With the current world health crisis, Disney World may have a two-year slog back to normalcy. Now that many economists assert that we’re headed into a global recession, things get a little more complicated.
The world health crisis itself is unprecedented, as is the resultant closure of Disney World. Since we don’t have any historical basis to look to for guidance, predicting the resort’s next few months can be a challenge. But looking back at what happened during the previous two recessions may give us glimpse into what we can anticipate for this one.
The last two decades have seen three U.S. recessions, including the one that we’re headed into now. In 2008 we saw Disney lean into the recession with a somewhat optimistic mindset. But in 2001, the fear and uncertainty factor in the travel industry after the 9/11 attacks caused the Disney Parks to react very differently.
Let’s turn to both previous recessions to see if we can make any predictions for the Disney Parks in 2020 and 2021.
Theme Parks May See Significantly Lower Demand
Tourism took a major hit in both the 2001 Recession and the Great Recession in 2008. Health concerns may affect the parks in 2020 and 2021 similarly to how terrorism fears docked attendance in 2001 and 2002.
If the theme parks do not have a response that is satisfactory to the public, a return to normalcy could be delayed. According to Amusement Business Magazine, Disney World attendance dropped from 43 million in 2000 to 39 million in 2001; then, it continued to drop to 37 million for 2002 and 2003. It wasn’t until 2006 that Disney World saw attendance rise above what it had been in 2000.
Though the situation in 2008 didn’t slam tourism as much as 2001, the economic downturn still made it inadvisable or impossible for many to take vacations. According to the LA Times, operating income for Disney theme parks was down 50% to $171 million, from $339 million a year earlier. Additionally, revenue was down 12% to $2.4 billion.
In 2008, the New York Post reported that “bookings [had] fallen off considerably as consumers [took] a ‘wait-and-see approach’ on the health of the economy.” This situation is mirrored today as people wait and see about the status of world health before deciding to cancel, reschedule, or book their trips.
Based on this data, demand will likely be lower during this recession. And the health exposure fear factor makes a larger dip like the one seen in 2001 a greater possibility. And in the event of a phased reopening or further health measures, some people may continue to push back their trips until Disney World returns to a semblance of normalcy.
Remember, this situation is unlike anything we’ve seen before! Anxieties about health could be more lasting than we anticipate and that has a lot of potential to affect attendance. Travel bans may extend LONG beyond when the theme parks reopen. International travel could be disallowed and domestic travelers may not be able to travel as easily depending on local government stay-at-home orders.
Even if health anxieties weren’t a factor, people are typically hesitant to travel during a recession. After all, Americans are taking a major financial hit just like companies. The U.S. unemployment situation is in a terrible place with 701,000 jobs lost in March alone, according to CNN. People may not be ABLE to travel if financial considerations keep them home. It’s possible that Florida and California locals may still frequent the parks and people who already booked may not cancel trips, but a fall in bookings seems likely.
Disney Parks May Reduce Staff
One way that Disney may have to make difficult decisions to stay afloat is through a reduction of staff. In the past recessions, Disney ended up eliminating a good deal of jobs. According to CNN, the 2001 Recession saw the Disney Company reduce the workforce by 4,000 people. In 2009, Walt Disney World saw over 1,400 jobs eliminated, as reported by the LA Times.
So far this year, we’ve already seen a few measures at work to reduce employment expenditures. We recently found out that Disney would be furloughing all theme park employees. This comes a few weeks after the total suspension of the College Program and the International Program. Even Disney bigwigs are taking substantial pay cuts!
Hopefully, when the parks are back in business, we will see the return of all of the Cast Members and College Programmers. But based on past actions, Disney may need to institute personnel cut-backs.
Disney proper isn’t the only company in Disney World and Disneyland making cuts, though. Some third-party businesses affiliated with Disney, like Disney Springs and Downtown Disney restaurants and shops, may be greatly affected by the health crisis and subsequent recession. We’ve already seen many Disney Springs restaurants lay off their employees in an attempt to keep the businesses afloat.
With a recession layering on top of the crisis, we may see more job cuts from these third-party restaurants on Disney property.
Disney Might Make Efforts to Drive Demand (Read: DISCOUNTS)
Due to this economic uncertainty and drop in demand, we could see Disney making significant marketing efforts to drive demand during the coming months.
In past recessions, the company did just that. In 2009, Disney put out hefty discounts in an attempt to drive demand. Disney World utilized such aggressively-discounted hotel rates that they were able to maintain an 89% occupancy rate. Still, with the rooms so deeply discounted this lead to a 17% drop in spending per room according to the LA Times. Whew.
Around the time that these promotions were coming out in response to the Great Recession, Bob Iger (then CEO of Walt Disney Company) was quoted saying, “We made a conscious decision to put in place promotions that would drive attendance. This strategy has had a predictable impact on margins, but it’s also had the intended effect of bringing people to our parks.”
Discounts weren’t the only device used to draw guest interest. The company also used some memorable marketing strategies to drive demand. Most notably, you might remember the Year of a Million Dreams. This promotion allowed guests to win all sorts of Disney World prizes — even a night in the Cinderella Suite. Because of the need to drive demand, the YEAR of a Million Dreams was extended far past its deadline and ended up running for two years!
Another surprising marketing tactic that Disney used was a promotion that allowed guests to get into the parks for FREE on their birthday in 2009. It’s hard to believe with ticket prices nowadays but YES, this really happened! Guests could show a valid photo ID on their birthday and be allowed into the theme park, free of charge.
So are discounts and deals something we might be able to look forward to as a “plus?” After all, we’ll never say no to a good discount! It’s possible that we will see Disney begin to offer discounts as the recession makes times harder economically.
We’ve already seen a special vacation offer for those whose trips were affected by the closures! Sure, this is a great way to make disgruntled guests feel better, but it’s also a pretty strong encouragement to actually rebook and spend your money at Disney parks.
We may see discounts show up from airlines and travel agents in an attempt to revitalize the industry! If we see significant travel price drops in response to the health crisis and the recession, it may persuade some to make the trip when they otherwise would have been hesitant.
So, stick with us here at DFB in the coming months — sign up for our exclusive and FREE newsletter. We’ll let you know if we hear of ANY new discounts. Remember, if a discount that applies to your vacation comes up after you’ve booked your trip, you can call to get that discount applied to your booking (or work with a travel agent and they’ll do it for you!).
Construction May Be Rescheduled. Projects Could Be Abandoned or Re-Imagined.
This next effect is a big one that we’ve all been wondering about. How will this recession affect Disney World construction? After all, there are a TON of big projects in the works like Reflections Lakeside Lodge, Space 220, and TRON Lightcycle Run. We’re really hoping that the construction halt and recession don’t slow these projects down, but we do have to recognize that it’s a possibility.
Now, the precedent set by past recessions on construction gives us mixed messages. In 2001, construction slowed and some Disney projects were completely abandoned.
For instance, Pop Century Resort was supposed to be a two-part hotel consisting of the Classic Years and the Legendary Years. Both sections were built but only the Classic Years were completed. The Legendary Years buildings sat empty and abandoned for half a decade until they were re-themed to become Art of Animation Resort.
But new projects weren’t the only things left abandoned in the wake of the recession. Disney World’s first water park, Disney’s River Country, didn’t make it through the 2001 downturn either.
In winter of 2001, the park closed for what was meant to be winter maintenance. However, as demand dropped, the park never reopened and in 2005, it was officially announced that the water park would be closed permanently. (Note that while there are rumors about the cause of the closure, a drop in demand in 2001 and guests favoring the newer Blizzard Beach and Typhoon Lagoon waterparks is known as the official reason for closure.)
So yes, that’s scary! We certainly don’t want to see any upcoming projects abandoned. Interestingly enough though, the way that construction was handled in the Great Recession of 2008 was an entirely different story. Instead of cutting back, Disney poured resources into improving the parks.
According to USA Today, Disney made costly improvements that resulted in them spending a whopping $3 billion on developing the theme parks — right in the middle of the Great Recession!
Instead of seeing projects abandoned or attractions closed, new attractions opened! The expensive American Idol Experience opened in 2009 right in the middle of the recession. Disney went on with their plans in a big way.
They even began developing the abandoned Legendary Years building into Art of Animation during this period! The new resort was opened in 2012 after two years of work.
But the most impressive example of Disney forging ahead with their plans comes in the form of New Fantasyland. The extremely ambitious expansion of Fantasyland took place from 2010 through 2012, right on the tail of the recession. What a MASSIVE expansion it was! There was a full re-theming of Mickey’s Toontown Fair into Storybook Circus and the addition of the Beauty and the Beast, Snow White, and Little Mermaid portions of the land.
So, like we said, looking at previous recessions give us mixed messages. The effect the upcoming recession will have on Disney World construction is still very much a mystery. We may see Disney making park improvements as usual — or even MORE than usual, like in 2009. After all, with the halt on construction, they may have some catching up to do. While others are forced to be cautious, Disney might drive forward on their projects as the 50th Anniversary of Disney World approaches.
Now, remember that the environment surrounding this recession looks a whole lot more like 2001 than it does the Great Recession, with travel and tourism possibly very affected by a fear-inspired slow-down. So, we very well may see some delays in construction, suspensions, or even abandonment of projects.
Namely, some pressing openings may see delays. Space 220 is supposed to be opening soon and Remy’s Ratatouille Adventure was set to debut this summer in Epcot. With finishing touches having been halted, these projects could could see significant delays.
On top of that, if tourism demand does tank as much as it did in 2001, Disney may need to put some projects on pause for a while. Incidentally, Reflections, A Lakeside Lodge, and the Star Wars Galactic Starcruiser Hotel are in similar stages of development to Legendary Years when the latter was tabled. Now, odds are Disney would avoid abandoning any projects at all costs, so seeing a general delay is much more likely.
At the End of the Recession, Demand Might Surge
And finally, when the recession ends, we may see a SURGE in demand for Disney World theme parks.
After the 2001 recession, Disney World returned to its station as a major money-maker for the state of Florida as soon as the effects of the recession ebbed. According to the Orlando Business Journal, even after years of economic uncertainty and safety concerns, Disney was still driving Florida’s economy by 2004.
As for the 2008 Great Recession, people leaped at the chance to return to the parks. In 2013, USA Today published an article about theme parks “roaring” back to life that said, “Now, Disney parks are bursting at the seams with visitors and well-positioned for what’s expected to be one of the busiest summers for theme parks in years. Perhaps most important, attendance is soaring, even as Disney is raising ticket prices and dropping any semblance of discounting.”
In truth, Disney continued raising base ticket prices by a few dollars each year during and after the Great Recession. Still, as the recession drew to a close, the discounts went away. That means no more birthday entry! And yet the people still came.
We mentioned before that demand will be uncertain in the wake of the world health crisis, and this is true. However, when the recession and its effects are declining and some semblance of normalcy is restored for the world, we think it’s entirely possible that Disney World will see a boom in demand. Many will be eager to return to the Disney World they know and love!
It will be nice to see Disney World thriving once more, however, we will also likely see a price increase to daily tickets — and perhaps more — at this time. We recently saw a price increase to Annual Passes, but the parks may hold off on increases during the health crisis and subsequent recession. So, of course, we’ll be keeping an eye out for changes to ticket pricing.
Plus, with great demand comes great CROWDS. The relief of being in the clear could drive up Disney’s attendance, and we’re already expecting large crowds for the 50th Anniversary of the resort next summer. Be wary that if traveling to Disney is your way of saying goodbye to hard times, you likely won’t be alone in doing so.
Overall, it’s not easy to predict how this health crisis and the coming recession will have a lasting effect on Disney, but seeing how the company behaved during the previous two recessions does give us some good ideas. Hopefully, our look back today has helped you set your expectations for what is to come. As always, we at DFB are here to keep you updated as the situation develops. Stay safe.
What do you think the upcoming months look like for Disney World? Share your thoughts in the comments.