Universal Orlando?is likely to add thousands more hotel rooms in coming years as Central Florida’s No. 2 theme-park resort continues an aggressive expansion, a top executive said Wednesday.
“We’ve done a study that says we could have 10,000 or 15,000 hotel rooms and still have occupancy that makes those rooms profitable,”?NBCUniversal?President and Chief Executive Officer Steve Burke told investment analysts at a conference in Beverly Hills, Calif.
“And all of those people staying in those hotel rooms would be more likely to go to our theme parks,” Burke added. “So I think, strategically, we need to get those hotel rooms open and build out the resort.”
Such an expansion would at least quadruple the 2,400 hotel rooms that Universal Orlando currently has, though that figure will jump to about 4,200 early next year with the opening of Universal’s Cabana Bay Beach Resort. All of Universal’s on-property hotels are owned and operated through joint ventures with Loews Hotels.
A large infusion of hotel rooms at Universal could pose a direct threat to?Walt Disney World, which has roughly 26,000 hotel rooms and time-share suites. One of Disney’s central business strategies for the past decade has been to lure more visitors into its hotels and encourage them to spend much or all of their vacations on Disney World property.
Burke told analysts that NBCUniversal wants to position the Universal theme parks as “a family destination in and of itself, and not an add-on destination for somebody that spends three or four days somewhere else.”
Universal could also pull business away from surrounding hotels in the?International Drive?corridor, much as Disney World has pulled guests onto its property from hotels and motels along U.S. Highway 192 in Osceola County.
Disney would not discuss Burke’s comments.
Analysts said Universal has demonstrated during the past three years ? since the opening of its $265 million Wizarding World of Harry Potter ? that it can attract travelers directly to its property rather than merely peeling off business stimulated by Disney.
“Being a weak No. 2 player in the market has not been very profitable for the resort [Universal] in the past,” said Bob Boyd, a leisure-industry analyst with the investment company Pacific Asset Management. “They have shown in recent years that they can meet or beat Disney in attraction quality at fraction of the price; now they need to add the room product to capture a greater share of tourists’ time and wallet. To do that, they need the ability to offer many more full-vacation packages.”
Universal has implemented other strategies designed to steer visitors into spending more time in its theme parks. Just before Wizarding World opened in 2010, Universal introduced a new price scale ? modeled after Disney World’s ? that offers three- and four-day passes with cheaper per-day prices than one-day tickets.
But one of the resort’s obvious weaknesses is its hotel inventory. All three of Universal’s existing hotels are priced as top-end, “deluxe” hotels, beyond the reach of most theme-park visitors. By contrast, three-quarters of Disney World’s hotels are in the low-end “value” or midtier “moderate” categories.
Cabana Bay, scheduled to open in the first quarter of 2014, should help. Universal says its fourth hotel will be priced as a cheaper alternative, though it will also include fewer amenities. Half of the rooms will also be “family suites,” with room for as many as six people, further expanding Universal’s inventory.
“Universal Orlando has attractive high-end room product,” Boyd said. “What they lack is diversity of room offerings.”
Although Universal has far less land than Disney does, it has some vacant and underused parcels near?Interstate 4?and its Wet ‘n Wild water park.
NBCUniversal, now 100 percent owned by cable-television giant?Comcast Corp., isn’t building just hotel rooms. The company has dramatically accelerated construction of new rides and attractions as well.
Universal Orlando alone added a Despicable Me simulator ride, character parade and evening light show last year and a Transformers thrill ride and a Simpsons retail area this year. And it is adding a second Harry Potter-themed land, which will open by next summer.
The investments are paying off: Burke said attendance at Universal Studios Florida, one of the two theme parks at Universal Orlando, has been up about 20 percent “most weeks” since Transformers opened in June.
Burke said NBCUniversal has elevated the capital spending in its theme parks to about $500 million this year ? an amount likely to become an annual baseline. The company’s goal is to open one new attraction every year both at Universal Orlando and at Universal Studios Hollywood in Southern California, he said.
“Our theory is, if we open the right kind of attraction ? they have to be well-executed; they have to be things that are easy and clear to market ? that we can really grow this business,” Burke said.