Disney World and Disneyland will be implementing many costly new procedures to help ensure the safety of guests and Cast Members upon the reopening of their theme parks.
All of these potential health measures and capacity cuts mean that Disney could be in a tough position — losing money to be able to make it again. Prior to the reopening announcement, we explored the financial impacts of opening the theme parks versus keeping them closed. With the parks officially reopening, some analysts are noting what Disney will need to do to make money again.
Disney hasn’t and won’t be generating anywhere close to the pre-closure levels of revenue in the Parks, Experience, and Products sector for a while. In an earnings call that took place last month, Disney CEO Bob Chapek noted that the company would not reopen any park unless it would ultimately generate profit.
So, with the Disney World parks reopening and Disneyland set to follow soon after, Disney may have determined what levels of capacity the parks need to maintain to keep a profit going. According to the Hollywood Reporter, Bernstein analyst Todd Juengar has estimated that Disney will need to maintain 25 percent of normal [pre-global health crisis] run-rate attendance to turn a profit.
The 25% attendance assertion is interesting. Disney has not made any indication as to how steeply park capacity will be reduced. If Juengar is correct, we may see it cut down to that 25% figure. Disneyland Shanghai saw a similar capacity decrease with a figure somewhere below 30% pre-closure attendance.
When we looked into this topic a month ago, we noted that at current operating cost, Disney would be operating at a loss if they lowered capacity by any more than 28%. Still, we also explored the fact that operating costs will greatly decrease as well with the continued closure of many attractions, resort hotels, dining experiences, and more. Take into account the cuts to operational costs and a less than 30% capacity opening starts to seem likely.
Again, Disney executives have explained that they do not intend to publicly release reopening capacity figures at this time. It seems that we’ll have to determine if Juengar (and our) predictions are right once the parks reopen and we can see how crowded (or not-crowded) they are. Chapek said that guests would have to be “lucky enough” to access the new theme park reservation system, so we can assume that capacity will be significantly limited — maybe even all the way down to 25%.
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Do you think Disney will make or lose money when they open their theme parks? Let us know your thoughts in the comments below!