The current situation has had an immense impact on people across the globe. And even though Disney is a major company, they haven’t been immune to the effects. All of the Disney parks are currently closed, Disney Cruise Line sailings are halted until at least April 28th, and many other arms of the Walt Disney Company face an uncertain future. With a huge section of their business impacted, Disney has some hard decisions to make about how to move forward.
Decision #1: How Long to Extend the Park Closures?
As of right now, Disney World, Disneyland, Shanghai Disneyland, Hong Kong Disneyland, Tokyo Disney Resort, and Disneyland Paris are all closed. First, and perhaps most obviously, Disney has to consider the safety of guests and Cast Members as they make the decision to reopen each park.
And while health and safety is the primary factor in making this decision, there are also financial considerations for the company. The lack of theme park revenue is a huge blow to Disney. According to The Walt Disney Company, at the end of their last fiscal year, the Parks, Experiences, and Products segment had an operating profit of $6.758 billion. It was Disney’s second most profitable segment behind Media Networks with an operating profit of $7.479 billion.
Despite Disney’s massive size, the closures will be debilitating financially. Which is why they’ll likely be eager to reopen each park around the globe once it’s deemed safe to do so.
But what measurement will Disney use to determine when it is safe to reopen each of the parks?
Shanghai Disneyland was the first park to close when it shut its gates on January 25th. It’s worth noting that while the park is still closed, Shanghai Disneyland Hotel and Disneytown have since reopened on March 9th with some restrictions.
But even though Shanghai Disneyland was the first park to close, Disney can’t expect to mirror the same timeline with every park. The parks span several different countries, so the trend of the global situation is likely to vary, maybe greatly, from location to location.
One factor that further complicates the decision of when to reopen the U.S. parks is the state-by-state response to the crisis. According to ABC News, as of April 3rd, nine states have still not issued formal stay-at-home orders. And Florida, the home state of Disney World, just recently issued a stay-at-home order effective April 2nd, as reported by NBC News. Given the staggered state-by-state responses, Disney will have to decide what they will use as the deciding factor for when it’s considered “safe” to reopen the parks. Will they choose to reopen as soon as the individual states lift social distancing guidelines? Will they wait for a federal announcement?
We can see the effects of this uncertainty in the differing approaches Disney took when announcing the initial Disney World and Disneyland closures, versus the extended closures. At first, the parks were set to remain closed through the end of March. But on March 27th, Disney announced that the parks would remain closed “until further notice.”
Given the unprecedented nature of the situation, determining how long to extend the park closures in the best interest of public health, without completely disregarding the financial impact, is a difficult and constantly shifting decision for Disney to make.
Decision #2: What Changes Will be Implemented to Improve Health and Safety at the Parks?
Disney is capable of moving quickly when it comes to implementing new safety measures. Following the terrorist attacks on September 11, 2001, when Disneyland and Disney World reopened the following day, they had already implemented additional security features at the front of the parks.
Given the massive impact of the current situation, Disney needs to decide what changes they will make to improve guest and Cast Member safety. Before the closure, we saw additional portable hand-washing stations throughout the parks.
This tracks with Disney’s current policy for preventing the spread of illness at the parks. Cast Members are trained on cleaning, disinfecting, and tending to spills. But none of these items address potentially airborne illnesses.
In order to prevent the spread of highly contagious diseases, Disney will need to consider options that could reduce the profitability of the parks and require a large financial investment. Will they limit the capacity at the parks to keep the crowds down? Will they provide virtual queues similar to the Rise of the Resistance boarding group system to reduce the number of guests in line for attractions?
Reducing the capacity at the parks would obviously reduce potential ticket sales. Building more virtual queues requires an investment in technology development. And since virtual queues are not without fault, it also opens the door for potential glitches that need to be addressed — meaning more Cast Members dedicated to assisting with these issues. Is Disney willing to take the financial risk in order to implement changes that reduce guest capacity and congestion?
Decision #3: Which Construction Projects Will Be Put On Hold?
This is a huge question mark when it comes to Disney World. There are several large construction projects currently in progress that were planned for the 50th anniversary of Disney World in 2021. Epcot, in particular, is in the middle of a massive transformation.
We learned that all construction was halted when the parks were closed. At the very least, it’s likely that the current construction project timelines will be impacted.
And unfortunately, some may not continue at all. With the loss of revenue due to the parks being closed, Disney has to decide which (if any) of the construction projects will be put on hold. Some projects are already pretty far along, like TRON Lightcycle Run and Remy’s Ratatouille Adventure. But we’re especially concerned about projects in the early stages of development, such as the Mary Poppins attraction.
During the recession after the 9/11 attacks, we saw Disney move project timelines or even abandon projects altogether (as was the case with the Legendary Years resort hotel).
Disney will have to consider the budget, timeline, and stages of the construction projects and decide which new attractions, restaurants, and hotels make the cut.
Decision #4: How Will Disney Cruise Line Address Concerns?
Cruise ships were a large area of concern at the advent of this current crisis. Several early patients could be found amongst cruise ship passengers, which led to widespread fear and restrictions of cruise ships. And the resulting financial impact on the cruise industry has been staggering.
According to CNBC the stock price for Carnival Corporation, the largest cruise vacation company worldwide, has dropped nearly 75% since January.
In a securities filing, Carnival expressed deep concern over the future of the industry, stating, “Even once travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or fare pricing.”
With the dramatic drop in consumer confidence, Disney will need to decide how to respond to passenger concerns, as measures such as additional hand-washing stations may not be enough in the higher risk, close-quartered environment of a cruise ship.
In the midst of the industry-wide loss of confidence, Disney Cruise Line has several large projects in the works that need to be considered. They are currently in the planning stages of construction on their second private island, Lighthouse Point, which was originally rumored to be completed in either 2022 or 2023.
Plus, Disney Cruise Line is in the process of adding three new ships, which will nearly double the size of its current fleet. The first of the three new ships, the Disney Wish, was set to be delivered to Disney in December, 2021, and begin sailing in January, 2022.
Currently, all Disney Cruise Line sailings are suspended through April 28th. With both a new private island and three new ships set to join Disney Cruise Line soon, Disney will have to decide on a strong message and plan of action to ease the minds of passengers when sailings resume.
Additionally, they will need to determine whether or not to move forward with the expansions in the light of the financial hurdle facing the cruise industry.
Decision #5: What About Disney Vacation Club Points?
With the timeline for the closures still unclear, the Disney Vacation Club team is facing a unique scenario. Disney Vacation Club Members are (understandably!) concerned about what will happen to any Points they have which are set to expire soon.
This is something that Disney doesn’t have an answer for at the moment. According to Disney, they are assessing the banking and expiration policy and the use of Points affected by the closures. The main concern which has been expressed by Disney is the impact that any changes on Point expirations could have on future DVC Resort availability.
This will be a tough decision for Disney to make. It’s true that there are logistical challenges with maintaining room availability if the expiration dates on the Points are changed, but since the closure is beyond guest control, the situation will still need to be addressed. Disney says a decision will be announced when there is a clearer picture of the full impact of the closures. But we bet this one is keeping both some DVC Members and Disney Cast Members up at night.
Decision #6: What Should They Do For Guests Affected By Closures?
When the decision to close the parks was made mid-March, we saw very quickly just how many guests were impacted by the decision. Guests on vacation at the time were forced to cut their trips short, and guests gearing up for upcoming trips had to cancel before they even left home.
When the closure was extended indefinitely, the number of guests impacted just kept rising. Disney did what they could to try and help reduce the pain felt by guests.
Canceling or Rebooking a Trip
Disney announced guests with trips between March 16th and June 30th are able to cancel or modify their trips with no change fees either by phone or through My Disney Experience. If guests chose to take no action, the full amount of their trip will be automatically refunded to them up in the form of payment originally used after their check-in date passes.
Dining reservations are also being canceled for guests with no fees or action required.
Disney World Special Dining Offer For Impacted Guests
To help take a bit of the sting off of rebooking, Disney World reached out to affected guests offering a special free dining promotion if they booked their new trip before May 31st for arrival dates from June 1st through Sept 30th.
Disneyland Room Discount for Impacted Guests
Similarly, Disneyland is offering a special room discount for affected guests as well. Guests can choose to rebook their trip from June 1st through December 31st and receive 10-20% off a room at a Disneyland Resort hotel, depending on which resort and room type is selected.
Early after announcing the initial closure, Disney World and Disneyland announced Annual Passholders would receive the number of days the parks were closed added on to their existing pass’ expiration date.
One element of Annual Passes that they remained tight-lipped on until just recently, though, was in regard to Passholders on a monthly payment plan looking to pause or cancel their payments due to personal financial difficulty during this time. While other theme parks offered delayed payment or the ability to cancel these passes, Disney remained silent.
But on April 2nd, Disney announced that monthly payment Passholders had the option to either postpone or waive payments during the closure.
Suprisingly, paid-in-full Annual Passholders were also given the option with their pass to forego the closure date extension in exchange for a partial refund.
Responding to guests affected by the closures is an ongoing challenge for Disney to navigate. If additional extensions are made, they will again need to pivot and take appropriate action.
Decision #7: How Should Disney Treat Cast Members?
With an uncertain timeline for how long this situation will last, Disney also has to decide how they will attempt to retain their Cast Members without losing even more cash. On April 2nd, Disney announced that most non-essential, non-union workers will be temporarily furloughed on April 19th.
Disney’s statement read, “With no clear indication of when we can restart our businesses, we’re forced to make the difficult decision to take the next step and furlough employees whose jobs aren’t necessary at this time. …The furlough process will begin on April 19, and all impacted workers will remain Disney employees through the duration of the furlough period.”
During the furlough, Cast Members will maintain health and insurance benefits coverage, with Disney paying both the employer and employee weekly benefit contributions. Cast Members can also elect to use some or all of their available paid-time off hours at the start of the furlough. Disney stated that this move was intended to preserve the jobs of Cast Members and make it easier for everyone to return to work when it’s safe to do so.
This comes after the Disney College Program, Disney Culinary Program, Disney Cultural Exchange Program, and Disney Academic Exchange Program were all temporarily suspended on March 16th. Disney Program participants were given a notice of successful program completion so they will have the opportunity to work with Disney again, but since many of these participants come from out-of-state — or even overseas — some will be unlikely to return after the parks reopen.
Plus, some of the third-party restaurants on Disney property have laid-off their employees. A representative for Splitsville Luxury Lanes and Chef Art Smith’s Homecomin’ said in a statement, “Our actions will allow our hourly teams to take advantage of their unemployment benefits and any other government assistance that will come available because of this crisis. In addition to their final checks, the company will continue to pay health insurance for employees who have elected to participate through April 30, 2020. Also, we are working on a plan to provide daily staff meals.”
With the majority of Cast Members furloughed and Disney Programs suspended, Disney has to decide how to re-hire and re-train once the parks and resort areas begin to open. This is a timeline Disney needs to establish up-front, to ensure Cast Members receive the communication needed to prepare for the parks to reopen.
Click here for answers to some of the most common questions surrounding the Disney World and Disneyland closures!
These are just a few of what seems like a never-ending stream of major dilemmas Disney’s facing right now. With Bob Iger and Bob Chapek at the helm, the company has creative and financial prowess. But despite the brains in the board room, there is a lot uncertainty right now — about the global crisis, the current and very likely long-term recession on its heels, and the future state of Disney’s multi-faceted entertainment company, which is built on film, television, travel, and theater — the four industries being simply massacred at the moment.
Some of the answers are starting to appear. But we will surely see many more issues before we see a comfortable resolution for the company, its stock, its employees, and its future.
What do you think Disney will decide to do about these situations? Let us know in the comments!