The Disney parks have been closed for over a month now. As experts attempt to predict a peak and path for the global health crisis, we’re starting to wonder what a reopening of the Disney parks might look like.
There are two MAJOR concerns when it comes to reopening the parks. The first is the safety of all guests, Cast Members, the surrounding communities, and beyond. On top of that, Disney’s financial situation has suffered considerably, so bringing money back in could be a driving factor surrounding when and how Disney can reopen.
That’s a pretty tough balance to strike. The company has to produce a reopening date and procedure that is both a cautious decision and a financial one. But what if reopening isn’t what’s best for the finances of the company? Will the parks even be profitable if they reopen with the necessary health-focused modifications and restrictions? Would it still be worth opening?
We’re checking out some of the difficult financial decisions that Disney is facing in regard to reopening their theme parks. Let’s jump in.
In order for the parks to open, things have to change.
There are a lot of uncertainties surrounding the global health crisis right now. Many health officials and analysts are considering widespread testing or a vaccine to be the goal if we want to return to normalcy, but that could be a while off — some note that a vaccine could take a year or more.
So, as the global health crisis begins to ever so slightly decline, a slow reopening of the country will likely begin. For some places, like Florida, it already has.
Until a vaccine is available, safety might remain a major concern. On top of that, there is financial pressure for Disney to reopen the parks. They’re losing money every day, stocks are suffering, and the country is heading into a recession that could have significant ramifications for the company. With such major financial pressures, Disney will be looking to reinstate profits from its major theme park sector. Still, a reopening doesn’t necessarily mean that Disney will immediately be making money again. In truth, there may be no “right time” to reopen the Disney parks.
A potential solution to this tricky balance is implementing health measures in the parks so that a reopen can occur sooner rather than later. Though keeping guests and Cast Members safe comes with a price. Such health measures could be expensive and time-consuming too.
How Much Would It Cost to Implement New Health Measures In the Parks?
We’ve talked about the kind of changes we could see in Disney World such as sanitation practices, capacity limits, ride modifications, and temperature screenings — but how much will those changes cost? Mostly, we’re talking about the possibility of park capacity limits and gradual openings, not to mention the fact that crowds may be lessened in general as people are hesitant or unable to travel.
Changes to Park Capacity
Last year, Disney made about $20.5 million per day on ticket sales for its theme parks around the world. Not to mention they also netted approximately $16 million per day on merchandise and food and roughly $17 million per day on resorts. That’s a whopping $53.5 million in revenue for the theme parks each day.
There has been discussion of a “gradual” reopening to the parks that would have Florida Residents allowed to visit in the first phase, then domestic guests, then international guests. We’ve already seen a similarly phased reopening for Shanghai Disney Resort. A slow introduction of guests into the parks would mean a significant limit to capacity and attendance.
So, when we start to think about limiting theme park capacity, it looks like there could be a significant financial loss. If all of the Disney theme parks around the world averaged a capacity loss of just 10%, it would mean a $5 million knock to profits per day.
And if operating expenses remain similar to before as Disney sees a reduction in capacity, the company could risk operating at a loss in the theme park sector.
Operating expenses in 2019 were approximately $38.4 million per day. With the above revenue, that leaves the Disney parks with a tidy profit of $15.1 million every day. That seems like a pretty big margin, but if Disney operates with capacity lowered beyond 28% the parks would be losing money every day. What’s worse than making $0? Operating at even more of a negative.
Of course, some of these operating expenses could scale down along with the capacity changes. Fewer people in the parks means that it will take less money to operate them. Hotels may not be as full, therefore having less need for staff. Similarly, food costs to feed Disney at 100% capacity are pretty different from the costs it would take to feed Disney at 50% capacity.
Even with these adjustments to operating costs, the lower they opt to set capacity and the fewer people who choose to visit Disney Parks, the more likely it is that theme park profits could end up in the red financially.
Now, that’s not to say that the parks aren’t operating in the negative right now. Essential employees are still getting paid and some departments are still up and running while revenues are almost nonexistent. Still, opening the parks and losing even more money has to be a consideration.
Other Health Measures
Park capacity isn’t the only thing that has us concerned about the financial aspects of a reopening. Some of the other health measures that may be necessary for the parks could result in significant costs. To keep Cast Members safe, Disney may look to provide them with Personal Protective Equipment, like masks and gloves. Since the start of the global health crisis, PPE has skyrocketed in price, sometimes costing up to 1,000% more than it used to per CNN.
On top of that, it’s possible that Disney will seek to expand virtual queues in the parks that have some capacity for it already. We’ve seen Virtual Queues used for major attraction openings such as Rise of the Resistance but it’s possible that we may start to see it for other popular rides in order to lessen crowded queue lines.
Expansion like that would mean that the costs associated with the new system and technological infrastructure would have to be absorbed as well. Still, Disney may be seeking to expand Virtual Queues anyway, so perhaps these costs have already been accounted for.
Enhanced sanitation measures in the parks come with costs as well. Prior to the closures, we saw temporary hand-washing stations around the parks. Perhaps Disney will seek to install permanent handwashing stations much like they do on the Disney Cruise Line. It’s possible the heightened demand for sanitation will culminate in a need for more janitorial staff. Every little health measure incurs costs of its own and they can build up quickly.
Implementation and Training of New Procedures
Suppose Disney does opt to open the parks with new health measures; there would need to be a period of implementation and training. The tens of thousands of furloughed Cast Members would need to return to the parks and resorts for training that could take a few days or even longer.
To get these health measures rolling, Disney would be ramping up operating costs including training, supplies, and labor while revenues remain almost nonexistent.
Besides, depending on the depth of training required, getting Cast Members acclimated to the new normal could take some time, further increasing costs. That said, if Disney does determine that opening the parks safely would not constitute a loss, then every day that they remain closed is more money out of Disney’s pockets.
Will Disney Open the Parks if Safety Measures Mean They Could Be Operating at a Loss?
So, will Disney open the parks if the safety measures implemented require operating at even more of a loss? Potentially. Even though it seems counterintuitive, Disney may have to lose money to make it again. It’s possible that until a vaccine is available, the Disney parks won’t reach a point where they could open and have significant profits for a while.
Operating at a loss at first might be necessary to build trust with guests and implement new procedures. They’ll need to work through the new protocols, so they may have to operate in the red to determine the new normal and work through any hiccups. A short period of financial loss could be what it takes to restore profit sooner rather than later.
Disney likely has a hard road of financial loss ahead of them whether they open the parks soon or further down the road. It’s all a numbers game, and Disney is likely determining how they can DEFINITELY bring the parks back to a profitable model SAFELY. Doing so might mean they’re in the red — but it could be worth it to operate at a loss as long as the parks can be a safe place for guests once again.
How do you think Disney will seek to balance safety and finance? Share your thoughts in the comments!