With Walt Disney World in Orlando set to open in mid-July, the conversation on Wall Street is shifting from the financial hit of shuttered theme parks and when they’ll restart to how quickly profitability will improve. The conclusion: not very until health precautions are eased and people can travel.
UBS analyst John Hodulik said an earlier-than-anticipated openings of parks has boosted his revenue estimates but that he’s keeping operating income flat due to limitations on attendance required by social distancing. His firm employed a fancy tool called the UBS Evidence Lab that analyzed satellite imagery of WDW’s Magic Kingdom, concluding that current guidelines will limit capacity to about 40% of average attendance, or 25% of peak attendance. He also said the mix at first would likely tilt towards lower-spending season-pass holders and in-state visitors at a park that is mostly a destination for travelers.
He anticipated the September quarter attendance would be roughly 25% of comparable 2019 levels for the Florida park and thinks it will take more than a year to return to pre-COVID-19 levels. Hodulik said he is going on the assumption that Disneyland in Anaheim will remain closed until September and then follow state guidelines on large gatherings. He’s also figuring on social distancing rules staying in place and no vaccine becoming widely available in calendar 2020 (both of which could drive near-term upside).
The Evidence Lab satellite imagery measuring Magic Kingdom, Disney’s largest and most profitable park, calculated all available indoor and outdoor space and usable and unusable areas for visitors. It also determined maximum capacity under different social distancing rules and attendance assumptions, like for families or groups. It created social distancing parameters for individuals or groups (all represented by hexagons) and spacing within groups. It plotted different attendance scenarios for individuals, couples and various sizes of groups.
Assuming 70% of attendees are families, 25% couples and 5% flying solo, and assuming 6 feet of distance between people, the mass capacity for WDW is 25,000. The figure may be exacerbated by limitations on travel. Airlines are operating at reduced levels and international borders are still closed.
The parks division is more than a third of Disney sales; WDW reps 70% of the conglom’s domestic park attendance. The bulk of its yearly traffic comes from out of state domestic (55%-60%) and international travelers (20%). About 20%-25% of attendees are from in-state. At smaller Disneyland, a rebound could be faster because the bulk of traffic there (over 50%) typically comes from in-state residents.
Hodulik sees Disney as the best positioned media company in the long term, but, due to the continued uncertainties, not the near term.