Disneyland May Have An Advantage Over Disney World When The Parks Re-Open
According to a recent piece in The Hollywood Reporter, Disneyland may fare better than Walt Disney World when the parks do reopen after the COVID-19 shutdown according to a veteran Wall Street analyst.
This coincides with S&P Global Ratings lowering Disney’s credit rating yesterday due to the fact that “theme parks won’t likely return to normal capacity utilization at the same rates os the economy in general even after stay-at-home restrictions are lifted and the theme parks are allowed to-re-open. ”
According to David Miller an analyst with Imperial Capital, Disney World will be impacted by lower crowds when the parks do re-open. Miller said, “By our estimation, 85 per cent of the attendance base in Orlando — in a normalized environment, forget about the virus for a second — comes from out of state or out of country.” He went on to argue, “Which means you pretty much have to fly there. So, it is a two-step process with getting consumers conformable with going back to the parks. You have to be comfortable No. 1 with getting on a plane … and then you have to be comfortable actually going into the park and hope that it is a fairly sterile environment and that people will hopefully adhere to safe social distancing.”
This is different from Disneyland Resort which has always had a larger local crowd. This means Walt Disney World will be more heavily impacted by families reluctant to travel. For example, last week American Airlines CEO Doug Park said that the airlines still don’t have a sense of when the airline industry would begin to recover from COVID-19. He said, “It depends on when our country starts moving again. It depends on when people feel comfortable.” Park added, “It depends on when Disneyland opens and shelter-in-place restrictions are lifted, and corporate restrictions on travel are lifted.”
In their report, MoffettNathanson said, “One would be hard-pressed to name a business more fundamentally ill-suited for a world in which social crowding is either (for now) forbidden or (later), well, scary.” The report went on to say. “It’s not just that they (the Disney theme parks) are currently closed and are therefore generating zero revenue (while still burdened with prodigious fixed costs). It’s that nobody has a clue when people will feel safe enough to go back in large enough numbers to cover fixed costs even after they reopen.”
Disney has an earnings call with investors scheduled for May 5th, at that time more should be revealed about the company’s strategy going forward when it comes to re-opening as well as policies that will need to be put into place to ensure guest safety. Bob Iger, who was recently appointed to a State of California Task Force working toward solutions to re-open the economy said that temperature checks and enhanced sanitation procedures were some of the ideas on the table.
Disney executives are no doubt running through all the possibilities of what may happen when the parks reopen, which some analysts (excluding Miller) have forecasted may not be until next year.
Until then, as Miller argues, Disney will have to gauge the overall demand curve and plan accordingly. He added, “If demand is high — this is my speculation — they’re going to have to limit the amount of people who can go in at any one time. No different than what the grocery stores are doing right now.” Miller adds, “If the demand curve moves to the left, and the demand is weak and they open up for business they have to hope the public will adhere to strict social distancing measures.”
Miller said another reason why analysts are downgrading the Walt Disney Company has to do with the optics issue around Iger officially stepping down as CEO of the company before the COVID-19 crisis came to ahead. Miller told Hollywood Reporter, “It is simply bad luck and bad timing that Bob [Iger] handed the reins over to Bob Chapek and then a week later the virus hit.”
This is a story that we’ll be following closely here at MickeyBlog. Readers are encouraged to keep following along for the latest Walt Disney World news and updates.
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Source: The Hollywood Reporter