patterned after Disney World’s Downtown Disney venue that included similar amenities designed to keep guests on property.
Subsequent additions at Universal Orlando included a highly themed miniature golf facility as well as a permanent Blue Man Group show and theater—another effort to emulate the Disney strategy that, in Disney’s case, was centered on a permanent Cirque du Soleil show and theater at Downtown Disney.
Even with these additions, though, Universal faced a fundamental challenge in competing against Disney World for an increased amount of visitors who stay on property:  the lack of lodging options.

Increasing the Potential Audience

While Disney World is unquestionably the largest and most visited theme park resort, Universal Orlando does have several advantages over its larger competitor.
According to Greg Curling, a theme park commentator who studies Central Florida resort trends, “an advantage that Universal Orlando has over Walt Disney World is scale, which translates to proximity of amenities.  The two Universal theme parks are directly adjacent to one another and are extremely close to City Walk. The three resort hotels are each close enough to the theme parks for guests to walk.”
This is in comparison to Disney World where, Curling notes, some of the resort amenities can be up to a 20 minute car or bus ride away even within the resort.  As a result, unlike at Universal, only a small percentage of guests staying on property at Disney World are within walking distance of the resort’s parks and other entertainment amenities.
For visitors who are interested in maximizing the convenience of a resort’s theme parks, hotels, and other entertainment options, this is a major advantage for Universal over Disney.  Up until recently, though, it was an advantage that Universal did not fully realize because all of the resort’s on-property hotels were higher-end options that, while immersively themed and filled with amenities, numbered less than 2,500 total rooms with an average daily rate well above $125 per night.  In comparison, Disney World offers nearly 10 times that amount with approximately 25,000 rooms in Disney hotels on property—many of which fall into the value and moderate-priced category.
In addition to the disparity in total number of rooms, Universal Orlando suffered from the fact that the available capacity at its two parks, CityWalk, and other entertainment venues was much higher than its currently available lodging capacity.  Meaning that, Universal had a major gap between the number of guests it could accommodate at its amusement facilities versus the number of available on-property hotel rooms.  The result was that, even if more guests wanted to stay at the existing resorts and take advantage of the resort’s smaller-scaled convenience, there was very little available room inventory for doing so.
In many ways, this was a similar situation that Disney World faced when Eisner and his leadership team took over in the 1980s—substantially more theme park visitors than hotel rooms that could house them on-property.
Fortunately for Universal Orlando, the leaders at Comcast and NBCUniversal have apparently recognized not only the need for more rooms but, more importantly, the need for more rooms that compete with Disney World at a lower price level.  This culminated in the announcement last year of a 1,800-room, moderate-priced hotel on a 30-plus-acre site within the existing footprint of Universal Orlando.
According to Curling, “With the arrival of Universal’s moderately priced resort on-site, convenience and privileges will be available to a wider range of vacation budgets. This will push Universal deeper into competition with Disney for on-site guests.”
The genius of this approach, Curling notes, is that it will increase both the number of available rooms and the number of potential guests within a broader economic range—all while maintaining the smaller-scale advantage that Universal Orlando offers over the massive Disney complex.
This is an important lesson for other theme park operators who are considering adding on-property lodging options or expanding existing ones.  While many hoteliers will note that higher end hotels that maximize RevPAR often perform better, the family vacation travel segment can be a major exception.  While most theme park guests are very interested in staying as close as possible to the parks and other amenities, the financial reality of pricing out a large portion of guests by only offering higher end hotels creates an economic ceiling that is often lower than the guest capacity of your amusement facilities and what guests can pay.
Therefore, large park operators should pay especially close attention to Universal Orlando’s major investment into a moderate-priced alternate to its existing deluxe hotels on property.
Indeed, if Universal Orlando’s new moderate-priced hotel is executed well, Disney World may face its stiffest test from Universal Orlando since the introduction of CityWalk as a counterpart to Downtown Disney.
This is important because, as one industry veteran noted, while CityWalk continues to prosper, an entire area of Downtown Disney known as Pleasure Island has been largely shuttered—a result that this and other industry vets attribute in large part to CityWalk’s success.
Could moderate priced hotels at Universal Orlando have the same effect on the lodging category at Disney World?
Only time will tell, but Universal Orlando’s investment in a more value-priced hotel option is likely to give Disney World its strongest challenge in years.
(Reach Contributor Chad Emerson at

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